As filed with the Securities and Exchange Commission on August 13, 2003
Securities Act Registration No. 811-3826
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-effective Amendment No. _______ Post-effective Amendment No. ______
(Check appropriate box or boxes)
INVESCO SECTOR FUNDS, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
4350 South Monaco Street, Denver, Colorado 80237
------------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number: (713) 626-1919
Name and Address of Agent for Service: Copy to:
NANCY L. MARTIN, ESQUIRE MARTHA J. HAYS, ESQUIRE
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza 1735 Market Street
Suite 100 51st Floor
Houston, TX 77046 Philadelphia, PA 19103
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective under the Securities Act of
1933.
The titles of the securities being registered are INVESCO Energy Fund
Classes A, B and C; INVESCO Financial Services Fund Classes A, B and C; INVESCO
Technology Fund Classes A, B, C, K and Investor Class; and INVESCO Utilities
Fund Classes A, B and C. No filing fee is due in reliance on Section 24(f) of
the Investment Company Act of 1940.
(AIM LOGO)
AIM GLOBAL ENERGY FUND,
A PORTFOLIO OF
AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
August 25, 2003
Dear Shareholder:
As you may be aware, AMVESCAP PLC, the parent company of your Fund's
investment advisor, has undertaken an integration initiative for its North
American mutual fund operations.
In the first phase of the integration initiative, A I M Distributors, Inc.
became the sole distributor for all AMVESCAP PLC mutual funds in the United
States. A I M Distributors, Inc. is now the distributor for all INVESCO Funds
and the AIM Funds (including your Fund).
AMVESCAP PLC also reviewed all AIM Funds and INVESCO Funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete for limited shareholder assets and to consolidate certain
funds having similar investment objectives and strategies. Your Fund is one of
the funds that AMVESCAP PLC recommended, and your Board of Trustees approved, be
consolidated with another fund. The attached proxy statement/prospectus seeks
your approval of this consolidation.
Finally, the independent trustees of your Board believe that your interests
would best be served if the AIM Funds and the INVESCO Funds had a unified board
of directors/trustees. The attached proxy statement/prospectus seeks your vote
in favor of the persons nominated to serve as trustees.
Your vote is important. Please take a moment after reviewing the enclosed
materials to sign and return your proxy card in the enclosed postage paid return
envelope. If you attend the meeting, you may vote your shares in person. If you
expect to attend the meeting in person, or have questions, please notify us by
calling (800) 952-3502. You may also vote your shares by telephone or through a
website established for that purpose by following the instructions that appear
on the enclosed proxy card. If we do not hear from you after a reasonable amount
of time, you may receive a telephone call from our proxy solicitor, Georgeson
Shareholder Communications Inc., reminding you to vote your shares.
Sincerely,
-s- Robert H. Graham
Robert H. Graham
Chairman and President
AIM GLOBAL ENERGY FUND,
A PORTFOLIO OF
AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 21, 2003
To the Shareholders of AIM Global Energy Fund:
We cordially invite you to attend our Special Meeting of Shareholders to:
1. Approve an Agreement and Plan of Reorganization (the "Agreement")
under which all of the assets of your Fund, an investment portfolio of AIM
Investment Funds ("Trust"), will be transferred to INVESCO Energy Fund
("Buying Fund"), an investment portfolio of INVESCO Sector Funds, Inc.
("Buyer"), Buying Fund will assume the liabilities of your Fund and Buyer
will issue shares of each class of Buying Fund to shareholders of the
corresponding class of shares of your Fund and, in connection therewith,
the sale of all of your Fund's assets and the termination of your Fund as a
designated series of Trust.
2. Elect 16 trustees to the Board of Trustees of Trust, each of whom
will serve until his or her successor is elected and qualified.
3. Transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.
We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 on October 21, 2003, at 3:00 p.m., Central Time.
Shareholders of record as of the close of business on July 25, 2003 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment of
the Special Meeting.
WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF
TRUST. YOU MAY ALSO VOTE YOUR SHARES BY TELEPHONE OR THROUGH A WEBSITE
ESTABLISHED FOR THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY
MATERIALS. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE
SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY
EXECUTING AND SUBMITTING A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION
TO THE SECRETARY OF TRUST OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
-s- NANCY L. MARTIN
Nancy L. Martin
Secretary
August 25, 2003
<Table>
AIM GLOBAL ENERGY FUND, INVESCO ENERGY FUND,
A PORTFOLIO OF A PORTFOLIO OF
AIM INVESTMENT FUNDS INVESCO SECTOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100 4350 SOUTH MONACO STREET
HOUSTON, TEXAS 77046-1173 DENVER, COLORADO 80237
(800) 347-4246 (800) 525-8085
</Table>
COMBINED PROXY STATEMENT AND PROSPECTUS
AUGUST 25, 2003
This document is a combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus"). We are sending you this Proxy Statement/Prospectus in
connection with the Special Meeting of Shareholders (the "Special Meeting") of
AIM Global Energy Fund (your Fund). The Special Meeting will be held on October
21, 2003. We intend to mail this Proxy Statement/Prospectus, the enclosed Notice
of Special Meeting of Shareholders and the enclosed proxy card on or about
August 25, 2003 to all shareholders entitled to vote.
At the Special Meeting, we are asking shareholders of your Fund to vote on
three Proposals. The first Proposal to be voted on is an Agreement and Plan of
Reorganization (the "Agreement") which provides for the combination of your
Fund, an investment portfolio of AIM Investment Funds ("Trust"), with INVESCO
Energy Fund ("Buying Fund"), an investment portfolio of INVESCO Sector Funds,
Inc. ("Buyer") (the "Reorganization") and, in connection therewith, the sale of
all of your Fund's assets and the termination of your Fund as a designated
series of Trust.
Under the Agreement, all of the assets of your Fund will be transferred to
Buying Fund, Buying Fund will assume the liabilities of your Fund and Buyer will
issue shares of each class of Buying Fund to shareholders of the corresponding
class of shares of your Fund, as set forth on Exhibit A.
The value of your account with Buying Fund immediately after the
Reorganization will be the same as the value of your account with your Fund
immediately prior to the Reorganization. The Reorganization has been structured
as a tax-free transaction. No sales charges will be imposed in connection with
the Reorganization.
The Board of Trustees of Trust (the "Board") has approved the Agreement and
the Reorganization as being in the best interests of your Fund.
Trust and Buyer are both registered open-end management investment
companies that issue their shares in separate series. Your Fund is a series of
Trust and Buying Fund is a series of Buyer. A I M Advisors, Inc. ("AIM") serves
as the investment advisor to your Fund and INVESCO Funds Group, Inc. ("INVESCO")
serves as the investment advisor to Buying Fund. Both AIM and INVESCO are wholly
owned subsidiaries of AMVESCAP PLC ("AMVESCAP"), an independent global
investment management company.
The investment objective of Buying Fund is similar to that of your Fund.
See "Comparison of Investment Objectives and Principal Strategies."
This Proxy Statement/Prospectus sets forth the information that you should
know before voting on the Agreement and the other Proposal described below. It
is both the Proxy Statement of your Fund and the Prospectus of Buying Fund. You
should read and retain this Proxy Statement/Prospectus for future reference.
The Prospectus of your Fund dated March 3, 2003, as supplemented June 12,
2003 (the "Selling Fund Prospectus"), together with the related Statement of
Additional Information dated March 3, 2003, as supplemented May 2, 2003, are on
file with the Securities and Exchange Commission (the "SEC"). The Selling Fund
Prospectus is incorporated by reference into this Proxy Statement/Prospectus.
The
i
Prospectus of Buying Fund dated July 31, 2003, as supplemented August 1, 2003
and August 14, 2003 (the "Buying Fund Prospectus"), and the related Statement of
Additional Information dated July 31, 2003, as supplemented August 14, 2003, and
the Statement of Additional Information relating to the Reorganization, dated
August 15, 2003, are on file with the SEC. The Buying Fund Prospectus is
incorporated by reference into this Proxy Statement/Prospectus and a copy of the
Buying Fund Prospectus is attached as Appendix II to this Proxy
Statement/Prospectus. The Statement of Additional Information relating to the
Reorganization dated August 15, 2003 also is incorporated by reference into this
Proxy Statement/Prospectus. The SEC maintains a website at www.sec.gov that
contains the Prospectuses and Statements of Additional Information described
above, material incorporated by reference, and other information about Trust and
Buyer.
Copies of the Buying Fund Prospectus, the Selling Fund Prospectus and the
related Statements of Additional Information are available without charge by
writing to A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739,
or by calling (800) 347-4246. Additional information about your Fund and Buying
Fund may be obtained on the internet at www.aiminvestments.com.
The remaining Proposal to be voted on is the election of 16 trustees to the
Board of Trustees of Trust. The Board has approved the nomination of the persons
set forth in this Proxy Statement/Prospectus for election as trustees of Trust.
Both Proposals are being submitted to you to implement an integration
initiative undertaken by AMVESCAP with respect to its North American mutual fund
operations, which includes your Fund.
Trust has previously sent to shareholders the most recent annual report for
your Fund, including financial statements, and the most recent semiannual report
succeeding the annual report, if any. If you have not received such report(s) or
would like to receive an additional copy, please contact A I M Fund Services,
Inc., P.O. Box 4739, Houston, Texas 77210-4739, or call (800) 347-4246. Such
report(s) will be furnished free of charge.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
ii
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
INTRODUCTION................................................ 1
PROPOSAL 1 -- APPROVAL OF THE AGREEMENT TO COMBINE YOUR FUND
AND BUYING FUND........................................... 2
SUMMARY..................................................... 2
The Reorganization........................................ 2
Comparison of Investment Objectives and Principal
Strategies............................................. 3
Comparison of Principal Service Providers................. 5
Comparison of Performance................................. 5
Comparison of Fees and Expenses........................... 5
Comparison of Multiple Class Structures................... 6
Comparison of Sales Charges............................... 6
Comparison of Distribution, Purchase and Redemption
Procedures and Exchange Rights......................... 7
The Board's Recommendation on Proposal 1.................. 7
RISK FACTORS................................................ 8
Risks Associated with Buying Fund......................... 8
Comparison of Risks of Buying Fund and Your Fund.......... 10
INFORMATION ABOUT BUYING FUND............................... 10
Description of Buying Fund Shares......................... 10
Management's Discussion of Fund Performance............... 10
Financial Highlights...................................... 10
Pending Shareholder Proposals for Buying Fund............. 10
ADDITIONAL INFORMATION ABOUT THE AGREEMENT.................. 11
Terms of the Reorganization............................... 11
The Reorganization........................................ 11
Board Considerations...................................... 11
Other Terms............................................... 12
Federal Income Tax Consequences........................... 13
Accounting Treatment...................................... 14
RIGHTS OF SHAREHOLDERS...................................... 14
General................................................... 14
Liability of Shareholders................................. 14
Election of Directors/Trustees; Terms..................... 15
Removal of Directors/Trustees............................. 15
Meetings of Shareholders.................................. 15
Liability of Directors/Trustees and Officers;
Indemnification........................................ 15
Dissolution and Termination............................... 16
Voting Rights of Shareholders............................. 16
Dissenters' Rights........................................ 16
Amendments to Organization Documents...................... 16
CAPITALIZATION.............................................. 18
INTERESTS OF CERTAIN PERSONS................................ 19
LEGAL MATTERS............................................... 19
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND...... 19
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION................................................ 19
</Table>
iii
<Table>
<Caption>
PAGE
----
PROPOSAL 2 -- ELECTION OF TRUSTEES.......................... 20
Background................................................ 20
Structure of the Board of Trustees........................ 20
Nominees for Trustees..................................... 20
The Board's Recommendation on Proposal 2.................. 23
Committees of the Board................................... 23
Board and Committee Meeting Attendance.................... 25
Trustee's Compensation.................................... 25
Retirement Plan for Trustees.............................. 25
Deferred Compensation Agreements.......................... 25
Officers of Trust......................................... 26
Security Ownership of Management.......................... 26
Trustee Ownership of Your Fund's Shares................... 26
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING............ 26
Proxy Statement/Prospectus................................ 26
Time and Place of Special Meeting......................... 26
Voting in Person.......................................... 27
Voting by Proxy........................................... 27
Voting by Telephone or the Internet....................... 27
Quorum Requirement and Adjournment........................ 27
Vote Necessary to Approve Each Proposal................... 28
Proxy Solicitation........................................ 28
Other Matters............................................. 28
Shareholder Proposals..................................... 28
Ownership of Shares....................................... 29
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 29
Fees Paid to the Auditor Related to Trust................. 29
Fees Paid to the Auditor Not Related to Trust............. 29
</Table>
<Table>
EXHIBIT A -- Classes of Shares of Your Fund and Corresponding Classes of
Shares of Buying Fund....................................... A-1
EXHIBIT B -- Comparison of Performance of Your Fund and Buying Fund...... B-1
EXHIBIT C -- Comparison Fee Table and Expense Example.................... C-1
EXHIBIT D -- Trustee Compensation Table.................................. D-1
EXHIBIT E -- Officers of Trust........................................... E-1
EXHIBIT F -- Security Ownership of Management............................ F-1
EXHIBIT G -- Trustee Ownership of Fund Shares............................ G-1
EXHIBIT H -- Shares Outstanding of Each Class of Your Fund on Record
Date........................................................ H-1
EXHIBIT I -- Ownership of Shares of Your Fund............................ I-1
EXHIBIT J -- Ownership of Shares of Buying Fund.......................... J-1
APPENDIX I -- Agreement and Plan of Reorganization for Your Fund (to
Effect the Reorganization)
APPENDIX II -- Prospectus of Buying Fund
APPENDIX III -- Discussion of Performance of Buying Fund
</Table>
THE AIM FAMILY OF FUNDS, AIM AND DESIGN, AIM, AIM FUNDS, AIM FUNDS AND
DESIGN, AIM INVESTOR, AIM LIFETIME AMERICA, AIM LINK, AIM INSTITUTIONAL FUNDS,
AIMFUNDS.COM, LA FAMILIA AIM DE FONDOS, LA FAMILIA AIM DE FONDOS AND DESIGN,
INVIERTA CON DISCIPLINA AND INVEST WITH
iv
DISCIPLINE ARE REGISTERED SERVICE MARKS AND AIM BANK CONNECTION, AIM INTERNET
CONNECT, AIM PRIVATE ASSET MANAGEMENT, AIM PRIVATE ASSET MANAGEMENT AND DESIGN,
AIM STYLIZED AND/OR DESIGN, AIM ALTERNATIVE ASSETS AND DESIGN, AIM INVESTMENTS,
AIM INVESTMENTS AND DESIGN, MYAIM.COM, THE AIM COLLEGE SAVINGS PLAN, AIM SOLO
401(k) AND YOUR GOALS. OUR SOLUTIONS. ARE SERVICE MARKS OF A I M MANAGEMENT
GROUP INC.
INVESCO, THE OPEN CIRCLE DESIGN, INVESCO FUNDS, INVESCO FUNDS GROUP,
INVESCO -- YOUR GLOBAL INVESTMENT PARTNER AND YOU SHOULD KNOW WHAT INVESCO KNOWS
ARE REGISTERED SERVICE MARKS OF AMVESCAP PLC.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this
Proxy Statement/Prospectus, and you should not rely on such other information or
representations.
v
INTRODUCTION
Your Fund is one of 86 portfolios advised by AIM and Buying Fund is one of
46 portfolios advised by INVESCO. Proposals 1 and 2 that you are being asked to
vote on relate to or result from an integration initiative announced on March
27, 2003, by AMVESCAP, the parent company of AIM and INVESCO, with respect to
its North American mutual fund operations. The primary components of AMVESCAP's
integration initiative are:
- Using a single distributor for all AMVESCAP mutual funds in the United
States. To that end, A I M Distributors, Inc., the distributor for the
retail mutual funds advised by AIM (the "AIM Funds"), replaced INVESCO
Distributors, Inc. as the distributor for the retail mutual funds advised
by INVESCO (the "INVESCO Funds") effective July 1, 2003.
- Integrating back office support and creating a single platform for back
office support of AMVESCAP's mutual fund operations in the United States,
including such support services as transfer agency and information
technology. One result of this integration will be that shares of the AIM
Funds and shares of the INVESCO Funds generally will be able to be
exchanged for shares of the same or a similar class of each other.
- Rationalizing and streamlining of the various AIM Funds and INVESCO
Funds. In that regard, AMVESCAP has undertaken an extensive review of
these funds and concluded that it would be appropriate to reduce the
number of smaller and less efficient funds that compete for limited
shareholder assets and to consolidate certain funds having similar
investment objectives and strategies. Reducing both the number of AIM
Funds and INVESCO Funds will allow AIM and INVESCO to concentrate on
managing their core products. The Reorganization is one of a number of
fund reorganizations proposed by AMVESCAP as a result of this review
process. AMVESCAP's belief is that the Reorganization will allow Buying
Fund the best available opportunities for investment management, growth
prospects and potential economies of scale. Proposal 1 relates to this
component of AMVESCAP's integration initiative.
- Rationalizing the contractual arrangements for the provision of
investment advisory and administrative services to the AIM Funds and the
INVESCO Funds. The objective of this component is to have AIM assume
primary responsibility for the investment advisory, administrative,
accounting and legal and compliance services for the INVESCO Funds. To
implement this component, each INVESCO Fund, including Buying Fund, is
seeking shareholder approval to enter into a new investment advisory
agreement with AIM. These changes will simplify AMVESCAP's mutual fund
operations in the United States in that there will be a uniform
arrangement for investment management for both the AIM Funds and the
INVESCO Funds.
- Simplifying the organizational structure of the AIM Funds and the INVESCO
Funds so that they are all organized as Delaware statutory trusts, using
as few entities as practicable. To implement this component, each AIM
Fund and each INVESCO Fund that currently is organized as a Maryland
corporation is seeking shareholder approval to redomesticated as a new
Delaware statutory trust, which also should provide these Funds with
greater flexibility in conducting their business operations. In addition,
certain series portfolios of AIM Funds with few portfolios are seeking
shareholder approval to be restructured as new series portfolios of
existing AIM Funds that are organized as Delaware statutory trusts.
In considering the integration initiative proposed by AMVESCAP, the
directors/trustees of the AIM Funds and the directors of the INVESCO Funds who
are not "interested persons" (as defined in the Investment Company Act of 1940
(the "1940 Act")) of the Funds or their advisors determined that the
shareholders of both the AIM Funds and the INVESCO Funds would benefit if one
set of directors/ trustees was responsible for overseeing the operation of both
the AIM Funds and the INVESCO Funds and the services provided by AIM, INVESCO
and their affiliates. Accordingly, these directors/trustees agreed to combine
the separate boards and create a unified board of directors/trustees. Proposal 2
relates to the election of trustees of your Fund.
1
You are being asked to approve Proposal 2 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to take advantage of
these other benefits of AMVESCAP's integration initiative. We will be unable to
determine whether a Proposal 2 should go forward until we have determined
whether Proposal 1 has been approved. Therefore, even if you vote in favor of
Proposal 1, it is still important that you vote on Proposal 2. For information
about the Special Meeting and voting on Proposals 1 and 2, see "Information
About the Special Meeting and Voting." For a description of the vote necessary
to approve each of Proposals 1 and 2, see "Information About the Special Meeting
and Voting -- Vote Necessary to Approve Each Proposal."
PROPOSAL 1 --
APPROVAL OF THE AGREEMENT
TO COMBINE YOUR FUND AND BUYING FUND
SUMMARY
The Board, including the independent trustees, has determined that the
Reorganization is in the best interests of your Fund and that the interests of
the shareholders of your Fund will not be diluted as a result of the
Reorganization. The Board believes that a larger combined fund should be more
viable and have greater market presence and should have greater investment
leverage in that portfolio managers should have broader investment opportunities
and lower trading costs. The Board also believes that a larger combined fund
also should result in greater operating efficiencies by providing economies of
scale to the combined fund in that certain fixed costs, such as legal,
accounting, shareholder services and director/trustee expenses, will be spread
over the greater assets of the combined fund. For additional information
concerning the factors the Board considered in approving the Agreement, see
"Additional Information About the Agreement -- Board Considerations."
The following summary discusses some of the key features of the
Reorganization and highlights certain differences between your Fund and Buying
Fund. This summary is not complete and does not contain all of the information
that you should consider before voting on whether to approve the Agreement. For
more complete information, please read this entire Proxy Statement/Prospectus.
THE REORGANIZATION
The Reorganization will result in the combination of your Fund with Buying
Fund. Your Fund is a series of Trust, a Delaware statutory trust. Buying Fund is
a series of Buyer, a Maryland corporation. The Board of Directors of Buyer is
soliciting the proxies of the shareholders of Buyer's series portfolios to vote
on an agreement and plan of reorganization to redomesticate Buyer as a Delaware
statutory trust in order to provide Buyer with greater flexibility in conducting
its business operations. If approved by Buyer's shareholders, the consummation
of the redomestication of Buyer as a Delaware statutory trust will occur prior
to the consummation of the Reorganization.
If shareholders of your Fund approve the Agreement and other closing
conditions are satisfied, all of the assets of your Fund will be transferred to
Buying Fund and Buying Fund will assume the liabilities of your Fund, and Buyer
will issue shares of each class of Buying Fund to shareholders of the
corresponding class of shares of your Fund, as set forth on Exhibit A. For a
description of certain closing conditions that must be satisfied, see
"Additional Information About the Agreement -- Other Terms."
The shares of Buying Fund issued in the Reorganization will have an
aggregate net asset value equal to the net value of the assets of your Fund
transferred to Buying Fund. The value of your account with Buying Fund
immediately after the Reorganization will be the same as the value of your
account with your Fund immediately prior to the Reorganization. A copy of the
Agreement is attached as Appendix I to this Proxy Statement/Prospectus. See
"Additional Information About the Agreement."
Trust and Buyer will receive an opinion of Kirkpatrick & Lockhart LLP to
the effect that the Reorganization will constitute a tax-free reorganization for
Federal income tax purposes. Thus, shareholders will not have to pay additional
Federal income tax as a result of the Reorganization except to
2
the extent your Fund disposes of securities at a net gain in anticipation of the
Reorganization, which gain would be included in a taxable distribution. See
"Additional Information About the Agreement -- Federal Income Tax Consequences."
No sales charges will be imposed in connection with the Reorganization.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
Your Fund and Buying Fund pursue similar investment objectives and invest
in similar types of securities. As a result, the Reorganization is not expected
to cause significant portfolio turnover or transaction expenses from the sale of
securities that are incompatible with the investment objective of Buying Fund.
The investment objective or goal of Buying Fund is classified as
fundamental, which means that the Board of Directors of Buyer cannot change it
without shareholder approval. The investment objective of your Fund is not
classified as fundamental, which means that the Board can change it without
shareholder approval.
A description of the fundamental and non-fundamental restrictions and
policies applicable to your Fund and Buying Fund can be found in each Fund's
Statement of Additional Information. While your Fund and Buying Fund have
slightly different approaches to disclosing and characterizing these
restrictions and policies, in substance your Fund and Buying Fund operate under
the same general restrictions and are subject to the same general policies.
The chart below provides a summary for comparison purposes of the
investment objectives and principal investment strategies of your Fund and
Buying Fund. You can find more detailed information about the investment
objectives, strategies and other investment policies of your Fund and Buying
Fund in the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
<Table>
<Caption>
AIM GLOBAL ENERGY FUND INVESCO ENERGY FUND
(YOUR FUND) (BUYING FUND)
---------------------- -------------------
INVESTMENT OBJECTIVE
- - long-term growth of capital - capital growth
INVESTMENT STRATEGIES
- - normally invests at least 80% of its assets - invests 80% of its net assets in the equity
in securities of energy sector companies securities and equity-related instruments
of companies doing business in the energy
- - invests primarily in marketable equity sector
securities, including convertible
securities, but its investments may include - invests primarily in equity securities that
synthetic instruments such as warrants, INVESCO believes will rise in price faster
futures, options, exchange-traded funds and than other securities, as well as in
American Depositary Receipts options and other investments whose values
are based upon the values of equity
securities
- - considers an "energy sector company" to be - considers a company to be in the energy
one that (1) derives at least 50% of its sector if it meets at least one of the
gross income or net sales from energy following tests:
sector activities; (2) devotes at least 50% -- at least 50% of its gross income or its
of its assets to such activities, based on net sales must come from activities in
its most recent fiscal year; or (3) based the sector;
on other available information, the advisor -- at least 50% of its assets must be
determines that its primary business is devoted to producing revenues from the
within the energy sector sector; or
-- based on the other available
information, it is determined that its
primary business is within the sector
</Table>
3
<Table>
<Caption>
AIM GLOBAL ENERGY FUND INVESCO ENERGY FUND
(YOUR FUND) (BUYING FUND)
---------------------- -------------------
- - invests in companies that develop, produce, - invests in companies that include, but are
provide, operate, own or distribute not limited to, oil companies, oil and gas
products or services related to energy exploration companies, natural gas pipeline
companies, refinery companies, energy
- - products or services include, but are not conservation companies, coal, alternative
limited to, exploration, production, energy companies, and innovative energy
development, refinement, management, technology companies
storage or distribution of oil, gas,
electricity and coal, as well as nuclear,
geothermal, oil shale, solar power and
other alternative energy sources; onshore
or offshore drilling; production and well
maintenance; pipelines; energy
conservation; pollution control technology;
and equipment supply and plant design or
construction
- - no corresponding strategy - generally prefers to keep its investments
divided among the four main energy
subsectors: major oil companies, energy
services, oil and gas
exploration/production companies, and
natural gas pipeline companies
- - will normally invest in the securities of - may invest up to 25% of its assets in
issuers located in at least three different securities of non-U.S. issuers (securities
countries, including the U.S. and may of Canadian issuers and American Depositary
invest a significant portion of its assets Receipts are not subject to this 25%
in the securities of U.S. issuers limitation); no specific requirement with
respect to allocation of assets in a
- - will invest no more than 50% of its total specific number of countries
assets in the securities of issuers in any
one country, other than the U.S.
- - the portfolio managers allocate your Fund's
assets among securities of countries and in
currency denominations that are expected to
provide the best opportunities for meeting
your Fund's investment objective
- - may invest in companies located in - no corresponding strategy
developing countries
- - may invest up to 20% of its net assets in - may invest in junk bonds which INVESCO
lower-quality debt securities, i.e., "junk believes are not highly speculative and
bonds" which are rated at least CCC by S&P or Caa
by Moody's, although not a principal
strategy
- - analyzes specific companies for possible - uses a research oriented bottom-up
investment and looks for several of the investment approach. Focuses on company
following characteristics: above-average fundamentals and growth prospects when
per share earnings growth; high return on selecting securities, generally emphasizes
invested capital; a healthy balance sheet; companies INVESCO believes are strongly
sound financial and accounting policies and managed and will generate above-average
overall financial strength; strong long-term capital appreciation
competitive advantages; effective research
and product development and marketing;
development of new technologies; efficient
service; pricing flexibility; strong
management; and general operating
characteristics that will enable the
companies to compete successfully in their
respective markets
- - may engage in active and frequent trading - adjusts portfolio weightings depending on
of portfolio securities to achieve its current economic conditions
investment objective
</Table>
4
<Table>
<Caption>
AIM GLOBAL ENERGY FUND INVESCO ENERGY FUND
(YOUR FUND) (BUYING FUND)
---------------------- -------------------
- - may invest in debt securities issued by - no corresponding strategy
energy companies, or in equity and debt
securities of other companies the portfolio
managers believe will benefit from
developments in the energy sector
</Table>
COMPARISON OF PRINCIPAL SERVICE PROVIDERS
The following is a list of the current principal service providers for your
Fund and Buying Fund.
<Table>
<Caption>
SERVICE PROVIDERS
-----------------------------------------------------------------
AIM GLOBAL ENERGY FUND INVESCO ENERGY FUND
SERVICE (YOUR FUND) (BUYING FUND)
- ------- ------------------------------- -------------------------------
Investment Advisor............. A I M Advisors, Inc. INVESCO Funds Group, Inc.*
11 Greenway Plaza, Suite 100 4350 South Monaco Street
Houston, Texas 77046-1173 Denver, Colorado 80237
Distributor.................... A I M Distributors, Inc. A I M Distributors, Inc.**
11 Greenway Plaza, Suite 100 11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 Houston, Texas 77046-1173
Administrator.................. A I M Advisors, Inc. INVESCO Funds Group, Inc.***
11 Greenway Plaza, Suite 100 4350 South Monaco Street
Houston, Texas 77046-1173 Denver, Colorado 80237
Custodian...................... State Street Bank and Trust State Street Bank and Trust
Company Company
Transfer Agent and Dividend
Disbursing Agent............. A I M Fund Services, Inc. INVESCO Funds Group, Inc.****
Independent Auditors........... PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
</Table>
- ---------------
* If the shareholders of Buying Fund approve a new investment advisory
agreement with AIM, AIM will replace INVESCO as investment advisor for your
Fund effective November 5, 2003.
** A I M Distributors, Inc. replaced INVESCO Distributors, Inc. as distributor
of Buying Fund effective July 1, 2003.
*** If the shareholders of Buying Fund approve a new investment advisory
agreement with AIM, AIM will replace INVESCO as administrator for Buying
Fund effective November 5, 2003.
**** A I M Fund Services, Inc. will replace INVESCO as transfer agent and
dividend disbursing agent for Buying Fund on or about October 1, 2003.
COMPARISON OF PERFORMANCE
A bar chart showing the annual total returns for calendar years ended
December 31 for Class A shares of your Fund and Investor Class shares of Buying
Fund can be found at Exhibit B. Also included as part of Exhibit B is a table
showing the average annual total returns for the periods indicated for your Fund
and Buying Fund, including sales charges. For more information regarding the
total return of your Fund, see the "Financial Highlights" section of the Selling
Fund Prospectus, which has been made a part of this Proxy Statement/Prospectus
by reference. For more information regarding the total return of Buying Fund,
see "Information About Buying Fund -- Financial Highlights." Past performance
cannot guarantee comparable future results.
COMPARISON OF FEES AND EXPENSES
A comparison of shareholder fees and annual operating expenses of each
class of shares of your Fund as of October 31, 2002, and Buying Fund as of March
31, 2003, expressed as a percentage of net assets
5
("Expense Ratio"), can be found at Exhibit C. Pro forma estimated Expense Ratios
for each class of shares of Buying Fund after giving effect to the
Reorganization are also provided as of March 31, 2003 as part of Exhibit C.
COMPARISON OF MULTIPLE CLASS STRUCTURES
A comparison of the share classes of your Fund that are available to
investors and the corresponding share classes of Buying Fund that shareholders
of your Fund will receive in the Reorganization can be found as Exhibit A. In
addition to the share classes of Buying Fund listed on Exhibit A, Investor Class
shares and Class K shares are available to investors. These share classes are
not involved in the Reorganization. For information regarding the features of
the various share classes of your Fund and Buying Fund, see the Selling Fund
Prospectus and the Buying Fund Prospectus, respectively.
COMPARISON OF SALES CHARGES
No initial sales charges are applicable to shares of Buying Fund received
by holders of your Fund's shares in connection with the Reorganization. No
redemption of your Fund's shares that could cause the imposition of a contingent
deferred sales charge ("CDSC") will result in connection with the
Reorganization. The holding period for purposes of determining whether to charge
a CDSC upon redemptions of shares of Buying Fund received by holders of your
Fund's shares in connection with the Reorganization will begin at the time your
Fund's shares were originally purchased.
The chart below provides a summary for comparison purposes of the initial
sales charges and CDSCs applicable to each class of shares of your Fund and
Buying Fund. The fee tables at Exhibit C include comparative information about
maximum initial sales charges on purchases of Class A shares of your Fund and
Buying Fund and the maximum CDSC on redemptions of certain classes of shares of
your Fund and Buying Fund. For more detailed information on initial sales
charges, including volume purchase breakpoints and waivers, and reductions of
CDSCs over time, see the Selling Fund Prospectus and the Buying Fund Prospectus.
<Table>
<Caption>
CLASS A CLASS B CLASS C
------- ------- -------
- - subject to an initial - not subject to an initial - not subject to an initial
sales charge* sales charge sales charge
- - may be subject to a CDSC - subject to a CDSC on - subject to a CDSC on
on redemptions made within certain redemptions made certain redemptions made
18 months from the date of within 6 years from the within 12 months from the
certain large purchases** date of purchase date of purchase***
</Table>
<Table>
<Caption>
CLASS K INVESTOR CLASS
(BUYING FUND ONLY) (BUYING FUND ONLY)
------------------ ------------------
- - not subject to an initial - not subject to an initial
sales charge sales charge
- - may be subject to a CDSC - not subject to a CDSC
on redemptions made within
12 months from the date of
certain purchases
</Table>
- ---------------
* Both your Fund and Buying Fund waive initial sales charges on Class A shares
for certain categories of investors, including certain of their affiliated
entities and certain of their employees, officers and directors/trustees and
those of their investment advisor.
** For qualified plans investing in Class A shares of Buying Fund, this period
is 12 months rather than 18 months.
*** Prior to August 18, 2003, Class C shares of Buying Fund are subject to a
CDSC on certain redemptions made within 13 months from the date of purchase.
This 13 month period changes to 12 months effective August 18, 2003.
6
The CDSC on redemptions of shares of your Fund is computed based on the
lower of their original purchase price or current market value. Prior to August
18, 2003, the CDSC on redemptions of shares of Buying Fund is computed based on
their original purchase price. This method of computation changes to conform to
your Fund's method of computation effective August 18, 2003.
COMPARISON OF DISTRIBUTION, PURCHASE AND REDEMPTION PROCEDURES AND EXCHANGE
RIGHTS
Shares of your Fund and Buying Fund are distributed by A I M Distributors,
Inc. ("AIM Distributors"), a registered broker-dealer and wholly owned
subsidiary of AIM. AIM Distributors replaced INVESCO Distributors, Inc. as
distributor of Buying Fund effective July 1, 2003.
Both your Fund and Buying Fund have adopted a distribution plan that allows
the payment of distribution and service fees for the sale and distribution of
the shares of each of their respective classes. Both your Fund and Buying Fund
have engaged AIM Distributors to provide such services either directly or
through third parties. The fee tables at Exhibit C include comparative
information about the distribution and service fees payable by each class of
shares of your Fund and Buying Fund. Overall, each class of shares of Buying
Fund has the same or lower aggregate distribution and service fees as the
corresponding class of shares of your Fund.
Although there are differences in the purchase, redemption and exchange
procedures of your Fund and Buying Fund as of the date of this Proxy
Statement/Prospectus, it is currently anticipated that the purchase, redemption
and exchange procedures of your Fund and/or Buying Fund will be changed so that
they are substantially the same prior to the consummation of the Reorganization.
For information regarding the current purchase, redemption and exchange
procedures of your Fund and Buying Fund, see the Selling Fund Prospectus and the
Buying Fund Prospectus, respectively.
As of the date of this Proxy Statement/Prospectus, shares of your Fund
generally may be exchanged for shares of the same or a similar class of funds
within The AIM Family of Funds(R) and shares of Buying Fund generally may be
exchanged for shares of the same or a similar class of funds within the INVESCO
Family of Funds. It is currently anticipated that, prior to the consummation of
the Reorganization, shares of The AIM Family of Funds(R) and shares of the
INVESCO Family of Funds generally will be able to be exchanged for shares of the
same or a similar class of each other. If this exchangeability feature is not
offered to shareholders prior to the consummation of the Reorganization, the
consummation of the Reorganization will be delayed until such time as it is
offered. See "Additional Information About the Agreement -- The Reorganization."
For more detailed information regarding the current exchange rights of your Fund
and Buying Fund, see the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
THE BOARD'S RECOMMENDATION ON PROPOSAL 1
Your Board, including the independent trustees, unanimously recommends that
you vote "FOR" this Proposal.
7
RISK FACTORS
RISKS ASSOCIATED WITH BUYING FUND
The following is a discussion of the principal risks associated with Buying
Fund.
Buying Fund is generally subject to risks that affect the energy sector.
Although individual security selection drives the performance of Buying Fund,
short-term fluctuations in commodity prices may influence Buying Fund's returns
and increase price fluctuations in its shares. The businesses in which Buying
Fund invests may be adversely affected by foreign government, federal, or state
regulations on energy production, distribution or sale. Buying Fund is also
subject to the following specific risks:
INVESTMENT STYLE RISK
Growth investing may be more volatile than other investment styles because
growth stocks are more sensitive to investor perceptions of an issuing company's
growth potential. Growth-oriented funds typically will underperform
value-oriented funds when investor sentiment favors the value investing style.
SECTOR RISK
Buying Fund is concentrated in a comparatively narrow segment of the
economy. This means Buying Fund's investment concentration in the energy sector
is higher than most mutual funds and the broad securities market. Consequently,
Buying Fund tends to be more volatile than other mutual funds, and the value of
its portfolio investments and consequently the value of an investment in Buying
Fund tend to go up and down more rapidly.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of Buying
Fund's investments. Certain stocks selected for Buying Fund's portfolio may
decline in value more than the overall stock market. In general, the securities
of small companies have more volatility than those of mid-size or large
companies.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory, and diplomatic risks. Buying Fund may invest up
to 25% of its assets in securities of non-U.S. issuers. Securities of Canadian
issuers and American Depository Receipts are not subject to this 25% limitation.
Foreign securities risk also includes the following:
Currency Risk. A change in the exchange rate between U.S. Dollars and a
foreign currency may reduce the value of Buying Fund's investment in a security
valued in the foreign currency, or based on that currency value.
Political Risk. Political actions, events, or instability may result in
unfavorable changes in the value of a security.
Regulatory Risk. Government regulations may affect the value of a
security. In foreign countries, securities markets that are less regulated than
those in the U.S. may permit trading practices that are not allowed in the U.S.
Diplomatic Risk. A change in the diplomatic relations between the U.S. and
a foreign country could affect the value or liquidity of investments.
LIQUIDITY RISK
Buying Fund's portfolio is liquid if Buying Fund is able to sell the
securities it owns at a fair price within a reasonable time. Liquidity is
generally related to the market trading volume for a particular
8
security. Investments in smaller companies or in foreign companies or companies
in emerging markets are subject to a variety of risks, including potential lack
of liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some
manner, from the price of another security, index, asset, or rate. Derivatives
include options and futures contracts, among a wide range of other instruments.
The principal risk of investments in derivatives is that the fluctuations in
their values may not correlate perfectly with the overall securities markets.
Some derivatives are more sensitive to interest changes and market price
fluctuations than others. Some derivatives are more sensitive to interest rate
changes and market price fluctuations than others. Also, derivatives are subject
to counterparty risk, described below.
Options and futures are common types of derivatives that Buying Fund may
occasionally use to hedge its investments. An option is the right to buy and
sell a security or other instrument, index, or commodity at a specific price on
or before a specific date. A future is an agreement to buy or sell a security or
other instrument, index, or commodity at a specific price on a specific date.
The use of options and futures may increase the performance of the Fund, but
also may increase market risk. Other types of derivatives include swaps, caps,
floors, and collars.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with
Buying Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete, or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
PORTFOLIO TURNOVER RISK
Buying Fund's investments may be bought and sold relatively frequently. A
high turnover rate may affect Buying Fund's performance because it results in
higher brokerage commissions and may result in taxable gain distributions to
Buying Fund's shareholders.
GENERAL RISKS
Not Insured. Mutual funds are not insured by the FDIC or any other
government agency, unlike bank deposits such as CDs or savings accounts.
No Guarantee. No mutual fund can guarantee that it will meet its
investment objectives.
Possible Loss of Investment. A mutual fund cannot guarantee its
performance, nor assure you that the market value of your investment will
increase. You may lose the money you invest, and Buying Fund will not reimburse
you for any of these losses.
Volatility. The price of your mutual fund shares will increase or decrease
with changes in the value of Buying Fund's underlying investments and changes in
the equity markets as a whole.
Not a Complete Investment Plan. An investment in any mutual fund does not
constitute a complete investment plan. Buying Fund is designed to be only a part
of your personal investment plan.
9
COMPARISON OF RISKS OF BUYING FUND AND YOUR FUND
The risks associated with an investment in your Fund are similar to those
described above for Buying Fund because of the similarities in their investment
objectives and strategies. Set forth below is a discussion of certain risks that
differ between Buying Fund and your Fund. You can find more detailed
descriptions of specific risks associated with your Fund in the Selling Fund
Prospectus.
Your Fund has a broader category of companies included in the energy sector
which may increase your Fund's diversification. In contrast, Buying Fund
generally prefers to limit investments to the four main energy subsectors, which
may lead to greater concentration within the energy industry and less
diversification within the energy sector.
Your Fund has a greater ability to invest in foreign securities compared to
Buying Fund, which can only invest up to 25% of its assets in foreign
securities. Because your Fund has no such restrictions, it may be subject to
greater foreign securities risk exposure than Buying Fund.
Your Fund may invest in debt securities which are particularly vulnerable
to credit risk and interest rate fluctuations. Interest rate increases can cause
the price of a debt security to decrease. Your Fund may invest up to 20% of its
net assets in junk bonds. Buying Fund may invest in junk bonds but it is not a
principal strategy of Buying Fund. Your Fund's greater exposure to junk bonds
may give it greater exposure to credit risks.
Your Fund may participate in the initial public offering (IPO) market in
some market cycles. Because of your Fund's small asset base, any investment it
may make in IPOs may significantly affect the fund's total return. As your
Fund's assets grow, the impact of IPO investments will decline, which may reduce
the effect of IPO investments on your Fund's total return.
INFORMATION ABOUT BUYING FUND
DESCRIPTION OF BUYING FUND SHARES
Shares of Buying Fund 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 Buyer in certain circumstances. Each share
of Buying Fund represents an equal proportionate interest in Buying Fund with
each other share and is entitled to such dividends and distributions out of the
income belonging to Buying Fund as are declared by the Board of Directors of
Buying Fund. Each share of Buying Fund generally has the same voting, dividend,
liquidation and other rights; however, each class of shares of Buying Fund is
subject to different sales loads, conversion features, exchange privileges and
class-specific expenses. When issued, shares of Buying 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.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Buying Fund taken from its annual report
to shareholders for the fiscal year ended March 31, 2003 is set forth in
Appendix III to this Proxy Statement/Prospectus.
FINANCIAL HIGHLIGHTS
For more information about Buying Fund's financial performance, see the
"Financial Highlights" section of the Buying Fund Prospectus, which is attached
to this Proxy Statement/Prospectus as Appendix II.
PENDING SHAREHOLDER PROPOSALS FOR BUYING FUND
As previously discussed, the Board of Directors of Buyer is soliciting the
shareholders of Buying Fund to vote on a new investment advisory agreement
between AIM and Buying Fund, a new sub-advisory
10
agreement between AIM and INVESCO Institutional (N.A.), Inc., an affiliate of
INVESCO, for Buying Fund, and an agreement and plan of reorganization to
redomesticate Buyer as a Delaware statutory trust.
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Agreement. Significant provisions of the Agreement are
summarized below; however, this summary is qualified in its entirety by
reference to the Agreement, a copy of which is attached as Appendix I to this
Proxy Statement/Prospectus.
THE REORGANIZATION
Consummation of the Reorganization (the "Closing") is expected to occur on
October 27, 2003, at 8:00 a.m., Eastern Time (the "Effective Time") on the basis
of values calculated as of the close of regular trading on the New York Stock
Exchange on October 24, 2003 (the "Valuation Date"). At the Effective Time, all
of the assets of your Fund will be delivered to Buyer's custodian for the
account of Buying Fund in exchange for the assumption by Buying Fund of the
liabilities of your Fund and delivery by Buyer directly to the holders of record
as of the Effective Time of the issued and outstanding shares of each class of
your Fund of a number of shares of each corresponding class of Buying Fund
(including, if applicable, fractional shares rounded to the nearest thousandth),
having an aggregate net asset value equal to the value of the net assets of your
Fund so transferred, assigned and delivered, all determined and adjusted as
provided in the Agreement. Upon delivery of such assets, Buying Fund will
receive good and marketable title to such assets free and clear of all liens.
In order to ensure continued qualification of your Fund for treatment as a
"regulated investment company" for tax purposes and to eliminate any tax
liability of your Fund arising by reason of undistributed investment company
taxable income or net capital gain, Trust will declare on or prior to the
Valuation Date to the shareholders of your Fund a dividend or dividends that,
together with all previous such dividends, shall have the effect of distributing
(a) all of your Fund's investment company taxable income (determined without
regard to any deductions for dividends paid) for the taxable year ended October
31, 2002 and for the short taxable year beginning on November 1, 2002 and ending
on the Closing and (b) all of your Fund's net capital gain recognized in its
taxable year ended October 31, 2002 and in such short taxable year (after
reduction for any capital loss carryover).
Buying Fund will proceed with the Reorganization if the shareholders of
your Fund approve the Agreement.
It is anticipated that, prior to the Closing, shares of The AIM Family of
Funds(R) and shares of the INVESCO Family of Funds generally will be able to be
exchanged for shares of the same or a similar class of each other. If this
exchangeability feature is not offered to shareholders prior to the Closing, the
Closing will be postponed until a mutually acceptable date not later than
December 31, 2003 (the "Termination Date").
BOARD CONSIDERATIONS
AMVESCAP initially proposed that the Board consider the Reorganization at
an in-person meeting of the Board held on May 13-14, 2003, at which preliminary
discussions of the Reorganization took place. The Board determined that the
Reorganization is in the best interests of your Fund and will not dilute the
interests of your Fund's shareholders, and approved the Agreement and the
Reorganization, at an in-person meeting of the Board held on June 10-11, 2003.
Over the course of the two Board meetings, the Board received from AIM and
INVESCO written materials that contained information concerning your Fund and
Buying Fund, including comparative total return and fee and expense information,
a comparison of investment objectives and strategies of your Fund
11
and Buying Fund and pro forma expense ratios for Buying Fund. AIM and INVESCO
also provided the Board with written materials concerning the structure of the
proposed Reorganization and the Federal tax consequences of the Reorganization.
In evaluating the Reorganization, the Board considered a number of factors,
including:
- The investment objective and principal investment strategies of your Fund
and Buying Fund.
- The comparative expenses of your Fund and Buying Fund and the pro forma
expenses of Buying Fund after giving effect to the Reorganization.
- The comparative performance of your Fund and Buying Fund.
- The comparative sizes of your Fund and Buying Fund.
- The consequences of the Reorganization for Federal income tax purposes,
including the treatment of capital loss carryforwards, if any, available
to offset future capital gains of both your Fund and Buying Fund.
- Any fees and expenses that will be borne directly or indirectly by your
Fund or Buying Fund in connection with the Reorganization.
The Board noted that your Fund will bear the costs and expenses incurred in
connection with the Reorganization.
The Board also noted that no sales charges or other charges would be
imposed on any of the shares of Buying Fund issued to the shareholders of your
Fund in connection with the Reorganization.
Based on the foregoing and the information presented at the two Board
meetings discussed above, the Board determined that the Reorganization is in the
best interests of your Fund and will not dilute the interests of your Fund's
shareholders. Therefore, the Board recommends the approval of the Agreement by
the shareholders of your Fund at the Special Meeting.
AMVESCAP initially proposed that the Board of Directors of Buyer consider
the Reorganization at a telephone meeting of the Board of Directors held on May
5, 2003. Preliminary discussions of the Reorganization took place at the May 5,
2003 telephone meeting and at an in-person meeting of the Board of Directors
held on May 13-15, 2003. The Board of Directors of Buyer determined that the
Reorganization is in the best interests of Buying Fund and will not dilute the
interests of Buying Fund shareholders, and approved the Agreement and the
Reorganization, at an in-person meeting of the Board of Directors held on June
9, 2003.
OTHER TERMS
If any amendment is made to the Agreement which would have a material
adverse effect on shareholders, such change will be submitted to the affected
shareholders for their approval. However, the Agreement may be amended without
shareholder approval by mutual agreement of the parties.
Trust and Buyer have made representations and warranties in the Agreement
that are customary in matters such as the Reorganization. The obligations of
Trust and Buyer pursuant to the Agreement are subject to various conditions,
including the following mutual conditions:
- the assets of your Fund to be acquired by Buying Fund shall constitute at
least 90% of the fair market value of the net assets and at least 70% of
the fair market value of the gross assets held by your Fund immediately
prior to the Reorganization;
- Buyer's Registration Statement on Form N-14 under the Securities Act of
1933 (the "1933 Act") shall have been filed with the SEC and such
Registration Statement shall have become effective, and no stop-order
suspending the effectiveness of the Registration Statement shall have
been issued, and no proceeding for that purpose shall have been initiated
or threatened by the SEC (and not withdrawn or terminated);
12
- the shareholders of your Fund shall have approved the Agreement; and
- Trust and Buyer shall have received an opinion from Kirkpatrick &
Lockhart LLP that the consummation of the transactions contemplated by
the Agreement will not result in the recognition of gain or loss for
Federal income tax purposes for your Fund, Buying Fund or their
shareholders.
The Board of Trustees of Trust and the Board of Directors of Buyer may
waive without shareholder approval any default by Trust or Buyer or any failure
by Trust or Buyer to satisfy any of the above conditions as long as such a
waiver is mutual and will not have a material adverse effect on the benefits
intended under the Agreement for the shareholders of your Fund. The Agreement
may be terminated and the Reorganization may be abandoned at any time by mutual
agreement of the parties, or by either party if the shareholders of your Fund do
not approve the Agreement or if the Closing does not occur on or before the
Termination Date.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Reorganization and is based upon the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the existing U.S.
Treasury regulations thereunder, current administrative rulings of the Internal
Revenue Service ("IRS") and published judicial decisions, all of which are
subject to change. The principal Federal income tax consequences that are
expected to result from the Reorganization, under currently applicable law, are
as follows:
- the Reorganization will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code;
- no gain or loss will be recognized by your Fund upon the transfer of its
assets to Buying Fund solely in exchange for shares of Buying Fund and
Buying Fund's assumption of the liabilities of your Fund or on the
distribution of those shares to your Fund's shareholders; notwithstanding
the foregoing, no conclusion is expressed as to the effect of the
Reorganization on your Fund or any shareholder of your Fund with respect
to any asset as to which any unrealized gain or loss is required to be
recognized for Federal income tax purposes at the end of a taxable year
(or on the termination or transfer of a taxpayer's rights (or
obligations) with respect to such asset) under a mark-to-market system of
accounting;
- no gain or loss will be recognized by Buying Fund on its receipt of
assets of your Fund in exchange for shares of Buying Fund issued directly
to your Fund's shareholders;
- no gain or loss will be recognized by any shareholder of your Fund upon
the exchange of shares of your Fund for shares of Buying Fund;
- the tax basis of the shares of Buying Fund to be received by a
shareholder of your Fund will be the same as the shareholder's tax basis
of the shares of your Fund surrendered in exchange therefor;
- the holding period of the shares of Buying Fund to be received by a
shareholder of your Fund will include the period for which such
shareholder held the shares of your Fund exchanged therefor, provided
that such shares of your Fund are capital assets in the hands of such
shareholder as of the Closing; and
- the tax year of your Fund will end on the date of the Closing, and Buying
Fund will thereafter succeed to and take into account any capital loss
carryover and certain other tax attributes of your Fund, subject to all
relevant conditions and limitations on the use of such tax benefits.
Neither Trust nor Buyer has requested or will request an advance ruling
from the IRS as to the Federal tax consequences of the Reorganization. As a
condition to Closing, Kirkpatrick & Lockhart LLP will render a favorable opinion
to Trust and Buyer as to the foregoing Federal income tax consequences of the
Reorganization, which opinion will be conditioned upon, among other things, the
accuracy, as of the Effective Time, of certain representations of Trust and
Buyer upon which Kirkpatrick & Lockhart LLP
13
will rely in rendering its opinion. The conclusions reached in that opinion
could be jeopardized if the representations of Trust or Buyer are incorrect in
any material respect.
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF YOUR FUND. YOUR FUND'S SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE
REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Buying Fund of the assets of your Fund will
be the same as the book cost basis of such assets to your Fund.
RIGHTS OF SHAREHOLDERS
GENERAL
Buyer is a Maryland corporation. Trust is a Delaware statutory trust. There
is much that is similar between Maryland corporations and Delaware statutory
trusts. For example, the responsibilities, powers and fiduciary duties of the
directors of Buyer are substantially similar to those of the trustees of Trust.
There are, however, certain differences between the two forms of
organization. The operations of Buyer, as a Maryland corporation, are governed
by its Articles of Incorporation, and any restatements, amendments and
supplements thereto (the "Articles of Incorporation"), and applicable Maryland
law. The operations of Trust, as a Delaware statutory trust, are governed by its
Amended and Restated Agreement and Declaration of Trust, as amended (the
"Declaration of Trust"), and applicable Delaware law.
As discussed above under "Summary -- The Reorganization," if approved by
Buyer's shareholders, Buyer will be redomesticated as a Delaware statutory trust
prior to the consummation of the Reorganization. If such redomestication occurs,
the discussion below of the rights of shareholders of a Maryland corporation
will be inapplicable to Buyer.
LIABILITY OF SHAREHOLDERS
Shareholders of a Maryland corporation generally do not have personal
liability for the corporation's obligations, except that a shareholder may be
liable to the extent that he or she receives any distribution which exceeds the
amount which he or she could properly receive under Maryland law or where such
liability is necessary to prevent fraud.
The Delaware Statutory Trust Act provides that 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, however, a remote
possibility that, under certain circumstances, shareholders of a Delaware
statutory trust might be held personally liable for the trust's obligations to
the extent the courts of another state that does not recognize such limited
liability were to apply the laws of such state to a controversy involving such
obligations. The Declaration of Trust provides that shareholders of the Trust
shall not be subject to any personal liability for acts or obligations of the
Trust and that every written agreement, obligation or other undertaking made or
issued by the Trust shall contain a provision to the effect that shareholders
are not personally liable thereunder. In addition, the Declaration of Trust
provides for indemnification out of the Trust's property for any shareholder
held personally liable solely by reason of his or her being or having been a
shareholder. Therefore, the risk of any shareholder incurring financial loss
beyond his or her investment due to shareholder liability is limited to
circumstances in which the Trust itself is unable to meet its obligations and
the express disclaimer of shareholder liabilities is determined not to be
effective. Given the nature of the assets and operations of the Trust, the
possibility of the Trust being unable to meet its obligations is considered
remote, and even if a claim were brought against the
14
Trust and a court determined that shareholders were personally liable, it would
likely not impose a material obligation on a shareholder.
ELECTION OF DIRECTORS/TRUSTEES; TERMS
The shareholders of Buyer have elected a majority of the directors of
Buyer. Each director serves until a successor is elected, subject to his or her
earlier death, resignation or removal in the manner provided by law (see below).
In the case of a vacancy on the Board of Directors (other than a vacancy created
by removal by the shareholders), a majority of the directors may appoint a
successor to fill such vacancy. The right of the Board of Directors to appoint
directors to fill vacancies without shareholder approval is subject to the
provisions of the 1940 Act.
The shareholders of Trust have elected a majority of the trustees of Trust.
Such trustees serve for the life of Trust, subject to their earlier death,
incapacitation, resignation, retirement or removal (see below). In the case of
any vacancy on the Board of Trustees, a majority of the trustees may appoint a
successor to fill such vacancy. The right of the Board of Trustees to appoint
trustees to fill vacancies without shareholder approval is subject to the
provisions of the 1940 Act.
REMOVAL OF DIRECTORS/TRUSTEES
A director of Buyer may be removed by the affirmative vote of a majority of
the Board of Directors, a committee of the Board of Directors appointed for such
purpose, or the holders of a majority of the outstanding shares of Buyer.
A trustee of Trust may be removed at any time by a written instrument
signed by at least two-thirds of the trustees or by vote of two-thirds of the
outstanding shares of Trust.
MEETINGS OF SHAREHOLDERS
Buyer is not required to hold annual meetings of shareholders and does not
intend to do so unless required by the 1940 Act. The bylaws of Buyer provide
that a special meeting of shareholders may be called by the president or, in his
or her absence, the vice-president or by a majority of the Board of Directors or
holders of shares entitled to cast at least 10% of the votes entitled to be cast
at the special meeting. Requests for special meetings must, among other things,
state the purpose of such meeting and the matters to be voted upon. No special
meeting need be called to consider any matter previously voted upon at a special
meeting called by the shareholders during the preceding twelve months, unless
requested by a majority of all shares entitled to vote at such meeting.
Trust is not required to hold annual meetings of shareholders unless
required by the 1940 Act and does not intend to do so. The bylaws of Trust
provide that any trustee may call a special meeting of shareholders and the
trustees shall call a special meeting of the shareholders solely for the purpose
of removing one or more trustees upon written request of the holders of not less
than 10% of the outstanding shares of Trust. Special meetings may be called for
the purpose of electing trustees or for any other action requiring shareholder
approval, or for any matter deemed by the trustees to be necessary or desirable.
LIABILITY OF DIRECTORS/TRUSTEES AND OFFICERS; INDEMNIFICATION
Maryland law permits a corporation to eliminate liability of its directors
and officers to the corporation or its stockholders, except for liability
arising from receipt of an improper benefit or profit and from active and
deliberate dishonesty. The Articles of Incorporation eliminate director and
officer liability to the fullest extent permitted under Maryland law. Under
Maryland law, indemnification of a corporation's directors and officers is
mandatory if a director or officer has been successful on the merits or
otherwise in the defense of certain proceedings. Maryland law permits
indemnification for other matters unless it is established that the act or
omission giving rise to the proceeding was committed in bad faith, a result of
active and deliberate dishonesty, or one in which a director or officer actually
received an improper benefit.
15
Delaware law provides that trustees of a statutory trust shall not be
liable to the statutory trust or its shareholders for acting in good faith
reliance on the provisions of its governing instrument and that the trustee's
liabilities may be expanded or restricted by such instrument. Under the
Declaration of Trust, the trustees and officers of Trust are not liable for any
act or omission or any conduct whatsoever in their capacity as trustees, except
for liability to the trust or shareholders due to willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of trustee. Delaware law allows a statutory trust to
indemnify and hold harmless any trustee or other person against any and all
claims and demands. The Declaration of Trust provides for the indemnification of
its trustees and officers to the extent that such trustees and officers act in
good faith and reasonably believe that their conduct is in the best interests of
Trust, except with respect to any matter in which it has been determined that
such trustee acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.
DISSOLUTION AND TERMINATION
Maryland law provides that Buyer may be dissolved by the vote of a majority
of the Board of Directors and two-thirds of the shares entitled to vote on the
dissolution; however the Articles of Incorporation reduce the required
shareholder vote from two-thirds to a majority of the shares entitled to vote on
the dissolution.
Pursuant to the Declaration of Trust, Trust or any series or class of
shares of beneficial interest in Trust may be terminated by: (1) a majority
shareholder vote of Trust or the affected series or class, respectively; or (2)
if there are fewer than 100 shareholders of record of Trust or of such
terminating series or class, the trustees pursuant to written notice to the
shareholders of Trust or the affected series or class.
VOTING RIGHTS OF SHAREHOLDERS
Shareholders of a Maryland corporation such as Buyer are entitled to vote
on, among other things, those matters which effect fundamental changes in the
corporate structure (such as a merger, consolidation or sale of substantially
all of the assets of the corporation) as provided by Maryland law.
The Declaration of Trust grants shareholders power to vote only with
respect to the following: (i) election of trustees, provided that a meeting of
shareholders has been called for that purpose; (ii) removal of trustees,
provided that a meeting of shareholders has been called for that purpose; (iii)
termination of Trust or a series or class of its shares of beneficial interest,
provided that a meeting of shareholders has been called for that purpose; (iv)
sale of all or substantially all of the assets of Trust or one of its investment
portfolios; (v) merger or consolidation of Trust or any of its investment
portfolios, with certain exceptions; (vi) approval of any amendments to
shareholders' voting rights under the Declaration of Trust; and (vii) approval
of such additional matters as may be required by law or as the trustees, in
their sole discretion, shall determine.
DISSENTERS' RIGHTS
Under Maryland law, shareholders may not demand the fair value of their
shares from the successor company in a transaction involving the transfer of the
corporation's assets and are, therefore, bound by the terms of the transaction
if the stock is that of an open-end investment company registered with the SEC
under the 1940 Act and the value placed on the stock in the transaction is its
net asset value.
Neither Delaware law nor the Declaration of Trust confers upon shareholders
rights of appraisal or dissenters' rights.
AMENDMENTS TO ORGANIZATION DOCUMENTS
Consistent with Maryland law, Buyer reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation in the
manner prescribed by statute, including any
16
amendment that alters the contract rights, as expressly set forth in the
Articles of Incorporation, of any outstanding stock, and all rights conferred on
shareholders are granted subject to this reservation. The Board of Directors of
Buyer may approve amendments to the Articles of Incorporation to classify or
reclassify unissued shares of a class of stock without shareholder approval.
Other amendments to the Articles of Incorporation may be adopted if approved by
the affirmative vote of a majority of all the votes entitled to be cast on the
matter. The directors shall have the power to alter, amend or repeal the bylaws
of Buyer or adopt new bylaws at any time.
Consistent with Delaware law, the Board of Trustees of Trust may, without
shareholder approval, amend the Declaration of Trust at any time, except to
eliminate any voting rights pertaining to the shares of Trust, without approval
of the majority of the shares of Trust. The trustees shall have the power to
alter, amend or repeal the bylaws of Trust or adopt new bylaws at any time.
17
CAPITALIZATION
The following table sets forth, as of March 31, 2003, (i) the
capitalization of each class of shares of your Fund, (ii) the capitalization of
each class of shares of Buying Fund, and (iii) the pro forma capitalization of
each class of shares of Buying Fund as adjusted to give effect to the
transactions contemplated by the Agreement.
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
CLASS A SHARES CLASS A SHARES CLASS A SHARES
-------------- -------------- --------------
Net Assets.......................................... $28,345,772 $9,130,699 $37,476,471
Shares Outstanding.................................. 2,415,278 542,002 2,224,619
Net Asset Value Per Share........................... $ 11.74 $ 16.85 $ 16.85
</Table>
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
CLASS B SHARES CLASS B SHARES CLASS B SHARES
-------------- -------------- --------------
Net Assets.......................................... $12,981,388 $1,501,954 $14,483,342
Shares Outstanding.................................. 1,139,594 89,871 866,625
Net Asset Value Per Share........................... $ 11.39 $ 16.71 $ 16.71
</Table>
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
CLASS C SHARES CLASS C SHARES CLASS C SHARES
-------------- -------------- --------------
Net Assets.......................................... $1,984,714 $9,566,346 $11,551,060
Shares Outstanding.................................. 174,072 581,459 702,094
Net Asset Value Per Share........................... $ 11.40 $ 16.45 $ 16.45
</Table>
<Table>
<Caption>
PRO FORMA
BUYING FUND BUYING FUND
INVESTOR CLASS SHARES INVESTOR CLASS SHARES
--------------------- ---------------------
Net Assets............................................... $231,023,351 $231,023,351
Shares Outstanding....................................... 13,745,599 13,745,599
Net Asset Value Per Share................................ $ 16.81 $ 16.81
</Table>
<Table>
<Caption>
PRO FORMA
BUYING FUND BUYING FUND
CLASS K SHARES CLASS K SHARES
-------------- --------------
Net Assets.................................................. $289,333 $289,333
Shares Outstanding.......................................... 18,602 18,602
Net Asset Value Per Share................................... $ 15.55 $ 15.55
</Table>
18
INTERESTS OF CERTAIN PERSONS
If the Reorganization is consummated and if the shareholders of Buying Fund
do not approve a proposed new investment advisory agreement with AIM, INVESCO,
as the current investment advisor of Buying Fund, will gain approximately $43.3
million in additional assets under management (based on your Fund's net assets
as of March 31, 2003), upon which INVESCO will receive advisory fees. Exhibit C
sets forth INVESCO's advisory fees applicable to Buying Fund.
LEGAL MATTERS
Certain legal matters concerning the tax consequences of the Reorganization
will be passed upon by Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
NW, Washington, DC 20036-1221.
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND
For more information with respect to your Fund concerning the following
topics, please refer to the following sections of the Selling Fund Prospectus,
which has been made a part of this Proxy Statement/ Prospectus by reference: (i)
see "Performance Information" for more information about the performance of your
Fund; (ii) see "Fund Management" for more information about the management of
your Fund; (iii) see "Other Information" for more information about your Fund's
policy with respect to dividends and distributions; and (iv) see "Other
Information" and "Shareholder Information" for more information about sales
charges, including contingent deferred sales charges, applicable to shares of
your Fund, the pricing, purchase, redemption and repurchase of shares of your
Fund, tax consequences to shareholders of various transactions in shares of your
Fund, distribution arrangements and the multiple class structure of your Fund.
For more information with respect to Buying Fund concerning the following
topics, please refer to the following sections of the Buying Fund Prospectus,
which has been made a part of this Proxy Statement/ Prospectus by reference and
which is attached to this Proxy Statement/Prospectus as Appendix II: (i) see
"Fund Performance" for more information about the performance of Buying Fund;
(ii) see "Fund Management" and "Portfolio Managers" for more information about
the management of Buying Fund; (iii) see "Share Price" for more information
about the pricing of shares of Buying Fund; (iv) see "Taxes" for more
information about tax consequences to shareholders of various transactions in
shares of Buying Fund; (v) see "Dividends And Capital Gain Distributions" for
more information about Buying Fund's policy with respect to dividends and
distributions; and (vi) see "How To Buy Shares", "How To Sell Shares" and "Your
Account Services" for more information about sales charges, including contingent
deferred sales charges, applicable to shares of Buying Fund, the purchase,
redemption and repurchase of shares of Buying Fund, distribution arrangements
and the multiple class structure of Buying Fund.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which Trust and
Buyer have filed with the SEC pursuant to the requirements of the 1933 Act and
the 1940 Act, to which reference is hereby made. The SEC file number of Trust's
registration statement containing the Selling Fund Prospectus and related
Statement of Additional Information is Registration No. 811-05426. Such Selling
Fund Prospectus is incorporated herein by reference. The SEC file number for
Buyer's registration statement containing the Buying Fund Prospectus and related
Statement of Additional Information is Registration No. 811-3826. Such Buying
Fund Prospectus is incorporated herein by reference.
Trust and Buyer are subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith
file reports and other information with the SEC. Reports, proxy material,
registration statements and other information filed by Trust and Buyer
(including the
19
Registration Statement of Buyer relating to Buying Fund on Form N-14 of which
this Proxy Statement/ Prospectus is a part) may be inspected without charge and
copied at the public reference facilities maintained by the SEC at Room 1014,
Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the
following regional office of the SEC: 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, NW, Washington, DC
20549, at the prescribed rates. The SEC maintains a website at www.sec.gov that
contains information regarding Trust and Buyer and other registrants that file
electronically with the SEC.
PROPOSAL 2 --
ELECTION OF TRUSTEES
BACKGROUND
In considering the integration initiative proposed by AMVESCAP, the
independent directors/trustees of the AIM Funds and the independent directors of
the INVESCO Funds determined that the shareholders of all the AIM Funds and the
INVESCO Funds would benefit if a unified board of directors/trustees was
responsible for overseeing the operation of both the AIM Funds and the INVESCO
Funds and the services provided by AIM, INVESCO and their affiliates.
Accordingly, the Boards of Directors/Trustees of the AIM Funds and the Boards of
Directors of the INVESCO Funds agreed to combine the separate boards and create
a unified board of directors/trustees.
You are being asked to approve Proposal 2 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to benefit from having
a combined board of trustees.
STRUCTURE OF THE BOARD OF TRUSTEES
The Board currently consists of 12 persons. Ten of the current trustees are
"independent," meaning they are not "interested persons" of Trust within the
meaning of the 1940 Act. Two of the current trustees are "interested persons"
because of their business and financial relationships with Trust and AIM, its
investment advisor, and/or AIM's parent, AMVESCAP.
NOMINEES FOR TRUSTEES
Trust's Committee on Directors/Trustees (which consists solely of
independent trustees) has approved the nomination of each of the 12 current
trustees, as set forth below, to serve as trustee until his or her successor is
elected and qualified. In addition, the Committee on Directors/Trustees has
approved the nomination of four new nominees, as set forth below, to serve as
trustee until his or her successor is elected and qualified. These four new
nominees were nominated to effect the proposed combination of the Boards of
Directors/Trustees of the AIM Funds and the Boards of Directors of the INVESCO
Funds.
Each nominee who is a current trustee serves as a director or trustee of
the 17 registered investment companies comprising the AIM Funds. Each nominee
who is a current trustee oversees 86 portfolios which comprise the AIM Funds.
The business address of each nominee who is a current trustee is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
Each new nominee serves as a director of the ten registered investment
companies comprising the INVESCO Funds. Each new nominee currently oversees 46
portfolios which comprise the INVESCO Funds. The business address of each new
nominee is 4350 South Monaco Street, Denver, Colorado 80237.
If elected, each nominee would oversee a total of 27 registered investment
companies currently comprising 132 portfolios.
20
NOMINEES WHO CURRENTLY ARE INDEPENDENT TRUSTEES
<Table>
<Caption>
TRUSTEE PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ------- ----------------------- --------------------------
Frank S. Bayley -- 1939........ 1987 Of Counsel, law firm of Baker Badgley Funds, Inc.
& McKenzie (registered investment
company)
Bruce L. Crockett -- 1944...... 2001 Chairman, Crockett Technology ACE Limited (insurance
Associates (technology company); Captaris, Inc.
consulting company) and (unified messaging provider)
Captaris, Inc. (unified
messaging provider)
Albert R. Dowden -- 1941....... 2001 Director of a number of public Cortland Trust, Inc.
and private business (Chairman) (registered
corporations, including the investment company); Annuity
Boss Group, Ltd. (private and Life Re (Holdings), Ltd.
investment and management) and (insurance company)
Magellan Insurance Company;
formerly President, Chief
Executive Officer and
Director, Volvo Group North
America, Inc.; Senior Vice
President, AB Volvo and
director of various affiliated
Volvo Group companies
Edward K. Dunn, Jr. -- 1935.... 2001 Formerly, Chairman, Mercantile None
Mortgage Corp.; President and
Chief Operating Officer,
Mercantile-Safe Deposit &
Trust Co.; and President,
Mercantile Bankshares Corp.
Jack M. Fields -- 1952......... 2001 Chief Executive Officer, Administaff
Twenty First Century Group,
Inc. (government affairs
company) and Texana Timber LP
Carl Frischling -- 1937........ 2001 Partner, law firm of Kramer Cortland Trust, Inc.
Levin Naftalis & Frankel LLP (registered investment
company)
Prema Mathai-Davis -- 1950..... 2001 Formerly, Chief Executive None
Officer, YWCA of the USA
Lewis F. Pennock -- 1942....... 2001 Partner, law firm of Pennock & None
Cooper
Ruth H. Quigley -- 1935........ 1987 Retired None
Louis S. Sklar -- 1939......... 2001 Executive Vice President, None
Development and Operations,
Hines Interests Limited
Partnership (real estate
development company)
</Table>
21
NOMINEES WHO CURRENTLY ARE INTERESTED PERSONS
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S)
POSITION(S) HELD WITH TRUST SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- --------------------------- ------- ----------------------- --------------------------
Robert H. Graham(1) -- 1946.... 1998 Director and Chairman, A I M None
Chairman and President Management Group Inc.
(financial services holding
company); and Director and
Vice Chairman, AMVESCAP PLC
(parent of AIM and a global
investment management firm)
and Chairman, AMVESCAP
PLC -- AIM Division; 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), A I M Fund
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 Director of each of the ten
Executive Vice President Executive Officer, A I M INVESCO Funds
Management Group Inc.;
Director, Chairman and
President, A I M Advisors,
Inc. (registered investment
advisor); Director, A I M
Distributors, Inc. (registered
broker dealer); and Chief
Executive Officer of the AIM
Division of AMVESCAP PLC
(2003-present); formerly,
Chief Executive Officer,
Managed Products Division,
AMVESCAP PLC (2001-2002);
Chairman of the Board
(1998-2002), President
(1998-2002) and Chief
Executive Officer (1998-2002)
of INVESCO Funds Group, Inc.
(registered investment
advisor) and INVESCO
Distributors, Inc. (registered
broker dealer); Chief
Operating Officer and Chairman
of the Board of INVESCO Global
Health Sciences Fund; Chairman
and Chief Executive Officer of
NationsBanc Advisors, Inc.;
and Chairman of NationsBanc
Investments, Inc.
</Table>
- ---------------
(1) Mr. Graham is considered an interested person of Trust because he is a
director of AMVESCAP PLC, parent of the advisor to, and principal
underwriter of, Trust.
(2) Mr. Williamson is considered an interested person of Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, Trust.
22
NEW NOMINEES WHO WILL BE INDEPENDENT TRUSTEES
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ----------------------- --------------------------
Bob R. Baker -- 1936.............. Consultant (2000-present); None
formerly, President and Chief
Executive Officer (1988-2000) of
AMC Cancer Research Center,
Denver, Colorado; until
mid-December 1988, Vice Chairman
of the Board of First Columbia
Financial Corporation, Englewood,
Colorado; formerly, Chairman of
the Board and Chief Executive
Officer of First Columbia
Financial Corporation.
James T. Bunch -- 1942............ Co-President and Founder of None
Green, Manning & Bunch Ltd.,
Denver, Colorado (1988-present)
(investment banking firm);
Director and Vice President of
Western Golf Association and
Evans Scholars Foundation;
Executive Committee, United
States Golf Association;
formerly, General Counsel and
Director of Boettcher & Co.,
Denver, Colorado; and formerly,
Chairman and Managing Partner,
law firm of Davis, Graham &
Stubbs, Denver, Colorado.
Gerald J. Lewis -- 1933........... Chairman of Lawsuit Resolution General Chemical Group, Inc.,
Services, San Diego, California Hampdon, New Hampshire (1996-
(1987-present); formerly, present), Wheelabrator
Associate Justice of the Technologies, Inc. (waste
California Court of Appeals; and management company), Fisher
Of Counsel, law firm of Latham & Scientific, Inc. (laboratory
Watkins, San Diego, California supplies), Henley Manufacturing,
(1987-1997). Inc., and California Coastal
Properties, Inc.
Larry Soll, Ph.D. -- 1942......... Retired; formerly, Chairman of Synergen Inc. (since
the Board (1987-1994), Chief incorporation in 1982) and Isis
Executive Officer (1982-1989 and Pharmaceuticals, Inc.
1993-1994) and President
(1982-1989) of Synergen Inc.
(biotechnology company); and
formerly, trustee of INVESCO
Global Health Sciences Fund.
</Table>
THE BOARD'S RECOMMENDATION ON PROPOSAL 2
Your Board, including the independent trustees, unanimously recommends that
you vote "FOR" these 16 nominees.
COMMITTEES OF THE BOARD
The Board has four standing committees: an Audit Committee, an Investments
Committee, a Valuation Committee and a Committee on Directors/Trustees. These
committees will remain as part of the proposed combined board.
AUDIT COMMITTEE
The Audit Committee is comprised entirely of independent trustees. The
members of the current Audit Committee are Messrs. Frank S. Bayley, Bruce L.
Crockett, Albert R. Dowden (Vice Chair), Edward K. Dunn, Jr. (Chair), Jack M.
Fields, Lewis F. Pennock, Louis S. Sklar, Dr. Prema Mathai-
23
Davis and Miss Ruth H. Quigley. The Audit Committee is responsible for: (i) the
appointment, compensation and oversight of any independent auditors employed by
your Fund (including resolution of disagreements between your Fund's management
and the auditor regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work; (ii) overseeing the financial reporting
process of your Fund; (iii) monitoring the process and the resulting financial
statements prepared by management to promote accuracy of financial reporting and
asset valuation; and (iv) pre-approving permissible non-audit services that are
provided to your Fund by its independent auditors.
COMMITTEE ON DIRECTORS/TRUSTEES
The Committee on Directors/Trustees is comprised entirely of independent
trustees. The current members of the Committee on Directors/Trustees are Messrs.
Bayley, Crockett (Chair), Dowden, Dunn, Fields (Vice Chair), Pennock and Sklar,
Dr. Mathai-Davis and Miss Quigley. The Committee on Directors/Trustees is
responsible for: (i) nominating persons who are not interested persons of Trust
for election or appointment: (a) as additions to the Board, (b) to fill
vacancies which, from time to time, may occur in the Board and (c) for election
by shareholders of Trust at meetings called for the election of trustees; (ii)
nominating persons who are not interested persons of Trust for selection as
members of each committee of the Board, including, without limitation, the Audit
Committee, the Committee on Directors/ Trustees, the Investments Committee and
the Valuation Committee, and to nominate persons for selection as chair and vice
chair of each such committee; (iii) reviewing from time to time the compensation
payable to the independent trustees and making recommendations to the Board
regarding compensation; (iv) reviewing and evaluating from time to time the
functioning of the Board and the various committees of the Board; (v) selecting
independent legal counsel to the independent trustees and approving the
compensation paid to independent legal counsel; and (vi) approving the
compensation paid to independent counsel and other advisers, if any, to the
Audit Committee of Trust.
The Committee on Directors/Trustees will consider nominees recommended by a
shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Committee on Directors/Trustees or the Board, as applicable, shall
make the final determination of persons to be nominated.
Notice procedures set forth in Trust's bylaws require that any shareholder
of your Fund desiring to nominate a trustee for election at a shareholder
meeting must submit to the Secretary of Trust 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 meeting and not earlier than the close of business
on the 120th day prior to the meeting. The notice must set forth: (i) as to each
person whom the shareholder proposes to nominate for election or reelection as a
trustee all information relating to such person that is required to be disclosed
in solicitations of proxies for election of trustees in an election contest, or
is otherwise required, in each case pursuant to Regulation 14A of the Securities
Exchange Act of 1934 (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a trustee if elected); and
(ii) as to the shareholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination is made: (a) the name and address of such
shareholder, as they appear on Trust's books, and of such beneficial owner; and
(b) the number of shares of each series portfolio of Trust which are owned of
record or beneficially by such shareholder and such beneficial owner.
INVESTMENTS COMMITTEE
The current members of the Investments Committee are Messrs. Bayley,
Crockett, Dowden, Dunn, Fields, Carl Frischling, Pennock and Sklar (Chair), Dr.
Mathai-Davis (Vice Chair) and Miss Quigley. The Investments Committee is
responsible for: (i) overseeing AIM's investment-related compliance systems and
procedures to ensure their continued adequacy; and (ii) considering and acting,
on an interim basis between meetings of the full Board, on investment-related
matters requiring Board consideration, including dividends and distributions,
brokerage policies and pricing matters.
24
VALUATION COMMITTEE
The current members of the Valuation Committee are Messrs. Dunn and Pennock
(Chair), and Miss Quigley (Vice Chair). The Valuation Committee is responsible
for: (i) periodically reviewing AIM's Procedures for Valuing Securities
("Procedures"), and making any recommendations to AIM with respect thereto; (ii)
reviewing proposed changes to the Procedures recommended by AIM from time to
time; (iii) periodically reviewing information provided by AIM regarding
industry developments in connection with valuation; (iv) periodically reviewing
information from AIM regarding fair value and liquidity determinations made
pursuant to the Procedures, and making recommendations to the full Board in
connection therewith (whether such information is provided only to the Committee
or to the Committee and the full Board simultaneously); and (v) if requested by
AIM, assisting AIM's internal valuation committee and/or the full Board in
resolving particular valuation anomalies.
BOARD AND COMMITTEE MEETING ATTENDANCE
During the fiscal year ended October 31, 2002, the Board met ten times, the
Audit Committee met six times, the Committee on Directors/Trustees met five
times, the Investments Committee met four times and the Valuation Committee met
one time. All of the current trustees then serving attended at least 75% of the
meetings of the Board or applicable committee during the most recent fiscal
year.
TRUSTEE'S COMPENSATION
Each trustee who is not affiliated with AIM is compensated for his or her
services according to a fee schedule which recognizes the fact that such trustee
also serves as a director or trustee of other AIM Funds. Each such trustee
receives a fee, allocated among the AIM Funds for which he or she serves as a
director or trustee, which consists of an annual retainer component and a
meeting fee component.
Information regarding compensation paid or accrued for each trustee of
Trust who was not affiliated with AIM during the year ended December 31, 2002 is
found in Exhibit D.
RETIREMENT PLAN FOR TRUSTEES
The trustees have adopted a retirement plan for the trustees of 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 Trust and/or the other AIM Funds (each, a "Covered Fund") who has at least
five years of credited service as a trustee (including service to a predecessor
fund) for a Covered Fund. The retirement benefits will equal 75% of the
trustee's annual retainer paid or accrued by any Covered Fund to such trustee
during the twelve-month period prior to retirement, including the amount of any
retainer deferred under a separate deferred compensation agreement between the
Covered Fund and the trustee. The annual retirement benefits are payable in
quarterly installments for a number of years equal to the lesser of (i) ten or
(ii) the number of such trustee's credited years of service. A death benefit is
also available under the plan that provides a surviving spouse with a quarterly
installment of 50% of a deceased trustee's retirement benefits for the same
length of time that the trustee would have received the benefits 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. Payment of benefits
under the plan is not secured or funded by Trust.
DEFERRED COMPENSATION AGREEMENTS
Messrs. Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (for
purposes of this paragraph only, the "Deferring Trustees") have each executed a
Deferred Compensation Agreement (collectively, the
25
"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 Trust, and such amounts are placed into a deferral
account. Currently, the Deferring Trustees have the option to select various AIM
Funds in which all or part of their deferral accounts shall be deemed to be
invested. Distributions from the Deferring Trustees' deferral accounts will be
paid in cash, generally in equal quarterly installments over a period of up to
ten (10) years (depending on the Compensation Agreement) beginning on the date
selected under the Compensation Agreement. The Board in its sole discretion, may
accelerate or extend the distribution of such deferral accounts after the
Deferring Trustees' 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 Trustees' termination of service as a
trustee of 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 Trust
and of each other AIM Fund from which they are deferring compensation.
OFFICERS OF TRUST
Information regarding the current officers of Trust can be found in Exhibit
E.
SECURITY OWNERSHIP OF MANAGEMENT
Information regarding the ownership of each class of your Fund's shares by
trustees, nominees, and current executive officers of Trust can be found in
Exhibit F.
TRUSTEE OWNERSHIP OF YOUR FUND'S SHARES
The dollar range of equity securities beneficially owned by each trustee
and nominee as of December 31, 2002 (i) in your Fund and (ii) on an aggregate
basis, in all registered investment companies overseen by the trustee within the
AIM Funds complex can be found in Exhibit G.
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
PROXY STATEMENT/PROSPECTUS
We are sending you this Proxy Statement/Prospectus and the enclosed proxy
card because the Board is soliciting your proxy to vote at the Special Meeting
and at any adjournments of the Special Meeting. This Proxy Statement/Prospectus
gives you information about the business to be conducted at the Special Meeting.
However, you do not need to attend the Special Meeting to vote your shares.
Instead, you may simply complete, sign and return the enclosed proxy card or
vote by telephone or through a website established for that purpose.
Trust intends to mail this Proxy Statement/Prospectus, the enclosed Notice
of Special Meeting of Shareholders and the enclosed proxy card on or about
August 25, 2003 to all shareholders entitled to vote. Shareholders of record as
of the close of business on July 25, 2003 (the "Record Date") are entitled to
vote at the Special Meeting. The number of shares outstanding of each class of
shares of your Fund on the Record Date can be found at Exhibit H. Each share is
entitled to one vote for each full share held, and a fractional vote for a
fractional share held.
TIME AND PLACE OF SPECIAL MEETING
We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 on October 21, 2003, at 3:00 p.m., Central Time.
26
VOTING IN PERSON
If you do attend the Special Meeting and wish to vote in person, we will
provide you with a ballot prior to the vote. However, if your shares are held in
the name of your broker, bank or other nominee, you must bring a letter from the
nominee indicating that you are the beneficial owner of the shares on the Record
Date and authorizing you to vote. Please call Trust at (800) 952-3502 if you
plan to attend the Special Meeting.
VOTING BY PROXY
Whether you plan to attend the Special Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the Special Meeting and vote.
If you properly fill in and sign your proxy card and send it to us in time
to vote at the Special Meeting, your "proxy" (the individual named on your proxy
card) will vote your shares as you have directed. If you sign your proxy card
but do not make specific choices, your proxy will vote your shares as
recommended by the Board as follows and in accordance with management's
recommendation on other matters:
- FOR the proposal to approve the Agreement.
- FOR the election of all 16 nominees for trustee.
Your proxy will have the authority to vote and act on your behalf at any
adjournment of the Special Meeting.
If you authorize a proxy, you may revoke it at any time before it is
exercised by sending in another proxy card with a later date or by notifying the
Secretary of Trust in writing to the address of Trust set forth on the cover
page of this Proxy Statement/Prospectus before the Special Meeting that you have
revoked your proxy. In addition, although merely attending the Special Meeting
will not revoke your proxy, if you are present at the Special Meeting you may
withdraw your proxy and vote in person. Shareholders may also transact any other
business not currently contemplated that may properly come before the Special
Meeting in the discretion of the proxies or their substitutes.
VOTING BY TELEPHONE OR THE INTERNET
You may vote your shares by telephone or through a website established for
that purpose by following the instructions that appear on the proxy card
accompanying this Proxy Statement/Prospectus.
QUORUM REQUIREMENT AND ADJOURNMENT
A quorum of shareholders is necessary to hold a valid meeting. A quorum
will exist for Proposal 1 if shareholders entitled to vote one-third of the
issued and outstanding shares of your Fund on the Record Date are present at the
Special Meeting in person or by proxy. A quorum will exist for Proposal 2 if
shareholders entitled to vote one-third of the issued and outstanding shares of
Trust on the Record Date are present at the Special Meeting in person or by
proxy.
Under the rules applicable to broker-dealers, if your broker holds your
shares in its name, the broker will not be entitled to vote your shares if it
has not received instructions from you. A "broker non-vote" occurs when a broker
has not received voting instructions from a shareholder and is barred from
voting the shares without shareholder instructions because the proposal is
non-routine.
Abstentions and broker non-votes will count as shares present at the
Special Meeting for purposes of establishing a quorum.
If a quorum is not present at the Special Meeting or a quorum is present
but sufficient votes to approve a Proposal are not received, the persons named
as proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies. Any such adjournment will require the
27
affirmative vote of a majority of those shares represented at the Special
Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR a Proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST such
Proposal against such adjournment. A shareholder vote may be taken on a Proposal
in this Proxy Statement/ Prospectus prior to any such adjournment if sufficient
votes have been received and it is otherwise appropriate.
VOTE NECESSARY TO APPROVE EACH PROPOSAL
PROPOSAL 1. Approval of Proposal 1 requires the lesser of (a) the
affirmative vote of 67% or more of the voting securities of your Fund present or
represented by proxy at the Special Meeting, if the holders of more than 50% of
the outstanding voting securities of your Fund are present or represented by
proxy, or (b) the affirmative vote of more than 50% of the outstanding voting
securities of your Fund. Abstentions and broker non-votes are counted as present
but are not considered votes cast at the Special Meeting. As a result, they have
the same effect as a vote against Proposal 1 because approval of Proposal 1
requires the affirmative vote of a percentage of the voting securities present
or represented by proxy or a percentage of the outstanding voting securities.
PROPOSAL 2. The affirmative vote of a plurality of votes cast at the
Special Meeting is necessary to elect trustees, meaning that the trustee nominee
with the most affirmative votes for a particular slot is elected for that slot.
In an uncontested election for trustees, the plurality requirement is not a
factor. Abstentions and broker non-votes will not count as votes cast and will
have no effect on the outcome of this proposal.
PROXY SOLICITATION
Trust has engaged the services of Georgeson Shareholder Communications Inc.
("Solicitor") to assist in the solicitation of proxies for the Special Meeting.
Solicitor's costs are estimated to be approximately $12,400. Trust expects to
solicit proxies principally by mail, but Trust or Solicitor may also solicit
proxies by telephone, facsimile or personal interview. Trust's officers will not
receive any additional or special compensation for any such solicitation. Your
Fund will bear the costs and expenses incurred in connection with the
Reorganization, including Solicitor's costs.
OTHER MATTERS
Management does not know of any matters to be presented at the Special
Meeting other than those discussed in this Proxy Statement/Prospectus. If any
other matters properly come before the Special Meeting, the shares represented
by proxies will be voted with respect thereto in accordance with management's
recommendation.
SHAREHOLDER PROPOSALS
As a general matter, your Fund does not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of your Fund, you should send such proposal to Trust at the address
set forth on the first page of this Proxy Statement/Prospectus. To be considered
for presentation at a meeting of shareholders, Trust must receive proposals a
reasonable time before proxy materials are prepared for the meeting. Your
proposal also must comply with applicable law.
For a discussion of procedures that you must follow if you want to propose
an individual for nomination as a trustee, please refer to the section of this
Proxy Statement/Prospectus entitled "Proposal 2 -- Committees of the
Board -- Committee on Directors/Trustees."
28
OWNERSHIP OF SHARES
A list of the name, address and percent ownership of each person who, as of
July 25, 2003 to the knowledge of Trust owned 5% or more of any class of the
outstanding shares of your Fund can be found at Exhibit I.
A list of the name, address and percent ownership of each person who, as of
July 25, 2003 to the knowledge of Buyer owned 5% or more of any class of the
outstanding shares of Buying Fund can be found at Exhibit J.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP
(the "Auditor") as Trust's independent public accountants for the fiscal year
ending October 31, 2003. A representative of the Auditor is expected to be
available at the Special Meeting and to have the opportunity to make a statement
and respond to appropriate questions from the shareholders. The Audit Committee
of the Board has considered whether the provision of the services below is
compatible with maintaining the Auditor's independence.
FEES PAID TO THE AUDITOR RELATED TO TRUST
The Auditor billed Trust (consisting of six separate series portfolio)
aggregate fees for professional services rendered for the 2002 fiscal year as
follows:
<Table>
Audit Fees.................................................. $166,720
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees*............................................. $ 78,103
--------
Total Fees.................................................. $244,823
</Table>
- ---------------
* All Other Fees includes fees billed for all other non-audit services,
including fees for tax-related services rendered to Trust.
FEES PAID TO THE AUDITOR NOT RELATED TO TRUST
The Auditor billed AIM aggregate fees for professional services rendered
for the 2002 fiscal year to AIM, or any affiliate that provided services to
Trust, as follows:
<Table>
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees**............................................ $346,364
--------
Total Fees.................................................. $346,364
</Table>
- ---------------
** As required by SEC rules, All Other Fees includes amounts paid to the Auditor
by your Fund's advisor and other related entities that provides support for
the operations of Trust. All Other Fees include business advisory services
performed for the selection of a transfer agent and its conversion. The
services provided benefited many legal entities of AIM, including many other
funds within the AIM Fund complex.
29
EXHIBIT A
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF SHARES OF YOUR FUND SHARES OF BUYING FUND
- ------------------------------ ------------------------
Class A shares.............................................. Class A shares
Class B shares.............................................. Class B shares
Class C shares.............................................. Class C shares
</Table>
A-1
EXHIBIT B
COMPARISON OF PERFORMANCE OF YOUR FUND AND BUYING FUND
AIM GLOBAL ENERGY FUND (YOUR FUND)
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.
ANNUAL TOTAL RETURNS(1)
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.
<Table>
<Caption>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
1995................................................................... 7.05%
1996................................................................... 47.19%
1997................................................................... -1.51%
1998................................................................... -34.31%
1999................................................................... 18.69%
2000................................................................... 0.77%
2001................................................................... -17.03%
2002................................................................... 6.15%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
31.87% (quarter ended September 30, 1997) and the lowest quarterly return was
- -21.61% (quarter ended September 30, 1998).
B-1
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of
a broad-based securities market index. The fund's performance reflects payment
of sales loads.
Average Annual Total Returns (for the periods ended December 31, 2002)
<Table>
<Caption>
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION(2) DATE
-------- -------- ------------ ----------
Class A 5/31/94
Return Before Taxes................... 1.10% (8.00)% 0.47%
Return After Taxes on Distributions... 0.85 (8.09) 0.12
Return After Taxes on Distributions
and Sale of Fund Shares............ 0.68 (6.21) 0.29
MSCI AC World Free Index(3)............. (18.98) (1.94) 4.24(4) 5/31/94(4)
(reflects no deduction for fees,
expenses, or taxes)
</Table>
- ---------------
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on an investor's tax situation and may
differ from those shown, and after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts.
(1) A significant portion of the fund's returns during certain periods prior to
2001 was attributable to its investments in IPOs. These investments had a
magnified impact when the fund's asset base was relatively small. As the
fund's assets grow, the impact of IPO investments will decline, which may
reduce the effect of IPOs on the fund's total return. For additional
information regarding the impact of IPO investments on the fund's
performance, please see the "Financial Highlights" section of the
prospectus.
(2) Since Inception performance is only provided for a class with less than ten
calendar years of performance.
(3) The Morgan Stanley Capital International All Country World Free Index
measures the performance of securities listed on the major world stock
exchanges of 47 markets, including both developed and emerging markets.
(4) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
INVESCO ENERGY FUND (BUYING FUND)
Performance information in the bar chart below is that of the Fund's
Investor Class shares, which has the longest operating history of the Fund's
classes.
The bar chart below shows the Fund's Investor Class shares actual yearly
performance (commonly known as their "total return") for the years ended
December 31 over the past decade. The table below shows the pre-tax and
after-tax average annual total returns of Investor Class shares for various
periods ended December 31, 2002 compared to the S&P 500 Index.
After-tax returns are provided on a pre-redemption and post-redemption
basis. Pre-redemption returns assume you continue to hold your shares and pay
taxes on Fund distributions (i.e., dividends and capital gains) but do not
reflect taxes that may be incurred upon selling or exchanging shares.
Post-redemption returns assume payment of taxes on fund distributions and also
that you close your account and pay remaining federal taxes. After-tax returns
are calculated using the highest individual federal income tax rates in effect
at the time the distribution is paid. State and local taxes are not considered.
Actual after-tax returns depend on an investor's tax situation and may differ
from those shown. For investors holding their
B-2
shares in tax-deferred arrangements such as 401(k) plans or individual
retirement accounts, the after-tax return shown is not relevant.
The information in the bar chart and table illustrates the variability of
the Fund's total return and how its performance compared to a broad measure of
market performance. Remember, past performance (before and after taxes) does not
indicate how the Fund will perform in the future.
ENERGY FUND -- INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1)(2)
<Table>
'93......................................................... 16.71%
'94......................................................... (7.25)%
'95......................................................... 19.80%
'96......................................................... 38.84%
'97......................................................... 19.09%
'98......................................................... (27.83)%
'99......................................................... 41.88%
'00......................................................... 58.17%
'01......................................................... (16.81)%
'02......................................................... (4.32)%
</Table>
Best Calendar Qtr. 9/97 28.24%
Worst Calendar Qtr. 9/98 (18.34)%
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/02
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
INVESTOR CLASS
Energy Fund(1)(2)
Return Before Taxes.................................... (4.32)% 5.21% 10.70%
Return After Taxes on Distributions.................... (4.32)% 4.86% 9.21%
Return After Taxes on Distributions and Sale of Fund
Shares................................................ (2.65)% 4.24% 8.34%
S&P 500 Index(3)
(reflects no deduction for fees, expenses or taxes)....... (22.09)% (0.58)% 9.35%
</Table>
- ---------------
(1) Total return figures include reinvested dividends and capital gain
distributions and the effect of each class' expenses.
(2) Returns before taxes for Investor Class shares of Energy Fund year-to-date
as of the calendar quarter ended June 30, 2003 was 10.05%.
(3) The S&P 500 Index is an unmanaged index considered representative of the
performance of the broad U.S. stock market. Please keep in mind that the
Index does not pay brokerage, management, administrative, or distribution
expenses, all of which are paid by the classes and are reflected in its
annual returns. Index returns also do not include sales charges or CDSCs
that may be paid by the shareholder.
B-3
EXHIBIT C
COMPARISON FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table compares the shareholder fees and annual operating expenses,
expressed as a percentage of net assets ("Expense Ratios"), of Class A, Class B
and Class C shares of AIM Global Energy Fund ("Selling Fund"), and of Class A,
Class B, Class C, Class K and Investor Class shares of INVESCO Energy Fund
("Buying Fund"). Pro Forma Combined Expense Ratios of Buying Fund giving effect
to the reorganization of Selling Fund into Buying Fund are also provided.
<Table>
<Caption>
SELLING FUND BUYING FUND
(AS OF 10/31/02) (AS OF 3/31/03)
------------------------------ ----------------------------------------------------
INVESTOR
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS K CLASS
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- ------- ------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Front-End Sales Charge
(Load) on purchases (as a
percentage of offering price).... 4.75% None None 5.50% None None None None
Maximum Contingent Deferred Sales
Charge (Load)(1)................. None(2)(3) 5.00% 1.00% None(3)(4) 5.00% 1.00% None(5) None
ANNUAL FUND OPERATING EXPENSES(6)
(expenses that are deducted from
fund assets)
Management Fees................... 0.98% 0.98% 0.98% 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1)
Fees(7).......................... 0.50% 1.00% 1.00% 0.35% 1.00% 1.00% 0.45% 0.25%
Other Expenses.................... 1.28% 1.28% 1.28% 0.36% 0.66% 0.78% 4.16% 0.69%
Total Annual Fund Operating
Expenses(8)(9)................... 2.76% 3.26% 3.26% 1.46% 2.41% 2.53% 5.36% 1.69%
Fee Waivers/Reimbursements........ 0.76% 0.76% 0.76% 0.00% 0.00% 0.00% 3.16% 0.00%
Net Expenses...................... 2.00% 2.50% 2.50% 1.46% 2.41% 2.53% 2.20% 1.69%
<Caption>
BUYING FUND
PRO FORMA COMBINED
(AS OF 3/31/03)
----------------------------------------------------
INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS
SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Front-End Sales Charge
(Load) on purchases (as a
percentage of offering price).... 5.50% None None None None
Maximum Contingent Deferred Sales
Charge (Load)(1)................. None(3)(4) 5.00% 1.00% None(5) None
ANNUAL FUND OPERATING EXPENSES(6)
(expenses that are deducted from
fund assets)
Management Fees................... 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1)
Fees(7).......................... 0.35% 1.00% 1.00% 0.45% 0.25%
Other Expenses.................... 0.72% 0.85% 0.79% 4.16% 0.70%
Total Annual Fund Operating
Expenses(8)(9)................... 1.82% 2.60% 2.54% 5.36% 1.70%
Fee Waivers/Reimbursements........ 0.00% 0.00% 0.00% 3.16% 0.00%
Net Expenses...................... 1.82% 2.60% 2.54% 2.20% 1.70%
</Table>
- ---------------
(1) For Selling Fund, calculated as a percentage of original purchase price or
redemption proceeds, whichever is less. For Buying Fund and Buying Fund Pro
Forma Combined, calculated as a percentage of original purchase price.
(2) Effective November 1, 2002, if you are a retirement plan participant and you
bought $1,000,000 or more of Class A shares, you may pay a 1% contingent
deferred sales charge ("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 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% CDSC at the
time of redemption.
C-1
(4) For qualified plans investing in Class A shares, you may pay a CDSC of 1% on
your Class A shares if the plan is redeemed within 12 months from the
initial deposit in the plan's INVESCO account.
(5) For qualified plans investing in Class K shares, you may pay a CDSC of 0.70%
on your Class K shares if the plan is redeemed within twelve months from
initial deposit in the plan's INVESCO account.
(6) There is no guarantee that actual expenses will be the same as those shown
in the table.
(7) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares for a long period of time, you
may pay more than the economic equivalent of the maximum front-end sales
charge permitted for mutual funds by the National Association of Securities
Dealers, Inc.
(8) AIM has contractually agreed to limit Total Annual Fund Operating Expenses
of Selling Fund (excluding interest, taxes, dividend expense on short sales,
extraordinary items and increases in expenses due to expense offset
arrangements, if any) on Class A, Class B and Class C shares to 2.00%, 2.50%
and 2.50%, respectively. The expense limitation agreement is in effect
through October 31, 2004.
(9) INVESCO has contractually agreed to waive fees and bear any expenses on
Buying Fund through April 30, 2004 to limit Total Annual Operating Expenses
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases due to expense offset arrangements, if any) to 2.10%, 2.75%,
2.75% and 2.20% on Class A, Class B, Class C and Class K shares,
respectively. INVESCO has also voluntarily agreed to limit Total Annual
Operating Expenses (excluding interest, taxes, brokerage commissions,
extraordinary expenses and increases in expenses due to expense offset
arrangements, if any) to 1.65%, 2.30%, 2.30% and 1.75% on Class A, Class B,
Class C and Class K shares, respectively. The voluntary expense limitations
cannot be revoked by INVESCO prior to May 2004. Effective June 1, 2002,
INVESCO is entitled to reimbursement from the classes for fees and expenses
absorbed pursuant to voluntary and contractual expense limitation
commitments between INVESCO and Buying Fund if such reimbursement does not
cause a class to exceed expense limitations and the reimbursement is made
within three years after INVESCO incurred the expense.
C-2
EXPENSE EXAMPLE
This Example is intended to help you compare the costs of investing in
different classes of Selling Fund and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes
of Buying Fund giving effect to the reorganization of Selling Fund into Buying
Fund are also provided. All costs are based upon the information set forth in
the Fee Table above.
The Example assumes that you invest $10,000 for the time periods indicated
and shows the expenses that you would pay both if you redeem all of your shares
at the end of those periods and if you do not redeem your shares. The Example
also assumes that your investment has a 5% return each year and that the
operating expenses remain the same. The Example reflects fee waivers and/or
expense reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
SELLING FUND
Class A shares(1)
Assuming complete redemption at end of period..... $668 $1,222 $1,801 $3,365
Assuming no redemption............................ $668 $1,222 $1,801 $3,365
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $752 $1,233 $1,837 $3,392
Assuming no redemption(3)......................... $253 $ 933 $1,637 $3,392
Class C shares
Assuming complete redemption at end of
period(2)...................................... $353 $ 933 $1,637 $3,507
Assuming no redemption............................ $253 $ 933 $1,637 $3,507
BUYING FUND
Class A shares(1)
Assuming complete redemption at end of period..... $690 $ 986 $1,304 $2,200
Assuming no redemption............................ $690 $ 986 $1,304 $2,200
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $744 $1,051 $1,485 $2,511
Assuming no redemption(3)......................... $244 $ 751 $1,285 $2,511
Class C shares
Assuming complete redemption at end of
period(2)...................................... $356 $ 788 $1,345 $2,866
Assuming no redemption............................ $256 $ 788 $1,345 $2,866
Investor Class shares
Assuming complete redemption at end of period..... $172 $ 533 $ 918 $1,998
Assuming no redemption............................ $172 $ 533 $ 918 $1,998
Class K shares
Assuming complete redemption at end of period..... $223 $1,321 $2,411 $5,103
Assuming no redemption............................ $223 $1,321 $2,411 $5,103
BUYING FUND -- PRO FORMA COMBINED
Class A shares(1)
Assuming complete redemption at end of period..... $725 $1,091 $1,481 $2,570
Assuming no redemption............................ $725 $1,091 $1,481 $2,570
</Table>
C-3
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $763 $1,108 $1,580 $2,745
Assuming no redemption(3)......................... $263 $ 808 $1,380 $2,745
Class C shares
Assuming complete redemption at end of
period(2)...................................... $357 $ 791 $1,350 $2,875
Assuming no redemption............................ $257 $ 791 $1,350 $2,875
Investor Class shares
Assuming complete redemption at end of period..... $173 $ 536 $ 923 $2,009
Assuming no redemption............................ $173 $ 536 $ 923 $2,009
Class K shares
Assuming complete redemption at end of period..... $223 $1,321 $2,411 $5,103
Assuming no redemption............................ $223 $1,321 $2,411 $5,103
</Table>
- ---------------
(1) Assumes payment of the maximum sales charge by the Investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class A shares at the end of the
eighth year.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. SELLING
FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND
DOES NOT REPRESENT SELLING FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-4
EXHIBIT D
TRUSTEE COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for
each trustee of Trust who was not affiliated with AIM during the year ended
December 31, 2002:
<Table>
<Caption>
TOTAL
ESTIMATED COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL FROM ALL
COMPENSATION ACCRUED BY ALL BENEFITS UPON AIM
NAME OF TRUSTEE FROM TRUST(1) AIM FUNDS(2) RETIREMENT(3) FUNDS(4)
- --------------- ------------- ------------------- ------------- ------------
Frank S. Bayley....................... $7,460 $142,800 $90,000 $150,000
Bruce L. Crockett..................... 7,413 50,132 90,000 149,000
Owen Daly II(5)....................... 1,047 40,045 75,000 -0-
Albert R. Dowden...................... 7,460 57,955 90,000 150,000
Edward K. Dunn, Jr. .................. 7,413 94,149 90,000 149,000
Jack M. Fields........................ 7,460 29,153 90,000 153,000
Carl Frischling(6).................... 7,460 74,511 90,000 150,000
Prema Mathai-Davis.................... 7,460 33,931 90,000 150,000
Lewis F. Pennock...................... 7,676 54,802 90,000 154,000
Ruth H. Quigley....................... 7,460 142,502 90,000 153,000
Louis S. Sklar........................ 7,629 78,500 90,000 153,000
</Table>
- ---------------
(1) Amounts shown are based on the fiscal year ended October 31, 2002. The total
amount of compensation deferred by all trustees of Trust during the fiscal
year ended October 31, 2002, including earnings, was $34,109.
(2) During the fiscal year ended October 31, 2002, the total amount of expenses
allocated to Trust in respect of such retirement benefits was $3,876.
(3) Amounts shown assume each trustee serves until his or her normal retirement
date.
(4) All trustees currently serve as directors or trustees of 17 registered
investment companies advised by AIM.
(5) Mr. Daly was a trustee until December 31, 2001, when he retired.
(6) During the fiscal year ended October 31, 2002, Trust paid $25,413 in legal
fees to Kramer Levin Naftalis & Frankel LLP for services rendered by such
firm as counsel to the independent trustees of Trust. Mr. Frischling is a
partner of such firm.
D-1
EXHIBIT E
OFFICERS OF TRUST
The following table provides information with respect to the current
officers of Trust. Each officer is elected by the Board and serves until his or
her successor is chosen and qualified or until his or her resignation or removal
by the Board. The business address of all officers of Trust is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND OFFICER
POSITION(S) HELD WITH TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- --------------------------- ------- -------------------------------------------
Robert H. Graham -- 1946.......... 1998 Director and Chairman, A I M Management Group Inc.
Chairman and President (financial services holding company); and Director and
Vice Chairman, AMVESCAP PLC (parent of AIM and a global
investment management firm) and Chairman, AMVESCAP
PLC -- AIM Division; 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), A I M Fund Services, Inc. (registered transfer
agent), and Fund Management Company (registered broker
dealer); and Chief Executive Officer, AMVESCAP
PLC-Managed Products
Mark H. Williamson -- 1951........ 2003 Director, President and Chief Executive Officer, A I M
Executive Vice President Management Group Inc.; Director, Chairman and
President, A I M Advisors, Inc. (registered investment
advisor); Director, A I M Distributors, Inc.
(registered broker dealer); and Chief Executive Officer
of the AIM Division of AMVESCAP PLC (2003-present);
formerly, Chief Executive Officer, Managed Products
Division, AMVESCAP PLC (2001-2002); Chairman of the
Board (1998-2002), President (1998-2002) and Chief
Executive Officer (1998-2002) of INVESCO Funds Group,
Inc. (registered investment advisor) and INVESCO
Distributors, Inc. (registered broker dealer); Chief
Operating Officer and Chairman of the Board of INVESCO
Global Health Sciences Fund; Chairman and Chief
Executive Officer of NationsBanc Advisors, Inc.; and
Chairman of NationsBanc Investments, Inc.
Kevin M. Carome -- 1956........... 2003 Director, Senior Vice President and General Counsel,
Senior Vice President A I M Management Group Inc. (financial services holding
company) and A I M Advisors, Inc.; and Vice President,
A I M Capital Management, Inc., A I M Distributors,
Inc. and A I M Fund Services; Director, Vice President
and General Counsel, Fund Management Company
Gary T. Crum -- 1947.............. 1998 Director, Chairman and Director of Investments, A I M
Senior Vice President Capital Management, Inc.; Director and Executive Vice
President, A I M Management Group, Inc.; Director and
Senior Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP PLC;
formerly Chief Executive Officer and President, A I M
Capital Management, Inc.
Stuart W. Coco -- 1955............ 2002 Managing Director and Chief Research Officer -- Fixed
Vice President Income, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
</Table>
E-1
<Table>
<Caption>
NAME, YEAR OF BIRTH AND OFFICER
POSITION(S) HELD WITH TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- --------------------------- ------- -------------------------------------------
Melville B. Cox -- 1943........... 1998 Vice President and Chief Compliance Officer, A I M
Vice President Advisors, Inc. and A I M Capital Management, Inc.; and
Vice President, A I M Fund Services, Inc.
Edgar M. Larsen -- 1940........... 2002 Vice President, A I M Advisors, Inc.; and President,
Vice President Chief Executive Officer and Chief Investment Officer,
A I M Capital Management, Inc.
Dana R. Sutton -- 1959............ 1998 Vice President and Fund Treasurer, A I M Advisors, Inc.
Vice President and Treasurer
Nancy L. Martin -- 1957........... 2003 Vice President, A I M Advisors, Inc.; and Vice
Secretary President and General Counsel, A I M Capital
Management, Inc.
</Table>
E-2
EXHIBIT F
SECURITY OWNERSHIP OF MANAGEMENT
To the best knowledge of Trust, the following table sets forth certain
information regarding the ownership as of July 25, 2003 of the shares of
beneficial interest of each class of each series portfolio of Trust by the
trustees, nominees, and current executive officers of Trust.
<Table>
<Caption>
NUMBER OF SHARES
OWNED BENEFICIALLY AND
SERIES AND CLASS PERCENTAGE OF CLASS*
---------------- ----------------------
Frank S. Bayley............................................
Bruce L. Crockett..........................................
Albert R. Dowden...........................................
Edward K. Dunn, Jr. .......................................
Jack M. Fields.............................................
Carl Frischling............................................
Robert H. Graham...........................................
Prema Mathai-Davis.........................................
Lewis F. Pennock...........................................
Ruth H. Quigley............................................
Louis S. Sklar.............................................
Mark H. Williamson.........................................
Bob R. Baker...............................................
James T. Bunch.............................................
Gerald J. Lewis............................................
Larry Soll, Ph.D. .........................................
Kevin M. Carome............................................
Gary T. Crum...............................................
Stuart W. Coco.............................................
Melville B. Cox............................................
Edgar M. Larsen............................................
Dana R. Sutton.............................................
Nancy L. Martin............................................
</Table>
- ---------------
* To the best knowledge of Trust, the ownership of shares of each series
portfolio of Trust by trustees, nominees, and current executive officers of
Trust as a group constituted less than 1% of each class of each series
portfolio of Trust as of July 25, 2003.
F-1
EXHIBIT G
TRUSTEE OWNERSHIP OF FUND SHARES
Set forth below is the dollar range of equity securities beneficially owned
by each trustee and nominee as of December 31, 2002 (i) in your Fund and (ii) on
an aggregate basis, in all registered investment companies overseen by the
trustee within the AIM Funds complex:
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
COMPANIES OVERSEEN
DOLLAR RANGE OF EQUITY BY TRUSTEE IN THE
NAME OF TRUSTEE SECURITIES IN YOUR FUND AIM FUNDS COMPLEX(1)
--------------- ----------------------- -------------------------
INTERESTED TRUSTEES
Robert H. Graham................................... None Over $100, 000
Mark H. Williamson................................. None $10,001-$50,000
INDEPENDENT TRUSTEES
Frank S. Bayley.................................... None $10,001-$50,000
Bruce L. Crockett.................................. None $1-$10,000
Albert R. Dowden................................... None $50,001-$100,000
Edward K. Dunn, Jr.(1)............................. None Over $100,000
Jack M. Fields(1).................................. None Over $100,000
Carl Frischling(1)................................. None Over $100,000
Prema Mathai-Davis(1).............................. None Over $100,000
Lewis F. Pennock................................... None $50,001-$100,000
Ruth H. Quigley.................................... None $1-$10,000
Louis S. Sklar(1).................................. None Over $100,000
INDEPENDENT NOMINEES
Bob R. Baker....................................... None None
James T. Bunch..................................... None None
Gerald J. Lewis.................................... None None
Larry Soll, Ph.D. ................................. None None
</Table>
- ---------------
(1) Includes the total amount of compensation deferred by the trustee at his or
her election pursuant to a deferred compensation plan. Such deferred
compensation is placed in a deferral account and deemed to be invested in
one or more of the AIM Funds.
G-1
EXHIBIT H
SHARES OUTSTANDING OF EACH CLASS OF YOUR FUND ON RECORD DATE
As of July 25, 2003, there were the following number of shares outstanding
of each class of your Fund:
CLASS A SHARES
[ADD]
CLASS B SHARES
[ADD]
CLASS C SHARES
[ADD]
H-1
EXHIBIT I
OWNERSHIP OF SHARES OF YOUR FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of Trust owned 5% or more of any
class of the outstanding shares of your Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of your Fund is presumed
to "control" your Fund as defined in the 1940 Act. Such control may affect the
voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- -------- ------------ --------------
</Table>
- ---------------
* Trust has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
I-1
EXHIBIT J
OWNERSHIP OF SHARES OF BUYING FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of Buyer owned 5% or more of any
class of the outstanding shares of Buying Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of Buying Fund is
presumed to "control" Buying Fund as defined in the 1940 Act. Such control may
affect the voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- -------- ------------ -------------
</Table>
- ---------------
* Buyer has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
J-1
APPENDIX I
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
AIM GLOBAL ENERGY FUND,
A SEPARATE PORTFOLIO OF
AIM INVESTMENT FUNDS
AUGUST 13, 2003
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE 1 DEFINITIONS........................................................ I-1
SECTION 1.1. Definitions................................................. I-1
ARTICLE 2 TRANSFER OF ASSETS................................................. I-4
SECTION 2.1. Reorganization of Selling Fund.............................. I-4
SECTION 2.2. Computation of Net Asset Value.............................. I-4
SECTION 2.3. Valuation Date.............................................. I-4
SECTION 2.4. Delivery.................................................... I-5
SECTION 2.5. Termination of Series....................................... I-5
SECTION 2.6. Issuance of Buying Fund Shares.............................. I-5
SECTION 2.7. Investment Securities....................................... I-5
SECTION 2.8. Liabilities................................................. I-6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER........................... I-6
SECTION 3.1. Organization; Authority..................................... I-6
SECTION 3.2. Registration and Regulation of Seller....................... I-6
SECTION 3.3. Financial Statements........................................ I-6
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities......... I-6
SECTION 3.5. Selling Fund Shares; Business Operations.................... I-6
SECTION 3.6. Accountants................................................. I-7
SECTION 3.7. Binding Obligation.......................................... I-7
SECTION 3.8. No Breaches or Defaults..................................... I-7
SECTION 3.9. Authorizations or Consents.................................. I-7
SECTION 3.10. Permits..................................................... I-8
SECTION 3.11. No Actions, Suits or Proceedings............................ I-8
SECTION 3.12. Contracts................................................... I-8
SECTION 3.13. Properties and Assets....................................... I-8
SECTION 3.14. Taxes....................................................... I-8
SECTION 3.15. Benefit and Employment Obligations.......................... I-9
SECTION 3.16. Brokers..................................................... I-9
SECTION 3.17. Voting Requirements......................................... I-9
SECTION 3.18. State Takeover Statutes..................................... I-9
SECTION 3.19. Books and Records........................................... I-9
SECTION 3.20. Prospectus and Statement of Additional Information.......... I-9
SECTION 3.21. No Distribution............................................. I-9
SECTION 3.22. Liabilities of Selling Fund................................. I-9
SECTION 3.23. Value of Shares............................................. I-10
SECTION 3.24. Shareholder Expenses........................................ I-10
SECTION 3.25. Intercompany Indebtedness; Consideration.................... I-10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............................ I-10
SECTION 4.1. Organization; Authority..................................... I-10
SECTION 4.2. Registration and Regulation of Buyer........................ I-10
SECTION 4.3. Financial Statements........................................ I-10
</Table>
I-i
<Table>
<Caption>
PAGE
----
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities......... I-10
SECTION 4.5. Registration of Buying Fund Shares.......................... I-11
SECTION 4.6. Accountants................................................. I-11
SECTION 4.7. Binding Obligation.......................................... I-11
SECTION 4.8. No Breaches or Defaults..................................... I-11
SECTION 4.9. Authorizations or Consents.................................. I-12
SECTION 4.10. Permits..................................................... I-12
SECTION 4.11. No Actions, Suits or Proceedings............................ I-12
SECTION 4.12. Taxes....................................................... I-12
SECTION 4.13. Brokers..................................................... I-13
SECTION 4.14. Representations Concerning the Reorganization............... I-13
SECTION 4.15. Prospectus and Statement of Additional Information.......... I-13
SECTION 4.16. Value of Shares............................................. I-13
SECTION 4.17. Intercompany Indebtedness; Consideration.................... I-14
ARTICLE 5 COVENANTS.......................................................... I-14
SECTION 5.1. Conduct of Business......................................... I-14
SECTION 5.2. Announcements............................................... I-14
SECTION 5.3. Expenses.................................................... I-14
SECTION 5.4. Further Assurances.......................................... I-14
SECTION 5.5. Notice of Events............................................ I-14
SECTION 5.6. Access to Information....................................... I-15
SECTION 5.7. Consents, Approvals and Filings............................. I-15
SECTION 5.8. Submission of Agreement to Shareholders..................... I-15
SECTION 5.9. Delay of Consummation of Reorganization..................... I-15
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION......................... I-15
SECTION 6.1. Conditions Precedent of Buyer............................... I-15
SECTION 6.2. Mutual Conditions........................................... I-16
SECTION 6.3. Conditions Precedent of Seller.............................. I-17
ARTICLE 7 TERMINATION OF AGREEMENT........................................... I-17
SECTION 7.1. Termination................................................. I-17
SECTION 7.2. Survival After Termination.................................. I-17
ARTICLE 8 MISCELLANEOUS...................................................... I-18
SECTION 8.1. Survival of Representations, Warranties and Covenants....... I-18
SECTION 8.2. Governing Law............................................... I-18
SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment........... I-18
SECTION 8.4. Obligations of Buyer and Seller............................. I-18
SECTION 8.5. Amendments.................................................. I-18
SECTION 8.6. Enforcement................................................. I-18
SECTION 8.7. Interpretation.............................................. I-18
SECTION 8.8. Counterparts................................................ I-19
SECTION 8.9. Entire Agreement; Exhibits and Schedules.................... I-19
SECTION 8.10. Notices..................................................... I-19
</Table>
I-ii
<Table>
<Caption>
PAGE
----
SECTION 8.11. Representations by Seller Investment Adviser................ I-19
SECTION 8.12. Representations by Buyer Investment Adviser................. I-19
SECTION 8.13. Successors and Assigns; Assignment.......................... I-20
Exhibit A Excluded Liabilities of Selling Fund
Schedule 2.1 Classes of Shares of Selling Fund and Corresponding Classes
of Shares of Buying Fund
Schedule 3.4 Certain Contingent Liabilities of Selling Fund
Schedule 3.5(d) Permitted Restructurings and Redomestications of Funds
Schedule 4.4 Certain Contingent Liabilities of Buying Fund
Schedule 4.5(a) Portfolios of Buyer
Schedule 4.5(b) Classes of Shares of Buying Fund and Number of Shares of
Each Class Buyer is Authorized to Issue
Schedule 5.1 Permitted Combinations of Funds
Schedule 6.2(f) Tax Opinions
</Table>
I-iii
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 13, 2003 (this
"Agreement"), by and among AIM Investment Funds, a Delaware statutory trust
("Seller"), acting on behalf of AIM Global Energy Fund ("Selling Fund"), a
separate series of Seller, INVESCO Sector Funds, Inc., a Maryland corporation
("Buyer"), acting on behalf of INVESCO Energy Fund ("Buying Fund"), a separate
series of Buyer, A I M Advisors, Inc., a Delaware corporation, and INVESCO Funds
Group, Inc., a Delaware corporation.
WITNESSETH
WHEREAS, Seller is a management investment company registered with the SEC
(as defined below) under the Investment Company Act (as defined below) that
offers separate series of its shares representing interests in its investment
portfolios, including Selling Fund, for sale to the public; and
WHEREAS, Buyer is a management investment company registered with the SEC
under the Investment Company Act that offers separate series of its shares
representing interests in investment portfolios, including Buying Fund, for sale
to the public; and
WHEREAS, Buyer Investment Adviser (as defined below) provides investment
advisory services to Buyer; and
WHEREAS, Seller Investment Adviser (as defined below) provides investment
advisory services to Seller; and
WHEREAS, Selling Fund desires to provide for its reorganization through the
transfer of all of its assets to Buying Fund in exchange for the assumption by
Buying Fund of all of the Liabilities (as defined below) of Selling Fund and the
issuance by Buyer of shares of Buying Fund in the manner set forth in this
Agreement; and
WHEREAS, this Agreement is intended to be and is adopted by the parties
hereto as a Plan of Reorganization within the meaning of the regulations under
Section 368(a) of the Code (as defined below).
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and undertakings contained in this Agreement, Seller, Buyer, Buyer
Investment Adviser and Seller Investment Adviser agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. For all purposes in this Agreement, the
following terms shall have the respective meanings set forth in this Section 1.1
(such definitions to be equally applicable to both the singular and plural forms
of the terms herein defined):
"Advisers Act" means the Investment Advisers Act of 1940, as amended, and
all rules and regulations of the SEC adopted pursuant thereto.
"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.
"Agreement" means this Agreement and Plan of Reorganization, together with
all exhibits and schedules attached hereto and all amendments hereto and
thereof.
"Applicable Law" means the applicable laws of the state in which each of
Buyer and Seller has been organized and shall include, as applicable, the
Delaware Statutory Trust Act and the Maryland General Corporation Law.
I-1
"Benefit Plan" means any material "employee benefit plan" (as defined in
Section 3(3) of ERISA) and any material bonus, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, retirement, profit sharing, welfare plans or other plan, arrangement
or understanding maintained or contributed to by Seller on behalf of Selling
Fund, or otherwise providing benefits to any current or former employee, officer
or director/trustee of Seller.
"Buyer" means INVESCO Sector Funds, Inc., a Maryland corporation.
"Buyer Counsel" means Kirkpatrick & Lockhart LLP.
"Buyer Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of Buying Fund.
"Buyer Investment Adviser" means INVESCO Funds Group, Inc.
"Buyer Registration Statement" means the registration statement on Form
N-1A of Buyer, as amended, 1940 Act Registration No. 811-03826.
"Buying Fund" means INVESCO Energy Fund, a separate series of Buyer.
"Buying Fund Auditors" means PricewaterhouseCoopers LLP.
"Buying Fund Financial Statements" means the audited financial statements
of Buying Fund for the fiscal year ended March 31, 2003.
"Buying Fund Shares" means shares of each class of Buying Fund issued
pursuant to Section 2.6 of this Agreement.
"Closing" means the transfer of the assets of Selling Fund to Buying Fund,
the assumption of all of Selling Fund's Liabilities by Buying Fund and the
issuance of Buying Fund Shares directly to Selling Fund Shareholders as
described in Section 2.1 of this Agreement.
"Closing Date" means October 27, 2003, or such other date as the parties
may mutually agree upon.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations adopted pursuant thereto.
"corresponding" means, when used with respect to a class of shares of
Selling Fund or Buying Fund, the classes of their shares set forth opposite each
other on Schedule 2.1.
"Effective Time" means 8:00 a.m. Eastern Time on the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations adopted pursuant thereto.
"Exchangeability Date" means the first date on which Buyer Investment
Adviser determines that shares of retail mutual funds advised by Buyer
Investment Adviser and shares of retail mutual funds advised by Seller
Investment Adviser generally may be exchanged for shares of the same or a
similar class of each other.
"Governing Documents" means the organic documents which govern the business
and operations of each of Buyer and Seller and shall include, as applicable, the
Charter, Amended and Restated Agreement and Declaration of Trust, Amended and
Restated Bylaws and Bylaws.
"Governmental Authority" means any foreign, United States or state
government, government agency, department, board, commission (including the SEC)
or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the NASD Regulation, Inc., the
Commodity Futures Trading
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Commission, the National Futures Association, the Investment Management
Regulatory Organization Limited and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Liabilities" means all of the liabilities of any kind of Selling Fund,
including without limitation all liabilities included in the calculation of the
net asset value per share of each class of Selling Fund Shares on the Closing
Date, but not including the excluded liabilities set forth on Exhibit A.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a change in the
condition (financial or otherwise), properties, assets or prospects of an entity
having an adverse monetary effect in an amount equal to or greater than $50,000.
"NYSE" means the New York Stock Exchange.
"Permits" shall have the meaning set forth in Section 3.10 of this
Agreement.
"Person" means an individual or a corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of the assets of Selling Fund by
Buying Fund in consideration of the assumption by Buying Fund of all of the
Liabilities of Selling Fund and the issuance by Buyer of Buying Fund Shares
directly to Selling Fund Shareholders as described in this Agreement, and the
termination of Selling Fund's status as a designated series of shares of Seller.
"Required Shareholder Vote" means the lesser of (a) the affirmative vote of
67% or more of the voting securities of Selling Fund present or represented by
proxy at the Shareholders Meeting, if the holders of more than 50% of the
outstanding voting securities of Selling Fund are present or represented by
proxy, or (b) the affirmative vote of more than 50% of the outstanding voting
securities of Selling Fund.
"Return" means any return, report or form or any attachment thereto
required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
"Seller" means AIM Investment Funds, a Delaware statutory trust.
"Seller Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of Selling Fund.
"Seller Investment Adviser" means A I M Advisors, Inc.
"Seller Registration Statement" means the registration statement on Form
N-1A of Seller, as amended, 1940 Act Registration No. 811-05426.
"Selling Fund" means AIM Global Energy Fund, a separate series of Seller.
"Selling Fund Auditors" means PricewaterhouseCoopers LLP.
"Selling Fund Financial Statements" means the audited financial statements
of Selling Fund for the fiscal year ended October 31, 2002 and the unaudited
financial statements of Selling Fund for the period ended April 30, 2003.
"Selling Fund Shareholders" means the holders of record of the outstanding
shares of each class of Selling Fund as of the close of regular trading on the
NYSE on the Valuation Date.
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"Selling Fund Shares" means the outstanding shares of each class of Selling
Fund.
"Shareholders Meeting" means a meeting of the shareholders of Selling Fund
convened in accordance with Applicable Law and the Governing Documents of Seller
to consider and vote upon the approval of this Agreement and, in connection
therewith, the sale of all of Selling Fund's assets and the termination of
Selling Fund as a designated series of Seller.
"Tax" means any tax or similar governmental charge, impost or levy
(including income taxes (including alternative minimum tax and estimated tax),
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes, or windfall
profit taxes), together with any related penalties, fines, additions to tax or
interest, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof.
"Termination Date" means December 31, 2003, or such later date as the
parties may mutually agree upon.
"Treasury Regulations" means the Federal income tax regulations adopted
pursuant to the Code.
"Valuation Date" shall have the meaning set forth in Section 2.2 of this
Agreement.
ARTICLE 2
TRANSFER OF ASSETS
SECTION 2.1. Reorganization of Selling Fund. At the Effective Time, all
of the assets of Selling Fund shall be delivered to Buyer Custodian for the
account of Buying Fund in exchange for the assumption by Buying Fund of all of
the Liabilities of Selling Fund and delivery by Buyer directly to the holders of
record as of the Effective Time of the issued and outstanding shares of each
class of Selling Fund of a number of shares of each corresponding class of
Buying Fund, as set forth on Schedule 2.1 (including, if applicable, fractional
shares rounded to the nearest thousandth), having an aggregate net asset value
equal to the value of the net assets of Selling Fund so transferred, assigned
and delivered, all determined and adjusted as provided in Section 2.2 below.
Upon delivery of such assets, Buying Fund will receive good and marketable title
to such assets free and clear of all Liens.
SECTION 2.2. Computation of Net Asset Value.
(a) The net asset value per share of each class of Buying Fund Shares, and
the value of the assets and the amount of the Liabilities of Selling Fund,
shall, in each case, be determined as of the close of regular trading on the
NYSE on the business day next preceding the Closing Date (the "Valuation Date").
(b) The net asset value per share of each class of Buying Fund Shares shall
be computed in accordance with the policies and procedures of Buying Fund as
described in the Buyer Registration Statement.
(c) The value of the assets and the amount of the Liabilities of Selling
Fund to be transferred to Buying Fund pursuant to this Agreement shall be
computed in accordance with the policies and procedures of Selling Fund as
described in the Seller Registration Statement.
(d) Subject to Sections 2.2(b) and (c) above, all computations of value
regarding the assets and Liabilities of Selling Fund and the net asset value per
share of each class of Buying Fund Shares to be issued pursuant to this
Agreement shall be made by agreement of Seller and Buyer. The parties agree to
use commercially reasonable efforts to resolve any material pricing differences
between the prices of portfolio securities determined in accordance with their
respective pricing policies and procedures.
SECTION 2.3. Valuation Date. The share transfer books of Selling Fund
will be permanently closed as of the close of business on the Valuation Date and
only requests for the redemption of shares of Selling Fund received in proper
form prior to the close of regular trading on the NYSE on the Valuation Date
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shall be accepted by Selling Fund. Redemption requests thereafter received by
Selling Fund shall be deemed to be redemption requests for Buying Fund Shares of
the corresponding class (assuming that the transactions contemplated by this
Agreement have been consummated), to be distributed to Selling Fund Shareholders
under this Agreement.
SECTION 2.4. Delivery.
(a) No later than three (3) business days preceding the Closing Date,
Seller shall instruct Seller Custodian to transfer all assets held by Selling
Fund to the account of Buying Fund maintained at Buyer Custodian. Such assets
shall be delivered by Seller to Buyer Custodian on the Closing Date. The assets
so delivered shall be duly endorsed in proper form for transfer in such
condition as to constitute a good delivery thereof, in accordance with the
custom of brokers, and shall be accompanied by all necessary state stock
transfer stamps, if any, or a check for the appropriate purchase price thereof.
Cash held by Selling Fund shall be delivered on the Closing Date and shall be in
the form of currency or wire transfer in Federal funds, payable to the order of
the account of Buying Fund at Buyer Custodian.
(b) If, on the Closing Date, Selling Fund is unable to make delivery in the
manner contemplated by Section 2.4(a) of securities held by Selling Fund for the
reason that any of such securities purchased prior to the Closing Date have not
yet been delivered to Selling Fund or its broker, then Buyer shall waive the
delivery requirements of Section 2.4(a) with respect to said undelivered
securities if Selling Fund has delivered to Buyer Custodian by or on the Closing
Date, and with respect to said undelivered securities, executed copies of an
agreement of assignment and escrow and due bills executed on behalf of said
broker or brokers, together with such other documents as may be required by
Buyer or Buyer Custodian, including brokers' confirmation slips.
SECTION 2.5. Termination of Series. Following receipt of the Required
Shareholder Vote and as soon as reasonably practicable after the Closing Date,
the status of Selling Fund as a designated series of Seller shall be terminated;
provided, however, that the termination of Selling Fund as a designated series
of Seller shall not be required if the Reorganization shall not have been
consummated.
SECTION 2.6. Issuance of Buying Fund Shares. At the Effective Time,
Selling Fund Shareholders holding shares of a class of Selling Fund shall be
issued that number of full and fractional shares of the corresponding class of
Buying Fund having a net asset value equal to the net asset value of such shares
of such class of Selling Fund held by Selling Fund Shareholders on the Valuation
Date. All issued and outstanding shares of Selling Fund shall thereupon be
canceled on the books of Seller. Seller shall provide instructions to the
transfer agent of Buyer with respect to the shares of each class of Buying Fund
to be issued to Selling Fund Shareholders. Buyer shall have no obligation to
inquire as to the validity, propriety or correctness of any such instruction,
but shall, in each case, assume that such instruction is valid, proper and
correct. Buyer shall record on its books the ownership of the shares of each
class of Buying Fund by Selling Fund Shareholders and shall forward a
confirmation of such ownership to Selling Fund Shareholders. No redemption or
repurchase of such shares credited to former Selling Fund Shareholders in
respect of Selling Fund Shares represented by unsurrendered share certificates
shall be permitted until such certificates have been surrendered to Buyer for
cancellation, or if such certificates are lost or misplaced, until lost
certificate affidavits have been executed and delivered to Buyer.
SECTION 2.7. Investment Securities. On or prior to the Valuation Date,
Seller shall deliver a list setting forth the securities Selling Fund then owned
together with the respective Federal income tax bases thereof and holding
periods therefor. Seller shall provide to Buyer on or before the Valuation Date
detailed tax basis accounting records for each security to be transferred to it
pursuant to this Agreement. Such records shall be prepared in accordance with
the requirements for specific identification tax lot accounting and clearly
reflect the bases used for determination of gain and loss realized on the sale
of any security transferred to Buying Fund hereunder. Such records shall be made
available by Seller prior to the Valuation Date for inspection by the Treasurer
(or his or her designee) or the auditors of Buyer upon reasonable request.
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SECTION 2.8. Liabilities. Selling Fund shall use reasonable best efforts
to discharge all of its known liabilities, so far as may be possible, prior to
the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, on behalf of Selling Fund, represents and warrants to Buyer as
follows:
SECTION 3.1. Organization; Authority. Seller is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 3.2. Registration and Regulation of Seller. Seller is duly
registered with the SEC as an investment company under the Investment Company
Act and all Selling Fund Shares which have been or are being offered for sale
have been duly registered under the Securities Act and have been duly
registered, qualified or are exempt from registration or qualification under the
securities laws of each state or other jurisdiction in which such shares have
been or are being offered for sale, and no action has been taken by Seller to
revoke or rescind any such registration or qualification. Selling Fund is in
compliance in all material respects with all applicable laws, rules and
regulations, including, without limitation, the Investment Company Act, the
Securities Act, the Exchange Act and all applicable state securities laws.
Selling Fund is in compliance in all material respects with the investment
policies and restrictions applicable to it set forth in the Seller Registration
Statement. The value of the net assets of Selling Fund is determined using
portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the policies of Selling Fund and
all purchases and redemptions of Selling Fund Shares have been effected at the
net asset value per share calculated in such manner.
SECTION 3.3. Financial Statements. The books of account and related
records of Selling Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited Selling Fund Financial
Statements previously delivered to Buyer present fairly in all material respects
the financial position of Selling Fund as of the date(s) indicated and the
results of operations and changes in net assets for the period(s) then ended in
accordance with generally accepted accounting principles applied on a consistent
basis for the period(s) then ended.
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Selling Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Selling
Fund or the status of Selling Fund as a regulated investment company under the
Code, other than changes resulting from any change in general conditions in the
financial or securities markets or the performance of any investments made by
Selling Fund or occurring in the ordinary course of business of Selling Fund or
Seller. Except as set forth on Schedule 3.4, there are no contingent liabilities
of Selling Fund not disclosed in the Selling Fund Financial Statements and no
contingent liabilities of Selling Fund have arisen since the date of the most
recent financial statements included in the Selling Fund Financial Statements.
SECTION 3.5. Selling Fund Shares; Business Operations.
(a) Selling Fund Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(b) During the five-year period ending on the date of the Reorganization,
neither Selling Fund nor any person related to Selling Fund (as defined in
Section 1.368-1(e)(3) of the Treasury Regulations without regard to Section
1.368-1(e)(3)(i)(A)) will have directly or through any transaction, agreement,
or arrangement with any other person, (i) acquired shares of Selling Fund for
consideration other than shares of Selling Fund, except for shares redeemed in
the ordinary course of Selling Fund's business as an open-end investment company
as required by the Investment Company Act, or (ii) made distributions with
respect to Selling Fund's shares, except for (a) distributions necessary to
satisfy the requirements of
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Sections 852 and 4982 of the Code for qualification as a regulated investment
company and avoidance of excise tax liability and (b) additional distributions,
to the extent such additional distributions do not exceed 50 percent of the
value (without giving effect to such distributions) of the proprietary interest
in Selling Fund on the Effective Date.
(c) At the time of its Reorganization, Selling Fund shall not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any Person could acquire Selling Fund Shares, except for
the right of investors to acquire Selling Fund Shares at net asset value in the
normal course of its business as a series of an open-end management investment
company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the Closing Date,
Selling Fund will have conducted its historic business within the meaning of
Section 1.368-1(d)(2) of the Treasury Regulations in a substantially unchanged
manner. In anticipation of its Reorganization, Selling Fund will not dispose of
assets that, in the aggregate, will result in less than fifty percent (50%) of
its historic business assets (within the meaning of Section 1.368-1(d)(3) of the
Treasury Regulations) being transferred to Buying Fund; provided, however, that
this Section 3.5(d) shall not preclude any of the restructurings or
redomestications of funds set forth on Schedule 3.5(d).
(e) Seller does not have, and has not had during the six (6) months prior
to the date of this Agreement, any employees, and shall not hire any employees
from and after the date of this Agreement through the Closing Date.
SECTION 3.6. Accountants. Selling Fund Auditors, which have reported upon
the Selling Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Selling Fund Financial Statements are independent public accountants as
required by the Securities Act and the Exchange Act.
SECTION 3.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Seller on behalf of Selling Fund and, assuming this
Agreement has been duly executed and delivered by Buyer and approved by the
shareholders of Selling Fund, constitutes the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms
from and with respect to the revenues and assets of Selling Fund, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization
or similar laws relating to or affecting creditors rights generally, or by
general equity principles (whether applied in a court of law or a court of
equity and including limitations on the availability of specific performance or
other equitable remedies).
SECTION 3.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Seller on behalf of Selling Fund and performance by Seller of its
obligations hereunder has been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Seller, other than approval by the
shareholders of Selling Fund, and (i) do not, and on the Closing Date will not,
result in any violation of the Governing Documents of Seller and (ii) do not,
and on the Closing Date will not, result in a breach of any of the terms or
provisions of, or constitute (with or without the giving of notice or the lapse
of time or both) a default under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation or imposition of any Lien upon any
property or assets of Selling Fund (except for such breaches or defaults or
Liens that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect) under (A) any indenture, mortgage or loan
agreement or any other material agreement or instrument to which Seller is a
party or by which it may be bound and which relates to the assets of Selling
Fund or to which any property of Selling Fund may be subject; (B) any Permit (as
defined below); or (C) any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over Seller or
any property of Selling Fund. Seller is not under the jurisdiction of a court in
a proceeding under Title 11 of the United States Code or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.9. Authorizations or Consents. Other than those which shall
have been obtained or made on or prior to the Closing Date and those that must
be made after the Closing Date to comply with
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Section 2.5 of this Agreement, no authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority will be required to
be obtained or made by Seller in connection with the due execution and delivery
by Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby.
SECTION 3.10. Permits. Seller has in full force and effect all approvals,
consents, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights of Governmental Authorities (collectively, "Permits")
necessary for it to conduct its business as presently conducted as it relates to
Selling Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of Seller there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 3.11. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of Seller, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Seller before any Governmental Authority which
questions the validity or legality of this Agreement or of the actions
contemplated hereby or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of Seller, threatened in
writing or, if probable of assertion, orally, against Seller affecting any
property, asset, interest or right of Selling Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Selling Fund. There are not in existence on the date hereof any
plea agreements, judgments, injunctions, consents, decrees, exceptions or orders
that were entered by, filed with or issued by any Governmental Authority
relating to Seller's conduct of the business of Selling Fund affecting in any
significant respect the conduct of such business. Seller is not, and has not
been, to the knowledge of Seller, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Selling Fund.
SECTION 3.12. Contracts. Seller is not in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party and which involves or affects the assets of Selling Fund,
by which the assets, business, or operations of Selling Fund may be bound or
affected, or under which it or the assets, business or operations of Selling
Fund receives benefits, and which default could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and, to the
knowledge of Seller there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
SECTION 3.13. Properties and Assets. Selling Fund has good and marketable
title to all properties and assets reflected in the Selling Fund Financial
Statements as owned by it, free and clear of all Liens, except as described in
the Selling Fund Financial Statements.
SECTION 3.14. Taxes.
(a) Selling Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Selling Fund has qualified for treatment as a
regulated investment company for each taxable year since inception that has
ended prior to the Closing Date and will have satisfied the requirements of Part
I of Subchapter M of the Code to maintain such qualification for the period
beginning on the first day of its current taxable year and ending on the Closing
Date. Selling Fund has no earnings and profits accumulated in any taxable year
in which the provisions of Subchapter M of the Code did not apply to it. In
order to (i) ensure continued qualification of Selling Fund for treatment as a
"regulated investment company" for tax purposes and (ii) eliminate any tax
liability of Selling Fund arising by reason of undistributed investment company
taxable income or net capital gain, Seller will declare on or prior to the
Valuation Date to the shareholders of Selling Fund a dividend or dividends that,
together with all previous such dividends, shall have the
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effect of distributing (A) all of Selling Fund's investment company taxable
income (determined without regard to any deductions for dividends paid) for the
taxable year ended October 31, 2002 and for the short taxable year beginning on
November 1, 2002 and ending on the Closing Date and (B) all of Selling Fund's
net capital gain recognized in its taxable year ended October 31, 2002 and in
such short taxable year (after reduction for any capital loss carryover).
(b) Selling Fund has timely filed all Returns required to be filed by it
and all Taxes with respect thereto have been paid, except where the failure so
to file or so to pay, would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Adequate provision has been made
in the Selling Fund Financial Statements for all Taxes in respect of all periods
ended on or before the date of such financial statements, except where the
failure to make such provisions would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. No deficiencies for any
Taxes have been proposed, assessed or asserted in writing by any taxing
authority against Selling Fund, and no deficiency has been proposed, assessed or
asserted, in writing, where such deficiency would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No waivers
of the time to assess any such Taxes are outstanding nor are any written
requests for such waivers pending and no Return of Selling Fund is currently
being or has been audited with respect to income taxes or other Taxes by any
Federal, state, local or foreign Tax authority.
SECTION 3.15. Benefit and Employment Obligations. As of the Closing Date,
Selling Fund will have no obligation to provide any post-retirement or
post-employment benefit to any Person, including but not limited to under any
Benefit Plan, and will have no obligation to provide unfunded deferred
compensation or other unfunded or self-funded benefits to any Person.
SECTION 3.16. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Seller in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Seller or any action taken by it.
SECTION 3.17. Voting Requirements. The Required Shareholder Vote is the
only vote of the holders of any class of shares of Selling Fund necessary to
approve this Agreement and, in connection therewith, the sale of all of Selling
Fund's assets and the termination of Selling Fund as a designated series of
Seller.
SECTION 3.18. State Takeover Statutes. No state takeover statute or
similar statute or regulation applies or purports to apply to this Agreement or
any of the transactions contemplated by this Agreement.
SECTION 3.19. Books and Records. The books and records of Seller relating
to Selling Fund, reflecting, among other things, the purchase and sale of
Selling Fund Shares, the number of issued and outstanding shares owned by each
Selling Fund Shareholder and the state or other jurisdiction in which such
shares were offered and sold, are complete and accurate in all material
respects.
SECTION 3.20. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Selling Fund as
of the date on which they were issued did not contain, and as supplemented by
any supplement thereto dated prior to or on the Closing Date do not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 3.21. No Distribution. Buying Fund Shares are not being acquired
for the purpose of any distribution thereof, other than in accordance with the
terms of this Agreement.
SECTION 3.22. Liabilities of Selling Fund. The Liabilities of Selling
Fund that are to be assumed by Buying Fund in connection with the
Reorganization, or to which the assets of Selling Fund to be transferred in the
Reorganization are subject, were incurred by Selling Fund in the ordinary course
of its business. The fair market value of the assets of Selling Fund to be
transferred to Buying Fund in the Reorganization will equal or exceed the sum of
the Liabilities to be assumed by Buying Fund, plus the
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amount of liabilities, if any, to which such transferred assets will be subject.
The total adjusted basis of the assets of Selling Fund to be transferred to
Buying Fund in the Reorganization will equal or exceed the sum of the
Liabilities to be assumed by Buying Fund, plus the amount of liabilities, if
any, to which such transferred assets will be subject.
SECTION 3.23. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
SECTION 3.24. Shareholder Expenses. Selling Fund Shareholders will pay
their own expenses, if any, incurred in connection with the Reorganization.
SECTION 3.25. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration other than Buying Fund
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including
for this purpose any liabilities to which the assets of Selling Fund are
subject) will be given in exchange for the assets of Selling Fund acquired by
Buying Fund in connection with the Reorganization.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer, on behalf of Buying Fund, represents and warrants to Seller as
follows:
SECTION 4.1. Organization; Authority. Buyer is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 4.2. Registration and Regulation of Buyer. Buyer is duly
registered with the SEC as an investment company under the Investment Company
Act. Buying Fund is in compliance in all material respects with all applicable
laws, rules and regulations, including, without limitation, the Investment
Company Act, the Securities Act, the Exchange Act and all applicable state
securities laws. Buying Fund is in compliance in all material respects with the
applicable investment policies and restrictions set forth in the Buyer
Registration Statement. The value of the net assets of Buying Fund is determined
using portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the policies of Buying Fund and
all purchases and redemptions of Buying Fund Shares have been effected at the
net asset value per share calculated in such manner.
SECTION 4.3. Financial Statements. The books of account and related
records of Buying Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited Buying Fund Financial
Statements previously delivered to Seller present fairly in all material
respects the financial position of Buying Fund as of the date(s) indicated and
the results of operations and changes in net assets for the period(s) then ended
in accordance with generally accepted accounting principles applied on a
consistent basis for the period(s) then ended.
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Buying Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Buying Fund
or the status of Buying Fund as a regulated investment company under the Code,
other than changes resulting from any change in general conditions in the
financial or securities markets or the performance of any investments made by
Buying Fund or occurring in the ordinary course of business of Buying Fund or
Buyer. There are no contingent liabilities of Buying Fund not disclosed in the
Buying Fund Financial Statements which are required to be disclosed in
accordance with generally accepted accounting principles. Except as set forth on
Schedule 4.4, no contingent liabilities of Buying Fund have arisen since the
date of
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the most recent financial statements included in the Buying Fund Financial
Statements which are required to be disclosed in accordance with generally
accepted accounting principles.
SECTION 4.5. Registration of Buying Fund Shares.
(a) The shares of Buyer are divided into those portfolios, including Buying
Fund, that are set forth on Schedule 4.5(a).
(b) Buying Fund currently has those classes of shares that are set forth on
Schedule 4.5(b). Under its Governing Documents, Buyer is authorized to issue the
number of shares of each such class that is set forth on Schedule 4.5(b).
(c) Buying Fund Shares to be issued pursuant to Section 2.6 shall on the
Closing Date be duly registered under the Securities Act by a Registration
Statement on Form N-14 of Buyer then in effect.
(d) Buying Fund Shares to be issued pursuant to Section 2.6 are duly
authorized and on the Closing Date will be validly issued and fully paid and
non-assessable and will conform to the description thereof contained in the
Registration Statement on Form N-14 then in effect. At the time of its
Reorganization, Buying Fund shall not have outstanding any warrants, options,
convertible securities or any other type of right pursuant to which any Person
could acquire shares of Buying Fund, except for the right of investors to
acquire shares of Buying Fund at net asset value in the normal course of its
business as a series of an open-end management investment company operating
under the Investment Company Act.
(e) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus"), which forms a part of Buyer's Registration Statement on
Form N-14, shall be furnished to the shareholders of Selling Fund entitled to
vote at the Shareholders Meeting. The Combined Proxy Statement/Prospectus and
related Statement of Additional Information of Buying Fund, when they become
effective, shall conform to the applicable requirements of the Securities Act
and the Investment Company Act and shall not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading, provided, however, that no
representation or warranty is made with respect to written information provided
by Seller for inclusion in the Combined Proxy Statement/Prospectus.
(f) The shares of Buying Fund which have been or are being offered for sale
(other than the Buying Fund Shares to be issued in connection with the
Reorganization) have been duly registered under the Securities Act by the Buyer
Registration Statement and have been duly registered, qualified or are exempt
from registration or qualification under the securities laws of each state or
other jurisdiction in which such shares have been or are being offered for sale,
and no action has been taken by Buyer to revoke or rescind any such registration
or qualification.
SECTION 4.6. Accountants. Buying Fund Auditors, which have reported upon
the Buying Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Buying Fund Financial Statements are independent public accountants as
required by the Securities Act and the Exchange Act.
SECTION 4.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Buyer on behalf of Buying Fund and, assuming this
Agreement has been duly executed and delivered by Seller, constitutes the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms from and with respect to the revenues and assets of Buying Fund,
except as the enforceability hereof may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting creditors' rights
generally, or by general equity principles (whether applied in a court or law or
a court of equity and including limitations on the availability of specific
performance or other equitable remedies).
SECTION 4.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Buyer on behalf of Buying Fund and performance by Buyer of its
obligations hereunder have been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Buyer and (i) do not, and on the
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Closing Date will not, result in any violation of the Governing Documents of
Buyer and (ii) do not, and on the Closing Date will not, result in a breach of
any of the terms or provisions of, or constitute (with or without the giving of
notice or the lapse of time or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation or imposition of any Lien upon
any property or assets of Buying Fund (except for such breaches or defaults or
Liens that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect) under (A) any indenture, mortgage or loan
agreement or any other material agreement or instrument to which Buyer is a
party or by which it may be bound and which relates to the assets of Buying Fund
or to which any properties of Buying Fund may be subject; (B) any Permit; or (C)
any existing applicable law, rule, regulation, judgment, order or decree of any
Governmental Authority having jurisdiction over Buyer or any property of Buying
Fund. Buyer is not under the jurisdiction of a court in a proceeding under Title
11 of the United States Code or similar case within the meaning of Section
368(a)(3)(A) of the Code.
SECTION 4.9. Authorizations or Consents. Other than those which shall
have been obtained or made on or prior to the Closing Date, no authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority will be required to be obtained or made by Buyer in connection with
the due execution and delivery by Buyer of this Agreement and the consummation
by Buyer of the transactions contemplated hereby.
SECTION 4.10. Permits. Buyer has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
Buying Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of Buyer there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 4.11. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of Buyer, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Buyer before any Governmental Authority which
questions the validity or legality of this Agreement or of the transactions
contemplated hereby, or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of Buyer, threatened in
writing or, if probable of assertion, orally, against Buyer, affecting any
property, asset, interest or right of Buying Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Buying Fund. There are not in existence on the date hereof any
plea agreements, judgments, injunctions, consents, decrees, exceptions or orders
that were entered by, filed with or issued by any Governmental Authority
relating to Buyer's conduct of the business of Buying Fund affecting in any
significant respect the conduct of such business. Buyer is not, and has not
been, to the knowledge of Buyer, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Buying Fund.
SECTION 4.12. Taxes.
(a) Buying Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Buying Fund has qualified for treatment as a
regulated investment company for each taxable year since inception that has
ended prior to the Closing Date and will satisfy the requirements of Part I of
Subchapter M of the Code to maintain such qualification for its current taxable
year. Buying Fund has no earnings or profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it.
(b) Buying Fund has timely filed all Returns required to be filed by it and
all Taxes with respect thereto have been paid, except where the failure so to
file or so to pay, would not reasonably be expected,
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individually or in the aggregate, to have a Material Adverse Effect. Adequate
provision has been made in the Buying Fund Financial Statements for all Taxes in
respect of all periods ending on or before the date of such financial
statements, except where the failure to make such provisions would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No deficiencies for any Taxes have been proposed, assessed or
asserted in writing by any taxing authority against Buying Fund, and no
deficiency has been proposed, assessed or asserted, in writing, where such
deficiency would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. No waivers of the time to assess any such Taxes
are outstanding nor are any written requests for such waivers pending and no
Return of Buying Fund is currently being or has been audited with respect to
income taxes or other Taxes by any Federal, state, local or foreign Tax
authority.
SECTION 4.13. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Buyer in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Buyer or any action taken by it.
SECTION 4.14. Representations Concerning the Reorganization.
(a) Buyer has no plan or intention to reacquire any Buying Fund Shares
issued in the Reorganization, except to the extent that Buying Fund is required
by the Investment Company Act to redeem any of its shares presented for
redemption at net asset value in the ordinary course of its business as an
open-end, management investment company.
(b) Buying Fund has no plan or intention to sell or otherwise dispose of
any of the assets of Selling Fund acquired in the Reorganization, other than in
the ordinary course of its business and to the extent necessary to maintain its
status as a "regulated investment company" under the Code; provided, however,
that this Section 4.14(b) shall not preclude any of the restructurings or
redomestications of funds set forth on Schedule 3.5(d).
(c) Following the Reorganization, Buying Fund will continue an "historic
business" of Selling Fund or use a significant portion of Selling Fund's
"historic business assets" in a business. For purposes of this representation,
the terms "historic business" and "historic business assets" shall have the
meanings ascribed to them in Section 1.368-1(d) of the Treasury Regulations;
provided, however, that this Section 4.14(c) shall not preclude any of the
restructurings or redomestications of funds set forth on Schedule 3.5(d).
(d) Prior to or in the Reorganization, neither Buying Fund nor any person
related to Buying Fund (for purposes of this paragraph as defined in Section
1.368-1(e)(3) of the Treasury Regulations) will have acquired directly or
through any transaction, agreement or arrangement with any other person, shares
of Selling Fund with consideration other than shares of Buying Fund. There is no
plan or intention by Buying Fund or any person related to Buying Fund to acquire
or redeem any of the Buying Fund Shares issued in the Reorganization either
directly or through any transaction, agreement, or arrangement with any other
person, other than redemptions in the ordinary course of Buying Fund's business
as an open-end investment company as required by the Investment Company Act.
SECTION 4.15. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Buying Fund as of
the date on which it was issued does not contain, and as supplemented by any
supplement thereto dated prior to or on the Closing Date does not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 4.16. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
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SECTION 4.17. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration other than Buying Fund
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including
for this purpose any liabilities to which the assets of Selling Fund are
subject) will be given in exchange for the assets of Selling Fund acquired by
Buying Fund in connection with the Reorganization. The fair market value of the
assets of Selling Fund transferred to Buying Fund in the Reorganization will
equal or exceed the sum of the Liabilities assumed by Buying Fund, plus the
amount of liabilities, if any, to which such transferred assets are subject.
ARTICLE 5
COVENANTS
SECTION 5.1. Conduct of Business.
(a) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), Seller shall conduct the business of Selling Fund only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business operations of Selling Fund in the
ordinary course in all material respects; provided, however, that this Section
5.1(a) shall not preclude any of the restructurings or redomestications of funds
set forth on Schedule 3.5(d) or any of the combinations of funds set forth on
Schedule 5.1.
(b) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), Buyer shall conduct the business of Buying Fund only in the ordinary
course and substantially in accordance with past practices, and shall use its
reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business operations of Buying Fund in the
ordinary course in all material respects; provided, however, that this Section
5.1(b) shall not preclude any of the restructurings or redomestications of funds
set forth on Schedule 3.5(d) or any of the combinations of funds set forth on
Schedule 5.1.
SECTION 5.2. Announcements. Seller and Buyer shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement and the transactions contemplated by this
Agreement, and neither Seller nor Buyer shall issue any such press release or
make any public statement without the prior written approval of the other party
to this Agreement, such approval not to be unreasonably withheld, except as may
be required by law.
SECTION 5.3. Expenses. Selling Fund shall bear the costs and expenses
incurred in connection with this Agreement and the Reorganization and other
transactions contemplated hereby.
SECTION 5.4. Further Assurances. Each of the parties hereto shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall, on or prior to the Closing Date, use
its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to the consummation of the Reorganization, including the
execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the Reorganization.
SECTION 5.5. Notice of Events. Buyer shall give prompt notice to Seller,
and Seller shall give prompt notice to Buyer, of (a) the occurrence or
non-occurrence of any event which to the knowledge of Buyer or to the knowledge
of Seller, the occurrence or non-occurrence of which would be likely to result
in any of the conditions specified in (i) in the case of Seller, Sections 6.1and
6.2 or (ii) in the case of Buyer, Sections 6.2 and 6.3, not being satisfied so
as to permit the consummation of the Reorganization and (b) any material failure
on its part, or on the part of the other party hereto of which it has knowledge,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it
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hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.5 shall not limit or otherwise affect the remedies available hereunder
to any party.
SECTION 5.6. Access to Information.
(a) Seller will, during regular business hours and on reasonable prior
notice, allow Buyer and its authorized representatives reasonable access to the
books and records of Seller pertaining to the assets of Selling Fund and to
officers of Seller knowledgeable thereof; provided, however, that any such
access shall not significantly interfere with the business or operations of
Seller.
(b) Buyer will, during regular business hours and on reasonable prior
notice, allow Seller and its authorized representatives reasonable access to the
books and records of Buyer pertaining to the assets of Buying Fund and to
officers of Buyer knowledgeable thereof; provided, however, that any such access
shall not significantly interfere with the business or operations of Buyer.
SECTION 5.7. Consents, Approvals and Filings. Each of Seller and Buyer
shall make all necessary filings, as soon as reasonably practicable, including,
without limitation, those required under the Maryland General Corporation Law,
the Securities Act, the Exchange Act, the Investment Company Act and the
Advisers Act, in order to facilitate prompt consummation of the Reorganization
and the other transactions contemplated by this Agreement. In addition, each of
Seller and Buyer shall use its reasonable best efforts, and shall cooperate
fully with each other (i) to comply as promptly as reasonably practicable with
all requirements of Governmental Authorities applicable to the Reorganization
and the other transactions contemplated herein and (ii) to obtain as promptly as
reasonably practicable all necessary permits, orders or other consents of
Governmental Authorities and consents of all third parties necessary for the
consummation of the Reorganization and the other transactions contemplated
herein. Each of Seller and Buyer shall use reasonable efforts to provide such
information and communications to Governmental Authorities as such Governmental
Authorities may request.
SECTION 5.8. Submission of Agreement to Shareholders. Seller shall take
all action necessary in accordance with applicable law and its Governing
Documents to convene the Shareholders Meeting. Seller shall, through its Board
of Directors/Trustees, recommend to the shareholders of Selling Fund approval of
this Agreement and, in connection therewith, the sale of all of Selling Fund's
assets and the termination of Selling Fund as a designated series of Seller.
Seller shall use its reasonable best efforts to hold a Shareholders Meeting as
soon as practicable after the date hereof.
SECTION 5.9. Delay of Consummation of Reorganization. The parties
acknowledge and agree that if the Exchangeability Date has not occurred prior to
the Closing Date, consummation of the Reorganization shall not occur on the
Closing Date but instead shall be postponed until a mutually acceptable date
occurring subsequent to the Exchangeability Date; provided, however, that in no
event shall the consummation of the Reorganization occur on a date subsequent to
the Termination Date. In the case of such postponement of the consummation of
the Reorganization, the parties agree that the term "Closing Date" in this
Agreement shall mean in each instance such mutually acceptable date subsequent
to the Exchangeability Date as the parties may choose to consummate the
Reorganization.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
SECTION 6.1. Conditions Precedent of Buyer. The obligation of Buyer to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by Buyer.
(a) The representations and warranties of Seller on behalf of Selling Fund
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date with the same effect
as though all such representations and warranties had been made as of the
Closing Date.
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(b) Seller shall have complied with and satisfied in all material respects
all agreements and conditions relating to Selling Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Buyer shall have received at the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Seller, in such individual's capacity
as an officer of Seller and not as an individual, to the effect that the
conditions specified in Sections 6.1(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Seller certifying as to the accuracy and completeness of the
attached Governing Documents of Seller, and resolutions, consents and
authorizations of or regarding Seller with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
(d) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
(e) Buyer shall have received from Seller confirmations or other adequate
evidence as to the tax costs and holding periods of the assets and property of
Selling Fund transferred to Buying Fund in accordance with the terms of this
Agreement.
(f) To the extent applicable, Seller Investment Adviser shall have
terminated or waived, in either case in writing, any rights to reimbursement
from Selling Fund to which it is entitled for fees and expenses absorbed by
Seller Investment Adviser pursuant to voluntary and contractual fee waiver or
expense limitation commitments between Seller Investment Adviser and Selling
Fund.
SECTION 6.2. Mutual Conditions. The obligations of Seller and Buyer to
consummate the Reorganization are subject to the satisfaction, at or prior to
the Closing Date, of all of the following further conditions, any one or more of
which may be waived in writing by Seller and Buyer, but only if and to the
extent that such waiver is mutual.
(a) All filings required to be made prior to the Closing Date with, and all
consents, approvals, permits and authorizations required to be obtained on or
prior to the Closing Date from Governmental Authorities in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by Seller and Buyer shall have been made or
obtained, as the case may be; provided, however, that such consents, approvals,
permits and authorizations may be subject to conditions that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) This Agreement, the Reorganization of Selling Fund and related matters
shall have been approved and adopted at the Shareholders Meeting by the
shareholders of Selling Fund on the record date by the Required Shareholder
Vote.
(c) The assets of Selling Fund to be acquired by Buying Fund shall
constitute at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets held by Selling Fund
immediately prior to the Reorganization. For purposes of this Section 6.2(c),
assets used by Selling Fund to pay the expenses it incurs in connection with
this Agreement and the Reorganization and to effect all shareholder redemptions
and distributions (other than regular, normal dividends and regular, normal
redemptions pursuant to the Investment Company Act, and not in excess of the
requirements of Section 852 of the Code, occurring in the ordinary course of
Selling Fund's business as a series of an open-end management investment
company) after the date of this Agreement shall be included as assets of Selling
Fund held immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent injunction or
other order issued by any Governmental Authority preventing the consummation of
the Reorganization on the Closing Date shall be in effect; provided, however,
that the party or parties invoking this condition shall use reasonable efforts
to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by Buyer with respect to
Buying Fund Shares to be issued to Selling Fund Shareholders in connection with
the Reorganization shall have become effective
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under the Securities Act and no stop order suspending the effectiveness thereof
shall have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the Securities Act.
(f) Seller and Buyer shall have received on or before the Closing Date an
opinion of Buyer Counsel in form and substance reasonably acceptable to Seller
and Buyer, as to the matters set forth on Schedule 6.2(f). In rendering such
opinion, Buyer Counsel may request and rely upon representations contained in
certificates of officers of Seller, Buyer and others, and the officers of Seller
and Buyer shall use their best efforts to make available such truthful
certificates.
SECTION 6.3. Conditions Precedent of Seller. The obligation of Seller to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by Seller.
(a) The representations and warranties of Buyer on behalf of Buying Fund
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date with the same effect
as though all such representations and warranties had been made as of the
Closing Date.
(b) Buyer shall have complied with and satisfied in all material respects
all agreements and conditions relating to Buying Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Seller shall have received on the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Buyer, in such individual's capacity
as an officer of Buyer and not as an individual, to the effect that the
conditions specified in Sections 6.3(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Buyer certifying as to the accuracy and completeness of the
attached Governing Documents of Buyer and resolutions, consents and
authorizations of or regarding Buyer with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
ARTICLE 7
TERMINATION OF AGREEMENT
SECTION 7.1. Termination. This Agreement may be terminated on or prior to
the Closing Date as follows:
(a) by mutual written consent of Seller and Buyer; or
(b) at the election of Seller or Buyer, to be effectuated by the delivery
by the terminating party to the other party of a written notice of such
termination:
(i) if the Closing Date shall not be on or before the Termination
Date, unless the failure to consummate the Reorganization is the result of
a willful and material breach of this Agreement by the party seeking to
terminate this Agreement;
(ii) if, upon a vote at the Shareholders Meeting or any final
adjournment thereof, the Required Shareholder Vote shall not have been
obtained as contemplated by Section 5.8; or
(iii) if any Governmental Authority shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Reorganization and such order, decree, ruling or
other action shall have become final and nonappealable.
SECTION 7.2. Survival After Termination. If this Agreement is terminated
in accordance with Section 7.1 hereof and the Reorganization of Selling Fund is
not consummated, this Agreement shall become void and of no further force and
effect with respect to the Reorganization and Selling Fund, except for the
provisions of Section 5.3.
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ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Survival of Representations, Warranties and Covenants. The
representations and warranties in this Agreement, and the covenants in this
Agreement that are required to be performed at or prior to the Closing Date,
shall terminate upon the consummation of the transactions contemplated
hereunder. The covenants in this Agreement that are required to be performed in
whole or in part subsequent to the Closing Date shall survive the consummation
of the transactions contemplated hereunder for a period of one (1) year
following the Closing Date.
SECTION 8.2. Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state.
SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns of the parties and such Persons.
Nothing in this Agreement is intended or shall be construed to confer upon any
entity or Person other than the parties hereto and their respective successors
and permitted assigns any right, remedy or claim under or by reason of this
Agreement or any part hereof. Without the prior written consent of the parties
hereto, this Agreement may not be assigned by any of the parties hereto.
SECTION 8.4. Obligations of Buyer and Seller.
(a) Seller and Buyer hereby acknowledge and agree that Buying Fund is a
separate investment portfolio of Buyer, that Buyer is executing this Agreement
on behalf of Buying Fund, and that any amounts payable by Buyer under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Buying Fund.
(b) Seller and Buyer hereby acknowledge and agree that Selling Fund is a
separate investment portfolio of Seller, that Seller is executing this Agreement
on behalf of Selling Fund and that any amounts payable by Seller under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Selling Fund. Buyer further acknowledges and agrees that this
Agreement has been executed by a duly authorized officer of Seller in his or her
capacity as an officer of Seller intending to bind Seller as provided herein,
and that no officer, trustee or shareholder of Seller shall be personally liable
for the liabilities or obligation of Seller incurred hereunder. Finally, Buyer
acknowledges and agrees that the liabilities and obligations of Selling Fund
pursuant to this Agreement shall be enforceable against the assets of Selling
Fund only and not against the assets of Seller generally or assets belonging to
any other series of Seller.
SECTION 8.5. Amendments. This Agreement may not be amended, altered or
modified except by a written instrument executed by Seller and Buyer.
SECTION 8.6. Enforcement. The parties agree irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
any state having jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity.
SECTION 8.7. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or a Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." Each representation and warranty contained in Article 3 or 4 that
relates to a general category of a subject matter shall be deemed superseded by
a specific representation and warranty relating to a subcategory thereof to the
extent of such specific representation or warranty.
I-18
SECTION 8.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and each of which shall
constitute one and the same instrument.
SECTION 8.9. Entire Agreement; Exhibits and Schedules. This Agreement,
including the Exhibits, Schedules, certificates and lists referred to herein,
and any documents executed by the parties simultaneously herewith or pursuant
thereto, constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, written or oral, between the parties with respect
to such subject matter.
SECTION 8.10. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand or by overnight courier, two days after being
sent by registered mail, return receipt requested, or when sent by telecopier
(with receipt confirmed), provided, in the case of a telecopied notice, a copy
is also sent by registered mail, return receipt requested, or by courier,
addressed as follows (or to such other address as a party may designate by
notice to the other):
(a) If to Seller:
AIM Investment Funds
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Kevin M. Carome
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attn: Martha J. Hays
(b) If to Buyer:
INVESCO Sector Funds, Inc.
4350 South Monaco Street
Denver, Colorado 80237
Attn: Glen A. Payne
with a copy to:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue N.W., 2nd Floor
Washington, D.C. 20036-1800
Attn: Clifford J. Alexander
SECTION 8.11. Representations by Seller Investment Adviser. In its
capacity as investment adviser to Seller, Seller Investment Adviser represents
to Buyer that to the best of its knowledge the representations and warranties of
Seller and Selling Fund contained in this Agreement are true and correct as of
the date of this Agreement. For purposes of this Section 8.11, the best
knowledge standard shall be deemed to mean that the officers of Seller
Investment Adviser who have substantive responsibility for the provision of
investment advisory services to Seller do not have actual knowledge to the
contrary after due inquiry.
SECTION 8.12. Representations by Buyer Investment Adviser. In its
capacity as investment adviser to Buyer, Buyer Investment Adviser represents to
Seller that to the best of its knowledge the representations and warranties of
Buyer and Buying Fund contained in this Agreement are true and correct as of the
date of this Agreement. For purposes of this Section 8.12, the best knowledge
standard shall be deemed to mean that the officers of Buyer Investment Adviser
who have substantive responsibility for the provision of investment advisory
services to Buyer do not have actual knowledge to the contrary after due
inquiry.
I-19
SECTION 8.13. Successors and Assigns; Assignment. This Agreement shall be
binding upon and inure to the benefit of Seller, on behalf of Selling Fund, and
Buyer, on behalf of Buying Fund, and their respective successors and assigns.
The parties hereto expressly acknowledge and agree that this Agreement shall be
binding upon and inure to the benefit of those Delaware statutory trusts that
are the resulting entities in the permitted restructurings and redomestications
of funds set forth on Schedule 3.5(d).
I-20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM INVESTMENT FUNDS, acting on behalf
of
AIM GLOBAL ENERGY FUND
By: /s/ RAYMOND R. CUNNINGHAM
------------------------------------
INVESCO SECTOR FUNDS, INC., acting on
behalf of INVESCO ENERGY FUND
By: /s/ ROBERT H. GRAHAM
------------------------------------
A I M ADVISORS, INC.
By: /s/ MARK H. WILLIAMSON
------------------------------------
INVESCO FUNDS GROUP, INC.
By: /s/ RAYMOND R. CUNNINGHAM
------------------------------------
I-21
EXHIBIT A
EXCLUDED LIABILITIES OF SELLING FUND
None.
SCHEDULE 2.1
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF SHARES OF SELLING FUND SHARES OF BUYING FUND
- --------------------------------- ------------------------
Class A shares.............................................. Class A shares
Class B shares.............................................. Class B shares
Class C shares.............................................. Class C shares
</Table>
SCHEDULE 3.4
CERTAIN CONTINGENT LIABILITIES OF SELLING FUND
None.
SCHEDULE 3.5(D)
PERMITTED RESTRUCTURINGS AND REDOMESTICATIONS OF FUNDS
<Table>
<Caption>
CURRENT FUNDS CORRESPONDING NEW FUNDS
- ------------- -----------------------
AIM ADVISOR FUNDS................................ AIM INVESTMENT SECURITIES FUNDS
(DELAWARE STATUTORY TRUST) (DELAWARE STATUTORY TRUST)
AIM International Core Equity Fund............... AIM International Core Equity Fund
AIM Real Estate Fund............................. AIM Real Estate Fund
AIM INTERNATIONAL FUNDS, INC. ................... AIM INTERNATIONAL MUTUAL FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
AIM European Growth Fund......................... AIM European Growth Fund
INVESCO BOND FUNDS, INC. ........................ AIM BOND FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO High Yield Fund.......................... INVESCO High Yield Fund
INVESCO Select Income Fund....................... INVESCO Select Income Fund
INVESCO Tax-Free Bond Fund....................... INVESCO Tax-Free Bond Fund
INVESCO U.S. Government Securities Fund.......... INVESCO U.S. Government Securities Fund
INVESCO COMBINATION STOCK & BOND FUNDS, INC. .... AIM COMBINATION STOCK & BOND FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Balanced Fund............................ INVESCO Balanced Fund
INVESCO Total Return Fund........................ INVESCO Total Return Fund
INVESCO COUNSELOR SERIES FUNDS, INC. ............ AIM COUNSELOR SERIES TRUST
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Advantage Fund........................... INVESCO Advantage Fund
INVESCO INTERNATIONAL FUNDS, INC. ............... AIM INTERNATIONAL MUTUAL FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO European Fund............................ INVESCO European Fund
INVESCO International Blue Chip Value Fund....... INVESCO International Blue Chip Value Fund
INVESCO MONEY MARKET FUNDS, INC. ................ AIM TREASURER'S SERIES TRUST
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Cash Reserves Fund....................... INVESCO Cash Reserves Fund
INVESCO Tax-Free Money Fund...................... INVESCO Tax-Free Money Fund
INVESCO SECTOR FUNDS, INC. ...................... AIM SECTOR FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Energy Fund.............................. INVESCO Energy Fund
INVESCO Financial Services Fund.................. INVESCO Financial Services Fund
INVESCO Real Estate Opportunity Fund............. INVESCO Real Estate Opportunity Fund
INVESCO Technology Fund.......................... INVESCO Technology Fund
INVESCO Telecommunications Fund.................. INVESCO Telecommunications Fund
INVESCO Utilities Fund........................... INVESCO Utilities Fund
INVESCO STOCK FUNDS, INC. ....................... AIM STOCK FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Growth Fund.............................. INVESCO Growth Fund
INVESCO Growth & Income Fund..................... INVESCO Growth & Income Fund
INVESCO Value Equity Fund........................ INVESCO Value Equity Fund
</Table>
SCHEDULE 4.4
CERTAIN CONTINGENT LIABILITIES OF BUYING FUND
None.
SCHEDULE 4.5(a)
PORTFOLIOS OF BUYER
INVESCO Energy Fund
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Real Estate Opportunity Fund
INVESCO Technology Fund
INVESCO Telecommunications Fund
INVESCO Utilities Fund
SCHEDULE 4.5(b)
<Table>
<Caption>
NUMBER OF SHARES OF EACH CLASS
CLASSES OF SHARES OF BUYING FUND BUYER IS AUTHORIZED TO ISSUE
- -------------------------------- ------------------------------
Class A shares.............................................. 100,000,000
Class B shares.............................................. 100,000,000
Class C shares.............................................. 100,000,000
Class K shares.............................................. 100,000,000
Investor Class shares....................................... 100,000,000
</Table>
SCHEDULE 5.1
PERMITTED COMBINATIONS OF FUNDS
<Table>
INVESCO Advantage Fund into AIM Opportunities III Fund
INVESCO Growth Fund into AIM Large Cap Growth Fund
INVESCO Growth & Income Fund into AIM Blue Chip Fund
INVESCO European Fund into AIM European Growth Fund
AIM International Core Equity Fund into INVESCO
International Blue Chip Value Fund
AIM New Technology Fund into INVESCO Technology Fund
AIM Global Science and Technology Fund into INVESCO
Technology Fund
INVESCO Telecommunications Fund into INVESCO Technology Fund
AIM Global Financial Services Fund into INVESCO Financial
Services Fund
AIM Global Energy Fund into INVESCO Energy Fund
AIM Global Utilities Fund into INVESCO Utilities Fund
INVESCO Real Estate Opportunity Fund into AIM Real Estate
Fund
INVESCO Tax-Free Bond Fund into AIM Municipal Bond Fund
INVESCO High Yield Fund into AIM High Yield Fund
INVESCO Select Income Fund into AIM Income Fund
INVESCO U.S. Government Securities Fund into AIM
Intermediate Government Fund
INVESCO Cash Reserves Fund into AIM Money Market Fund
INVESCO Tax-Free Money Fund into AIM Tax-Exempt Cash Fund
INVESCO Balanced Fund into INVESCO Total Return Fund
INVESCO Value Equity Fund into AIM Large Cap Basic Value
Fund
AIM Premier Equity Fund II into AIM Premier Equity Fund
</Table>
SCHEDULE 6.2(f)
TAX OPINIONS
(i) The transfer of the assets of Selling Fund to Buying Fund in exchange
solely for Buying Fund Shares distributed directly to Selling Fund Shareholders
and Buying Fund's assumption of the Liabilities, as provided in the Agreement,
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code and Selling Fund and Buying Fund will be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
(ii) In accordance with Section 361(a) and Section 361(c)(1) of the Code,
no gain or loss will be recognized by Selling Fund on the transfer of its assets
to Buying Fund solely in exchange for Buying Fund Shares and Buying Fund's
assumption of the Liabilities or on the distribution of Buying Fund Shares to
Selling Fund Shareholders; provided that, no opinion is expressed as to the
effect of the Reorganization on Selling Fund or any Selling Fund Shareholder
with respect to any asset as to which any unrealized gain or loss is required to
be recognized for Federal income tax purposes at the end of a taxable year (or
on the termination or transfer of a taxpayer's rights (or obligations) with
respect to such asset) under a mark-to-market system of accounting.
(iii) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange
for Buying Fund Shares issued directly to Selling Fund Shareholders.
(iv) In accordance with Section 354(a)(1) of the Code, no gain or loss will
be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares
in exchange for Selling Fund Shares.
(v) In accordance with Section 362(b) of the Code, the basis to Buying Fund
of the assets of Selling Fund will be the same as the basis of such assets in
the hands of Selling Fund immediately prior to the Reorganization.
(vi) In accordance with Section 358(a) of the Code, a Selling Fund
Shareholder's basis for Buying Fund Shares received by the Selling Fund
Shareholder will be the same as his or her basis for Selling Fund Shares
exchanged therefor.
(vii) In accordance with Section 1223(1) of the Code, a Selling Fund
Shareholder's holding period for Buying Fund Shares will be determined by
including such Selling Fund Shareholder's holding period for Selling Fund Shares
exchanged therefor, provided that such Selling Fund Shareholder held such
Selling Fund Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the Code, the holding period
with respect to the assets of Selling Fund transferred to Buying Fund in the
Reorganization will include the holding period for such assets in the hands of
Selling Fund.
(ix) In accordance with Section 381(a)(2) of the Code, Buying Fund will
succeed to and take into account the items of Selling Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381 through 384 of the Code and the Treasury Regulations thereunder.
APPENDIX II
INVESCO SECTOR FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & Precious Metals Fund--Investor Class, Class A, B, and C
INVESCO Real Estate Opportunity Fund--Investor Class, Class A, B, and C
INVESCO Utilities Fund--Investor Class, Class A, B, and C
Supplement dated August 1, 2003 to the Prospectus dated August 1, 2003
INVESCO REAL ESTATE OPPORTUNITY FUND
The Board of Directors of INVESCO Sector Funds, Inc. ("Seller") unanimously
approved, on June 9, 2003, an Agreement and Plan of Reorganization (the "Plan")
pursuant to which INVESCO Real Estate Opportunity Fund ("Selling Fund"), a
series of Seller, would transfer all of its assets and liabilities to AIM Real
Estate Fund ("Buying Fund"), a series of AIM Advisor Funds (the
"Reorganization"). As a result of the Reorganization, shareholders of Selling
Fund would receive shares of Buying Fund in exchange for their shares of Selling
Fund, and Selling Fund would cease operations.
INVESCO Funds Group, Inc. ("INVESCO") serves as the investment advisor to
Selling Fund and A I M Advisors, Inc. ("AIM") serves as the investment advisor
to Buying Fund. Both investment advisors are wholly owned subsidiaries of
AMVESCAP PLC ("AMVESCAP"), an independent global investment management company.
The Reorganization is part of an integration initiative announced on March 27,
2003, by AMVESCAP, with respect to its North American mutual fund operations.
One component of AMVESCAP's integration initiative is the rationalization and
streamlining of the various funds within The AIM Family of Funds(R) and the
INVESCO Family of Funds. In that regard, AMVESCAP has undertaken an extensive
review of these funds and concluded that it would be appropriate to reduce the
number of smaller and less efficient funds that compete in the same space for
shareholder assets and to consolidate certain funds having similar investment
objectives and strategies. Reducing the number of funds both within The AIM
Family of Funds(R) and the INVESCO Family of Funds will allow AIM and INVESCO to
concentrate on managing their core products.
In AMVESCAP's view, AIM has best developed the expertise and resources for
managing funds with an investment objective and strategies similar to those of
Selling Fund and should therefore manage the combined fund. AMVESCAP's belief is
that the Reorganization will allow Buying Fund the best available opportunities
for investment management, growth prospects and potential economies of scale.
The Board of Directors of Seller, including the independent directors, has
determined that the Reorganization is advisable and in the best interests of
Selling Fund and that the interests of the shareholders of Selling Fund will not
be diluted as a result of the Reorganization.
The investment objectives of Selling Fund and Buying Fund are similar. Selling
Fund's investment objective is capital growth and income. Buying Fund's
investment objective is high total return.
The Plan requires approval of Selling Fund shareholders and will be submitted to
the shareholders for their consideration at a meeting to be held on or around
October 21, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
It is anticipated that Selling Fund will be closed to new investors during the
fourth quarter of 2003.
INVESCO TELECOMMUNICATIONS FUND
The Board of Directors of INVESCO Sector Funds, Inc. ("Seller") unanimously
approved, on June 9, 2003, an Agreement and Plan of Reorganization (the "Plan")
pursuant to which INVESCO Telecommunications Fund ("Selling Fund"), would
transfer all of its assets and liabilities to INVESCO Technology Fund ("Buying
Fund"), both of which are series of Seller (the "Reorganization"). As a result
of the Reorganization, shareholders of Selling Fund would receive shares of
Buying Fund in exchange for their shares of Selling Fund, and Selling Fund would
cease operations.
INVESCO Funds Group, Inc. ("INVESCO") serves as the investment advisor to both
Selling Fund and Buying Fund. The investment advisor is a wholly owned
subsidiary of AMVESCAP PLC ("AMVESCAP"), an independent global investment
management company. The Reorganization is part of an integration initiative
announced on March 27, 2003, by AMVESCAP, with respect to its North American
mutual fund operations.
One component of AMVESCAP's integration initiative is the rationalization and
streamlining of various funds within the INVESCO Family of Funds. In that
regard, AMVESCAP has undertaken an extensive review of these funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete in the same space for shareholder assets and to consolidate
certain funds having similar investment objectives and strategies. Reducing the
number of funds within the INVESCO Family of Funds will allow INVESCO to
concentrate on managing its core products.
AMVESCAP's belief is that the Reorganization will allow Buying Fund the best
available opportunities for investment management, growth prospects and
potential economies of scale.
The Board of Directors of Seller, including the independent directors, has
determined that the Reorganization is advisable and in the best interests of
Selling Fund and that the interests of the shareholders of Selling Fund will not
be diluted as a result of the Reorganization.
The investment objectives of Selling Fund and Buying Fund are the same. Selling
Fund's investment objective is capital growth and income. Buying Fund's
investment objective is capital growth.
The Plan requires approval of Selling Fund shareholders and will be submitted to
the shareholders for their consideration at a meeting to be held on or around
October 21, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
It is anticipated that Selling Fund will be closed to new investors during the
fourth quarter of 2003.
Effective August 18, 2003, the section of the Prospectus entitled "Fees And
Expenses" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Investor Class Class A Class B Class C Class K
Maximum Front-End Sales Charge
on purchases as a percentage of
offering price None 5.50% None None None
Maximum Contingent Deferred Sales
Charge (CDSC) as a percentage of
the lower of the total original cost or
current market value of the shares None None(1) 5.00%(2) 1.00%(2) None(1)
Maximum Sales Charge on reinvested
dividends/distributions None None None None None
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares
within eighteen months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) A 5% and 1% CDSC may
be charged on Class B and Class C shares, respectively. Please see the section
entitled "How To Buy Shares."
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
With the exception of Class A shares, there is no charge to invest directly
through INVESCO. Class A shares are subject to a front-end sales charge. For
more information on this charge, please see the subsection entitled "Sales
Charges." If you buy $1,000,000 or more of Class A shares and redeem the shares
within eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the lower of the total original
cost or current market value of the shares may be assessed. With respect to
redemption of Class C shares held twelve months or less, a CDSC of 1% of the
lower of the total original cost or current market value of the shares may be
assessed. With respect to Class K shares, if you are a qualified plan and elect
to receive a dealer concession, you may pay a CDSC of 0.70% on your Class K
shares if the plan is redeemed within twelve months from initial deposit in the
plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. For a non-qualified plan, in
determining whether a CDSC applies to a redemption, it is assumed that the
shares being redeemed first are any shares in the shareholder's Fund account
that are not subject to a CDSC, followed by shares held the longest in the
shareholder's account. These charges are not assessed upon Class A, B, C, or K
shares acquired through reinvestment of dividends or other distributions, or
Class A, B, C, or K shares exchanged for the same class of another INVESCO Fund.
For more information on CDSC charges, please see the subsection of the
Prospectus entitled "Choosing A Share Class" and the section of the Statement of
Additional Information entitled "Distributor - Sales Charges and Dealer
Concessions."
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares - Choosing A Share Class" is amended to (i) delete the second paragraph
in its entirety and (ii) substitute the following in its place:
In addition, you should also consider the factors below:
Investor
Class Class A Class B Class C Class K
Initial Sales Charge None 5.50% None None None
CDSC(1) None 1% on certain 1%-5% for 1% for shares 0.70% on certain
purchases held shares held held less than purchases
less than 18 less than 12 months held less than
months 6 years 12 months
12b-1 Fee 0.25% 0.35% 1.00% 1.00% 0.45%
12b-1 Fee
(Utilities Fund Only) 0.25% 0.25% 1.00% 1.00% None
Conversion No No Yes(2) No No
Purchase Order
Maximum None None $250,000 $1,000,000 None
(1) Please see the subsection entitled "Sales Charges" below and the section of
the Funds' Statement of Additional Information entitled "Distributor - Sales
Charges and Dealer Concessions" for more information regarding CDSC charges and
dealer concessions.
(2) Class B shares, along with the pro rata portion of the shares' reinvested
dividends and distributions, automatically convert to Class A shares at the end
of the month which is eight years after the date on which such Class B shares
were purchased.
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares - Sales Charges (Class A, B, C And K Only)" is amended to (i) delete the
third, fourth, seventh, eighth, and tenth paragraphs in their entirety and (ii)
substitute the following, respectively, in their place:
CONTINGENT DEFERRED SALES CHARGE (CDSC) for Class A and Class K Shares. You
can purchase $1,000,000 or more of Class A shares at net asset value, and
the distributor may pay a dealer concession and/or a service fee for
purchases of $1,000,000 or more. However, if you purchase shares worth
$1,000,000 or more, they may be subject to a CDSC of 1% if you redeem them
prior to eighteen months after the date of purchase. We will use the
"first-in, first-out" method to determine your holding period. Under this
method, the date of redemption will be compared with the earliest purchase
date of shares held in your account. If your holding period is less than
eighteen months, the CDSC may be assessed on the amount of the lower of the
total original cost or current market value of the shares. For qualified
plans investing in Class A shares, you may pay a CDSC of 1% if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. For qualified plans investing in Class K shares, you may pay a
CDSC of 0.70% if the plan is redeemed within twelve months from initial
deposit in the plan's INVESCO account.
CDSC 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 CDSC in the following percentages. If your holding
period is less than six years for Class B shares and twelve months for
Class C shares, the CDSC may be assessed on the amount of the lower of the
total original cost or current market value of the shares.
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(1) None
(1) Class B shares, along with the pro rata portion of the shares'
reinvested dividends and distributions, automatically convert to Class A
shares at the end of the month which is eight years after the date on which
such Class B shares were purchased.
RIGHTS OF ACCUMULATION. You may combine your new purchases of Class A
shares with shares currently owned (Class A, B, C, or K) for the purpose of
qualifying for the lower initial sales charge rates that apply to larger
purchases. The applicable initial sales charge for the new purchase is
based on the total of your current purchase and the current value of all
other shares you own.
LETTER OF INTENT. Under a Letter of Intent (LOI), you commit to purchase a
specified dollar amount of Class A shares of a Fund during a thirteen-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 thirteen-month period, your account will be adjusted to the
higher initial sales charge level for the amount actually invested.
You will not pay a CDSC:
|X| if you purchase less than $1,000,000 of Class A shares;
|X| if you purchase $1,000,000 or more of Class A shares and hold
those shares for more than eighteen months;
|X| if you redeem Class B shares you held for more than six years;
|X| if you redeem Class C shares you held for more than twelve
months;
|X| if you participate in the periodic withdrawal program and
withdraw up to 12% of the value of your shares that are subject
to a CDSC in any twelve-month period. The value of your shares,
and applicable twelve-month period, will be calculated based upon
the value of your account on, and the date of, the first periodic
withdrawal;
|X| if you redeem shares acquired through reinvestment of dividends
and distributions;
|X| if you are a participant in a qualified retirement plan and
redeem Class C shares or Class K shares in order to fund a
distribution;
|X| if you are a qualified plan investing in Class A shares or Class
K shares and elect to forego any dealer concession;
|X| on increases in the net asset value of your shares;
|X| to pay account fees;
|X| for IRA distributions due to death or disability or periodic
distribution based on life expectancy;
|X| to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
|X| for redemptions following the death of a shareholder or
beneficial owner.
Effective August 18, 2003, the section of the Prospectus entitled "How To Sell
Shares" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
Various fees may apply to Fund redemptions. You may be charged a CDSC at
the time of redemption depending how long you have held your shares. If you
buy $1,000,000 or more of Class A shares and redeem the shares within
eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a
dealer concession, you may pay a CDSC of 1% on your Class A shares if the
plan is redeemed within twelve months from initial deposit in the plan's
INVESCO account. If you are a qualified plan and elect to forego the dealer
concession, you will not be charged a CDSC. With respect to redemption of
Class B shares held six years or less, a CDSC of 1% - 5% of the lower of
the total original cost or current market value of the shares may be
assessed. With respect to redemption of Class C shares held twelve months
or less, a CDSC of 1% of the lower of the total original cost or current
market value of the shares may be assessed. With respect to Class K shares,
if you are a qualified plan and elect to receive a dealer concession, you
may pay a CDSC of 0.70% on your Class K shares if the plan is redeemed
within twelve months from initial deposit in the plan's INVESCO account. If
you are a qualified plan and elect to forego the dealer concession, you
will not be charged a CDSC. For a non-qualified plan, in determining
whether a CDSC applies to a redemption, it is assumed that the shares being
redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the
shareholder's account. These charges are not assessed upon Class A, B, C,
or K shares acquired through reinvestment of dividends or other
distributions, or Class A, B, C, or K shares exchanged for the same class
of another INVESCO Fund. For more information on CDSC charges, please see
the subsection of the Prospectus entitled "Choosing A Share Class" and the
section of the Statement of Additional Information entitled "Distributor -
Sales Charges and Dealer Concessions."
INVESCO HEALTH SCIENCES FUND
Effective August 1, 2003, the section of the Prospectus entitled "Portfolio
Managers" is amended to add:
ANDY SUMMERS is a Portfolio Manager for all INVESCO Health Sciences portfolios.
Andy joined the INVESCO Health Sciences investment team in 1998. He is a CFA
charterholder. Prior to joining INVESCO, Andy worked as an analyst assistant for
Denver Investment Advisors. He received his master's degree in finance from the
University of Wisconsin at Madison in 1998. He received his bachelor's degree in
finance from the University of Wisconsin at Whitewater in 1996.
INVESCO TECHNOLOGY FUND
Effective August 1, 2003, the section of the Prospectus entitled "Portfolio
Managers" is amended to add:
CHRIS DRIES is a Portfolio Manager for the INVESCO Technology Fund. Chris
joined INVESCO in 1993, and was promoted to the investment division in 1995. He
previously held the position of manager of investment operations for the
investment division at INVESCO. Chris received his master's degree in finance
from the University of Colorado at Denver and his bachelor's degree in finance
from the University of Colorado at Boulder.
MICHELLE FENTON is a Portfolio Manager of INVESCO Dynamics Fund and INVESCO
Mid-Cap Growth Fund. Michelle is also a Portfolio Manager for the INVESCO
Technology Fund. She is a CFA charterholder. Michelle has more than eight years
of investment industry experience. Before joining the investment division of
INVESCO in 1998, Michelle worked at Berger Funds as an equity analyst. Prior to
that, she was a research analyst at Smith Barney. Michelle received her
bachelor's degree in finance from Montana State University.
PROSPECTUS | AUGUST 1, 2003
- --------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS(R)
- --------------------------------------------------------------------------------
INVESCO SECTOR
FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & PRECIOUS METALS FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO REAL ESTATE OPPORTUNITY FUND--INVESTOR CLASS, CLASS A, B AND C
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO UTILITIES FUND--INVESTOR CLASS, CLASS A, B, AND C
NINE MUTUAL FUNDS DESIGNED FOR INVESTORS SEEKING CAPITAL GROWTH THROUGH TARGETED
INVESTMENT OPPORTUNITIES.
INVESTOR CLASS SHARES OFFERED BY THIS PROSPECTUS ARE OFFERED ONLY TO
GRANDFATHERED INVESTORS. PLEASE SEE THE SECTION OF THE PROSPECTUS ENTITLED "HOW
TO BUY SHARES."
CLASS A, B, AND C SHARES ARE SOLD PRIMARILY THROUGH FINANCIAL INTERMEDIARIES.
CLASS K SHARES ARE SOLD TO QUALIFIED RETIREMENT PLANS, RETIREMENT SAVINGS
PROGRAMS, EDUCATIONAL SAVINGS PROGRAMS, AND WRAP PROGRAMS PRIMARILY THROUGH
FINANCIAL INTERMEDIARIES.
TABLE OF CONTENTS
Investment Goals, Strategies, And Risks....................2
Fund Performance...........................................5
Fees And Expenses.........................................10
Investment Risks..........................................14
Principal Risks Associated With The Funds.................14
Temporary Defensive Positions.............................16
Portfolio Turnover........................................16
Fund Management...........................................17
Portfolio Managers........................................17
Potential Rewards.........................................18
Share Price...............................................18
How To Buy Shares.........................................19
Your Account Services.....................................23
How To Sell Shares........................................24
Taxes.....................................................26
Dividends And Capital Gain Distributions..................26
Financial Highlights......................................27
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.
[INVESCO ICON] INVESCO(R)
The Securities and Exchange Commission has not approved or disapproved the
shares of these Funds. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is committing
a federal crime. INVESCO Funds Group, Inc. ("INVESCO") is the investment advisor
for the Funds. Together with our affiliated companies, we at INVESCO direct all
aspects of the management and sale of the Funds.
INVESCO Funds Group, Inc. ("INVESCO") is the investment advisor for the Funds.
Together with our affiliated companies, we at INVESCO direct all aspects of the
management and sale of the Funds.
This Prospectus contains important information about the Funds' Investor Class,
Class A, B, C, and, if applicable, K shares. Class A, B, and C shares are sold
primarily through financial intermediaries. Class K shares are sold to qualified
retirement plans, retirement savings programs, educational savings programs, and
wrap programs primarily through financial intermediaries. If you invest through
a financial intermediary, please contact your financial intermediary or, with
respect to Class K shares, your plan or program sponsor, for detailed
information on suitability and transactional issues (i.e., how to purchase or
sell shares, minimum investment amounts, and fees and expenses). INVESCO
Technology Fund also offers an additional class of shares through a separate
Prospectus. Each of the Fund's classes has varying expenses, with resulting
effects on their performance. You can choose the class of shares that is best
for you, based on how much you plan to invest and other relevant factors
discussed in "How To Buy Shares." To obtain additional information about the
other class of Technology Fund's shares, contact A I M Distributors, Inc.
("ADI") at 1-800-347-4246.
THIS PROSPECTUS WILL TELL YOU MORE ABOUT:
[KEY ICON] INVESTMENT GOALS & STRATEGIES
[ARROWS ICON] POTENTIAL INVESTMENT RISKS
[GRAPH ICON] PAST PERFORMANCE
[INVESCO ICON] WORKING WITH INVESCO
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[KEY ICON] [ARROWS ICON] INVESTMENT GOALS, STRATEGIES, AND RISKS
FACTORS COMMON TO ALL THE FUNDS
FOR MORE DETAILS ABOUT EACH FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK,
PLEASE SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.
The Funds seek capital growth; Real Estate Opportunity, Telecommunications, and
Utilities Funds also attempt to earn income for you. The Funds are actively
managed. They invest primarily in equity securities that INVESCO believes will
rise in price faster than other securities, as well as in options and other
investments whose values are based upon the values of equity securities.
Each Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies doing business in the
economic sector described by its name. At any given time, 20% of each Fund's
assets is not required to be invested in the sector. To determine whether a
potential investment is truly doing business in a particular sector, a company
must meet at least one of the following tests:
o At least 50% of its gross income or its net sales must come from activities
in the sector;
o At least 50% of its assets must be devoted to producing revenues from the
sector;
o or Based on other available information, we determine that its primary
business is within the sector.
INVESCO uses a research oriented "bottom-up" investment approach to create each
Fund's investment portfolio, focusing on company fundamentals and growth
prospects when selecting securities. In general, the Funds emphasize companies
that INVESCO believes are strongly managed and will generate above-average
long-term capital appreciation.
Growth investing may be more volatile than other investment styles because
growth stocks are more sensitive to investor perceptions of an issuing company's
growth potential. Growth-oriented funds typically will underperform
value-oriented funds when investor sentiment favors the value investing style.
Value investing seeks securities, particularly stocks, that are currently
undervalued by the market -- companies that are performing well, or have solid
management and products, but whose stock prices do not reflect that value.
Through our value process, we seek to provide reasonably consistent returns over
a variety of market cycles. Value-oriented funds typically will underperform
growth-oriented funds when investor sentiment favors the growth investing style.
As sector funds, each portfolio is concentrated in a comparatively narrow
segment of the economy. This means a Fund's investment concentration in a sector
is higher than most mutual funds and the broad securities markets. Consequently,
the Funds tend to be more volatile than other mutual funds, and the value of
their portfolio investments and consequently the value of an investment in a
Fund tend to go up and down more rapidly.
The Funds are subject to other principal risks, as applicable, such as market,
foreign securities, liquidity, derivatives, counterparty, lack of timely
information, and portfolio turnover risks. These risks are described and
discussed later in the Prospectus under the headings "Investment Risks" and
"Principal Risks Associated With The Funds." An investment in a Fund is not a
deposit of any bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") or any other government agency. As with any
mutual fund, there is always a risk that you may lose money on your investment
in a Fund.
The Funds are concentrated in these sectors:
[KEY ICON] INVESCO ENERGY FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies within the energy sector.
These companies include, but are not limited to, oil companies, oil and gas
exploration companies, natural gas pipeline companies, refinery companies,
energy conservation companies, coal, alternative energy companies, and
innovative energy technology companies.
Generally, we prefer to keep the Fund's investments divided among the four main
energy subsectors: major oil companies, energy services, oil and gas
exploration/production companies, and natural gas pipeline companies. We adjust
portfolio weightings depending on current economic conditions. Although
individual security selection drives the performance of the Fund, short-term
fluctuations in commodity prices may influence Fund returns and increase price
fluctuations in the Fund's shares. The businesses in which we invest may be
adversely affected by foreign government, federal, or state regulations on
energy production, distribution, and sale.
[KEY ICON] INVESCO FINANCIAL SERVICES FUND -- INVESTOR CLASS, CLASS A, B, C,
AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies involved in the financial
services sector. These companies include, but are not limited to, banks
(regional and money-centers), insurance companies (life, property and casualty,
and multiline), investment and miscellaneous industries (asset managers,
brokerage firms, and government-sponsored agencies), and suppliers to financial
services companies.
We place a greater emphasis on companies that are increasing their revenue
streams along with their earnings. We seek companies that we believe can grow
their revenues and earnings in a variety of interest rate environments --
although securities prices of financial services companies generally are
interest rate sensitive. We seek companies with successful sales and marketing
cultures and that leverage technologies in their operations and distribution. We
adjust portfolio weightings depending on current economic conditions and
relative valuations of securities.
This sector generally is subject to extensive governmental regulation, which may
change frequently. In addition, the profitability of businesses in these
industries depends heavily upon the availability and cost of money, and may
fluctuate significantly in response to changes in interest rates, as well as
changes in general economic conditions. From time to time, severe competition
may also affect the profitability of these industries.
[KEY ICON] INVESCO GOLD & PRECIOUS METALS FUND -- INVESTOR CLASS, CLASS A, B,
AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies involved in exploring
for, mining, processing, or dealing and investing in gold, gold bullion, and
other precious metals, such as silver, platinum, and palladium, as well as
diamonds. The securities of these companies are highly dependent on the price of
precious metals at any given time.
Fluctuations in the price of gold directly -- and often dramatically -- affect
the profitability and market value of companies in this sector. Changes in
political or economic climate for the two largest gold producers -- South Africa
and the former Soviet Union -- may have a direct impact on the price of gold
worldwide. Up to 10% at the time of purchase of the Fund's assets may be
invested in gold bullion. The Fund's investments directly in gold bullion will
earn no income return; appreciation in the market price of gold is the sole
manner in which the Fund can realize gains on bullion investments. The Fund may
have higher storage and custody costs in connection with its ownership of
bullion than those associated with the purchase, holding and sale of more
traditional types of investments.
The Fund primarily focuses on those gold companies that have the ability to
increase production capacity at low costs, while having the potential to make
major gold discoveries around the world. Additionally, we try to identify
companies that leverage increasing gold prices; that is, companies that do not
hedge gold prices on the market. While the Fund may take positions in mid- to
small-sized exploration companies that may be more volatile than investments in
large, more established companies, it will primarily focus on major gold stocks
that are leaders in their fields. Up to 100% of the Fund's assets may be
invested in foreign companies.
[KEY ICON] INVESCO HEALTH SCIENCES FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies that develop, produce, or
distribute products or services related to health care. These companies include,
but are not limited to, medical equipment or supplies, pharmaceuticals,
biotechnology, and health care providers and services companies.
We focus on the dominant players in fast-growing therapeutic areas or companies
on the verge of exciting medical breakthroughs. We seek companies with strong,
commercially successful products as well as promising product pipelines. This
strategy may lead us to invest in both well-established health care firms and
faster-growing, more dynamic entities. Well-established health care companies
typically provide liquidity and earnings visibility for the portfolio and
represent core holdings in the Fund. The Fund also may invest in high growth,
earlier stage companies whose future profitability could be dependent upon
increasing market shares from one or a few key products. Such companies often
have limited operating histories and their potential profitability may be
dependent on regulatory approval of their products, which increases the
volatility of these companies' securities prices and could have an adverse
impact upon the companies' future growth and profitability.
Changes in government regulation could also have an adverse impact. Continuing
technological advances may mean rapid obsolescence of products and services.
[KEY ICON] INVESCO LEISURE FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in the design,
production, and distribution of products related to the leisure activities.
These industries include, but are not limited to, hotels/gaming, publishing,
advertising, beverages, audio/video, broadcasting-radio/TV, cable & satellite
operators, cable & satellite programmers, motion pictures & TV, recreation
services/entertainment, retail, and toys.
We seek firms that can grow their businesses regardless of the economic
environment. INVESCO attempts to keep the portfolio well diversified across the
leisure sector, adjusting portfolio weightings depending on prevailing economic
conditions and relative valuations of securities. This sector depends on
consumer discretionary spending, which generally falls during economic
downturns. Securities of gambling casinos often are subject to high price
volatility and are considered speculative. Video and electronic games are
subject to risks of rapid obsolescence.
[KEY ICON] INVESCO REAL ESTATE OPPORTUNITY FUND -- INVESTOR CLASS, CLASS A,
B, AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies doing business in the
real estate industry, including real estate investment trusts ("REITS"), which
invest in real estate or interests in real estate. No one property type will
represent more than 50% of the Fund's total assets. The companies in which the
Fund invests may also include, but are not limited to, real estate brokers, home
builders or real estate developers, companies with substantial real estate
holdings, and companies with significant involvement in the real estate industry
or other real estate-related companies.
The real estate industry is highly cyclical, and the value of securities issued
by companies doing business in that sector may fluctuate widely. The real estate
industry -- and, therefore, the performance of the Fund -- is highly sensitive
to national, regional and local economic conditions, interest rates, property
taxes, overbuilding, decline in value of real estate, and changes in rental
income. REITS are companies or trusts that own and/or operate income-producing
real estate. Shares of REITS are publicly traded and are subject to the same
risks as any other security, as well as risks specific to the real estate
industry.
[KEY ICON] INVESCO TECHNOLOGY FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in
technology-related industries. These include, but are not limited to, various
applied technologies, hardware, software, semiconductors, telecommunications
equipment and services, and service-related companies in information technology.
Many of these products and services are subject to rapid obsolescence, which may
lower the market value of the securities of the companies in this sector.
A core portion of the Fund's portfolio is invested in market-leading technology
companies among various subsectors in the technology universe that we believe
will maintain or improve their market share regardless of overall economic
conditions. These companies are leaders in their field and are believed to have
a strategic advantage over many of their competitors. The remainder of the
Fund's portfolio consists of faster-growing, more volatile technology companies
that INVESCO believes to be emerging leaders in their fields. The market prices
of these companies tend to rise and fall more rapidly than those of larger, more
established companies.
[KEY ICON] INVESCO TELECOMMUNICATIONS FUND -- INVESTOR CLASS, CLASS A, B, C,
AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in the design,
development, manufacture, distribution, or sale of communications services and
equipment, and companies that are involved in supplying equipment or services to
such companies. The telecommunications sector includes, but is not limited to,
companies that offer telephone services, wireless communications, satellite
communications, television and movie programming, broadcasting, and Internet
access. Many of these products and services are subject to rapid obsolescence,
which may lower the market value of the securities of the companies in this
sector.
We select stocks based on projected total return for individual companies, while
also analyzing country specific factors that might affect stock performance or
influence company valuation. Normally, the Fund will invest primarily in
companies located in at least three different countries, although U.S. issuers
will often dominate the portfolio. The Fund's portfolio emphasizes strongly
managed market leaders, with a lesser weighting on smaller, faster growing
companies that offer new products or services and/or are increasing their market
share.
[KEY ICON] INVESCO UTILITIES FUND -- INVESTOR CLASS, CLASS A, B, AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in
utilities-related industries. These include, but are not limited to, companies
that produce, generate, transmit, or distribute natural gas or electricity, as
well as companies that provide telecommunications services, including local,
long distance and wireless.
Governmental regulation, difficulties in obtaining adequate financing and
investment return, environmental issues, prices of fuel for generation of
electricity, availability of natural gas, risks associated with power marketing
and trading, and risks associated with nuclear power facilities may adversely
affect the market value of the Fund's holdings. The recent trend towards
deregulation in the utility industries presents special risks. Some companies
may be faced with increased competition and may become less profitable.
Normally, INVESCO seeks to keep the portfolio divided among the electric
utilities, natural gas, and telecommunications industries. Weightings within the
various industry segments are continually monitored, and INVESCO adjusts the
portfolio weightings depending on the prevailing economic conditions.
[GRAPH ICON] FUND PERFORMANCE
Performance information in the bar charts below is that of the Funds' Investor
Class shares, which has the longest operating history of the Funds' classes.
Information included in the table is that of Investor Class, Class C, and, if
applicable, Class K shares. Performance information for Class A and B shares is
not shown in the table as those classes do not yet have a full calendar year of
performance. Investor Class and Class A, B, C, and K returns would be similar
because all classes of shares invest in the same portfolio of securities. The
returns of the classes would differ, however, to the extent of differing levels
of expenses. In this regard, the returns reflected in the bar charts and table
reflect only the applicable total expenses of the class shown. If the effect of
the other classes' total expenses were reflected, the returns would be lower
than those shown because the other classes have higher total expenses.
The bar charts below show the Funds' Investor Class actual yearly performance
(commonly known as their "total return") for the years ended December 31 over
the past decade or since inception. The returns in the bar charts do not reflect
a 12b-1 fee in excess of 0.25%, the sales charge for Class A shares, or the
applicable contingent deferred sales charge (CDSC) for Class B or Class C
shares; if they did, the total returns shown would be lower. The table below
shows the pre-tax and after-tax average annual total returns of Investor Class
and pre-tax average annual total returns for Class C shares, and, if applicable,
Class K shares for various periods ended December 31, 2002 compared to the S&P
500 Index, the S&P 500 Financials Index with respect to Financial Services Fund,
and the NAREIT -- Equity REIT Index with respect to Real Estate Opportunity
Fund. The after-tax returns are shown only for the Investor Class shares.
After-tax returns for other classes of shares offered in this Prospectus will
vary.
After-tax returns are provided on a pre-redemption and post-redemption basis.
Pre-redemption returns assume you continue to hold your shares and pay taxes on
Fund distributions (i.e., dividends and capital gains) but do not reflect taxes
that may be incurred upon selling or exchanging shares. Post-redemption returns
assume payment of taxes on fund distributions and also that you close your
account and pay remaining federal taxes. After-tax returns are calculated using
the highest individual federal income tax rates in effect at the time the
distribution is paid. State and local taxes are not considered. Actual after-tax
returns depend on an investor's tax situation and may differ from those shown.
For investors holding their shares in tax-deferred arrangements such as 401(k)
plans or individual retirement accounts, the after-tax returns shown are not
relevant.
The information in the bar charts and table illustrates the variability of each
Fund's total return and how its performance compared to a broad measure of
market performance. Remember, past performance (before and after taxes) does not
indicate how a Fund will perform in the future.
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ENERGY FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
16.71% (7.25%) 19.80% 38.84% 19.09% (27.83%) 41.88% 58.17% (16.81%) (4.32)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/97 28.24%
Worst Calendar Qtr. 9/98 (18.34%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
18.52% (5.89%) 39.81% 30.29% 44.79% 13.45% 0.73% 26.69% (10.17%) (15.56%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/00 22.76%
Worst Calendar Qtr. 9/98 (18.20%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLD & PRECIOUS METALS FUND--
INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
72.47% (27.85%) 12.72% 40.64% (55.50%) (22.54%) (8.99%) (12.98%) 17.12% 59.65%
- --------------------------------------------------------------------------------
Best Calendar Qtr. 3/96 46.17%
Worst Calendar Qtr. 12/97 (37.51%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
(8.41%) 0.94% 58.89% 11.41% 18.46% 43.40% 0.59% 25.80% (14.68%) (25.24%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/95 19.53%
Worst Calendar Qtr. 3/01 (22.91%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEISURE FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
35.73% (4.98%) 15.79% 9.08% 26.46% 29.78% 65.59% (7.97%) 4.10% (15.41%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 25.59%
Worst Calendar Qtr. 9/01 (24.06%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND--
INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(3)
================================================================================
[GRAPHIC OMITTED]
1997 1998 1999 2000 2001 2002
21.50% (23.48%) (5.50%) 24.72% (1.91%) 5.81%
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/97 14.19%
Worst Calendar Qtr. 9/98 (20.46%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TECHNOLOGY FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
15.03% 5.27% 45.80% 21.75% 8.85% 30.12% 144.94% (22.77%) (45.51%) (47.22%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 66.77%
Worst Calendar Qtr. 9/01 (41.44%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(4)
================================================================================
[GRAPHIC OMITTED]
1995 1996 1997 1998 1999 2000 2001 2002
27.37% 16.81% 30.29% 40.98% 144.28% (26.91%) (54.19%) (50.96%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 62.22%
Worst Calendar Qtr. 9/01 (41.40%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UTILITIES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
21.20% (9.94%) 25.25% 12.75% 24.38% 24.30% 19.88% 4.14% (33.98%) (22.29%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/98 16.33%
Worst Calendar Qtr. 9/01 (23.67%)
- --------------------------------------------------------------------------------
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
INVESTOR CLASS
Energy Fund(1),(2)
Return Before Taxes (4.32%) 5.21% 10.70%
Return After Taxes on Distributions (4.32%) 4.86% 9.21%
Return After Taxes on Distributions
and Sale of Fund Shares (2.65%) 4.24% 8.34%
Gold & Precious Metals Fund(1),(2)
Return Before Taxes 59.65% 2.78% 0.07%
Return After Taxes on Distributions 59.65% 2.58% (1.25%)
Return After Taxes on Distributions
and Sale of Fund Shares 36.62% 2.12% (0.26%)
Health Sciences Fund(1),(2)
Return Before Taxes (25.24%) 2.97% 8.42%
Return After Taxes on Distributions (25.24%) 0.99% 6.14%
Return After Taxes on Distributions
and Sale of Fund Shares (15.50%) 2.36% 6.54%
Leisure Fund(1),(2)
Return Before Taxes (15.41%) 11.73% 13.63%
Return After Taxes on Distributions (15.41%) 10.02% 11.35%
Return After Taxes on Distributions
and Sale of Fund Shares (9.46%) 9.43% 10.73%
Technology Fund(1),(2)
Return Before Taxes (47.22%) (6.67%) 5.18%
Return After Taxes on Distributions (47.22%) (7.16%) 2.46%
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
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10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
Return After Taxes on Distributions
and Sale of Fund Shares (28.99%) (4.64%) 3.64%
Utilities Fund(1),(2)
Return Before Taxes (22.29%) (4.46%) 4.32%
Return After Taxes on Distributions (23.10%) (5.55%) 2.14%
Return After Taxes on Distributions
and Sale of Fund Shares (13.67%) (3.41%) 2.79%
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.35%
Financial Services Fund(1),(2)
Return Before Taxes (15.56%) 1.89% 12.44%
Return After Taxes on Distributions (15.60%) 0.59% 9.48%
Return After Taxes on Distributions
and Sale of Fund Shares (9.53%) 1.43% 9.20%
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.35%
S&P 500 Financials Index6
(reflects no deduction for fees, expenses
or taxes) (14.64%) 2.53% 14.08%
Real Estate Opportunity Fund(1),(2)
Return Before Taxes 5.81% (1.32%) 2.17%(3)
Return After Taxes on Distributions 4.56% (3.55%) (0.55%)(3)
Return After Taxes on Distributions
and Sale of Fund Shares 3.58% (2.21%) 0.35%(3)
NAREIT-- Equity REIT Index(6)
(reflects no deduction for fees, expenses
or taxes) 3.82% 3.30% 5.95%(3)
Telecommunications Fund(1),(2)
Return Before Taxes (50.96%) (10.78%) 1.69%(4)
Return After Taxes on Distributions (50.96%) (11.09%) 0.21%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (31.29%) (7.89%) 1.12%(4)
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.96%(4)
CLASS C - RETURN BEFORE TAXES (INCLUDING CDSC)
Energy Fund(1),(7) (6.01%) N/A 7.54%(8)
Gold & Precious Metals Fund(1),(7) 56.69% N/A 19.78%(8)
Health Sciences Fund(1),(7) (27.28%) N/A (12.12%)(8)
Leisure Fund(1),(7) (17.21%) N/A (6.36%)(8)
Technology Fund(1),(7) (48.74%) N/A (44.62%)(8)
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
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10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
Telecommunications Fund(1),(7) (52.53%) N/A (49.61%)(8)
Utilities Fund(1),(7) (24.11%) N/A (23.09%)(8)
S&P 500 Index(6) (22.09%) N/A (13.19%)(8)
Financial Services Fund(1),(7) (17.36%) N/A 2.05%(8)
S&P 500 Index(6) (22.09%) N/A (13.19%)(8)
S&P 500 Financials Index(6) (14.64%) N/A 4.45%(8)
Real Estate Opportunity Fund(1),(7) 3.94% N/A 7.99%(8)
NAREIT-- Equity REIT Index(6) 3.82% N/A 15.58%(8)
CLASS K - RETURN BEFORE TAXES
Energy Fund(1),(9) (7.29%) N/A (4.04%)(10)
Health Sciences Fund(1),(9) (25.71%) N/A (17.67%)(10)
Technology Fund(1),(9) (47.20%) N/A (45.27%)(10)
Telecommunications Fund(1),(9) (51.03%) N/A (51.38%)(10)
S&P 500 Index(6) (22.09%) N/A (16.32%)(10)
Financial Services Fund(1),(9) (15.88%) N/A (8.84%)(10)
S&P 500 Index(6) (22.09%) N/A (16.32%)(10)
S&P 500 Financials Index(6) (14.64%) N/A (7.64%)(10)
Leisure Fund(1),(9) (15.52%) N/A (11.49%)(11)
S&P 500 Index(6) (22.09%) N/A (22.09%)(11)
(1) Total return figures include reinvested dividends and capital gain distributions and the effect of each class's expenses.
(2) Returns before taxes for Investor Class shares of Energy, Financial Services, Gold & Precious Metals, Health Sciences, Leisure,
Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds year-to-date as of the calendar quarter ended June
30, 2003 were 10.05%, 11.02%, 0.37%, 16.16%, 12.19%, 15.14%, 17.80%, 15.21%, and 9.35%, respectively.
(3) The Fund (Investor Class shares) commenced investment operations on January 2, 1997. Index comparison begins on January 2,
1997.
(4) The Fund (Investor Class shares) commenced investment operations on August 1, 1994. Index comparison begins on August 1, 1994.
(5) The total returns are for those classes of shares with a full calendar year of performance. If the effect of the other classes'
total expenses, including 12b-1 fees, front-end sales charge for Class A, and CDSC for Class B were reflected, returns for
those classes would be lower than those shown.
(6) The S&P 500 Index is an unmanaged index considered representative of the performance of the broad U.S. stock market. The S&P
500 Financials Index is an unmanaged index that contains companies involved in activities such as banking, consumer finance,
investment banking and brokerage, asset management, insurance and investment, and real estate, including REITs. The NAREIT --
Equity REIT Index is an unmanaged index considered representative of the U.S. real estate investment trust equity market.
Please keep in mind that the Indexes do not pay brokerage, management, administrative, or distribution expenses, all of which
are paid by the classes and are reflected in their annual returns. Index returns also do not include sales charges or CDSCs
that may be paid by the shareholder.
(7) Returns before taxes, including CDSC, for Class C shares of Energy, Financial Services, Gold & Precious Metals, Health
Sciences, Leisure, Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds year-to-date as of the calendar
quarter ended June 30, 2003 were 8.76%, 9.38%, (1.00%), 14.43%, 10.69%, 13.73%, 16.57%, 13.90%, and 7.72%, respectively.
(8) Since inception of Class C shares on February 15, 2000. Index comparison begins on February 29, 2000.
(9) Returns before taxes for Class K shares of Energy, Financial Services, Health Sciences, Leisure, Technology, and
Telecommunications Funds year-to-date as of the calendar quarter ended June 30, 2003 were 10.01%, 11.00%, 15.74%, 11.82%,
17.56%, and 15.06%, respectively.
(10) Since inception of Class K shares on December 1, 2000. Index comparisons begin on December 1, 2000.
(11) Since inception of Class K shares on December 17, 2001. Index comparison begins on December 31, 2001.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class, Class A, Class B, Class C, or, if applicable, Class K shares of
the Funds. If you invest in the Funds through a financial intermediary, you may
be charged a commission or transaction fee by the financial intermediary for
purchases and sales of Fund shares.
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Investor Class Class A Class B Class C Class K
Maximum Front-End Sales Charge
on purchases as a percentage of
offering price None 5.50% None None None
Maximum Contingent Deferred
Sales Charge (CDSC) as a percentage
of the total original cost of the shares None None(1) 5.00%(2) 1.00%(2) None(1)
Maximum Sales Charge on reinvested
dividends/distributions None None None None None
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
ENERGY FUND Investor Class Class A Class B Class C Class K
Management Fees 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.69% 0.36% 0.66%(6) 0.78%(7) 4.16%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.69% 1.46% 2.41%(6) 2.53%(7) 5.36%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 3.16%
Net Expenses(5),(9) 1.69% 1.46% 2.41%(6) 2.53%(7) 2.20%(8)
==== ==== ==== ==== ====
FINANCIAL SERVICES FUND Investor Class Class A Class B Class C Class K
Management Fees 0.66% 0.66% 0.66% 0.66% 0.66%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.49% 0.50%(10) 0.74%(6) 0.79% 1.02%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.40% 1.51%(10) 2.40%(6) 2.45% 2.13%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 0.00%
Net Expenses(5),(9) 1.40% 1.51%(10) 2.40%(6) 2.45% 2.13%(8)
==== ==== ==== ==== ====
GOLD & PRECIOUS METALS FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00%
Other Expenses(4),(5) 0.88% 1.01%(10) 0.43% 0.90%
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.88% 2.11%(10) 2.18% 2.65%
==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.01% 0.00% 0.00%
Net Expenses(5),(9) 1.88% 2.10%(10) 2.18% 2.65%
==== ==== ==== ====
HEALTH SCIENCES FUND Investor Class Class A Class B Class C Class K
Management Fees 0.64% 0.64% 0.64% 0.64% 0.64%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.55% 0.89%(10) 0.87%(6) 1.63%(7) 0.98%
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.44% 1.88%(10) 2.51%(6) 3.27%(7) 2.07%
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.52% 0.00%
Net Expenses(5),(9) 1.44% 1.88%(10) 2.51%(6) 2.75%(7) 2.07%
==== ==== ==== ==== ====
LEISURE FUND Investor Class Class A Class B Class C Class K
Management Fees 0.69% 0.69% 0.69% 0.69% 0.69%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.56% 0.38% 0.54%(6) 0.75% 1.07%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.50% 1.42% 2.23%(6) 2.44% 2.21%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 0.01%
Net Expenses(5),(9) 1.50% 1.42% 2.23%(6) 2.44% 2.20%(8)
==== ==== ==== ==== ====
REAL ESTATE OPPORTUNITY FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00%
Other Expenses(4),(5) 1.43%(11) 0.56% 1.98%(6) 1.99%(7)
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 2.43%(11) 1.66% 3.73%(6) 3.74%(7)
==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.98% 0.99%
Net Expenses(5),(9) 2.43%(11) 1.66% 2.75%(6) 2.75%(7)
==== ==== ==== ====
TECHNOLOGY FUND Investor Class Class A Class B Class C Class K
Management Fees 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.92% 0.56%(10) 1.14%(6) 2.35%(7) 1.44%(8)
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.77% 1.51%(10) 2.74%(6) 3.95%(7) 2.49%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 1.20% 0.29%
Net Expenses(5),(9) 1.77% 1.51%(10) 2.74%(6) 2.75%(7) 2.20%(8)
==== ==== ==== ==== ====
TELECOMMUNICATIONS FUND Investor Class Class A Class B Class C Class K
Management Fees 0.65% 0.65% 0.65% 0.65% 0.65%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 1.86%(11) 0.66% 10.50%(6) 4.11%(7) 2.20%(8)
---- ---- ----- ---- ----
Total Annual Fund Operating Expenses(4),(5) 2.76%(11) 1.66% 12.15%(6) 5.76%(7) 3.30%(8)
==== ==== ===== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 9.40% 3.01% 1.10%
Net Expenses(5),(9) 2.76%(11) 1.66% 2.75%(6) 2.75%(7) 2.20%(8)
==== ==== ===== ==== ====
UTILITIES FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.25%(12) 1.00% 1.00%
Other Expenses(4),(5) 0.90%(11) 0.64%(10) 0.94%(6) 1.95%(7)
---- ---- ----- ----
Total Annual Fund Operating Expenses(4),(5) 1.90%(11) 1.64%(10),(12)2.69%(6) 3.70%(7)
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.95%
==== ==== ===== ====
Net Expenses(5),(9) 1.90%(11) 1.64%(10),(12)2.69%(6) 2.75%(7)
==== ==== ===== ====
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares within eighteen months from the date of purchase, you
may pay a 1% contingent deferred sales charge (CDSC) at the time of redemption. For qualified plans investing in Class A
shares, you may pay a CDSC of 1% on your Class A shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. For qualified plans investing in Class K shares, you may pay a CDSC of 0.70% on your Class K shares
if the plan is redeemed within twelve months from initial deposit in the plan's INVESCO account. Please see the sections
entitled "How to Buy Shares" and "How To Sell Shares."
(2) A 5% and 1% CDSC may be charged on Class B and Class C shares, respectively. Please see the section entitled "How To Buy
Shares."
(3) Because each class pays a 12b-1 distribution and service fee which is based upon each class's assets, if you own shares of a
Fund for a certain period of time, you may pay more than the economic equivalent of the maximum front-end sales charge
permitted for mutual funds by the National Association of Securities Dealers, Inc.
(4) Each Fund's actual Other Expenses and Total Annual Fund Operating Expenses were lower than the figures shown, because their
custodian fees were reduced under expense offset arrangements.
(5) INVESCO is entitled to reimbursement from the classes for fees and expenses absorbed pursuant to voluntary and contractual
expense limitation commitments between INVESCO and the Funds if such reimbursements do not cause a class to exceed expense
limitations and the reimbursement is made within three years after INVESCO incurred the expense. The voluntary expense
limitations may be changed at any time following consultation with the board of directors.
(6) Certain expenses of Class B shares of Energy, Financial Services, Health Sciences, Leisure, Real Estate Opportunity,
Technology, Telecommunications, and Utilities Funds were absorbed voluntarily by INVESCO pursuant to commitments between the
Funds and INVESCO. These commitments may be changed at any time following consultation with the board of directors. After
absorption, but excluding any expense offset arrangements, Energy Fund's Class B shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.58% and 2.33%, respectively, of the Fund's average net assets attributable to Class B shares;
Financial Services Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.43% and 2.09%,
respectively, of the Fund's average net assets attributable to Class B shares; Health Sciences Fund's Class B shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.42% and 2.06%, respectively, of the Fund's average net assets
attributable to Class B shares; Leisure Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were
0.45% and 2.14%, respectively, of the Fund's average net assets attributable to Class B shares; Real Estate Opportunity Fund's
Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.61% and 2.36%, respectively, of the Fund's
average net assets attributable to Class B shares; Technology Fund's Class B shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.55% and 2.15%, respectively, of the Fund's average net assets attributable to Class B shares;
Telecommunications Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.92% and 2.57%,
respectively, of the Fund's average net assets attributable to Class B shares; and Utilities Fund's Class B shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.39% and 2.14%, respectively, of the Fund's average net assets
attributable to Class B shares.
(7) Certain expenses of Class C shares of Energy, Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds were
absorbed voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any
time following consultation with the board of directors. Certain expenses of Class C shares of Health Sciences Fund were
absorbed by INVESCO pursuant to a contractual agreement between the Fund and INVESCO. After absorption, but excluding any
expense offset arrangements, Energy Fund's Class C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.58%
and 2.33%, respectively, of the Fund's average net assets attributable to Class C shares; Real Estate Opportunity Fund's Class
C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.60% and 2.35%, respectively, of the Fund's average net
assets attributable to Class C shares; Technology Fund's Class C shares' Other Expenses and Total Annual Fund Operating
Expenses were 1.09% and 2.69%, respectively, of the Fund's average net assets attributable to Class C shares;
Telecommunications Fund's Class C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.98% and 2.63%,
respectively, of the Fund's average net assets attributable to Class C shares; and Utilities Fund's Class C shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.30% and 2.05%, respectively, of the Fund's average net assets
attributable to Class C shares.
(8) Certain expenses of Class K shares of Energy, Financial Services, and Telecommunications Funds were absorbed voluntarily by
INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time following
consultation with the board of directors. Certain expenses of Class K shares of Leisure and Technology Funds were absorbed by
INVESCO pursuant to contractual agreements between the Funds and INVESCO. After absorption, but excluding any expense offset
arrangement, Energy Fund's Class K shares' Other Expenses and Total Annual Fund Operating Expenses were 0.87% and 2.07%,
respectively, of the Fund's average net assets attributable to Class K shares; Financial Services Fund's Class K shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.67% and 1.78%, respectively, of the Fund's average net assets
attributable to Class K shares; and Telecommunications Fund's Class K shares' Other Expenses and Total Annual Fund Operating
Expenses were 0.96% and 2.06%, respectively, of the Fund's average net assets attributable to Class K shares.
(9) To limit expenses, INVESCO has contractually obligated itself to waive fees and bear expenses through March 31, 2004 that would
cause the ratio of expenses to average net assets to exceed 2.10% for Class A shares, 2.75% for each of Class B and Class C
shares, and 2.20% for Class K shares.
(10) Certain expenses of Class A shares of Financial Services, Health Sciences, Technology, and Utilities Funds were absorbed
voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time
following consultation with the board of directors. Certain expenses of Class A shares of Gold & Precious Metals Fund were
absorbed by INVESCO pursuant to a contractual agreement between the Fund and INVESCO. After absorption, but excluding any
expense offset arrangements, Financial Services Fund's Class A shares' Other Expenses and Total Annual Fund Operating Expenses
were 0.37% and 1.38%, respectively, of the Fund's average net assets attributable to Class A shares; Health Sciences Fund's
Class A shares' Other Expenses and Total Annual Fund Operating Expenses were 0.42% and 1.41%, respectively, of the Fund's
average net assets attributable to Class A shares; Technology Fund's Class A shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.52% and 1.47%, respectively, of the Fund's average net assets attributable to Class A shares; and
Utilities Fund's Class A shares' Other Expenses and Total Annual Fund Operating Expenses were 0.41% and 1.41%, respectively, of
the Fund's average net assets attributable to Class A shares.
(11) Certain expenses of Investor Class shares of Real Estate Opportunity, Telecommunications, and Utilities Funds were absorbed
voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time
following consultation with the board of directors. After absorption, but excluding any expense offset arrangements, Real
Estate Opportunity Fund's Investor Class shares' Other Expenses and Total Annual Fund Operating Expenses were 0.60% and 1.60%,
respectively, of the Fund's average net assets attributable to Investor Class shares; Telecommunications Fund's Investor Class
shares' Other Expenses and Total Annual Fund Operating Expenses were 0.91% and 1.81%, respectively, of the Fund's average net
assets attributable to Investor Class shares; and Utilities Fund's Investor Class shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.30% and 1.30%, respectively, of the Fund's average net assets attributable to Investor Class shares.
(12 )Effective July 1, 2003, the Distribution and Service (12b-1) Fees have been reduced from 0.35% to 0.25%. Total Annual Fund
Operating Expenses have been restated for the current fiscal year end.
EXPENSE EXAMPLE
The Example is intended to help you compare the cost of investing in the
Investor Class, Class A, Class B, Class C, and, if applicable, Class K shares of
the Funds to the cost of investing in other mutual funds.
The Example assumes that you invested $10,000 in Investor Class, Class A, Class
B, Class C, or Class K shares of a Fund for the time periods indicated. Within
each Example, there is an assumption that you redeem all of your shares at the
end of those periods and that you keep your shares. The Example also assumes
that your investment had a hypothetical 5% return each year, and that a Fund's
Investor Class, Class A, Class B, Class C, and Class K shares' operating
expenses remain the same. Although the actual costs and performance of a Fund's
Investor Class, Class A, Class B, Class C, and Class K shares may be higher or
lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
ENERGY FUND
Investor Class $172 $ 533 $ 918 $1,998
Class A(1) $690 $ 986 $1,304 $2,200
Class B - With Redemption(1) $744 $1,051 $1,485 $2,511(2)
Class B - Without Redemption $244 $ 751 $1,285 $2,511(2)
Class C - With Redemption1 $356 $ 788 $1,345 $2,866
Class C - Without Redemption $256 $ 788 $1,345 $2,866
Class K(3) $223 $1,321 $2,411 $5,103
FINANCIAL SERVICES FUND
Investor Class $143 $ 443 $ 766 $1,680
Class A(1) $695 $1,001 $1,328 $2,252
Class B - With Redemption(1) $743 $1,048 $1,480 $2,515(2)
Class B - Without Redemption $243 $ 748 $1,280 $2,515(2)
Class C - With Redemption(1) $348 $ 764 $1,306 $2,786
Class C - Without Redemption $248 $ 764 $1,306 $2,786
Class K $216 $ 667 $1,144 $2,462
GOLD & PRECIOUS METALS FUND
Investor Class $191 $ 591 $1,016 $2,201
Class A(1),(3) $751 $1,174 $1,621 $2,856
Class B - With Redemption(1) $721 $ 982 $1,369 $2,496(2)
Class B - Without Redemption $221 $ 682 $1,169 $2,496(2)
Class C - With Redemption(1) $368 $ 823 $1,405 $2,983
Class C - Without Redemption $268 $ 823 $1,405 $2,983
HEALTH SCIENCES FUND
Investor Class $147 $ 456 $ 787 $1,724
Class A(1) $730 $1,108 $1,510 $2,630
Class B - With Redemption(1) $754 $1,082 $1,535 $2,691(2)
Class B - Without Redemption $254 $ 782 $1,335 $2,691(2)
Class C - With Redemption(1),(3) $378 $ 958 $1,663 $3,532
Class C - Without Redemption(3) $278 $ 958 $1,663 $3,532
Class K $210 $ 649 $1,114 $2,400
LEISURE FUND
Investor Class $153 $ 474 $ 818 $1,791
Class A(1) $687 $ 975 $1,284 $2,158
Class B - With Redemption(1) $726 $ 997 $1,395 $2,361(2)
Class B - Without Redemption $226 $ 697 $1,195 $2,361(2)
Class C - With Redemption(1) $347 $ 761 $1,301 $2,776
Class C - Without Redemption $247 $ 761 $1,301 $2,776
Class K(3) $223 $ 690 $1,184 $2,543
REAL ESTATE OPPORTUNITY FUND
Investor Class $246 $ 758 $1,296 $2,766
Class A(1) $709 $1,045 $1,403 $2,407
Class B - With Redemption(1),(3) $778 $1,351 $2,043 $3,454(2)
Class B - Without Redemption(3) $278 $1,051 $1,843 $3,454(2)
Class C - With Redemption(1),(3) $378 $1,053 $1,847 $3,921
Class C - Without Redemption(3) $278 $1,053 $1,847 $3,921
TECHNOLOGY FUND
Investor Class $180 $ 557 $ 959 $2,084
Class A(1) $695 $1,001 $1,328 $2,252
Class B - With Redemption(1) $777 $1,150 $1,650 $2,773(2)
Class B - Without Redemption $277 $ 850 $1,450 $2,773(2)
Class C - With Redemption(1),(3) $378 $1,094 $1,928 $4,089
Class C - Without Redemption(3) $278 $1,094 $1,928 $4,089
Class K(3) $223 $ 748 $1,300 $2,804
TELECOMMUNICATIONS FUND
Investor Class $279 $ 856 $1,459 $3,090
Class A(1) $709 $1,045 $1,403 $2,407
Class B - With Redemption(1),(3) $778 $2,888 $4,780 $7,273(2)
Class B - Without Redemption(3) $278 $2,588 $4,580 $7,273(2)
Class C - With Redemption(1),(3) $378 $1,447 $2,598 $5,401
Class C - Without Redemption(3) $278 $1,447 $2,598 $5,401
Class K(3) $223 $ 913 $1,627 $3,520
UTILITIES FUND
Investor Class $193 $ 597 $1,026 $2,222
Class A(1) $708 $1,039 $1,393 $2,387
Class B - With Redemption(1) $772 $1,135 $1,625 $2,768(2)
Class B - Without Redemption $272 $ 835 $1,425 $2,768(2)
Class C - With Redemption(1),(3) $378 $1,045 $1,831 $3,889
Class C - Without Redemption(3) $278 $1,045 $1,831 $3,889
(1) Based on initial sales charge for Class A shares at the beginning of each period shown and CDSC
charges for Class B and C shares based on redemption at the end of each period shown. Please see "How
To Buy Shares."
(2) Assumes conversion of Class B to Class A at the end of the eighth year. Please see "How To Buy
Shares."
(3) Class expenses remain the same for each period (except that the Example reflects the contractual
expense reimbursements by INVESCO for the one-year period and the first year of the three-, five-, and
ten-year periods).
[ARROWS ICON] INVESTMENT RISKS
BEFORE INVESTING IN A FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH WHICH
YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER, INCOME
LEVEL, AND TIME HORIZON.
You should determine the level of risk with which you are comfortable before you
invest. The principal risks of investing in any mutual fund, including these
Funds, are:
NOT INSURED. Mutual funds are not insured by the FDIC or any other government
agency, unlike bank deposits such as CDs or savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its performance, nor
assure you that the market value of your investment will increase. You may lose
the money you invest, and the Funds will not reimburse you for any of these
losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease with
changes in the value of a Fund's underlying investments and changes in the
equity markets as a whole.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Funds are designed to be only a part
of your personal investment plan.
[ARROWS ICON] PRINCIPAL RISKS ASSOCIATED WITH THE FUNDS
You should consider the special risk factors discussed below associated with the
Funds' policies in determining the appropriateness of investing in a Fund. See
the Statement of Additional Information for a discussion of additional risk
factors.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of a Fund's
investments. Certain stocks selected for any Fund's portfolio may decline in
value more than the overall stock market. In general, the securities of small
companies are more volatile than those of mid-size companies or large companies.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory, and diplomatic risks. Energy, Financial
Services, Health Sciences, Leisure, Real Estate Opportunity, Technology, and
Utilities Funds may invest up to 25% of their respective assets in securities of
non-U.S. issuers. Securities of Canadian issuers and American Depositary
Receipts are not subject to this 25% limitation. Foreign securities risks are
potentially greater for Gold & Precious Metals and Telecommunications Funds,
since those Funds have the ability to invest more than 25% of their respective
assets in the securities of non-U.S. issuers.
CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of a Fund's investment in a security
valued in the foreign currency, or based on that currency value.
POLITICAL RISK. Political actions, events, or instability may result in
unfavorable changes in the value of a security.
REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.
DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
LIQUIDITY RISK
A Fund's portfolio is liquid if the Fund is able to sell the securities it owns
at a fair price within a reasonable time. Liquidity is generally related to the
market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some manner,
from the price of another security, index, asset, or rate. Derivatives include
options and futures contracts, among a wide range of other instruments. The
principal risk of investments in derivatives is that the fluctuations in their
values may not correlate perfectly with the overall securities markets. Some
derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk,
described below.
Options and futures are common types of derivatives that a Fund may occasionally
use to hedge its investments. An option is the right to buy and sell a security
or other instrument, index, or commodity at a specific price on or before a
specific date. A future is an agreement to buy or sell a security or other
instrument, index, or commodity at a specific price on a specific date. The use
of options and futures may increase the performance of the Fund, but also may
increase market risk. Other types of derivatives include swaps, caps, floors,
and collars.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with a
Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete, or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
PORTFOLIO TURNOVER RISK
A Fund's investments may be bought and sold relatively frequently. A high
turnover rate may affect a Fund's performance because it results in higher
brokerage commissions and may result in taxable gain distributions to a Fund's
shareholders.
----------------------------------------------
Although each Fund generally invests in equity securities of companies in the
economic sector described by its name, the Funds also may invest in other types
of securities and other financial instruments, indicated in the chart below.
Although these investments typically are not part of any Fund's principal
investment strategy, they may constitute a significant portion of a Fund's
portfolio, thereby possibly exposing a Fund and its investors to the following
additional risks.
- --------------------------------------------------------------------------------
INVESTMENT RISKS APPLIES TO THESE FUNDS
- --------------------------------------------------------------------------------
AMERICAN DEPOSITARY RECEIPTS
(ADRs)
These are securities issued Market, Information, All Funds
by U.S. banks that represent Political, Regulatory,
shares of foreign corpora- Diplomatic, Liquidity,
tions held by those banks. and Currency Risks
Although traded in U.S.
securities markets and
valued in U.S. dollars, ADRs
carry most of the risks of
investing directly in
foreign securities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT RISKS APPLIES TO THESE FUNDS
- --------------------------------------------------------------------------------
FUTURES
A futures contract is an Market, Liquidity, Technology
agreement to buy or sell a and Derivatives Risks Telecommunications
specific amount of a
financial instrument (such
as an index option) at a
stated price on a stated
date. A Fund may use futures
contracts to pro- vide
liquidity and to hedge
portfolio value.
- --------------------------------------------------------------------------------
OPTIONS
The obligation or right to Information, Liquidity, Technology
deliver or receive a and Derivatives Risks Telecommunications
security or other
instrument, index, or
commodity, or cash payment
depending on the price of
the underlying security or
the performance of an index
or other benchmark. Includes
options on specific
securities and stock
indices, and options on
stock index futures. May be
used in a Fund's portfolio
to provide liquidity and
hedge portfolio value.
- --------------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS
These may include forward Counterparty, Currency, Technology
contracts, swaps, caps, Liquidity, Market, and Telecommunications
floors, and collars. They Regulatory Risks
may be used to try to manage
a Fund's foreign currency
exposure and other
investment risks, which can
cause its net asset value to
rise or fall. A Fund may use
these financial instruments,
commonly known as
"derivatives," to increase
or decrease its exposure to
changing securities prices,
interest rates, currency
exchange rates, or other
factors.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A contract under which the Counterparty Risk All Funds
seller of a security agrees
to buy it back at an
agreed-upon price and time
in the future.
- --------------------------------------------------------------------------------
[ARROWS ICON] TEMPORARY DEFENSIVE POSITIONS
When securities markets or economic conditions are unfavorable or unsettled, we
might try to protect the assets of a Fund by investing in securities that are
highly liquid, such as high-quality money market instruments like shortterm U.S.
government obligations, commercial paper, or repurchase agreements, even though
that is not the normal investment strategy of any Fund. We have the right to
invest up to 100% of a Fund's assets in these securities, although we are
unlikely to do so. Even though the securities purchased for defensive purposes
often are considered the equivalent of cash, they also have their own risks.
Investments that are highly liquid or comparatively safe tend to offer lower
returns. Therefore, a Fund's performance could be comparatively lower if it
concentrates in defensive holdings.
[ARROWS ICON] PORTFOLIO TURNOVER
We actively manage and trade the Funds' portfolios. Therefore, some of the Funds
may have a higher portfolio turnover rate compared to many other mutual funds.
The Funds with higher-than-average portfolio turnover rates for the fiscal year
ended March 31, 2003, were:
Energy 144%
Health Sciences 179%
Real Estate Opportunity 248%
Technology 107%(1)
Telecommunications 137%(1)
(1) The increase in the Funds' portfolio turnover rates was greater than
expected during the year due to active trading undertaken in response to
market conditions.
A portfolio turnover rate of 200%, for example, is equivalent to a Fund buying
and selling all of the securities in its portfolio two times in the course of a
year. A comparatively high turnover rate may affect a Fund's performance because
it results in higher brokerage commissions and may result in taxable capital
gain distributions to a Fund's shareholders.
[INVESCO ICON] FUND MANAGEMENT
INVESTMENT ADVISOR
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT MANAGEMENT
COMPANY THAT MANAGES MORE THAN $318.5 BILLION IN ASSETS WORLDWIDE. AMVESCAP IS
BASED IN LONDON, WITH MONEY M ANAGERS LOCATED IN EUROPE, NORTH AND SOUTH AMEICA,
AND THE FAR EAST.
INVESCO, located at 4350 South Monaco Street, Denver, Colorado, is the
investment advisor of the Funds. INVESCO was founded in 1932 and manages over
$17 billion for 2,848,927 shareholder accounts in 47 INVESCO mutual funds as of
March 31, 2003. INVESCO performs a wide variety of other services for the Funds,
including administrative and transfer agency functions (the processing of
purchases, sales, and exchanges of Fund shares).
ADI is the Funds' distributor and is responsible for the sale of the Funds'
shares.
INVESCO and ADI are subsidiaries of AMVESCAP PLC.
The following table shows the fees the Funds paid to INVESCO for its advisory
services in the fiscal year ended March 31, 2003.
- --------------------------------------------------------------------------------
ADVISORY FEE AS A PERCENTAGE OF
FUND AVERAGE ANNUAL NET ASSETS UNDER MANAGEMENT
- --------------------------------------------------------------------------------
Energy 0.75%
Financial Services 0.66%
Gold & Precious Metals 0.75%
Health Sciences 0.64%
Leisure 0.69%
Real Estate Opportunity 0.75%
Technology 0.60%
Telecommunications 0.65%
Utilities 0.75%
- --------------------------------------------------------------------------------
[INVESCO ICON] PORTFOLIO MANAGERS
The following individuals are primarily responsible for the daytoday management
of their respective Fund's or Funds' portfolio holdings:
FUND PORTFOLIO MANAGER
Energy John S. Segner
Financial Services Joseph W. Skornicka
Gold & Precious Metals John S. Segner
Health Sciences Thomas R. Wald
Andy Summers
Leisure Mark D. Greenberg
Real Estate Opportunity Joe V. Rodriguez, Jr.
Mark Blackburn
James W. Trowbridge
Technology William R. Keithler
Chris Dries
Telecommunications William R. Keithler
Utilities Jeffrey G. Morris
MARK BLACKBURN, Portfolio Manager, has been responsible for INVESCO Real Estate
Opportunity Fund since July 1, 2003. He has been responsible for A I M Real
Estate Fund since 2000 and has been associated with the subadvisor and/or its
affiliates since 1998. From 1995 to 1997, he was Senior Analyst and Associate
Director of Research for Southwest Securities.
CHRIS DRIES is the Assistant Portfolio Manager for the INVESCO Technology Fund.
Chris joined INVESCO in 1993, and was promoted to the investment division in
1995. He previously held the position of manager of investment operations for
the investment division at INVESCO. Chris received his master's degree in
finance from the University of Colorado at Denver and his bachelor's degree in
finance from University of Colorado at Boulder.
MARK D. GREENBERG, a senior vice president of INVESCO, is the portfolio manager
of Leisure Fund. Before joining INVESCO in 1996, Mark was a vice president and
global media and entertainment analyst with Scudder, Stevens & Clark. He is a
CFA charterholder. Mark holds a B.S.B.A. from Marquette University.
WILLIAM R. KEITHLER, Director of Sector Management and a senior vice president
of INVESCO, is the lead portfolio manager of Technology Fund and heads the
Technology Team at INVESCO. Before rejoining INVESCO in 1998, Bill was a
portfolio manager with Berger Associates, Inc. He is a CFA charterholder. Bill
holds an M.S. from the University of Wisconsin--Madison and a B.A. from Webster
College.
JEFFREY G. MORRIS, a vice president of INVESCO, is the portfolio manager of
Utilities Fund. Jeff joined INVESCO in 1991 and is a CFA charterholder. He holds
an M.S. in Finance from the University of Colorado--Denver and a B.S. in
Business Administration from Colorado State University.
JOE V. RODRIGUEZ, JR., (lead manager), Portfolio Manager, has been responsible
for INVESCO Real Estate Opportunity Fund since July 1, 2003. He has been
responsible for A I M Real Estate Fund since 1995 and has been associated with
the subadvisor and/or its affiliates since 1990.
JOHN S. SEGNER, a senior vice president of INVESCO, is the portfolio manager of
Energy and Gold & Precious Metals Funds. Before joining INVESCO in 1997, John
was a managing director and principal with The Mitchell Group, Inc. He holds an
M.B.A. in Finance from the University of Texas-Austin and a B.S. in Civil
Engineering from the University of Alabama.
JOSEPH W. SKORNICKA, a vice president of INVESCO, is the portfolio manager of
Financial Services Fund. Before joining INVESCO in 2001, Joe was a senior equity
analyst and fund manager with Munder Capital Management and an assistant vice
president for Comerica Incorporated. He is a CFA charterholder. Joe holds an
M.B.A. from the University of Michigan and a B.A. from Michigan State
University.
ANDY SUMMERS is an Assistant Portfolio Manager for all INVESCO Health Sciences
portfolios. Andy joined the INVESCO Health Sciences investment team in 1998. He
is a CFA charterholder. Prior to joining INVESCO, Andy worked as an analyst for
Denver Investment Advisors. He received his master's degree in finance from the
University of Wisconsin at Madison in 1998. He received hid bachelor's degree in
finance from the University of Wisconsin at Whitewater in 1996.
JAMES W. TROWBRIDGE, Portfolio Manager, has been responsible for INVESCO Real
Estate Opportunity Fund since July 1, 2003. He has been responsible for A I M
Real Estate Fund since 1995 and has been associated with the subadvisor and/or
its affiliates since 1989.
THOMAS R. WALD, a vice president of INVESCO, is the portfolio manager of Health
Sciences Fund. Before joining INVESCO in 1997, Tom was an analyst with Munder
Capital Management, Duff & Phelps and Prudential Investment Corp. He is a CFA
charterholder. Tom holds an M.B.A. from the Wharton School at the University of
Pennsylvania and a B.A. from Tulane University.
Effective July 1, 2003, Messrs. Blackburn, Rodriguez, and Trowbridge are dual
employees of INVESCO Funds Group, Inc. (the "advisor") and INVESCO Institutional
(N.A.) Inc. (the "subadvisor").
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD YOU
ATTEMPT TO USE THE FUNDS FOR SHORT-TERM TRADING PURPOSES.
The Funds offer shareholders the potential to increase the value of their
capital over time; Real Estate Opportunity, Telecommunications, and Utilities
Funds also offer the opportunity for current income. Like most mutual funds,
each Fund seeks to provide higher returns than the market or its competitors,
but cannot guarantee that performance. While each Fund invests in a single
targeted market sector, each seeks to minimize risk by investing in many
different companies.
SUITABILITY FOR INVESTORS
Only you can determine if an investment in a Fund is right for you based upon
your own economic situation, the risk level with which you are comfortable and
other factors. In general, the Funds are most suitable for investors who:
o are willing to grow their capital over the long-term (at least five years)
o can accept the additional risks and volatility associated with sector
investing
o understand that shares of a Fund can, and likely will, have daily price
fluctuations
o are investing through tax-deferred retirement accounts, such as traditional
and Roth Individual Retirement Accounts ("IRAs"), as well as
employer-sponsored qualified retirement plans, including 401(k)s and
403(b)s, all of which have longer investment horizons.
You probably do not want to invest in the Funds if you are:
o primarily seeking current dividend income (although Real Estate Opportunity,
Telecommunications, and Utilities Funds do seek to provide income in
addition to capital growth)
o unwilling to accept potentially significant changes in the price of Fund
shares
o speculating on short-term fluctuations in the stock markets.
[INVESCO ICON] SHARE PRICE
CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- --------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV)
The value of your Fund shares is likely to change daily. This value is known as
the Net Asset Value per share, or NAV. INVESCO determines the market value of
each investment in each Fund's portfolio each day that the New York Stock
Exchange ("NYSE") is open, at the close of the regular trading day on that
exchange (normally 4:00 p.m. Eastern time), except that securities traded
primarily on the Nasdaq Stock Market ("Nasdaq") are normally valued by a Fund at
the Nasdaq Official Closing Price provided by Nasdaq each business day. Shares
of the Funds are not priced on days when the NYSE is closed, which generally is
on weekends, most national holidays in the U.S., and Good Friday.
NAV is calculated by adding together the current market price of all of a Fund's
investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares. Because
their expenses vary, NAV is calculated separately for each class.
All purchases, sales, and exchanges of Fund shares are made by INVESCO at the
NAV next calculated after INVESCO receives proper instructions from you, your
financial intermediary, or your plan or program sponsor. Instructions must be
received by INVESCO no later than the close of the NYSE to effect transactions
at that day's NAV. If INVESCO receives instructions from you, your financial
intermediary, or your plan or program sponsor after that time, the instructions
will be processed at the NAV next calculated after receipt of these
instructions. Financial institutions that process customer transactions through
the National Securities Clearing Corporation's Fund/SERV and Networking
facilities must obtain their customers' permission for each transaction, and
each financial institution retains responsibility to its customers for any
errors or irregularities related to these transactions.
Foreign securities exchanges, which set the prices for foreign securities held
by the Funds, are not always open the same days as the NYSE, and may be open for
business on days the NYSE is not. For example, Thanksgiving Day is a holiday
observed by the NYSE and not by overseas exchanges. In this situation, the Funds
would not calculate NAV on Thanksgiving Day (and INVESCO would not buy, sell, or
exchange shares for you on that day), even though activity on foreign exchanges
could result in changes in the value of investments held by the Funds on that
day.
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE CLOSE
OF THE NYSE, NORMALLY 4:00 P.M. EASTERN TIME.
The Funds offer multiple classes of shares. The chart in this section shows
several convenient ways to invest in the shares of the Funds if you invest
directly through INVESCO. If you invest in a Fund through a financial
intermediary, please consult the financial intermediary, or with respect to
Class K shares, the plan or program sponsor, for more information on how to
purchase shares of a Fund. You may be charged a commission or transaction fee by
the financial intermediary or plan or program sponsor for purchases of Fund
shares.
With the exception of Class A shares, there is no charge to invest directly
through INVESCO. Class A shares are subject to a front-end sales charge. For
more information on this charge, please see the subsection entitled "Sales
Charges." If you buy $1,000,000 or more of Class A shares and redeem the shares
within eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the total original cost of the
shares may be assessed. With respect to redemption of Class C shares held
thirteen months or less, a CDSC of 1% of the total original cost of the shares
may be assessed. With respect to Class K shares, if you are a qualified plan and
elect to receive a dealer concession, you may pay a CDSC of 0.70% on your Class
K shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. In determining whether a CDSC
applies to a redemption from a non-qualified plan, it is assumed that the shares
being redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the shareholder's
account. These charges are not assessed upon Class A, B, C, or K shares acquired
through reinvestment of dividends or other distributions, or Class A, B, C, or K
shares exchanged for the same class of another INVESCO Fund. For more
information on CDSC charges, please see the subsection of the Prospectus
entitled "Choosing A Share Class" and the section of the Statement of Additional
Information entitled "Distributor - Sales Charges and Dealer Concessions."
For all new accounts, please send a completed application form, and specify the
fund or funds and class or classes of shares you wish to purchase. If you do not
specify a fund or funds, your initial investment and any subsequent purchases
will automatically go into INVESCO Cash Reserves Fund - Class A, a series of
INVESCO Money Market Funds, Inc. You will receive a confirmation of this
transaction and may contact INVESCO to exchange into the fund you choose.
A share of each class represents an identical interest in a Fund and has the
same rights, except that each class bears its own distribution and shareholder
servicing charges, and other expenses. The income attributable to each class and
the dividends payable on the shares of each class will be reduced by the amount
of the distribution fee, if applicable, and the other expenses payable by that
class.
INVESCO reserves the right to increase, reduce, or waive each Fund's minimum
investment requirements in its sole discretion, if it determines this action is
in the best interests of that Fund's shareholders. INVESCO also reserves the
right in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.
Please remember that if you pay by check, Automated Clearing House ("ACH"), or
wire and your funds do not clear, you will be responsible for any related loss
to a Fund or INVESCO. If you are already an INVESCO funds shareholder, the Fund
may seek reimbursement for any loss from your existing account(s).
MINIMUM INITIAL INVESTMENT. $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.
MINIMUM SUBSEQUENT INVESTMENT. $50 (Minimums are lower for certain retirement
plans.)
The following chart shows several ways to invest in a Fund if you invest
directly through INVESCO.
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY CHECK $1,000 for regular INVESCO does not
Mail to: accounts; $250 for an accept cash, credit
INVESCO Funds Group, Inc. IRA; $50 for each cards, travelers'
P.O. Box 173706 subsequent investment. cheques, credit card
Denver, CO 80217-3706. checks, instant loan
You may send your check by checks, money orders,
overnight courier to: 4350 or third party checks
South Monaco Street Denver, unless they are from
CO 80237. another financial
institution related to
a retirement plan
transfer.
- --------------------------------------------------------------------------------
BY WIRE $1,000 for regular
You may send your payment by accounts; $250 for an
bank wire (call IRA; $50 for each
1-800-525-8085 for subsequent investment.
instructions).
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $1,000 for regular You must provide your
Call 1-800-525-8085 to accounts; $250 for an bank account
request your purchase. Upon IRA; $50 for each information to INVESCO
your telephone instructions, subsequent investment. prior to using this
INVESCO will move money from option.
your designated bank/ credit
union checking or savings
account in order to purchase
shares.
- --------------------------------------------------------------------------------
BY INTERNET (INVESTOR CLASS - $1,000 for regular You will need a Web
GRANDFATHERED INVESTORS ONLY) accounts; $250 for an browser to use this
Go to the INVESCO Web site IRA; $50 for each service. Internet
at invescofunds.com. subsequent investment. transactions are
limited to a maximum
of $25,000.
- --------------------------------------------------------------------------------
REGULAR INVESTING WITH EASIVEST $50 per month for Like all regular
OR DIRECT PAYROLL PURCHASE EasiVest; $50 per pay investment plans,
You may enroll on your fund period for Direct neither EasiVest nor
application, or call us for Payroll Purchase. You Direct Payroll
a separate form and more may start or stop your Purchase ensures a
details. Investing the same regular investment profit or protects
amount on a monthly basis plan at any time, with against loss in a
allows you to buy more two weeks' notice to falling market.
shares when prices are low INVESCO. Because you'll invest
and fewer shares when prices continually,
are high. This "dollar cost regardless of varying
averaging" may help offset price levels, consider
market fluctuations. Over a your financial ability
period of time, your average to keep buying through
cost per share may be less low price levels. And
than the actual average net remember that you will
asset value per share. lose money if you
redeem your shares
when the market value
of all your shares is
less than their cost.
- --------------------------------------------------------------------------------
BY PERSONAL ACCOUNT LINE $50 for subsequent You must provide your
WITH ACH investments. bank account
Automated transactions by information to INVESCO
telephone are available for prior to using this
subsequent purchases and option. Automated
exchanges 24 hours a day. transactions are
Simply call 1-800-424-8085. limited to a maximum
of $25,000.
- --------------------------------------------------------------------------------
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000 for regular See "Exchange Policy."
Between the same class of accounts; $250 for an
any two INVESCO funds. Call IRA; $50 for each
1-800-525-8085 for subsequent investment.
prospectuses of other
INVESCO funds. Exchanges may
be made by phone or at our
Web site at
invescofunds.com. You may
also establish an automatic
monthly exchange service
between two INVESCO funds;
call us for further details
and the correct form.
GRANDFATHERED INVESTORS. Investor Class shares of a Fund can be purchased only
by:
o Persons or entities who had established an account in any of the funds
managed and distributed by INVESCO (the "INVESCO Funds") in Investor Class
shares prior to April 1, 2002 and have continuously maintained such account
in Investor Class shares since April 1, 2002;
o Any person or entity listed in the account registration for any INVESCO Funds
account in Investor Class shares that has been established prior to April 1,
2002 and continuously maintained since April 1, 2002, such as joint owners,
trustees, custodians, and designated beneficiaries;
o Customers of certain financial institutions, wrap accounts or other fee-based
advisory programs, or insurance company separate accounts, which have had
relationships with INVESCO and/or any of the INVESCO Funds' Investor Class
shares prior to April 1, 2002 and continuously maintained such relationships
since April 1, 2002;
o Defined benefit, defined contribution, and deferred compensation plans; and
o INVESCO employees, INVESCO Funds directors, AMVESCAP employees, AMVESCAP
directors, and their immediate families.
For more detailed information about eligibility, please call 1-800-525-8085. If
you hold INVESCO Funds Investor Class shares through a broker/dealer or other
financial institution, your eligibility to purchase Investor Class shares may
differ depending on that institution's policies.
EXCHANGE POLICY. You may exchange your shares in any of the Funds for shares of
the same class in another INVESCO fund on the basis of their respective NAVs at
the time of the exchange.
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR INVESTMENTS, OR
TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately followed by the purchase of
shares in another. Therefore, any gain or loss realized on the exchange is
recognizable for federal income tax purposes (unless, of course, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.
You will not pay a sales charge when exchanging Class B shares for other Class B
shares, Class C shares for other Class C shares, or Class K shares for other
Class K shares. If you make an exchange involving Class B, Class C, or Class K
shares, the amount of time you held the original shares will be added to the
holding period of the Class B, Class C, or Class K shares, respectively, into
which you exchanged for the purpose of calculating any CDSC that may be assessed
upon a subsequent redemption.
We have the following policies governing exchanges:
o Both fund accounts involved in the exchange must be registered in exactly the
same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of each Fund per twelve-month period.
o Each Fund reserves the right to reject any exchange request, or to modify or
terminate the exchange policy, if it is in the best interests of the Fund.
Notice of all such modifications or terminations that affect all shareholders
of the Fund will be given at least sixty days prior to the effective date of
the change, except in unusual instances, including a suspension of redemption
of the exchanged security under Section 22(e) of the Investment Company Act
of 1940.
In addition, the ability to exchange may be temporarily suspended at any time
that sales of the Fund into which you wish to exchange are temporarily stopped.
CHOOSING A SHARE 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 applicable to the
class, if any, (iii) the eligibility requirements that apply to purchases of a
particular class, and (iv) any services you may receive in making your
investment determination. Your financial intermediary can help you decide among
the various classes. Please contact your financial intermediary for several
convenient ways to invest in a Fund. Class A, B, C, and K shares of the Funds
are available primarily through financial intermediaries.
In addition, you should also consider the factors below:
Investor Class Class A Class B Class C Class K
-------------- ------- ------- ------- -------
Initial Sales Charge None 5.50% None None None
CDSC(1) None 1% on certain 1%-5% for 1% for 0.70% on cer-
purchases held shares held shares held tain purchases
less than 18 months less than 6 less than 13 held less than
years months 12 months
12b-1 Fee 0.25% 0.35% 1.00% 1.00% 0.45%
12b-1 Fee (Utilities Fund only)(3) 0.25% 0.25% 1.00% 1.00% 0.45%
Conversion No No Yes(2) No No
Purchase Order Maximum None None $250,000 $1,000,000 None
(1) Please see the subsection entitled "Sales Charges" below and the section of the Funds' Statement of Additional Information
entitled "Distributor - Sales Charges and Dealer Concessions" for more information regarding CDSC charges and dealer
concessions.
(2) Class B shares, along with the pro rata portion of the shares' reinvested dividends and distributions, automatically convert to
Class A shares at the end of the month which is eight years after the date on which such Class B shares were purchased.
(3) Effective July 1, 2003.
INTERNET TRANSACTIONS (INVESTOR CLASS - GRANDFATHERED INVESTORS ONLY). Investors
may open new accounts and exchange and redeem Investor Class shares of any
INVESCO fund through the INVESCO Web site. To use this service, you will need a
web browser (presently Netscape version 4.0 or higher, Microsoft Internet
Explorer version 4.0 or higher, or AOL version 5.0 or higher) and the ability to
use the INVESCO Web site. INVESCO will accept Internet purchase instructions
only for exchanges or if the purchase price is paid to INVESCO through debiting
your bank account, and any Internet cash redemptions will be paid only to the
same bank account from which the payment to INVESCO originated. INVESCO imposes
a limit of $25,000 on Internet purchase and redemption transactions. Other
minimum transaction amounts are discussed in this Prospectus. You may also
download an application to open an account from the Web site, complete it by
hand, and mail it to INVESCO, along with a check.
INVESCO employs reasonable procedures to confirm that transactions entered into
over the Internet are genuine. These procedures include the use of alphanumeric
passwords, secure socket layering, encryption, and other precautions reasonably
designed to protect the integrity, confidentiality, and security of shareholder
information. In order to enter into a transaction on the INVESCO Web site, you
will need an account number, your Social Security number, and an alphanumeric
password. If INVESCO follows these procedures, neither INVESCO, its affiliates
nor any INVESCO fund will be liable for any loss, liability, cost, or expense
for following instructions communicated via the Internet that are reasonably
believed to be genuine or that follow INVESCO's security procedures. By entering
into the user's agreement with INVESCO to open an account through our Web site,
you lose certain rights if someone gives fraudulent or unauthorized instructions
to INVESCO that result in a loss to you.
SALES CHARGES (CLASS A, B, C, AND K ONLY)
Sales charges on Class A shares of the Funds are detailed below. As used below,
the term "offering price" with respect to Class A shares includes the initial
sales charge.
INITIAL SALES CHARGES. Class A shares of the Funds are subject to the following
initial sales charges:
Investor's Sales Charge
Amount of investment As a % of As a % of
in a 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%
$1,000,000 or more NAV NAV
CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS A AND CLASS K SHARES. You can
purchase $1,000,000 or more of Class A shares at net asset value, and the
distributor may pay a dealer concession and/or a service fee for purchases of
$1,000,000 or more. However, if you purchase shares worth $1,000,000 or more,
they may be subject to a CDSC of 1% if you redeem them prior to eighteen months
after the date of purchase. We will use the "first-in, first-out" method to
determine your holding period. Under this method, the date of redemption will be
compared with the earliest purchase date of shares held in your account. If your
holding period is less than eighteen months, the CDSC may be assessed on the
amount of the total original cost of the shares. For qualified plans investing
in Class A shares, you may pay a CDSC of 1% if the plan is redeemed within
twelve months from initial deposit in the plan's INVESCO account. For qualified
plans investing in Class K shares, you may pay a CDSC of 0.70% if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account.
CDSC 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. If your holding period is less
than six years for Class B shares and thirteen months for Class C shares, the
CDSC may be assessed on the amount of the total original cost of the shares.
Year Since
Purchase Made Class B Class C
First 5% 1%(1)
Second 4% None
Third 3% None
Fourth 3% None
Fifth 2% None
Sixth 1% None
Seventh and following None(2) None
(1) The first year will consist of the first thirteen months.
(2) Class B shares, along with the pro rata portion of the shares' reinvested
dividends and distributions, automatically convert to Class A shares at the
end of the month which is eight years after the date on which such Class B
shares were purchased.
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 intermediary must provide sufficient
information at the time of purchase to verify that your purchase qualifies for
such treatment.
REDUCED SALES CHARGES. You may be eligible to buy Class A shares at reduced
initial sales charge rates under Right of Accumulation or Letter of Intent
under certain circumstances.
RIGHTS OF ACCUMULATION. You may combine your new purchases of Class A
shares with Class A shares that were previously purchased for the
purpose of qualifying for the lower initial sales charge rates that
apply to larger purchases. The applicable initial sales charge for the
new purchase is based on the total of your current purchase and the
current value of all Class A shares you own.
LETTER OF INTENT. Under a Letter of Intent (LOI), you commit to
purchase a specified dollar amount of Class A shares of the Fund
during a thirteen-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 thirteen-month period,
your account will be adjusted to the higher initial sales charge level
for the amount actually invested.
INITIAL SALES CHARGE/CDSC EXCEPTIONS.
You will not pay initial sales charges:
o on shares purchased by reinvesting dividends and distributions;
o when exchanging shares of the same class among certain INVESCO
funds;
o when using the reinstatement privilege;
o when a merger, consolidation, or acquisition of assets of an
INVESCO fund occurs; and
o upon automatic conversion of Class B to Class A.
You will not pay a CDSC:
o if you purchase less than $1,000,000 of Class A shares;
o if you purchase $1,000,000 or more of Class A shares and hold those
shares for more than eighteen months;
o if you redeem Class B shares you held for more than six years;
o if you redeem Class C shares you held for more than thirteen
months;
o if you participate in the periodic withdrawal program and withdraw
up to 10% of the value of your shares that are subject to a CDSC in
any twelve-month period. The value of your shares, and applicable
twelve-month period, will be calculated based upon the value of
your account on, and the date of, the first periodic withdrawal;
o if you redeem shares acquired through reinvestment of dividends and
distributions;
o if you are a qualified plan investing in Class A or Class K shares
and elect to forego any dealer concession;
o on increases in the net asset value of your shares;
o to pay account fees;
o for IRA distributions due to death or disability or periodic
distributions based on life expectancy;
o to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
o for redemptions following the death of a shareholder or beneficial
owner.
There may be other situations when you may be able to purchase or redeem shares
at reduced or no sales charges. Consult the Funds' Statement of Additional
Information for further details.
DISTRIBUTION EXPENSES. We have adopted a Master Distribution Plan and Agreement
(commonly known as a "12b-1 Plan") for each class of shares of the Funds. The
12b-1 fees paid by each Fund's classes of shares are used to pay distribution
and service fees to ADI for the sale and distribution of the Funds' shares and
to pay for services provided to shareholders. These services include
compensation to financial intermediaries that sell Fund shares and/or service
shareholder accounts. Because each Fund's shares pay these fees out of their
assets on an ongoing basis, these fees increase the cost of your investment.
Under each Plan, payments are limited to an amount computed at each class's
applicable 12b-1 fee. If distribution expenses for a class exceed these computed
amounts, ADI pays the difference. Conversely, if distribution fees are less than
computed amounts, ADI retains the difference.
[INVESCO ICON] YOUR ACCOUNT SERVICES
With the exception of householding, the following information pertains only to
shareholders who hold their shares directly through INVESCO.
SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains your
current Fund holdings. The Funds do not issue share certificates.
INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL, OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.
QUARTERLY INVESTMENT SUMMARIES. Each calendar quarter, you receive a written
statement which consolidates and summarizes account activity and value at the
beginning and end of the period for each of your INVESCO funds.
TRANSACTION CONFIRMATIONS. You receive detailed confirmations of individual
purchases, exchanges, and sales. If you choose certain recurring transaction
plans (for instance, EasiVest), your transactions are confirmed on your
quarterly Investment Summaries.
TELEPHONE TRANSACTIONS. You and your financial intermediary or plan or program
sponsor may buy, exchange, and sell Fund shares by telephone, unless these
privileges are specifically declined when the INVESCO new account Application is
filled out.
YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, INVESCOFUNDS.COM.
Unless you decline the telephone transaction privileges, when you fill out and
sign the new account Application, a Telephone Transaction Authorization Form, or
use your telephone transaction privileges, you lose certain rights if someone
gives fraudulent or unauthorized instructions to INVESCO that result in a loss
to you. In general, if INVESCO has followed reasonable procedures, such as
recording telephone instructions and sending written transaction confirmations,
INVESCO is not liable for following telephone instructions that it believes to
be genuine. Therefore, you have the risk of loss due to unauthorized or
fraudulent instructions.
HOUSEHOLDING. To save money for the Funds, you may receive only one copy of a
prospectus or financial report to each household address. This process, known as
"householding," is used for most required shareholder mailings. It does not
apply to account statements. You may, of course, request an additional copy of a
prospectus or financial report at any time by calling or writing INVESCO. You
may also request that householding be eliminated from all your required
mailings.
IRAS AND OTHER RETIREMENT PLANS. Shares of any INVESCO mutual fund may be
purchased for IRAs and many other types of tax-deferred retirement plans. Please
call INVESCO for information and forms to establish or transfer your existing
retirement plan or account.
[INVESCO ICON] HOW TO SELL SHARES
The chart in this section shows several convenient ways to sell your Fund shares
if you invest directly through INVESCO. If you invest in a Fund through a
financial intermediary, please consult the financial intermediary, or with
respect to Class K shares, the plan or program sponsor, for information on how
to sell shares of a Fund. You may be charged a commission or transaction fee by
your financial intermediary or plan or program sponsor for sales of Fund shares.
Shares of the Funds may be sold at any time at the next NAV calculated after
your request to sell is received by INVESCO in proper form. Depending on Fund
performance, the NAV at the time you sell your shares may be more or less than
the price you paid to purchase your shares.
Various fees may apply to Fund redemptions. You may be charged a CDSC at the
time of redemption depending on how long you have held your shares.If you buy
$1,000,000 or more of Class A shares and redeem the shares within eighteen
months from the date of purchase, you may pay a 1% CDSC at the time of
redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the total original cost of the
shares may be assessed. With respect to redemption of Class C shares held
thirteen months or less, a CDSC of 1% of the total original cost of the shares
may be assessed. With respect to Class K shares, if you are a qualified plan and
elect to receive a dealer concession, you may pay a CDSC of 0.70% on your Class
K shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. In determining whether a CDSC
applies to a redemption from a non-qualified plan, it is assumed that the shares
being redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the shareholder's
account. These charges are not assessed upon Class A, B, C, or K shares acquired
through reinvestment of dividends or other distributions, or Class A, B, C, or K
shares exchanged for the same class of another INVESCO Fund. For more
information on CDSC charges, please see the subsection of the Prospectus
entitled "Choosing A Share Class" and the section of the Statement of Additional
Information entitled "Distributor - Sales Charges and Dealer Concessions."
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00 P.M.
EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell and specify the class of shares. Remember that any sale
or exchange of shares in a non-retirement account will likely result in a
taxable gain or loss.
While INVESCO attempts to process telephone redemptions promptly, there may be
times -- particularly in periods of severe economic or market disruption -- when
you may experience delays in redeeming shares by telephone.
INVESCO usually forwards the proceeds from the sale of fund shares within seven
days after we receive your request to sell in proper form. However, payment may
be postponed under unusual circumstances -- for instance, if normal trading is
not taking place on the NYSE, or during an emergency as defined by the
Securities and Exchange Commission. If your INVESCO fund shares were purchased
by a check which has not yet cleared, payment will be made promptly when your
purchase check does clear; that can take up to twelve business days.
If you participate in EasiVest, the Funds' automatic monthly investment program,
and sell all of the shares in your account, we will not make any additional
EasiVest purchases unless you give us other instructions.
Because of the Funds' expense structures, it costs as much to handle a small
account as it does to handle a large one. If the value of your account in a Fund
falls below $250 as a result of your actions (for example, sale of your Fund
shares), the Fund reserves the right to sell all of your shares, send the
proceeds of the sale to you and close your account. Before this is done, you
will be notified and given sixty days to increase the value of your account to
$250 or more.
REDEMPTION FEES. Except for any applicable CDSC, we will not charge you any fees
to redeem your shares; however, your financial intermediary may charge service
fees for handling these transactions.
REINSTATEMENT PRIVILEGE (CLASS A AND CLASS B ONLY). You may, within ninety days
after you sell Class A or Class B shares, reinvest all or part of your
redemption proceeds in Class A shares of a Fund at net asset value in an
identically registered account. You will not pay any sales charges on the amount
reinvested. You must notify INVESCO in writing at the time you reinstate that
you are exercising your reinstatement privilege. You may exercise this privilege
only once per calendar year.
The following chart shows several ways to sell your shares of the Funds if you
invest directly through INVESCO.
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY TELEPHONE Any amount. You must provide an IRA
Call us toll-free at: redemption form to
1-800-525-8085. INVESCO prior to making
an IRA redemption by
telephone. INVESCO's
telephone redemption
privileges may be
modified or terminated in
the future at INVESCO's
discretion. The maximum
amount which may be
redeemed by telephone is
generally $25,000.
- --------------------------------------------------------------------------------
IN WRITING Any amount. The redemption request
Mail your request to: must be signed by all
INVESCO Funds Group, Inc. registered account
P.O. Box 173706 owners. Payment will be
Denver, CO 80217-3706. mailed to your address as
You may also send your it appears on INVESCO's
request by overnight records, or to a bank
courier to: designated by you in
4350 South Monaco Street writing.
Denver, CO 80237.
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH Any amount. You must provide your
Call 1-800-525-8085 to bank account information
request your redemption. or IRA redemption form to
INVESCO prior to using
this option. INVESCO will
automatically pay the
proceeds into your
designated bank account.
- --------------------------------------------------------------------------------
BY INTERNET (INVESTOR Any amount. IRA You will need a Web
CLASS - GRANDFATHERED redemptions are not browser to use this
INVESTORS ONLY) permitted via the service. Internet
Go to the INVESCO Web site internet. transactions are limited
at invescofunds.com. to a maximum of $25,000.
INVESCO will
automatically pay the
proceeds into your
designated bank account.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BY PERSONAL ACCOUNT LINE $50. Be sure to write down the
WITH ACH (INVESTOR CLASS - confirmation number
GRANDFATHERED INVESTORS provided to you. You must
ONLY) provide your bank account
Automated transactions by information to INVESCO
telephone are available prior to using this
for redemptions and option.
exchanges 24 hours a day.
Simply call 1-800-424-8085.
- --------------------------------------------------------------------------------
PERIODIC WITHDRAWAL PLAN $100 per payment on a You must have at least
You may call us to request monthly or quarterly $10,000 total invested
the appropriate form and basis. The redemption with the INVESCO funds
more information at check may be made with at least $5,000 of
1-800-525-8085. payable to any party that total invested in
you designate. the fund from which
withdrawals will be made.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD PARTY Any amount. All registered account
Mail your request to: owners must sign the
INVESCO Funds Group, Inc. request, with signature
P.O. Box 173706 guarantees from an
Denver, CO 80217-3706. eligible guarantor
financial institution,
such as a commercial bank
or a recognized national
or regional securities
firm.
[GRAPH ICON] TAXES
Everyone's tax status is unique. We manage the Funds in an effort to provide
maximum total returns to all shareholders of the Funds. INVESCO generally
focuses on pre-tax results and ordinarily does not manage a Fund to minimize
taxes. We may, nevertheless, take advantage of opportunities to mitigate taxes
through management of capital gains and losses. We encourage you to consult your
own tax adviser on the tax impact to you of investing directly or indirectly in
the Funds.
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.
Each Fund customarily distributes to its shareholders substantially all of its
net investment income, net capital gains and net gains from foreign currency
transactions, if any. You receive a proportionate part of these distributions,
depending on the percentage of a Fund's shares that you own. These distributions
are required under federal tax laws governing mutual funds. It is the policy of
each Fund to distribute all investment company taxable income and net capital
gains. As a result of this policy and each Fund's qualification as a regulated
investment company, it is anticipated that none of the Funds will pay any
federal income or excise taxes. Instead, each Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
However, unless you are (or your account is) exempt from income taxes, you must
include all dividends and capital gain distributions paid to you by a Fund in
your taxable income for federal, state, and local income tax purposes. You also
may realize capital gains or losses when you sell shares of a Fund at more or
less than the price you originally paid. An exchange is treated as a sale, and
is a taxable event. Dividends and other distributions usually are taxable
whether you receive them in cash or automatically reinvest them in shares of the
distributing Fund(s) or other INVESCO funds.
If you have not provided INVESCO with complete, correct tax information, the
Funds are required by law to withhold from your distributions, and any money
that you receive from the sale of shares of the Funds, a backup withholding tax
at the rate in effect on the date of the transaction.
Unless your account is held through a financial intermediary, we will provide
you with detailed information every year about your dividends and capital gain
distributions. Depending on the activity in your individual account, we may also
be able to assist with cost basis figures for shares you sell.
[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Funds earn ordinary or investment income from dividends and interest on
their investments. Energy, Financial Services, Gold & Precious Metals, Health
Sciences, Leisure, Technology, and Telecommunications Funds expect to distribute
their respective investment income, less Fund expenses, to shareholders
annually. Real Estate Opportunity and Utilities Funds expect to make such
distributions quarterly. All Funds can make distributions at other times, if
they choose to do so. Please note that classes with higher expenses are expected
to have lower dividends.
NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN
ADDITIONAL SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT OR TAX-DEFERRED
ACCOUNTS).
Each Fund also realizes capital gains or losses when it sells securities in its
portfolio for more or less than it had paid for them. If total gains on sales
exceed total losses (including losses carried forward from previous years), a
Fund has a net realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually, usually in November or December.
Dividends and capital gain distributions are paid to you if you hold shares on
the record date of the distribution regardless of how long you have held your
shares.
Under present federal income tax laws, capital gains may be taxable at different
rates, depending on how long a Fund has held the underlying investment.
Short-term capital gains, which are derived from the sale of assets held one
year or less, are taxed as ordinary income. Long-term capital gains, which are
derived from the sale of assets held for more than one year, are taxed at up to
the maximum capital gains rate, currently 20% for individuals.
A Fund's daily NAV reflects all realized capital gains that have not yet been
distributed to shareholders. Therefore, a Fund's NAV will drop by the amount of
a distribution, net of market fluctuations, on the day the distribution is
declared. If you buy shares of a Fund just before a distribution is declared,
you may wind up "buying a distribution." This means that if the Fund declares a
dividend or capital gain distribution shortly after you buy, you will receive
some of your investment back as a taxable distribution. Although purchasing your
shares at the resulting higher NAV may mean a smaller capital gain or greater
loss upon sale of the shares, most shareholders want to avoid the purchase of
shares immediately before the distribution record date. However, keep in mind
that your basis in the Fund will be increased to the extent such distributions
are reinvested in the Fund. If you sell your shares of a Fund at a loss for tax
purposes and then replace those shares with a substantially identical investment
either thirty days before or after that sale, the transaction is usually
considered a "wash sale" and you will not be able to claim a tax loss.
Dividends and capital gain distributions paid by each Fund are automatically
reinvested in additional Fund shares at the NAV on the ex-distribution date,
unless you choose to have them automatically reinvested in another INVESCO fund
or paid to you by check or electronic funds transfer. If you choose to be paid
by check, the minimum amount of the check must be at least $10; amounts less
than that will be automatically reinvested. Dividends and other distributions,
whether received in cash or reinvested in additional Fund shares, are generally
subject to federal income tax.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the various classes of each Fund for the past five years (or, if
shorter, the period of the class's operations). Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the annual percentages that an investor would have earned (or lost) on
an investment in a Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the financial statements, is
included in INVESCO Sector Funds, Inc.'s 2003 Annual Report to Shareholders,
which is incorporated by reference into the Statement of Additional Information.
This Report is available without charge by contacting ADI at the address or
telephone number on the back cover of this Prospectus.
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
ENERGY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30 $ 19.38
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.10) (0.07) (0.08) (0.00) (0.00) 0.00
Net Investment Income(Loss)(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.35) (0.40) 3.84 3.72 2.39 (5.04)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.45) (0.47) 3.76 3.72 2.39 (5.04)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00 0.01 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.81 $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30
====================================================================================================================================
TOTAL RETURN (12.72%) (2.38%) 23.09% 27.19%(d) 21.19% (28.51%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 231,023 $ 358,439 $ 445,845 $ 221,432 $ 196,136 $ 137,455
Ratio of Expenses to Average Net Assets(e) 1.69% 1.53% 1.41% 1.60%(f) 1.68% 1.58%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.57%) (0.34%) (0.35%) (0.26%)(f) (0.05%) 0.01%
Portfolio Turnover Rate 144% 144% 166% 109%(d) 279% 192%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001.
(c) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis for the period ended March 31, 2000 and the years
ended October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 19.26 $ 19.26
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.05) (0.17)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (2.36) (2.38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.41) (2.55)
====================================================================================================================================
Net Asset Value--End of Period $ 16.85 $ 16.71
====================================================================================================================================
TOTAL RETURN(c)
RATIOS (12.51%) (13.24%)
Net Assets--End of Period ($000 Omitted) $ 9,131 $ 1,502
Ratio of Expenses to Average Net Assets(d)(e) 1.46% 2.33%
Ratio of Net Investment Loss to Average Net Assets(e) (0.33%) (1.16%)
Portfolio Turnover Rate 144% 144%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charge for Class A or CDSC for Class B is not included in the Total Return Calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 2.41% and ratio of net investment
loss to average net assets would have been (1.24%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------------
2003 2002 2001 2000(a)
ENERGY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 18.98 $ 19.58 $ 17.39 $ 14.35
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.11) (0.07) (0.05) (0.01)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (2.42) (0.53) 3.67 3.05
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.53) (0.60) 3.62 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.45 $ 18.98 $ 19.58 $ 17.39
====================================================================================================================================
TOTAL RETURN(c) (13.33%) (3.06%) 22.35% 21.11%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 9,566 $ 12,324 $ 8,704 $ 16
Ratio of Expenses to Average Net Assets(e)(f) 2.33% 2.27% 2.05% 2.05%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.22%) (1.08%) (1.10%) (1.11%)(g)
Portfolio Turnover Rate 144% 144% 166% 109%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.53% and ratio of net investment loss to
average net assets would have been (1.42%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
--------------------------------------------------------
2003 2002 2001(a)
ENERGY FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 17.98 $ 19.62 $ 16.76
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.14) (0.05) (0.15)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (2.29) (1.59) 3.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.43) (1.64) 2.86
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 15.55 $ 17.98 $ 19.62
====================================================================================================================================
TOTAL RETURN (13.52%) (8.36%) 17.06%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 289 $ 37 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 2.07% 11.62% 3.11%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.90%) (10.45%) (2.34%)(f)
Portfolio Turnover Rate 144% 144% 166%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2003.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 5.36% and ratio of net investment loss to
average net assets would have been (4.19%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-----------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
FINANCIAL SERVICES FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45 $ 29.14
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.10 0.07 0.10 0.03 0.08 0.25
Net Investment Income
Net Gains or (Losses) on Securities (Both
Realized and Unrealized) (6.42) 0.94 2.97 0.05 3.52 3.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.32) 1.01 3.07 0.08 3.60 3.26
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.13 1.67 1.32 2.68 2.32 3.95
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.77 $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45
====================================================================================================================================
TOTAL RETURN (22.39%) 3.82% 11.25% 0.60%(b) 13.52% 11.76%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 734,440 $ 1,234,230 $ 1,368,583 $ 1,133,350 $ 1,242,555 $ 1,417,655
Ratio of Expenses to Average Net Assets(c) 1.40% 1.27% 1.25% 1.29%(d) 1.26% 1.05%
Ratio of Net Investment Income to
Average Net Assets 0.38% 0.24% 0.36% 0.25%(d) 0.25% 0.85%
Portfolio Turnover Rate 60% 81% 99% 38%(b) 83% 52%
(a) From November 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(d) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 28.22 $ 28.22
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.06 (0.03)
Net Investment Income (Loss)
Net Losses on Securities (Both Realized and Unrealized) (6.37) (6.30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.31) (6.33)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.23 0.15
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.68 $ 21.74
====================================================================================================================================
TOTAL RETURN(b) (22.36%) (22.48%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,311 $ 990
Ratio of Expenses to Average Net Assets(c)(d) 1.38% 2.09%
Ratio of Net Investment Income (Loss) to Average Net Assets(d) 0.49% (0.20%)
Portfolio Turnover Rate 60% 60%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of each Class were absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been 1.51% for Class A and 2.40% for Class B and ratio
of net investment income (loss) to average net assets would have been 0.36% for Class A and (0.51%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------
2003 2002 2001 2000(a)
FINANCIAL SERVICES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 27.89 $ 28.72 $ 27.06 $ 23.66
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.25) (0.10) (0.09) 0.00
Net Investment Income (Loss)(c)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.22) 0.87 3.05 3.48
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.47) 0.77 2.96 3.48
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.04 1.60 1.30 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.38 $ 27.89 $ 28.72 $ 27.06
====================================================================================================================================
TOTAL RETURN(d) (23.22%) 2.98% 10.87% 14.72%(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 10,026 $ 16,880 $ 12,221 $ 138
Ratio of Expenses to Average Net Assets(f) 2.45% 2.07% 1.85% 1.63%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.68%) (0.57%) (0.31%) 0.39%(g)
Portfolio Turnover Rate 60% 81% 99% 38%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Income aggregated less than $0.01 on a per share basis for the period ended March 31, 2000.
(d) The applicable CDSC is not included in the Total Return Calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------
2003 2002 2001(a)
FINANCIAL SERVICES FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 27.69 $ 28.67 $ 29.35
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) 0.15 (0.03) (0.17)
Net Investment Income (Loss)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.14) 0.90 (0.38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.26) 0.87 (0.55)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.16 1.85 0.13
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.27 $ 27.69 $ 28.67
====================================================================================================================================
TOTAL RETURN (22.62%) 3.38% (1.97%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,348 $ 1,033 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.78% 1.63% 3.35%(f)
Ratio of Net Investment Loss to Average Net Assets(e) 0.18% (0.12%) (1.80%)(f)
Portfolio Turnover Rate 60% 81% 99%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.13% and ratio of net investment loss to
average net assets would have been (0.17%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
GOLD & PRECIOUS METALS
FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90 $ 3.21
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.02) (0.01) (0.01) (0.01) (0.03) 0.01
OPERATIONS(b)
Net Investment Income (Loss)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.13) 0.87 (0.12) (0.22) (0.04) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.11 0.86 (0.13) (0.23) (0.07) (1.28)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00 0.00 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.40 $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90
====================================================================================================================================
TOTAL RETURN 4.80% 60.14% (8.38%) (12.58%)(c) (3.68%) (39.98%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 98,388 $ 104,831 $ 64,429 $ 81,470 $ 99,753 $ 107,249
Ratio of Expenses to Average Net Assets(d) 1.88% 2.10% 2.34% 2.08%(e) 2.20% 1.90%
Ratio of Net Investment
Loss to Average Net Assets (0.79%) (0.80%) (0.99%) (0.76%)(e) (1.60%) (0.93%)
Portfolio Turnover Rate 84% 46% 90% 37%(c) 141% 133%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003 and 2001 and October 31, 1999.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(e) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
--------------------------------------------------
GOLD & PRECIOUS METALS FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.29 $ 2.29
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.02) (0.02)
Net Investment Loss
Net Gains on Securities (Both Realized and Unrealized) 0.12 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.39 $ 2.39
====================================================================================================================================
TOTAL RETURN(c) 4.37% 4.37%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,514 $ 2,315
Ratio of Expenses to Average Net Assets(d)(e) 2.09% 2.18%
Ratio of Net Investment Loss to Average Net Assets(e) (1.09%) (1.12%)
Portfolio Turnover Rate 84% 84%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of Class A were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class A, ratio of expenses to average net assets would have been 2.11% and ratio of net investment
loss to average net assets would have been (1.11%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------
2003 2002 2001 2000(a)
GOLD & PRECIOUS METALS FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.42 $ 1.53 $ 1.60 $ 1.75
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.00) (0.07) (0.01) (0.00)
Net Investment Loss(c)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.10) 0.96 (0.02) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.89 (0.03) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.52 $ 2.42 $ 1.53 $ 1.60
====================================================================================================================================
TOTAL RETURN(d) 4.13% 58.17% (1.95%) ( 8.57%)(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,459 $ 515 $ 57 $ 1
Ratio of Expenses to Average Net Assets(f) 2.65% 3.33% 3.38% 3.54%(g)
Ratio of Net Investment Loss to Average Net Assets (1.60%) (1.67%) (1.41%) (0.82%)(g)
Portfolio Turnover Rate 84% 46% 90% 37%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2003 and the period ended March
31, 2000.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
----------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
HEALTH SCIENCES FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12 $ 57.50
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS(b)
Net Investment Income (Loss) (0.28) (0.38) (0.12) (0.06) 0.14 0.13
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (8.75) 2.18 (0.51) 3.53 5.02 13.55
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.03) 1.80 (0.63) 3.47 5.16 13.68
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 9.11 6.34 8.89 9.06
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 38.53 $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12
====================================================================================================================================
TOTAL RETURN (18.99%) 3.95% (4.12%) 6.30%(d) 8.44% 28.58%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 954,765 $ 1,475,313 $ 1,580,378 $ 1,622,624 $ 1,574,020 $ 1,328,196
Ratio of Expenses to Average Net Assets(e) 1.44% 1.31% 1.23% 1.18%(f) 1.22% 1.12%
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.68%) (0.75%) (0.20%) (0.22%)(f) 0.07% 0.25%
Portfolio Turnover Rate 179% 160% 177% 107%(d) 127% 92%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 47.56 $ 47.56
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.22) (0.44)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (8.78) (8.78)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.00) (9.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 38.56 $ 38.34
====================================================================================================================================
TOTAL RETURN(c) (18.92%) (19.39)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 3,731 $ 621
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.06%
Ratio of Net Investment Loss to Average Net Assets(e) (0.69%) (1.22%)
Portfolio Turnover Rate 179% 179%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.88% for Class A and 2.51% for Class B and
ratio of net investment loss to average net assets would have been (1.16%) for Class A and (1.67%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------------
2003 2002 2001 2000(a)
HEALTH SCIENCES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 46.68 $ 45.40 $ 55.50 $ 62.05
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (1.20) (0.35) (0.05) (0.03)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.21) 1.65 (0.94) (6.52)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.41) 1.30 (0.99) (6.55)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS (0.00) 0.02(c) 9.11 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 37.27 $ 46.68 $ 45.40 $ 55.50
====================================================================================================================================
TOTAL RETURN(d) (20.16%) 2.85% (4.79%) (10.56%)(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,846 $ 15,892 $ 10,767 $ 470
Ratio of Expenses to Average Net Assets(f)(g) 2.81% 2.26% 2.03% 1.65%(h)
Ratio of Net Investment Loss to Average Net Assets(g) (2.04%) (1.70%) (1.08%) (0.54%)(h)
Portfolio Turnover Rate 179% 160% 177% 107%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 3.27% and ratio of net investment loss to
average net assets would have been (2.50%).
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-----------------------------------------------------------
2003 2002 2001(a)
HEALTH SCIENCES FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 46.98 $ 45.43 $ 55.84
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.23) (0.48) (0.22)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.94) 2.05 (10.19)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.17) 1.57 (10.41)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 37.81 $ 46.98 $ 45.43
====================================================================================================================================
TOTAL RETURN (19.50%) 3.42% (18.64%)(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,990 $ 2,405 $ 1
Ratio of Expenses to Average Net Assets(e) 2.07% 1.71% 3.62%(f)
Ratio of Net Investment Loss to Average Net Assets (1.29%) (1.09%) (2.75%)(f)
Portfolio Turnover Rate 179% 160% 177%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
LEISURE FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92 $ 27.21
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.23) (0.03) (0.00) (0.13) (0.00) (0.00)
OPERATIONS(b)
Net Investment Loss(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (7.89) 2.21 (3.05) 7.27 17.20 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.12) 2.18 (3.05) 7.14 17.20 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 3.23 1.91 2.98
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.83 $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92
====================================================================================================================================
TOTAL RETURN (20.87%) 6.01% (5.50%) 17.34%(d) 65.13% 15.16%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 536,108 $ 799,465 $ 607,428 $ 549,523 $ 443,348 $ 228,681
Ratio of Expenses to Average Net Assets(e) 1.50% 1.40% 1.36% 1.28%(f) 1.44% 1.41%
Ratio of Net Investment Loss
to Average Net Assets (0.69%) (0.64%) (0.51%) (0.65%)(f) (0.68%) (0.09%)
Portfolio Turnover Rate 20% 27% 28% 23%(d) 35% 31%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2003 and the period ended March 31,
2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001 and the years ended
October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
LEISURE FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.96 $ 38.96
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.17) (0.38)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (7.91) (7.93)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.08) (8.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.88 $ 30.65
====================================================================================================================================
TOTAL RETURN(c) (20.74%) (21.33%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 27,175 $ 8,268
Ratio of Expenses to Average Net Assets(d)(e) 1.42% 2.14%
Ratio of Net Investment Loss to Average Net Assets(e) (0.56%) (1.29%)
Portfolio Turnover Rate 20% 20%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return Calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expenses
offset arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 2.23% and ratio of net investment
loss to average net assets would have been (1.38%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------
2003 2002 2001 2000(a)
LEISURE FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.29 $ 36.80 $ 47.09 $ 45.51
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.18) (0.17) (0.13) (0.02)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.11) 2.02 (3.22) 1.60
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.29) 1.85 (3.35) 1.58
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.00 $ 38.29 $ 36.80 $ 47.09
====================================================================================================================================
TOTAL RETURN(c) (21.65%) 5.10% (6.18%) 3.47%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 17,768 $ 16,307 $ 5,388 $ 84
Ratio of Expenses to Average Net Assets(e) 2.44% 2.26% 2.08% 1.71%(f)
Ratio of Net Investment Loss to Average Net Assets (1.62%) (1.48%) (1.08%) (0.42%)(f)
Portfolio Turnover Rate 20% 27% 28% 23%(g)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED PERIOD ENDED
MARCH 31 MARCH 31
---------------------------------------------
2003 2002(a)
LEISURE FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.98 $ 36.11
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.06) (0.09)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.18) 2.96
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.24) 2.87
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.74 $ 38.98
====================================================================================================================================
TOTAL RETURN (21.14%) 7.95%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 67,465 $ 62,226
Ratio of Expenses to Average Net Assets(d)(e) 1.87% 1.23%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.05%) (0.48%)(f)
Portfolio Turnover Rate 20% 27%(g)
(a) From December 17, 2001, inception of Class, to March 31, 2002.
(b) The per share information was computed based on average shares for the period ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.21% and ratio of net investment loss to
average net assets would have been (1.39%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2002.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
----------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
REAL ESTATE OPPORTUNITY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15 $ 10.99
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.24 0.26 0.27 0.33 0.38
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.37) 0.78 0.48 (0.28) (1.56) (0.96)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.09) 1.02 0.74 (0.01) (1.23) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.27 0.25 0.25 0.26 1.02 1.26
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.53 $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15
====================================================================================================================================
TOTAL RETURN (1.12%) 14.67% 11.05% (0.03%)(b) (13.29%) (6.49%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 20,313 $ 20,345 $ 28,546 $ 20,046 $ 17,406 $ 23,548
Ratio of Expenses to Average Net Assets(c)(d) 1.60% 1.61% 1.60% 1.34%(e) 1.34% 1.22%
Ratio of Net Investment Income to Average Net Assets(d) 3.92% 3.58% 3.52% 5.54%(e) 4.23% 3.53%
Portfolio Turnover Rate 248% 196% 338%(f) 272%(b)(f) 697%(f) 258%
(a) From August 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001, the
period ended March 31, 2000 and the years ended July 31, 1999 and 1998. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.43%, 2.25%, 2.03%, 2.73% (annualized), 2.76%, and 1.97%, respectively,
and ratio of net investment income to average net assets would have been 3.09%, 2.94%, 3.09%, 4.15% (annualized), 2.81%, and
2.78%, respectively.
(e) Annualized
(f) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.89 $ 7.89
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.28 0.21
Net Investment Income
Net Losses on Securities (Both Realized and Unrealized) (0.39) (0.36)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.11) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.34 0.32
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.44 $ 7.42
====================================================================================================================================
TOTAL RETURN(b) (1.45%) (1.94%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,409 $ 133
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.36%
Ratio of Net Investment Income to Average Net Assets(d) 4.57% 3.49%
Portfolio Turnover Rate 248% 248%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expense had not been
voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 3.73% and ratio of net investment
income to average net assets would have been 2.12%.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------
2003 2002 2001 2000(a)
REAL ESTATE OPPORTUNITY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.95 $ 7.10 $ 6.62 $ 6.58
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.14 0.14 0.20 0.08
Net Investment Income
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.28) 0.82 0.48 0.06
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.14) 0.96 0.68 0.14
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.08 0.11 0.20 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.73 $ 7.95 $ 7.10 $ 6.62
====================================================================================================================================
TOTAL RETURN(b) (1.81%) 13.69% 10.20% 2.10%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 838 $ 484 $ 1,336 $ 143
Ratio of Expenses to Average Net Assets(d)(e) 2.35% 2.37% 2.26% 1.77%(f)
Ratio of Net Investment Income to Average Net Assets(e) 3.25% 2.72% 2.90% 19.13%(f)
Portfolio Turnover Rate 248% 196% 338%(g) 272%(g)(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The applicable CDSC is not included in the Total Return Calculation.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 3.74%, 2.72%, 2.26%, and 2.04% (annualized), respectively, and ratio of net investment income to average net assets
would have been 1.86%, 2.37%, 2.90%, and 18.86% (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
---------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
TECHNOLOGY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07 $ 35.97
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.41) (0.08) (0.10) (0.03) (0.07) (0.00)
OPERATIONS
Net Investment Loss(b)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (13.37) (5.11) (63.58) 47.69 30.17 (1.45)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.51) (5.19) (63.68) 47.66 30.10 (1.45)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 3.91 0.00 6.45
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.90 $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07
====================================================================================================================================
TOTAL RETURN (44.43% (14.58%) (63.54%) 85.87%(c) 107.23% (2.47%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 853,530 $ 1,865,251 $ 2,181,879 $ 5,034,087 $ 2,081,613 $ 1,008,771
Ratio of Expenses to Average Net Assets(d) 1.77% 1.37% 0.98% 0.88%(e) 1.20% 1.17%
Ratio of Net Investment Loss
to Average Net Assets (1.46% (1.08%) (0.47%) (0.48%)(e) (0.79%) (0.49%)
Portfolio Turnover Rate 107% 79% 85% 28%(c) 143% 178%
(a) From November 1, 1999 to March 31, 2000.
(b) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended October 31, 1998.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(e) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.41 $ 30.41
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.20) (0.27)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (13.23) (13.30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.43) (13.57)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.98 $ 16.84
====================================================================================================================================
TOTAL RETURN(c) (44.16%) (44.62%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 4,460 $ 532
Ratio of Expenses to Average Net Assets(d)(e) 1.47% 2.15%
Ratio of Net Investment Loss to Average Net Assets(e) (1.12%) (1.71%)
Portfolio Turnover Rate 107% 107%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of each Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.51% for Class A and 2.74% for Class B and
ratio of net investment loss to average net assets would have been (1.16%) for Class A and (2.30%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------------
2003 2002 2001 2000(a)
TECHNOLOGY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 29.73 $ 35.22 $ 101.85 $ 95.51
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.62) (0.22) (0.18) (0.15)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (12.72) (5.27) (63.81) 6.49
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.34) (5.49) (63.99) 6.34
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.39 $ 29.73 $ 35.22$ 101.85
====================================================================================================================================
TOTAL RETURN(c) (44.87%) (15.59%) (63.89%) 6.63%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,759 $ 18,910 $ 15,919 $ 2,970
Ratio of Expenses to Average Net Assets(e)(f) 2.69% 2.54% 1.86% 1.45%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (2.39%) (2.26%) (1.30%) (1.03%)(g)
Portfolio Turnover Rate 107% 79% 85% 28%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 3.95%, and ratio of net investment loss to
average net assets would have been (3.65%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
----------------------------------------------------------
2003 2002 2001(a)
TECHNOLOGY FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.22 $ 35.09 $ 60.01
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.07) (0.27) (0.82)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (13.37) (4.60) (24.10)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.44) (4.87) (24.92)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.78 $ 30.22 $ 35.09
====================================================================================================================================
TOTAL RETURN (44.47%) (13.85%) (41.54%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 22,156 $ 27,147 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.88% 1.28% 5.18%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.55%) (1.15%) (4.67%)(f)
Portfolio Turnover Rate 107% 79% 85%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO , if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.49%, and ratio of net investment loss to
average net assets would have been (2.16%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
--------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
TELECOMMUNICATIONS FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60 $ 15.31
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS(b)
Net Investment Income (Loss)(c) (0.04) (0.11) (0.16) (0.10) (0.00) 0.01
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (4.36) (11.42) (38.91) 32.87 12.57 5.32
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.53) (39.07) 32.77 12.57 5.33
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.15 0.37 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.96 $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60
====================================================================================================================================
TOTAL RETURN (35.60%) (48.26%) (61.42%) 103.25%(d) 65.52% 36.79%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 274,947 $ 573,969 $ 1,486,660 $ 4,125,890 $ 1,029,256 $ 276,577
Ratio of Expenses to Average Net Assets(e)(f) 1.81% 1.70% 1.10% 0.99%(g) 1.24% 1.32%
Ratio of Net Investment Loss to Average
Net Assets(f) (0.49%) (0.57%) (0.32%) (0.32%)(g) (0.49%) (0.16%)
Portfolio Turnover Rate 137% 91% 61% 24%(d) 62% 55%
(a) From August 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended July 31, 1999.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian, distribution, and transfer agent fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.76%, and ratio of net investment loss to
average net assets would have been (1.44%).
(g) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.36 $ 12.36
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS (0.08) (0.03)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (4.36) (4.44)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.44) (4.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.92 $ 7.89
====================================================================================================================================
TOTAL RETURN(b) (35.92%) (36.17%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 326 $ 16
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.57%
Ratio of Net Investment Loss to Average Net Assets(d) (0.65%) (1.44%)
Portfolio Turnover Rate 137% 137%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 12.15% and ratio of net
investment loss to average net assets would have been (11.02%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------
2003 2002 2001 2000(a)
TELECOMMUNICATIONS FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.10 $ 23.70 $ 64.37 $ 59.28
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.34) (0.04) (0.13) (0.06)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (4.04) (11.56) (39.08) 5.15
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.38) (11.60) (39.21) 5.09
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.72 $ 12.10 $ 23.70 $ 64.37
====================================================================================================================================
TOTAL RETURN(c) (36.20%) (48.95%) (61.69%) 8.59%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,188 $ 10,392 $ 11,980 $ 2,530
Ratio of Expenses to Average Net Assets(e)(f) 2.63% 2.60% 1.99% 1.49%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.18%) (1.52%) (1.18%) (0.86%)(g)
Portfolio Turnover Rate 137% 91% 61% 24%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed , ratio of expenses to average net assets would have been 5.76% and ratio of net investment loss to
average net assets would have been (4.31%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-----------------------------------------------------
2003 2002 2001(a)
TELECOMMUNICATIONS FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.30 $ 23.80 $ 36.43
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.02) (0.15) (0.19)
Net Losses on Securities (Both Realized and Unrealized) (4.38) (11.35) (12.44)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.50) (12.63)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.90 $ 12.30 $ 23.80
====================================================================================================================================
TOTAL RETURN (35.77%) (48.32%) (34.67%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 666 $ 864 $ 1
Ratio of Expenses to Average Net Assets(d)(e) $ 2.06% 2.21% 2.30%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.77%) (1.32%) (1.52%)(f)
Portfolio Turnover Rate 137% 91% 61%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003 and 2002 and the period
ended March 31, 2001. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have
been 3.30%, 2.42% and 3.38% (annualized), respectively, and ratio of net investment loss to average net assets would have been
(2.01%), (1.53%) and (2.60%) (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-----------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
UTILITIES FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73 $ 12.42
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT 0.23 0.15 0.13 0.04 0.17 0.30
OPERATIONS
Net Investment Income
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.46) (5.54) (3.22) 3.95 3.20 2.56
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.23) (5.39) (3.09) 3.99 3.37 2.86
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.24(b) 0.15 1.13 1.25 0.42 0.55
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.19 $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73
====================================================================================================================================
TOTAL RETURN (20.99%) (33.34%) (15.18%) 23.99%(c) 23.22% 23.44%
RATIOS
Net Assets--End of Period ($000
Omitted) $ 72,749 $ 124,578 $ 232,877 $ 260,554 $ 223,334 $ 177,309
Ratio of Expenses to Average Net Assets(d)(e) 1.30% 1.30% 1.30% 1.24%(f) 1.26% 1.29%
Ratio of Net Investment Income to
Average Net Assets(e) 2.63% 1.09% 0.74% 0.50%(f) 1.02% 1.82%
Portfolio Turnover Rate 64% 56% 49% 18%(c) 32% 47%
(a) From November 1, 1999 to March 31, 2000.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian, distribution, and transfer agent fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002 and 2001, the period
ended March 31, 2000 and the years ended October 31, 1999, and 1998. If such expenses had not been voluntarily absorbed, ratio
of expenses to average net assets would have been 1.90%, 1.57%, 1.40%, 1.33% (annualized), 1.43% and 1.36%, respectively, and
ratio of net investment income to average net assets would have been 2.03%, 0.82%, 0.64%, 0.41% (annualized), 0.85% and 1.75%,
respectively.
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.66 $ 10.66
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.16 0.13
Net Investment Income
Net Losses on Securities (Both Realized and Unrealized) (2.40) (2.43)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.24) (2.30)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENTS AND DISTRIBUTIONS 0.29(b) 0.21(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.13 $ 8.15
====================================================================================================================================
TOTAL RETURN(c) (21.05%) (21.67%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 450 $ 193
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.14%
Ratio of Net Investment Income to Average Net Assets(e) 2.79% 1.84%
Portfolio Turnover Rate 64% 64%
(a) Class commenced operations on April 1, 2002.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expenses offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.74% for Class A and 2.69% for Class B and
ratio of net investment income to average net assets would have been 2.46% for Class A and 1.29% for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------
2003 2002 2001 2000(a)
UTILITIES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.63 $ 16.08 $ 20.40 $ 19.91
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) 0.15 0.03 (0.00) (0.01)
Net Investment Income (Loss)(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.47) (5.48) (3.22) 0.52
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.32) (5.45) (3.22) 0.51
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.09 0.00 1.10 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.22 $ 10.63 $ 16.08 $ 20.40
====================================================================================================================================
TOTAL RETURN(d) (21.85%) (33.87%) (15.83%) 2.58%(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 667 $ 1,799 $ 3,579 $ 248
Ratio of Expenses to Average Net Assets(f)(g) 2.05% 2.04% 2.07% 1.83%(h)
Ratio of Net Investment Income (Loss) to Average Net Assets(g) 1.75% 0.32% (0.02%) (0.32%)(h)
Portfolio Turnover Rate 64% 56% 49% 18%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001.
(d) The applicable CDSC is included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 3.70%, 2.45%, 2.11% and 1.83% (annualized), respectively, and ratio of net investment income (loss) to average net
assets would have been 0.10% (0.09%), (0.06%) and (0.32%) (annualized), respectively.
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
JULY 31, 2003
INVESCO SECTOR FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & PRECIOUS METALS FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO REAL ESTATE OPPORTUNITY FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO UTILITIES FUND--INVESTOR CLASS, CLASS A, B, AND C
You may obtain additional information about the Funds from several sources:
FINANCIAL REPORTS. Although this Prospectus describes the Funds' anticipated
investments and operations, the Funds also prepare annual and semiannual reports
that detail the Funds' actual investments at the report date. These reports
include discussion of each Fund's recent performance, as well as the effect of
market and general economic trends and a Fund's investment strategy on each
Fund's performance. The annual report also includes the report of the Funds'
independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI dated July 31, 2003 is a supplement
to this Prospectus and has detailed information about the Funds and their
investment policies and practices. A current SAI for the Funds is on file with
the Securities and Exchange Commission and is incorporated into this Prospectus
by reference; in other words, the SAI is legally a part of this Prospectus, and
you are considered to be aware of the contents of the SAI.
INTERNET. The current Prospectuses of the Funds may be accessed through the
INVESCO Web site at invescofunds.com. In addition, the Prospectuses, SAI, annual
report, and semiannual report of the Funds are available on the SEC Web site at
www.sec.gov.
To obtain a free copy of the current Prospectuses, SAI, annual report, or
semiannual report, write to A I M Fund Services, Inc., P.O. Box 4739, Houston,
Texas 77210-4739; or call 1-800-347-4246. Copies of these materials are also
available (with a copying charge) from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information on
the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 1-202-942-8090. This information can be
obtained by electronic request at the following E-mail address:
publicinfo@sec.gov. The SEC file numbers for the Funds are 811-3826 and
002-85905.
811-3826
APPENDIX III
YOUR FUND'S REPORT
ENERGY FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
The annual reporting period ended March 31, 2003, was characterized by a
sluggish economy, concerns over corporate accounting practices, and uncertainty
stemming from the tense geopolitical climate -- factors which weighed on stocks
from all sectors of the market, including energy. Against this backdrop, the
value of Energy Fund-Investor Class shares lost 12.72%. However, this return
significantly outperformed the S&P 500 Index,(R) which declined 24.75% during
that same period. (Of course, past performance is not a guarantee of future
results.)(1),(2) For performance of other share classes, please see page 2.
- --------------------------------------------------------------------------------
ENERGY FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Murphy Oil......................................5.27%
BP PLC Sponsored ADR Representing 6 Ord Shrs....4.23%
Nabors Industries Ltd...........................4.12%
Pioneer Natural Resources.......................4.04%
Talisman Energy.................................3.66%
Apache Corp.....................................3.56%
Conoco Phillips.................................3.52%
Enbridge Energy International LLC...............3.48%
Weatherford International Ltd...................3.45%
TotalFinaElf Sponsored ADR
Representing 1/2 Ord Shr........................3.45%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
FUNDAMENTALS STILL KEY TO LONG-TERM GROWTH
Over the course of the fiscal year, commodity prices soared, increasing by about
50% during the reporting period. This was partially the result of worries
regarding the situation in Iraq, as well as disruptions in oil output due to
strikes in Venezuela, and, later in the period, an outbreak of violence in
Nigeria. Meanwhile, a cold winter made for strong demand for natural gas.
LINE GRAPH: INVESCO ENERGY FUND - INVESTOR CLASS GROWTH OF $10,000(1)
This line graph compares the value of a $10,000 investment in INVESCO Energy
Fund - Investor Class to the value of a $10,000 investment in the S&P 500
Index(R)(2), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO ENERGY FUND - INVESTOR CLASS S&P 500 INDEX(R)(2)
3/93 $10,000 $10,000
3/94 $ 9,506 $10,146
3/95 $ 9,364 $11,723
3/96 $11,524 $15,482
3/97 $14,717 $18,551
3/98 $18,128 $27,448
3/99 $14,642 $32,523
3/00 $22,427 $38,354
3/01 $27,606 $30,043
3/02 $26,948 $30,115
3/03 $23,520 $22,661
Yet even as commodity prices rose, energy stocks declined for the year --
further proof that the two are not necessarily as correlated as some investors
would believe. In fact, we view short-term moves in commodity prices as
relatively inconsequential. Over the past five years, the average
price-per-barrel for crude oil has been in the neighborhood of $23 (versus $17
to $18 throughout the majority of the 1990s), and we expect it to level off
around $25 once the war is over and investors realize that Iraq, which is
capable of producing only 2.8 million barrels per day, is not likely to flood
the market.
More important, we believe, are the compelling underlying fundamentals at work
in the energy sector. Driven by ever-growing demand, oil inventories continued
to move lower this past year, reaching below-normal levels as of March 31.
Indeed, the U.S. economy's reliance on inexpensive and dependable energy sources
for future economic expansion has shown no signs of abating. Just 15 years ago,
the world consumed 58 million barrels of crude oil per day. So far in 2003, we
are using an average of nearly 78 million barrels per day -- more than ever
before. Furthermore, excess capacity (100% of which is in OPEC countries) is
currently at a 4% level versus 25% 15 years ago. Unlike the many sectors facing
overcapacity problems, we are now faced with the challenge of building up
capacity in the energy sector, given the tight supply/demand fundamentals for
oil. This challenge defines a long-term trend that we expect to see for some
time in the oil business.
Fundamentals in the natural gas industry worked to the fund's advantage over the
annual period. Prices increased as a result of production declines that seem to
be deepening due to increasing depletion rates, and we finished the winter
months with some of the lowest natural gas inventories in history. There simply
has not been enough capital spending on drilling to keep up with demand, given
that consumption of natural gas in the U.S. has risen sharply over the past
decade. And because 95% of new electrical plants are fueled by natural gas, we
believe that the demand for it will only increase as the country takes steps to
expand electrical capacity.
STRONG STOCK SELECTION BENEFITS PERFORMANCE
A number of key holdings in the fund outperformed the broad market for the
annual period. For example, the fund's largest position and a longtime holding,
Murphy Oil, enjoyed a solid gain. During the first half of the year, the company
was recognized for a major new oil discovery in Malaysia. This discovery only
enhanced our already high opinion of Murphy, a company that we believe can
succeed in almost any market environment. We think it's telling that Murphy's
production growth is already locked in place for every year of this decade
except one (and that year is expected to be locked in place soon), and are also
pleased to report that, as of March 31, 2003, the firm was providing a dividend
yield of approximately 2%.
GROWTH IN CONSUMPTION
As the strikes in Venezuela and problems in Nigeria proved this past year,
inventories are so tight, any disruption in output is enough to remind investors
of how important it is to build energy capacity. Furthermore, we're seeing
incredible growth of consumption in developing areas -- namely China, a nation
where automobile usage has been trending markedly higher in recent years.
The underlying dynamics driving energy prices and industry earnings worldwide
are as favorable as ever, and in an expanding economy this will become even more
evident. Consequently, we believe that the energy industry is entering a
multiyear cycle of capacity expansion -- one that will provide ample
opportunities for a variety of firms going forward.
LINE GRAPH: INVESCO ENERGY FUND - CLASS A & B GROWTH OF $10,000(1)
This line graph compares the value of a $10,000 investment in INVESCO Energy
Fund - Class A and the value of a $10,000 investment in INVESCO Energy Fund -
Class B to the value of a $10,000 investment in the S&P 500 Index(R)(2),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the cases of INVESCO Energy Fund - Class A and Class B,
inclusion of front-end sales charge and contingent deferred sales charge,
respectively, for the period since inception (4/02) through 3/31/03.
INVESCO ENERGY FUND - CLASS A INVESCO ENERGY FUND - CLASS B S&P 500 INDEX(R)(2)
4/02 $10,000 $10,000 $10,000
3/03 $ 8,268 $ 8,176 $ 7,525
LINE GRAPH: INVESCO ENERGY FUND - CLASS C GROWTH OF $10,000(1)
This line graph compares the value of a $10,000 investment in INVESCO Energy
Fund - Class C to the value of a $10,000 investment in the S&P 500 Index(R)(2),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the case of INVESCO Energy Fund - Class C, inclusion of
contingent deferred sales charge, for the period since inception (2/00) through
3/31/03.
INVESCO ENERGY FUND - CLASS C S&P 500 INDEX(2)
2/00 $10,000 $10,000
3/00 $12,112 $10,978
3/01 $14,818 $ 8,599
3/02 $14,364 $ 8,620
3/03 $12,449 $ 6,486
LINE GRAPH: INVESCO ENERGY FUND - CLASS K GROWTH OF $10,000(1)
This line graph compares the value of a $10,000 investment in INVESCO Energy
Fund - Class K to the value of a $10,000 investment in the S&P 500 Index(R)(2),
assuming in each case reinvestment of all dividends and capital gain
distributions, for the period since inception (12/00) through 3/31/03.
INVESCO ENERGY FUND - CLASS K S&P 500 INDEX(R)(2)
12/00 $10,000 $10,000
3/01 $11,706 $ 8,858
3/02 $10,728 $ 8,879
3/03 $ 9,278 $ 6,682
(1)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEX DOES NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED ITS PERFORMANCE.
(2)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE INDEX IS NOT MANAGED; THEREFORE,
ITS PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED
WITH THE FUND INCLUDING FRONT-END SALES CHARGES AND CDSC. INVESTORS CANNOT
INVEST DIRECTLY IN ANY MARKET INDEX.
PIE CHART: ENERGY FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Oil & Gas Equipment & Services......28.73%
Integrated Oil & Gas................25.06%
Oil & Gas Exploration, Production
& Transportation....................21.65%
Oil & Gas Drilling..................11.09%
Oil & Gas Refining & Marketing.......5.71%
Natural Gas Pipelines................3.48%
Gas Utilities........................0.60%
Net Cash & Cash Equivalents......... 3.68%
FUND MANAGEMENT
[PHOTOGRAPH OF JOHN S. SEGNER OMITTED]
JOHN S. SEGNER
JOHN SEGNER IS A SENIOR VICE PRESIDENT OF INVESCO FUNDS GROUP. HE RECEIVED A BS
FROM THE UNIVERSITY OF ALABAMA AND AN MBA FROM THE UNIVERSITY OF TEXAS AT
AUSTIN. BEFORE JOINING INVESCO IN 1997, JOHN SERVED AS MANAGING DIRECTOR AND
PRINCIPAL FOR THE MITCHELL GROUP. HE ALSO PREVIOUSLY HELD ENGINEERING
RESPONSIBILITIES WITH TEXACO INC., AND FINANCIAL RESPONSIBILITIES WITH AMERADA
HESS CORP. AND FIRST TENNESSEE NATIONAL CORP. JOHN BEGAN HIS INVESTMENT CAREER
IN 1980.
(AIM LOGO)
AIM GLOBAL FINANCIAL SERVICES FUND,
A PORTFOLIO OF
AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
August 25, 2003
Dear Shareholder:
As you may be aware, AMVESCAP PLC, the parent company of your Fund's
investment advisor, has undertaken an integration initiative for its North
American mutual fund operations.
In the first phase of the integration initiative, A I M Distributors, Inc.
became the sole distributor for all AMVESCAP PLC mutual funds in the United
States. A I M Distributors, Inc. is now the distributor for all INVESCO Funds
and the AIM Funds (including your Fund).
AMVESCAP PLC also reviewed all AIM Funds and INVESCO Funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete for limited shareholder assets and to consolidate certain
funds having similar investment objectives and strategies. Your Fund is one of
the funds that AMVESCAP PLC recommended, and your Board of Trustees approved, be
consolidated with another fund. The attached proxy statement/prospectus seeks
your approval of this consolidation.
Finally, the independent trustees of your Board believe that your interests
would best be served if the AIM Funds and the INVESCO Funds had a unified board
of directors/trustees. The attached proxy statement/prospectus seeks your vote
in favor of the persons nominated to serve as trustees.
Your vote is important. Please take a moment after reviewing the enclosed
materials to sign and return your proxy card in the enclosed postage paid return
envelope. If you attend the meeting, you may vote your shares in person. If you
expect to attend the meeting in person, or have questions, please notify us by
calling (800) 952-3502. You may also vote your shares by telephone or through a
website established for that purpose by following the instructions that appear
on the enclosed proxy card. If we do not hear from you after a reasonable amount
of time, you may receive a telephone call from our proxy solicitor, Georgeson
Shareholder Communications Inc., reminding you to vote your shares.
Sincerely,
-s- Robert H. Graham
Robert H. Graham
Chairman and President
AIM GLOBAL FINANCIAL SERVICES FUND,
A PORTFOLIO OF
AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 21, 2003
To the Shareholders of AIM Global Financial Services Fund:
We cordially invite you to attend our Special Meeting of Shareholders to:
1. Approve an Agreement and Plan of Reorganization (the "Agreement")
under which all of the assets of your Fund, an investment portfolio of AIM
Investment Funds ("Trust"), will be transferred to INVESCO Financial
Services Fund ("Buying Fund"), an investment portfolio of INVESCO Sector
Funds, Inc. ("Buyer"), Buying Fund will assume the liabilities of your Fund
and Buyer will issue shares of each class of Buying Fund to shareholders of
the corresponding class of shares of your Fund and, in connection
therewith, the sale of all of your Fund's assets and the termination of
your Fund as a designated series of Trust.
2. Elect 16 trustees to the Board of Trustees of Trust, each of whom
will serve until his or her successor is elected and qualified.
3. Transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.
We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 on October 21, 2003, at 3:00 p.m., Central Time.
Shareholders of record as of the close of business on July 25, 2003 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment of
the Special Meeting.
WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF
TRUST. YOU MAY ALSO VOTE YOUR SHARES BY TELEPHONE OR THROUGH A WEBSITE
ESTABLISHED FOR THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY
MATERIALS. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE
SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY
EXECUTING AND SUBMITTING A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION
TO THE SECRETARY OF TRUST OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
-s- NANCY L. MARTIN
Nancy L. Martin
Secretary
August 25, 2003
<Table>
AIM GLOBAL FINANCIAL INVESCO FINANCIAL
SERVICES FUND, SERVICES FUND,
A PORTFOLIO OF A PORTFOLIO OF
AIM INVESTMENT FUNDS INVESCO SECTOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100 4350 SOUTH MONACO STREET
HOUSTON, TEXAS 77046-1173 DENVER, COLORADO 80237
(800) 347-4246 (800) 525-8085
</Table>
COMBINED PROXY STATEMENT AND PROSPECTUS
AUGUST 25, 2003
This document is a combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus"). We are sending you this Proxy Statement/Prospectus in
connection with the Special Meeting of Shareholders (the "Special Meeting") of
AIM Global Financial Services Fund (your Fund). The Special Meeting will be held
on October 21, 2003. We intend to mail this Proxy Statement/Prospectus, the
enclosed Notice of Special Meeting of Shareholders and the enclosed proxy card
on or about August 25, 2003 to all shareholders entitled to vote.
At the Special Meeting, we are asking shareholders of your Fund to vote on
three Proposals. The first Proposal to be voted on is an Agreement and Plan of
Reorganization (the "Agreement") which provides for the combination of your
Fund, an investment portfolio of AIM Investment Funds ("Trust"), with INVESCO
Financial Services Fund ("Buying Fund"), an investment portfolio of INVESCO
Sector Funds, Inc. ("Buyer") (the "Reorganization") and, in connection
therewith, the sale of all of your Fund's assets and the termination of your
Fund as a designated series of Trust.
Under the Agreement, all of the assets of your Fund will be transferred to
Buying Fund, Buying Fund will assume the liabilities of your Fund and Buyer will
issue shares of each class of Buying Fund to shareholders of the corresponding
class of shares of your Fund, as set forth on Exhibit A.
The value of your account with Buying Fund immediately after the
Reorganization will be the same as the value of your account with your Fund
immediately prior to the Reorganization. The Reorganization has been structured
as a tax-free transaction. No sales charges will be imposed in connection with
the Reorganization.
The Board of Trustees of Trust (the "Board") has approved the Agreement and
the Reorganization as being in the best interests of your Fund.
Trust and Buyer are both registered open-end management investment
companies that issue their shares in separate series. Your Fund is a series of
Trust and Buying Fund is a series of Buyer. A I M Advisors, Inc. ("AIM") serves
as the investment advisor to your Fund and INVESCO Funds Group, Inc. ("INVESCO")
serves as the investment advisor to Buying Fund. Both AIM and INVESCO are wholly
owned subsidiaries of AMVESCAP PLC ("AMVESCAP"), an independent global
investment management company.
The investment objective of Buying Fund is similar to that of your Fund.
See "Comparison of Investment Objectives and Principal Strategies."
This Proxy Statement/Prospectus sets forth the information that you should
know before voting on the Agreement and the other Proposal described below. It
is both the Proxy Statement of your Fund and the Prospectus of Buying Fund. You
should read and retain this Proxy Statement/Prospectus for future reference.
The Prospectus of your Fund dated March 3, 2003, as supplemented June 12,
2003 (the "Selling Fund Prospectus"), together with the related Statement of
Additional Information dated March 3, 2003, as supplemented May 2, 2003, are on
file with the Securities and Exchange Commission (the "SEC"). The Selling Fund
Prospectus is incorporated by reference into this Proxy Statement/Prospectus.
The
i
Prospectus of Buying Fund dated July 31, 2003, as supplemented August 1, 2003
and August 14, 2003 (the "Buying Fund Prospectus"), and the related Statement of
Additional Information dated July 31, 2003, as supplemented August 14, 2003, and
the Statement of Additional Information relating to the Reorganization, dated
August 15, 2003, are on file with the SEC. The Buying Fund Prospectus is
incorporated by reference into this Proxy Statement/Prospectus and a copy of the
Buying Fund Prospectus is attached as Appendix II to this Proxy
Statement/Prospectus. The Statement of Additional Information relating to the
Reorganization dated August 15, 2003 also is incorporated by reference into this
Proxy Statement/Prospectus. The SEC maintains a website at www.sec.gov that
contains the Prospectuses and Statements of Additional Information described
above, material incorporated by reference, and other information about Trust and
Buyer.
Copies of the Buying Fund Prospectus, the Selling Fund Prospectus and the
related Statements of Additional Information are available without charge by
writing to A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739,
or by calling (800) 347-4246. Additional information about your Fund and Buying
Fund may be obtained on the internet at www.aiminvestments.com.
The remaining Proposal to be voted on is the election of 16 trustees to the
Board of Trustees of Trust. The Board has approved the nomination of the persons
set forth in this Proxy Statement/Prospectus for election as trustees of Trust.
Both Proposals are being submitted to you to implement an integration
initiative undertaken by AMVESCAP with respect to its North American mutual fund
operations, which includes your Fund.
Trust has previously sent to shareholders the most recent annual report for
your Fund, including financial statements, and the most recent semiannual report
succeeding the annual report, if any. If you have not received such report(s) or
would like to receive an additional copy, please contact A I M Fund Services,
Inc., P.O. Box 4739, Houston, Texas 77210-4739, or call (800) 347-4246. Such
report(s) will be furnished free of charge.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
ii
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
INTRODUCTION................................................ 1
PROPOSAL 1 -- APPROVAL OF THE AGREEMENT TO COMBINE YOUR FUND
AND BUYING FUND........................................... 2
SUMMARY..................................................... 2
The Reorganization........................................ 2
Comparison of Investment Objectives and Principal
Strategies............................................. 3
Comparison of Principal Service Providers................. 5
Comparison of Performance................................. 5
Comparison of Fees and Expenses........................... 5
Comparison of Multiple Class Structures................... 5
Comparison of Sales Charges............................... 6
Comparison of Distribution, Purchase and Redemption
Procedures and Exchange Rights......................... 6
The Board's Recommendation on Proposal 1.................. 6
RISK FACTORS................................................ 8
Risks Associated with Buying Fund......................... 8
Comparison of Risks of Buying Fund and Your Fund.......... 10
INFORMATION ABOUT BUYING FUND............................... 10
Description of Buying Fund Shares......................... 10
Management's Discussion of Fund Performance............... 10
Financial Highlights...................................... 10
Pending Shareholder Proposals for Buying Fund............. 10
ADDITIONAL INFORMATION ABOUT THE AGREEMENT.................. 11
Terms of the Reorganization............................... 11
The Reorganization........................................ 11
Board Considerations...................................... 11
Other Terms............................................... 12
Federal Income Tax Consequences........................... 13
Accounting Treatment...................................... 14
RIGHTS OF SHAREHOLDERS...................................... 14
General................................................... 14
Liability of Shareholders................................. 14
Election of Directors/Trustees; Terms..................... 15
Removal of Directors/Trustees............................. 15
Meetings of Shareholders.................................. 15
Liability of Directors/Trustees and Officers;
Indemnification........................................ 15
Dissolution and Termination............................... 16
Voting Rights of Shareholders............................. 16
Dissenters' Rights........................................ 16
Amendments to Organization Documents...................... 16
CAPITALIZATION.............................................. 18
INTERESTS OF CERTAIN PERSONS................................ 19
LEGAL MATTERS............................................... 19
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND...... 19
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION................................................ 19
PROPOSAL 2 -- ELECTION OF TRUSTEES.......................... 20
Background................................................ 20
</Table>
iii
<Table>
<Caption>
PAGE
----
Structure of the Board of Trustees........................ 20
Nominees for Trustees..................................... 20
The Board's Recommendation on Proposal 2.................. 23
Committees of the Board................................... 23
Board and Committee Meeting Attendance.................... 25
Trustee's Compensation.................................... 25
Retirement Plan for Trustees.............................. 25
Deferred Compensation Agreements.......................... 25
Officers of Trust......................................... 26
Security Ownership of Management.......................... 26
Trustee Ownership of Your Fund's Shares................... 26
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING............ 26
Proxy Statement/Prospectus................................ 26
Time and Place of Special Meeting......................... 26
Voting in Person.......................................... 27
Voting by Proxy........................................... 27
Voting by Telephone or the Internet....................... 27
Quorum Requirement and Adjournment........................ 27
Vote Necessary to Approve Each Proposal................... 28
Proxy Solicitation........................................ 28
Other Matters............................................. 28
Shareholder Proposals..................................... 28
Ownership of Shares....................................... 29
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 29
Fees Paid to the Auditor Related to Trust................. 29
Fees Paid to the Auditor Not Related to Trust............. 29
</Table>
<Table>
EXHIBIT A -- Classes of Shares of Your Fund and Corresponding Classes of
Shares of Buying Fund....................................... A-1
EXHIBIT B -- Comparison of Performance of Your Fund and Buying Fund...... B-1
EXHIBIT C -- Comparison Fee Table and Expense Example.................... C-1
EXHIBIT D -- Trustee Compensation Table.................................. D-1
EXHIBIT E -- Officers of Trust........................................... E-1
EXHIBIT F -- Security Ownership of Management............................ F-1
EXHIBIT G -- Trustee Ownership of Fund Shares............................ G-1
EXHIBIT H -- Shares Outstanding of Each Class of Your Fund on Record
Date........................................................ H-1
EXHIBIT I -- Ownership of Shares of Your Fund............................ I-1
EXHIBIT J -- Ownership of Shares of Buying Fund.......................... J-1
APPENDIX I -- Agreement and Plan of Reorganization for Your Fund (to
Effect the Reorganization)
APPENDIX II -- Prospectus of Buying Fund
APPENDIX III -- Discussion of Performance of Buying Fund
</Table>
THE AIM FAMILY OF FUNDS, AIM AND DESIGN, AIM, AIM FUNDS, AIM FUNDS AND
DESIGN, AIM INVESTOR, AIM LIFETIME AMERICA, AIM LINK, AIM INSTITUTIONAL FUNDS,
AIMFUNDS.COM, LA FAMILIA AIM DE FONDOS, LA FAMILIA AIM DE FONDOS AND DESIGN,
INVIERTA CON DISCIPLINA AND INVEST WITH DISCIPLINE ARE REGISTERED SERVICE MARKS
AND AIM BANK CONNECTION, AIM INTERNET CONNECT, AIM
iv
PRIVATE ASSET MANAGEMENT, AIM PRIVATE ASSET MANAGEMENT AND DESIGN, AIM STYLIZED
AND/OR DESIGN, AIM ALTERNATIVE ASSETS AND DESIGN, AIM INVESTMENTS, AIM
INVESTMENTS AND DESIGN, MYAIM.COM, THE AIM COLLEGE SAVINGS PLAN, AIM SOLO 401(k)
AND YOUR GOALS. OUR SOLUTIONS. ARE SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
INVESCO, THE OPEN CIRCLE DESIGN, INVESCO FUNDS, INVESCO FUNDS GROUP,
INVESCO -- YOUR GLOBAL INVESTMENT PARTNER AND YOU SHOULD KNOW WHAT INVESCO KNOWS
ARE REGISTERED SERVICE MARKS OF AMVESCAP PLC.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this
Proxy Statement/Prospectus, and you should not rely on such other information or
representations.
v
INTRODUCTION
Your Fund is one of 86 portfolios advised by AIM and Buying Fund is one of
46 portfolios advised by INVESCO. Proposals 1 and 2 that you are being asked to
vote on relate to or result from an integration initiative announced on March
27, 2003, by AMVESCAP, the parent company of AIM and INVESCO, with respect to
its North American mutual fund operations. The primary components of AMVESCAP's
integration initiative are:
- Using a single distributor for all AMVESCAP mutual funds in the United
States. To that end, A I M Distributors, Inc., the distributor for the
retail mutual funds advised by AIM (the "AIM Funds"), replaced INVESCO
Distributors, Inc. as the distributor for the retail mutual funds advised
by INVESCO (the "INVESCO Funds") effective July 1, 2003.
- Integrating back office support and creating a single platform for back
office support of AMVESCAP's mutual fund operations in the United States,
including such support services as transfer agency and information
technology. One result of this integration will be that shares of the AIM
Funds and shares of the INVESCO Funds generally will be able to be
exchanged for shares of the same or a similar class of each other.
- Rationalizing and streamlining of the various AIM Funds and INVESCO
Funds. In that regard, AMVESCAP has undertaken an extensive review of
these funds and concluded that it would be appropriate to reduce the
number of smaller and less efficient funds that compete for limited
shareholder assets and to consolidate certain funds having similar
investment objectives and strategies. Reducing both the number of AIM
Funds and INVESCO Funds will allow AIM and INVESCO to concentrate on
managing their core products. The Reorganization is one of a number of
fund reorganizations proposed by AMVESCAP as a result of this review
process. AMVESCAP's belief is that the Reorganization will allow Buying
Fund the best available opportunities for investment management, growth
prospects and potential economies of scale. Proposal 1 relates to this
component of AMVESCAP's integration initiative.
- Rationalizing the contractual arrangements for the provision of
investment advisory and administrative services to the AIM Funds and the
INVESCO Funds. The objective of this component is to have AIM assume
primary responsibility for the investment advisory, administrative,
accounting and legal and compliance services for the INVESCO Funds. To
implement this component, each INVESCO Fund, including Buying Fund, is
seeking shareholder approval to enter into a new investment advisory
agreement with AIM. These changes will simplify AMVESCAP's mutual fund
operations in the United States in that there will be a uniform
arrangement for investment management for both the AIM Funds and the
INVESCO Funds.
- Simplifying the organizational structure of the AIM Funds and the INVESCO
Funds so that they are all organized as Delaware statutory trusts, using
as few entities as practicable. To implement this component, each AIM
Fund and each INVESCO Fund that currently is organized as a Maryland
corporation is seeking shareholder approval to redomesticated as a new
Delaware statutory trust, which also should provide these Funds with
greater flexibility in conducting their business operations. In addition,
certain series portfolios of AIM Funds with few portfolios are seeking
shareholder approval to be restructured as new series portfolios of
existing AIM Funds that are organized as Delaware statutory trusts.
In considering the integration initiative proposed by AMVESCAP, the
directors/trustees of the AIM Funds and the directors of the INVESCO Funds who
are not "interested persons" (as defined in the Investment Company Act of 1940
(the "1940 Act")) of the Funds or their advisors determined that the
shareholders of both the AIM Funds and the INVESCO Funds would benefit if one
set of directors/ trustees was responsible for overseeing the operation of both
the AIM Funds and the INVESCO Funds and the services provided by AIM, INVESCO
and their affiliates. Accordingly, these directors/trustees agreed to combine
the separate boards and create a unified board of directors/trustees. Proposal 2
relates to the election of trustees of your Fund.
1
You are being asked to approve Proposal 2 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to take advantage of
these other benefits of AMVESCAP's integration initiative. We will be unable to
determine whether Proposal 2 should go forward until we have determined whether
Proposal 1 has been approved. Therefore, even if you vote in favor of Proposal
1, it is still important that you vote on Proposal 2. For information about the
Special Meeting and voting on Proposals 1 and 2, see "Information About the
Special Meeting and Voting." For a description of the vote necessary to approve
each of Proposals 1 and 2, see "Information About the Special Meeting and
Voting -- Vote Necessary to Approve Each Proposal."
PROPOSAL 1 --
APPROVAL OF THE AGREEMENT
TO COMBINE YOUR FUND AND BUYING FUND
SUMMARY
The Board, including the independent trustees, has determined that the
Reorganization is in the best interests of your Fund and that the interests of
the shareholders of your Fund will not be diluted as a result of the
Reorganization. The Board believes that a larger combined fund should be more
viable and have greater market presence and should have greater investment
leverage in that portfolio managers should have broader investment opportunities
and lower trading costs. The Board also believes that a larger combined fund
also should result in greater operating efficiencies by providing economies of
scale to the combined fund in that certain fixed costs, such as legal,
accounting, shareholder services and director/trustee expenses, will be spread
over the greater assets of the combined fund. For additional information
concerning the factors the Board considered in approving the Agreement, see
"Additional Information About the Agreement -- Board Considerations."
The following summary discusses some of the key features of the
Reorganization and highlights certain differences between your Fund and Buying
Fund. This summary is not complete and does not contain all of the information
that you should consider before voting on whether to approve the Agreement. For
more complete information, please read this entire Proxy Statement/Prospectus.
THE REORGANIZATION
The Reorganization will result in the combination of your Fund with Buying
Fund. Your Fund is a series of Trust, a Delaware statutory trust. Buying Fund is
a series of Buyer, a Maryland corporation. The Board of Directors of Buyer is
soliciting the proxies of the shareholders of Buyer's series portfolios to vote
on an agreement and plan of reorganization to redomesticate Buyer as a Delaware
statutory trust in order to provide Buyer with greater flexibility in conducting
its business operations. If approved by Buyer's shareholders, the consummation
of the redomestication of Buyer as a Delaware statutory trust will occur prior
to the consummation of the Reorganization.
If shareholders of your Fund approve the Agreement and other closing
conditions are satisfied, all of the assets of your Fund will be transferred to
Buying Fund and Buying Fund will assume the liabilities of your Fund, and Buyer
will issue shares of each class of Buying Fund to shareholders of the
corresponding class of shares of your Fund, as set forth on Exhibit A. For a
description of certain of the closing conditions that must be satisfied, see
"Additional Information About the Agreement -- Other Terms."
The shares of Buying Fund issued in the Reorganization will have an
aggregate net asset value equal to the net value of the assets of your Fund
transferred to Buying Fund. The value of your account with Buying Fund
immediately after the Reorganization will be the same as the value of your
account with your Fund immediately prior to the Reorganization. A copy of the
Agreement is attached as Appendix I to this Proxy Statement/Prospectus. See
"Additional Information About the Agreement."
Trust and Buyer will receive an opinion of Kirkpatrick & Lockhart LLP to
the effect that the Reorganization will constitute a tax-free reorganization for
Federal income tax purposes. Thus, shareholders will not have to pay additional
Federal income tax as a result of the Reorganization except to
2
the extent your Fund disposes of securities at a net gain in anticipation of the
Reorganization, which gain would be included in a taxable distribution. See
"Additional Information About the Agreement -- Federal Income Tax Consequences."
No sales charges will be imposed in connection with the Reorganization.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
Your Fund and Buying Fund pursue similar investment objectives and invest
in similar types of securities. As a result, the Reorganization is not expected
to cause significant portfolio turnover or transaction expenses from the sale of
securities that are incompatible with the investment objective of Buying Fund.
The investment objective or goal of Buying Fund is classified as
fundamental, which means that the Board of Directors of Buyer cannot change it
without shareholder approval. The investment objective of your Fund is not
classified as fundamental, which means that the Board can change it without
shareholder approval.
A description of the fundamental and non-fundamental restrictions and
policies applicable to your Fund and Buying Fund can be found in each Fund's
Statement of Additional Information. While your Fund and Buying Fund have
slightly different approaches to disclosing and characterizing these
restrictions and policies, in substance your Fund and Buying Fund operate under
the same general restrictions and are subject to the same general policies.
The chart below provides a summary for comparison purposes of the
investment objectives and principal investment strategies of your Fund and
Buying Fund. You can find more detailed information about the investment
objectives, strategies and other investment policies of your Fund and Buying
Fund in the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
<Table>
<Caption>
AIM GLOBAL FINANCIAL SERVICES FUND INVESCO FINANCIAL SERVICES FUND
(YOUR FUND) (BUYING FUND)
---------------------------------- -------------------------------
INVESTMENT OBJECTIVE
- - long-term growth of capital - capital growth
INVESTMENT STRATEGIES
- - invests at least 80% of its assets in - invests at least 80% of its net assets in
securities of financial services companies the equity securities and equity-related
- - invests primarily in marketable equity instruments of companies doing business in
securities, including convertible the financial services sector
securities, and debt securities, but its - invests primarily in equity securities that
investments may include synthetic INVESCO believes will rise in price faster
instruments such as warrants, futures, than other securities, as well as in
options, exchange-traded funds and American options and other investments whose values
Depositary Receipts are based upon the values of equity
securities
- - considers a financial services company to - considers a company to be in the financial
be one that derives at least 40% of its services sector if it meets at least one of
revenues or earnings from financial the following tests:
services activities. Such companies include -- at least 50% of its gross income or its
those that provide financial services (such net sales must come from activities in
as commercial banks, insurance brokerages, the sector;
securities brokerages, investment banks, -- at least 50% of its assets must be
leasing companies, and real estate-related devoted to producing revenues from the
companies) sector; or
- - may invest in equity and debt securities of -- based on other available information, it
other companies the portfolio managers is determined that its primary business
believe will benefit from developments in is within the sector
the financial services sector - financial services sector companies
include, but are not limited to, banks
(regional and money-centers), insurance
companies (life, property and
</Table>
3
<Table>
<Caption>
AIM GLOBAL FINANCIAL SERVICES FUND INVESCO FINANCIAL SERVICES FUND
(YOUR FUND) (BUYING FUND)
---------------------------------- -------------------------------
casualty, and multiline), investment and
miscellaneous industries (asset managers,
brokerage firms, and government-sponsored
agencies), and suppliers to financial
services companies
- - normally invests in securities of issuers - may invest up to 25% of its assets in
in at least three countries, including the securities of non-U.S. issuers (securities
United States, and may invest a significant of Canadian issuers and American Depositary
portion of its assets in the securities of Receipts are not subject to this 25%
U.S. issuers. limitation)
- - will invest no more than 40% of its total
assets in securities of issuers in any one
country, other than the U.S.
- - portfolio managers allocate your Fund's
assets among securities of countries and in
currency denominations that are expected to
provide the best opportunities for meeting
your Fund's investment objective
- - analyzes specific companies for possible - places a greater emphasis on companies that
investment and looks for several of the are increasing their revenue streams along
following characteristics: above-average with their earnings; seeks companies that
per share earnings growth; high return on can grow their revenues and earnings in a
invested capital; a healthy balance sheet; variety of interest rate environments;
sound financial and accounting policies and seeks companies with successful sales and
overall financial strength; strong marketing cultures and that leverage
competitive advantages; effective research technologies in their operations and
and product development and marketing; distribution; adjusts portfolio weightings
development of new technologies; efficient depending on current economic conditions
service; pricing flexibility; strong and relative valuations of securities
management; and general operating - uses a research oriented bottom-up
characteristics that will enable the investment approach, focuses on company
companies to compete successfully in their fundamentals and growth prospects when
respective markets selecting securities and generally
emphasizes companies INVESCO believes are
strongly managed and will generate
above-average long-term capital
appreciation
- - may invest up to 5% of its total assets in - may invest in junk bonds which INVESCO
lower-quality debt securities, i.e., "junk believes are not highly speculative and
bonds" which are rated at least CCC by S&P or Caa
by Moody's, although not a principal
strategy
</Table>
4
COMPARISON OF PRINCIPAL SERVICE PROVIDERS
The following is a list of the current principal service providers for your
Fund and Buying Fund.
<Table>
<Caption>
SERVICE PROVIDERS
---------------------------------------------------------------------
AIM GLOBAL FINANCIAL SERVICES FUND INVESCO FINANCIAL SERVICES FUND
SERVICE (YOUR FUND) (BUYING FUND)
- ------- ---------------------------------- --------------------------------
Investment Advisor............. A I M Advisors, Inc. INVESCO Funds Group, Inc.*
11 Greenway Plaza, Suite 100 4350 South Monaco Street
Houston, Texas 77046-1173 Denver, Colorado 80237
Distributor.................... A I M Distributors, Inc. A I M Distributors, Inc.**
11 Greenway Plaza, Suite 100 11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 Houston, Texas 77046-1173
Administrator.................. A I M Advisors, Inc. INVESCO Funds Group, Inc.***
11 Greenway Plaza, Suite 100 4350 South Monaco Street
Houston, Texas 77046-1173 Denver, Colorado 80237
Custodian...................... State Street Bank and Trust State Street Bank and Trust
Company Company
Transfer Agent and Dividend
Disbursing Agent............. A I M Fund Services, Inc. INVESCO Funds Group, Inc.****
Independent Auditors........... PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
</Table>
- ---------------
* If the shareholders of Buying Fund approve a new investment advisory
agreement with AIM, AIM will replace INVESCO as investment advisor for your
Fund effective November 5, 2003.
** A I M Distributors, Inc. replaced INVESCO Distributors, Inc. as distributor
of Buying Fund effective July 1, 2003.
*** If the shareholders of Buying Fund approve a new investment advisory
agreement with AIM, AIM will replace INVESCO as administrator for Buying
Fund effective November 5, 2003.
**** A I M Fund Services, Inc. will replace INVESCO as transfer agent and
dividend disbursing agent for Buying Fund on or about October 1, 2003.
COMPARISON OF PERFORMANCE
A bar chart showing the annual total returns for calendar years ended
December 31 for Class A shares of your Fund and Investor Class shares of Buying
Fund can be found at Exhibit B. Also included as part of Exhibit B is a table
showing the average annual total returns for the periods indicated for your Fund
and Buying Fund, including sales charges. For more information regarding the
total return of your Fund, see the "Financial Highlights" section of the Selling
Fund Prospectus, which has been made a part of this Proxy Statement/Prospectus
by reference. For more information regarding the total return of Buying Fund,
see "Information About Buying Fund -- Financial Highlights." Past performance
cannot guarantee comparable future results.
COMPARISON OF FEES AND EXPENSES
A comparison of shareholder fees and annual operating expenses of each
class of shares of your Fund, as of October 31, 2002, and Buying Fund, as of
March 31, 2003, expressed as a percentage of net assets ("Expense Ratio"), can
be found at Exhibit C. Pro forma estimated Expense Ratios for each class of
shares of Buying Fund after giving effect to the Reorganization are also
provided as of March 31, 2003 as part of Exhibit C.
COMPARISON OF MULTIPLE CLASS STRUCTURES
A comparison of the share classes of your Fund that are available to
investors and the corresponding share classes of Buying Fund that shareholders
of your Fund will receive in the Reorganization can be
5
found as Exhibit A. In addition to the share classes of Buying Fund listed on
Exhibit A, Investor Class shares and Class K shares are available to investors.
These share classes are not involved in the Reorganization. For information
regarding the features of the various share classes of your Fund and Buying
Fund, see the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
COMPARISON OF SALES CHARGES
No initial sales charges are applicable to shares of Buying Fund received
by holders of your Fund's shares in connection with the Reorganization. No
redemption of your Fund's shares that could cause the imposition of a contingent
deferred sales charge ("CDSC") will result in connection with the
Reorganization. The holding period for purposes of determining whether to charge
a CDSC upon redemptions of shares of Buying Fund received by holders of your
Fund's shares in connection with the Reorganization will begin at the time your
Fund's shares were originally purchased.
The chart below provides a summary for comparison purposes of the initial
sales charges and CDSCs applicable to each class of shares of your Fund and
Buying Fund. The fee tables at Exhibit C include comparative information about
maximum initial sales charges on purchases of Class A shares of your Fund and
Buying Fund and the maximum CDSC on redemptions of certain classes of shares of
your Fund and Buying Fund. For more detailed information on initial sales
charges, including volume purchase breakpoints and waivers, and reductions of
CDSCs over time, see the Selling Fund Prospectus and the Buying Fund Prospectus.
<Table>
<Caption>
CLASS A CLASS B CLASS C
------- ------- -------
- - subject to an initial sales - not subject to an initial - not subject to an initial
charge* sales charge sales charge
- - may be subject to a CDSC on - subject to a CDSC on certain - subject to a CDSC on certain
redemptions made within 18 redemptions made within 6 redemptions made within 12
months from the date of years from the date of months from the date of
certain large purchases** purchase purchase***
</Table>
<Table>
<Caption>
CLASS K INVESTOR CLASS
(BUYING FUND ONLY) (BUYING FUND ONLY)
------------------ ------------------
- - not subject to an initial - not subject to an initial
sales charge sales charge
- - may be subject to a CDSC on - not subject to a CDSC
redemptions made within 12
months from the date of
certain purchases
</Table>
- ---------------
* Both your Fund and Buying Fund waive initial sales charges on Class A shares
for certain categories of investors, including certain of their affiliated
entities and certain of their employees, officers and directors/trustees and
those of their investment advisor.
** For qualified plans investing in Class A shares of Buying Fund, this period
is 12 months rather than 18 months.
*** Prior to August 18, 2003, Class C shares of Buying Fund are subject to a
CDSC on certain redemptions made within 13 months from the date of purchase.
This 13 month period changes to 12 months effective August 18, 2003.
The CDSC on redemptions of shares of your Fund is computed based on the
lower of their original purchase price or current market value. Prior to August
18, 2003, the CDSC on redemptions of shares of Buying Fund is computed based on
their original purchase price. This method of computation changes to conform to
your Fund's method of computation effective August 18, 2003.
6
COMPARISON OF DISTRIBUTION, PURCHASE AND REDEMPTION PROCEDURES AND EXCHANGE
RIGHTS
Shares of your Fund and Buying Fund are distributed by A I M Distributors,
Inc. ("AIM Distributors"), a registered broker-dealer and wholly owned
subsidiary of AIM. AIM Distributors replaced INVESCO Distributors, Inc. as
distributor of Buying Fund effective July 1, 2003.
Both your Fund and Buying Fund have adopted a distribution plan that allows
the payment of distribution and service fees for the sale and distribution of
the shares of each of their respective classes. Both your Fund and Buying Fund
have engaged AIM Distributors to provide such services either directly or
through third parties. The fee tables at Exhibit C include comparative
information about the distribution and service fees payable by each class of
shares of your Fund and Buying Fund. Overall, each class of shares of Buying
Fund has the same or lower aggregate distribution and service fees as the
corresponding class of shares of your Fund.
Although there are differences in the purchase, redemption and exchange
procedures of your Fund and Buying Fund as of the date of this Proxy
Statement/Prospectus, it is currently anticipated that the purchase, redemption
and exchange procedures of your Fund and/or Buying Fund will be changed so that
they are substantially the same prior to the consummation of the Reorganization.
For information regarding the current purchase, redemption and exchange
procedures of your Fund and Buying Fund, see the Selling Fund Prospectus and the
Buying Fund Prospectus, respectively.
As of the date of this Proxy Statement/Prospectus, shares of your Fund
generally may be exchanged for shares of the same or a similar class of funds
within The AIM Family of Funds(R) and shares of Buying Fund generally may be
exchanged for shares of the same or a similar class of funds within the INVESCO
Family of Funds. It is currently anticipated that, prior to the consummation of
the Reorganization, shares of The AIM Family of Funds(R) and shares of the
INVESCO Family of Funds generally will be able to be exchanged for shares of the
same or a similar class of each other. If this exchangeability feature is not
offered to shareholders prior to the consummation of the Reorganization, the
consummation of the Reorganization will be delayed until such time as it is
offered. See "Additional Information About the Agreement -- The Reorganization."
For more detailed information regarding the current exchange rights of your Fund
and Buying Fund, see the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
THE BOARD'S RECOMMENDATION ON PROPOSAL 1
Your Board, including the independent trustees, unanimously recommends that
you vote "FOR" this Proposal.
7
RISK FACTORS
RISKS ASSOCIATED WITH BUYING FUND
The following is a discussion of the principal risks associated with Buying
Fund.
Buying Fund is generally subject to risks that affect the financial
services sector. The financial services sector is subject to extensive
governmental regulation, which may change frequently. In addition, the
profitability of businesses in these industries depends heavily upon the
availability and cost of money, and may fluctuate significantly in response to
changes in interest rates, as well as changes in general economic conditions.
From time to time, severe competition may also affect the profitability of
financial services sector companies. Buying Fund is also subject to the
following specific risks:
INVESTMENT STYLE RISK
Growth investing may be more volatile than other investment styles because
growth stocks are more sensitive to investor perceptions of an issuing company's
growth potential. Growth-oriented funds typically will underperform
value-oriented funds when investor sentiment favors the value investing style.
SECTOR RISK
Buying Fund is concentrated in a comparatively narrow segment of the
economy. This means Buying Fund's investment concentration in the financial
services sector is higher than most mutual funds and the broad securities
market. Consequently, Buying Fund tends to be more volatile than other mutual
funds, and the value of its portfolio investments and consequently the value of
an investment in Buying Fund tend to go up and down more rapidly.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of Buying
Fund's investments. Certain stocks selected for Buying Fund's portfolio may
decline in value more than the overall stock market. In general, the securities
of small companies have more volatility than those of mid-size or large
companies.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory, and diplomatic risks. Buying Fund may invest up
to 25% of its assets in securities of non-U.S. issuers. Securities of Canadian
issuers and American Depository Receipts are not subject to this 25% limitation.
Foreign securities risk also includes the following:
Currency Risk. A change in the exchange rate between U.S. Dollars and a
foreign currency may reduce the value of Buying Fund's investment in a security
valued in the foreign currency, or based on that currency value.
Political Risk. Political actions, events, or instability may result in
unfavorable changes in the value of a security.
Regulatory Risk. Government regulations may affect the value of a
security. In foreign countries, securities markets that are less regulated than
those in the U.S. may permit trading practices that are not allowed in the U.S.
Diplomatic Risk. A change in the diplomatic relations between the U.S. and
a foreign country could affect the value or liquidity of investments.
LIQUIDITY RISK
Buying Fund's portfolio is liquid if Buying Fund is able to sell the
securities it owns at a fair price within a reasonable time. Liquidity is
generally related to the market trading volume for a particular
8
security. Investments in smaller companies or in foreign companies or companies
in emerging markets are subject to a variety of risks, including potential lack
of liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some
manner, from the price of another security, index, asset, or rate. Derivatives
include options and futures contracts, among a wide range of other instruments.
The principal risk of investments in derivatives is that the fluctuations in
their values may not correlate perfectly with the overall securities markets.
Some derivatives are more sensitive to interest changes and market price
fluctuations than others. Some derivatives are more sensitive to interest rate
changes and market price fluctuations than others. Also, derivatives are subject
to counterparty risk, described below.
Options and futures are common types of derivatives that Buying Fund may
occasionally use to hedge its investments. An option is the right to buy and
sell a security or other instrument, index, or commodity at a specific price on
or before a specific date. A future is an agreement to buy or sell a security or
other instrument, index, or commodity at a specific price on a specific date.
The use of options and futures may increase the performance of the Fund, but
also may increase market risk. Other types of derivatives include swaps, caps,
floors, and collars.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with
Buying Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete, or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
PORTFOLIO TURNOVER RISK
Buying Fund's investments may be bought and sold relatively frequently. A
high turnover rate may affect Buying Fund's performance because it results in
higher brokerage commissions and may result in taxable gain distributions to
Buying Fund's shareholders.
GENERAL RISKS
Not Insured. Mutual funds are not insured by the FDIC or any other
government agency, unlike bank deposits such as CDs or savings accounts.
No Guarantee. No mutual fund can guarantee that it will meet its
investment objectives.
Possible Loss of Investment. A mutual fund cannot guarantee its
performance, nor assure you that the market value of your investment will
increase. You may lose the money you invest, and Buying Fund will not reimburse
you for any of these losses.
Volatility. The price of your mutual fund shares will increase or decrease
with changes in the value of Buying Fund's underlying investments and changes in
the equity markets as a whole.
Not a Complete Investment Plan. An investment in any mutual fund does not
constitute a complete investment plan. Buying Fund is designed to be only a part
of your personal investment plan.
9
COMPARISON OF RISKS OF BUYING FUND AND YOUR FUND
The risks associated with an investment in your Fund are similar to those
described above for Buying Fund because of the similarities in their investment
objectives and strategies. Set forth below is a discussion of certain risks that
differ between Buying Fund and your Fund. You can find more detailed
descriptions of specific risks associated with your Fund in the Selling Fund
Prospectus.
Your Fund considers a financial services company to be one that derives at
least 40% of its revenues or earnings from financial services activities. Buying
Fund has a 50% definitional threshold. As a result, your Fund's lower threshold
definition of financial service company broadens the types of companies that
your Fund may invest in. In contrast, Buying Fund's higher threshold definition
may lead to greater concentration within the financial services industry and
less diversification within the financial services sector.
Your Fund has a greater ability to invest in foreign securities compared to
Buying Fund, which can only invest up to 25% of its assets in foreign
securities. Because your Fund has no such restrictions, it may be subject to
greater foreign securities risk exposure than Buying Fund.
Your Fund may invest in debt securities which are particularly vulnerable
to credit risk and interest rate fluctuations. Interest rate increases can cause
the price of a debt security to decrease.
Your Fund may participate in the initial public offering (IPO) market in
some market cycles. Because of your Fund's small asset base, any investment it
may make in IPOs may significantly affect the fund's total return. As your
Fund's assets grow, the impact of IPO investments will decline, which may reduce
the effect of IPO investments on your Fund's total return.
INFORMATION ABOUT BUYING FUND
DESCRIPTION OF BUYING FUND SHARES
Shares of Buying Fund 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 Buyer in certain circumstances. Each share
of Buying Fund represents an equal proportionate interest in Buying Fund with
each other share and is entitled to such dividends and distributions out of the
income belonging to Buying Fund as are declared by the Board of Directors of
Buying Fund. Each share of Buying Fund generally has the same voting, dividend,
liquidation and other rights; however, each class of shares of Buying Fund is
subject to different sales loads, conversion features, exchange privileges and
class-specific expenses. When issued, shares of Buying 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.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Buying Fund taken from its annual report
to shareholders for the fiscal year ended March 31, 2003 is set forth in
Appendix III to this Proxy Statement/Prospectus.
FINANCIAL HIGHLIGHTS
For more information about Buying Fund's financial performance, see the
"Financial Highlights" section of the Buying Fund Prospectus, which is attached
to this Proxy Statement/Prospectus as Appendix II.
PENDING SHAREHOLDER PROPOSALS FOR BUYING FUND
As previously discussed, the Board of Directors of Buyer is soliciting the
shareholders of Buying Fund to vote on a new investment advisory agreement
between AIM and Buying Fund, a new sub-advisory
10
agreement between AIM and INVESCO Institutional (N.A.), Inc., an affiliate of
INVESCO, for Buying Fund, and an agreement and plan of reorganization to
redomesticate Buyer as a Delaware statutory trust.
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Agreement. Significant provisions of the Agreement are
summarized below; however, this summary is qualified in its entirety by
reference to the Agreement, a copy of which is attached as Appendix I to this
Proxy Statement/Prospectus.
THE REORGANIZATION
Consummation of the Reorganization (the "Closing") is expected to occur on
October 27, 2003, at 8:00 a.m., Eastern Time (the "Effective Time") on the basis
of values calculated as of the close of regular trading on the New York Stock
Exchange on October 24, 2003 (the "Valuation Date"). At the Effective Time, all
of the assets of your Fund will be delivered to Buyer's custodian for the
account of Buying Fund in exchange for the assumption by Buying Fund of the
liabilities of your Fund and delivery by Buyer directly to the holders of record
as of the Effective Time of the issued and outstanding shares of each class of
your Fund of a number of shares of each corresponding class of Buying Fund
(including, if applicable, fractional shares rounded to the nearest thousandth),
having an aggregate net asset value equal to the value of the net assets of your
Fund so transferred, assigned and delivered, all determined and adjusted as
provided in the Agreement. Upon delivery of such assets, Buying Fund will
receive good and marketable title to such assets free and clear of all liens.
In order to ensure continued qualification of your Fund for treatment as a
"regulated investment company" for tax purposes and to eliminate any tax
liability of your Fund arising by reason of undistributed investment company
taxable income or net capital gain, Trust will declare on or prior to the
Valuation Date to the shareholders of your Fund a dividend or dividends that,
together with all previous such dividends, shall have the effect of distributing
(a) all of your Fund's investment company taxable income (determined without
regard to any deductions for dividends paid) for the taxable year ended October
31, 2002 and for the short taxable year beginning on November 1, 2002 and ending
on the Closing and (b) all of your Fund's net capital gain recognized in its
taxable year ended October 31, 2002 and in such short taxable year (after
reduction for any capital loss carryover).
Buying Fund will proceed with the Reorganization if the shareholders of
your Fund approve the Agreement.
It is anticipated that, prior to the Closing, shares of The AIM Family of
Funds(R) and shares of the INVESCO Family of Funds generally will be able to be
exchanged for shares of the same or a similar class of each other. If this
exchangeability feature is not offered to shareholders prior to the Closing, the
Closing will be postponed until a mutually acceptable date not later than
December 31, 2003 (the "Termination Date").
BOARD CONSIDERATIONS
AMVESCAP initially proposed that the Board consider the Reorganization at
an in-person meeting of the Board held on May 13-14, 2003, at which preliminary
discussions of the Reorganization took place. The Board determined that the
Reorganization is in the best interests of your Fund and will not dilute the
interests of your Fund's shareholders, and approved the Agreement and the
Reorganization, at an in-person meeting of the Board held on June 10-11, 2003.
Over the course of the two Board meetings, the Board received from AIM and
INVESCO written materials that contained information concerning your Fund and
Buying Fund, including comparative total return and fee and expense information,
a comparison of investment objectives and strategies of your Fund
11
and Buying Fund and pro forma expense ratios for Buying Fund. AIM and INVESCO
also provided the Board with written materials concerning the structure of the
proposed Reorganization and the Federal tax consequences of the Reorganization.
In evaluating the Reorganization, the Board considered a number of factors,
including:
- The investment objective and principal investment strategies of your Fund
and Buying Fund.
- The comparative expenses of your Fund and Buying Fund and the pro forma
expenses of Buying Fund after giving effect to the Reorganization.
- The comparative performance of your Fund and Buying Fund.
- The comparative sizes of your Fund and Buying Fund.
- The consequences of the Reorganization for Federal income tax purposes,
including the treatment of capital loss carryforwards, if any, available
to offset future capital gains of both your Fund and Buying Fund.
- Any fees and expenses that will be borne directly or indirectly by your
Fund or Buying Fund in connection with the Reorganization.
The Board noted that your Fund will bear the costs and expenses incurred in
connection with the Reorganization.
The Board also noted that no sales charges or other charges would be
imposed on any of the shares of Buying Fund issued to the shareholders of your
Fund in connection with the Reorganization.
Based on the foregoing and the information presented at the two Board
meetings discussed above, the Board determined that the Reorganization is in the
best interests of your Fund and will not dilute the interests of your Fund's
shareholders. Therefore, the Board recommends the approval of the Agreement by
the shareholders of your Fund at the Special Meeting.
AMVESCAP initially proposed that the Board of Directors of Buyer consider
the Reorganization at a telephone meeting of the Board of Directors held on May
5, 2003. Preliminary discussions of the Reorganization took place at the May 5,
2003 telephone meeting and at an in-person meeting of the Board of Directors
held on May 13-15, 2003. The Board of Directors of Buyer determined that the
Reorganization is in the best interests of Buying Fund and will not dilute the
interests of Buying Fund shareholders, and approved the Agreement and the
Reorganization, at an in-person meeting of the Board of Directors held on June
9, 2003.
OTHER TERMS
If any amendment is made to the Agreement which would have a material
adverse effect on shareholders, such change will be submitted to the affected
shareholders for their approval. However, the Agreement may be amended without
shareholder approval by mutual agreement of the parties.
Trust and Buyer have made representations and warranties in the Agreement
that are customary in matters such as the Reorganization. The obligations of
Trust and Buyer pursuant to the Agreement are subject to various conditions,
including the following mutual conditions:
- the assets of your Fund to be acquired by Buying Fund shall constitute at
least 90% of the fair market value of the net assets and at least 70% of
the fair market value of the gross assets held by your Fund immediately
prior to the Reorganization;
- Buyer's Registration Statement on Form N-14 under the Securities Act of
1933 (the "1933 Act") shall have been filed with the SEC and such
Registration Statement shall have become effective, and no stop-order
suspending the effectiveness of the Registration Statement shall have
been issued, and no proceeding for that purpose shall have been initiated
or threatened by the SEC (and not withdrawn or terminated);
12
- the shareholders of your Fund shall have approved the Agreement; and
- Trust and Buyer shall have received an opinion from Kirkpatrick &
Lockhart LLP that the consummation of the transactions contemplated by
the Agreement will not result in the recognition of gain or loss for
Federal income tax purposes for your Fund, Buying Fund or their
shareholders.
The Board of Trustees of Trust and the Board of Directors of Buyer may
waive without shareholder approval any default by Trust or Buyer or any failure
by Trust or Buyer to satisfy any of the above conditions as long as such a
waiver is mutual and will not have a material adverse effect on the benefits
intended under the Agreement for the shareholders of your Fund. The Agreement
may be terminated and the Reorganization may be abandoned at any time by mutual
agreement of the parties, or by either party if the shareholders of your Fund do
not approve the Agreement or if the Closing does not occur on or before the
Termination Date.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Reorganization and is based upon the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the existing U.S.
Treasury regulations thereunder, current administrative rulings of the Internal
Revenue Service ("IRS") and published judicial decisions, all of which are
subject to change. The principal Federal income tax consequences that are
expected to result from the Reorganization, under currently applicable law, are
as follows:
- the Reorganization will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code;
- no gain or loss will be recognized by your Fund upon the transfer of its
assets to Buying Fund solely in exchange for shares of Buying Fund and
Buying Fund's assumption of the liabilities of your Fund or on the
distribution of those shares to your Fund's shareholders; notwithstanding
the foregoing, no conclusion is expressed as to the effect of the
Reorganization on your Fund or any shareholder of your Fund with respect
to any asset as to which any unrealized gain or loss is required to be
recognized for Federal income tax purposes at the end of a taxable year
(or on the termination or transfer of a taxpayer's rights (or
obligations) with respect to such asset) under a mark-to-market system of
accounting;
- no gain or loss will be recognized by Buying Fund on its receipt of
assets of your Fund in exchange for shares of Buying Fund issued directly
to your Fund's shareholders;
- no gain or loss will be recognized by any shareholder of your Fund upon
the exchange of shares of your Fund for shares of Buying Fund;
- the tax basis of the shares of Buying Fund to be received by a
shareholder of your Fund will be the same as the shareholder's tax basis
of the shares of your Fund surrendered in exchange therefor;
- the holding period of the shares of Buying Fund to be received by a
shareholder of your Fund will include the period for which such
shareholder held the shares of your Fund exchanged therefor, provided
that such shares of your Fund are capital assets in the hands of such
shareholder as of the Closing; and
- the tax year of your Fund will end on the date of the Closing, and Buying
Fund will thereafter succeed to and take into account any capital loss
carryover and certain other tax attributes of your Fund, subject to all
relevant conditions and limitations on the use of such tax benefits.
Neither Trust nor Buyer has requested or will request an advance ruling
from the IRS as to the Federal tax consequences of the Reorganization. As a
condition to Closing, Kirkpatrick & Lockhart LLP will render a favorable opinion
to Trust and Buyer as to the foregoing Federal income tax consequences of the
Reorganization, which opinion will be conditioned upon, among other things, the
accuracy, as of the Effective Time, of certain representations of Trust and
Buyer upon which Kirkpatrick & Lockhart LLP
13
will rely in rendering its opinion. The conclusions reached in that opinion
could be jeopardized if the representations of Trust or Buyer are incorrect in
any material respect.
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF YOUR FUND. YOUR FUND'S SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE
REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Buying Fund of the assets of your Fund will
be the same as the book cost basis of such assets to your Fund.
RIGHTS OF SHAREHOLDERS
GENERAL
Buyer is a Maryland corporation. Trust is a Delaware statutory trust. There
is much that is similar between Maryland corporations and Delaware statutory
trusts. For example, the responsibilities, powers and fiduciary duties of the
directors of Buyer are substantially similar to those of the trustees of Trust.
There are, however, certain differences between the two forms of
organization. The operations of Buyer, as a Maryland corporation, are governed
by its Articles of Incorporation, and any restatements, amendments and
supplements thereto (the "Articles of Incorporation"), and applicable Maryland
law. The operations of Trust, as a Delaware statutory trust, are governed by its
Amended and Restated Agreement and Declaration of Trust, as amended (the
"Declaration of Trust"), and applicable Delaware law.
As discussed above under "Summary -- The Reorganization," if approved by
Buyer's shareholders, Buyer will be redomesticated as a Delaware statutory trust
prior to the consummation of the Reorganization. If such redomestication occurs,
the discussion below of the rights of shareholders of a Maryland corporation
will be inapplicable to Buyer.
LIABILITY OF SHAREHOLDERS
Shareholders of a Maryland corporation generally do not have personal
liability for the corporation's obligations, except that a shareholder may be
liable to the extent that he or she receives any distribution which exceeds the
amount which he or she could properly receive under Maryland law or where such
liability is necessary to prevent fraud.
The Delaware Statutory Trust Act provides that 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, however, a remote
possibility that, under certain circumstances, shareholders of a Delaware
statutory trust might be held personally liable for the trust's obligations to
the extent the courts of another state that does not recognize such limited
liability were to apply the laws of such state to a controversy involving such
obligations. The Declaration of Trust provides that shareholders of the Trust
shall not be subject to any personal liability for acts or obligations of the
Trust and that every written agreement, obligation or other undertaking made or
issued by the Trust shall contain a provision to the effect that shareholders
are not personally liable thereunder. In addition, the Declaration of Trust
provides for indemnification out of the Trust's property for any shareholder
held personally liable solely by reason of his or her being or having been a
shareholder. Therefore, the risk of any shareholder incurring financial loss
beyond his or her investment due to shareholder liability is limited to
circumstances in which the Trust itself is unable to meet its obligations and
the express disclaimer of shareholder liabilities is determined not to be
effective. Given the nature of the assets and operations of the Trust, the
possibility of the Trust being unable to meet its obligations is considered
remote, and even if a claim were brought against the
14
Trust and a court determined that shareholders were personally liable, it would
likely not impose a material obligation on a shareholder.
ELECTION OF DIRECTORS/TRUSTEES; TERMS
The shareholders of Buyer have elected a majority of the directors of
Buyer. Each director serves until a successor is elected, subject to his or her
earlier death, resignation or removal in the manner provided by law (see below).
In the case of a vacancy on the Board of Directors (other than a vacancy created
by removal by the shareholders), a majority of the directors may appoint a
successor to fill such vacancy. The right of the Board of Directors to appoint
directors to fill vacancies without shareholder approval is subject to the
provisions of the 1940 Act.
The shareholders of Trust have elected a majority of the trustees of Trust.
Such trustees serve for the life of Trust, subject to their earlier death,
incapacitation, resignation, retirement or removal (see below). In the case of
any vacancy on the Board of Trustees, a majority of the trustees may appoint a
successor to fill such vacancy. The right of the Board of Trustees to appoint
trustees to fill vacancies without shareholder approval is subject to the
provisions of the 1940 Act.
REMOVAL OF DIRECTORS/TRUSTEES
A director of Buyer may be removed by the affirmative vote of a majority of
the Board of Directors, a committee of the Board of Directors appointed for such
purpose, or the holders of a majority of the outstanding shares of Buyer.
A trustee of Trust may be removed at any time by a written instrument
signed by at least two-thirds of the trustees or by vote of two-thirds of the
outstanding shares of Trust.
MEETINGS OF SHAREHOLDERS
Buyer is not required to hold annual meetings of shareholders and does not
intend to do so unless required by the 1940 Act. The bylaws of Buyer provide
that a special meeting of shareholders may be called by the president or, in his
or her absence, the vice-president or by a majority of the Board of Directors or
holders of shares entitled to cast at least 10% of the votes entitled to be cast
at the special meeting. Requests for special meetings must, among other things,
state the purpose of such meeting and the matters to be voted upon. No special
meeting need be called to consider any matter previously voted upon at a special
meeting called by the shareholders during the preceding twelve months, unless
requested by a majority of all shares entitled to vote at such meeting.
Trust is not required to hold annual meetings of shareholders unless
required by the 1940 Act and does not intend to do so. The bylaws of Trust
provide that any trustee may call a special meeting of shareholders and the
trustees shall call a special meeting of the shareholders solely for the purpose
of removing one or more trustees upon written request of the holders of not less
than 10% of the outstanding shares of Trust. Special meetings may be called for
the purpose of electing trustees or for any other action requiring shareholder
approval, or for any matter deemed by the trustees to be necessary or desirable.
LIABILITY OF DIRECTORS/TRUSTEES AND OFFICERS; INDEMNIFICATION
Maryland law permits a corporation to eliminate liability of its directors
and officers to the corporation or its stockholders, except for liability
arising from receipt of an improper benefit or profit and from active and
deliberate dishonesty. The Articles of Incorporation eliminate director and
officer liability to the fullest extent permitted under Maryland law. Under
Maryland law, indemnification of a corporation's directors and officers is
mandatory if a director or officer has been successful on the merits or
otherwise in the defense of certain proceedings. Maryland law permits
indemnification for other matters unless it is established that the act or
omission giving rise to the proceeding was committed in bad faith, a result of
active and deliberate dishonesty, or one in which a director or officer actually
received an improper benefit.
15
Delaware law provides that trustees of a statutory trust shall not be
liable to the statutory trust or its shareholders for acting in good faith
reliance on the provisions of its governing instrument and that the trustee's
liabilities may be expanded or restricted by such instrument. Under the
Declaration of Trust, the trustees and officers of Trust are not liable for any
act or omission or any conduct whatsoever in their capacity as trustees, except
for liability to the trust or shareholders due to willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of trustee. Delaware law allows a statutory trust to
indemnify and hold harmless any trustee or other person against any and all
claims and demands. The Declaration of Trust provides for the indemnification of
its trustees and officers to the extent that such trustees and officers act in
good faith and reasonably believe that their conduct is in the best interests of
Trust, except with respect to any matter in which it has been determined that
such trustee acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.
DISSOLUTION AND TERMINATION
Maryland law provides that Buyer may be dissolved by the vote of a majority
of the Board of Directors and two-thirds of the shares entitled to vote on the
dissolution; however the Articles of Incorporation reduce the required
shareholder vote from two-thirds to a majority of the shares entitled to vote on
the dissolution.
Pursuant to the Declaration of Trust, Trust or any series or class of
shares of beneficial interest in Trust may be terminated by: (1) a majority
shareholder vote of Trust or the affected series or class, respectively; or (2)
if there are fewer than 100 shareholders of record of Trust or of such
terminating series or class, the trustees pursuant to written notice to the
shareholders of Trust or the affected series or class.
VOTING RIGHTS OF SHAREHOLDERS
Shareholders of a Maryland corporation such as Buyer are entitled to vote
on, among other things, those matters which effect fundamental changes in the
corporate structure (such as a merger, consolidation or sale of substantially
all of the assets of the corporation) as provided by Maryland law.
The Declaration of Trust grants shareholders power to vote only with
respect to the following: (i) election of trustees, provided that a meeting of
shareholders has been called for that purpose; (ii) removal of trustees,
provided that a meeting of shareholders has been called for that purpose; (iii)
termination of Trust or a series or class of its shares of beneficial interest,
provided that a meeting of shareholders has been called for that purpose; (iv)
sale of all or substantially all of the assets of Trust or one of its investment
portfolios; (v) merger or consolidation of Trust or any of its investment
portfolios, with certain exceptions; (vi) approval of any amendments to
shareholders' voting rights under the Declaration of Trust; and (vii) approval
of such additional matters as may be required by law or as the trustees, in
their sole discretion, shall determine.
DISSENTERS' RIGHTS
Under Maryland law, shareholders may not demand the fair value of their
shares from the successor company in a transaction involving the transfer of the
corporation's assets and are, therefore, bound by the terms of the transaction
if the stock is that of an open-end investment company registered with the SEC
under the 1940 Act and the value placed on the stock in the transaction is its
net asset value.
Neither Delaware law nor the Declaration of Trust confers upon shareholders
rights of appraisal or dissenters' rights.
AMENDMENTS TO ORGANIZATION DOCUMENTS
Consistent with Maryland law, Buyer reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation in the
manner prescribed by statute, including any
16
amendment that alters the contract rights, as expressly set forth in the
Articles of Incorporation, of any outstanding stock, and all rights conferred on
shareholders are granted subject to this reservation. The Board of Directors of
Buyer may approve amendments to the Articles of Incorporation to classify or
reclassify unissued shares of a class of stock without shareholder approval.
Other amendments to the Articles of Incorporation may be adopted if approved by
the affirmative vote of a majority of all the votes entitled to be cast on the
matter. The directors shall have the power to alter, amend or repeal the bylaws
of Buyer or adopt new bylaws at any time.
Consistent with Delaware law, the Board of Trustees of Trust may, without
shareholder approval, amend the Declaration of Trust at any time, except to
eliminate any voting rights pertaining to the shares of Trust, without approval
of the majority of the shares of Trust. The trustees shall have the power to
alter, amend or repeal the bylaws of Trust or adopt new bylaws at any time.
17
CAPITALIZATION
The following table sets forth, as of March 31, 2003, (i) the
capitalization of each class of shares of your Fund, (ii) the capitalization of
each class of shares of Buying Fund, and (iii) the pro forma capitalization of
each class of shares of Buying Fund as adjusted to give effect to the
transactions contemplated by the Agreement.
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
CLASS A SHARES CLASS A SHARES CLASS A SHARES
-------------- -------------- --------------
Net Assets......................................... $91,490,278 $ 5,310,648 $96,800,926
Shares Outstanding................................. 5,153,261 244,946 4,464,060
Net Asset Value Per Share.......................... $ 17.75 $ 21.68 $ 21.68
</Table>
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
CLASS B SHARES CLASS B SHARES CLASS B SHARES
-------------- -------------- --------------
Net Assets......................................... $75,931,168 $ 989,629 $76,920,797
Shares Outstanding................................. 4,457,777 45,528 3,537,522
Net Asset Value Per Share.......................... $ 17.03 $ 21.74 $ 21.74
</Table>
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
CLASS C SHARES CLASS C SHARES CLASS C SHARES
-------------- -------------- --------------
Net Assets......................................... $22,863,269 $10,026,026 $32,889,295
Shares Outstanding................................. 1,342,343 469,023 1,538,251
Net Asset Value Per Share.......................... $ 17.03 $ 21.38 $ 21.38
</Table>
<Table>
<Caption>
PRO FORMA
BUYING FUND BUYING FUND
CLASS K SHARES CLASS K SHARES
-------------- --------------
Net Assets.................................................. $ 1,347,781 $ 1,347,781
Shares Outstanding.......................................... 63,360 63,360
Net Asset Value Per Share................................... $ 21.27 $ 21.27
</Table>
<Table>
<Caption>
PRO FORMA
BUYING FUND BUYING FUND
INVESTOR CLASS SHARES INVESTOR CLASS SHARES
--------------------- ---------------------
Net Assets............................................... $734,439,759 $734,439,759
Shares Outstanding....................................... 33,736,622 33,736,622
Net Asset Value Per Share................................ $ 21.77 $ 21.77
</Table>
18
INTERESTS OF CERTAIN PERSONS
If the Reorganization is consummated and if the shareholders of Buying Fund
do not approve a proposed new investment advisory agreement with AIM, INVESCO,
as the current investment advisor of Buying Fund, will gain approximately $190.3
million in additional assets under management (based on your Fund's net assets
as of March 31, 2003), upon which INVESCO will receive advisory fees. Exhibit C
sets forth INVESCO's advisory fees applicable to Buying Fund.
LEGAL MATTERS
Certain legal matters concerning the tax consequences of the Reorganization
will be passed upon by Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
NW, Washington, DC 20036-1221.
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND
For more information with respect to your Fund concerning the following
topics, please refer to the following sections of the Selling Fund Prospectus,
which has been made a part of this Proxy Statement/ Prospectus by reference: (i)
see "Performance Information" for more information about the performance of your
Fund; (ii) see "Fund Management" for more information about the management of
your Fund; (iii) see "Other Information" for more information about your Fund's
policy with respect to dividends and distributions; and (iv) see "Other
Information" and "Shareholder Information" for more information about sales
charges, including contingent deferred sales charges, applicable to shares of
your Fund, the pricing, purchase, redemption and repurchase of shares of your
Fund, tax consequences to shareholders of various transactions in shares of your
Fund, distribution arrangements and the multiple class structure of your Fund.
For more information with respect to Buying Fund concerning the following
topics, please refer to the following sections of the Buying Fund Prospectus,
which has been made a part of this Proxy Statement/ Prospectus by reference and
which is attached to this Proxy Statement/Prospectus as Appendix II: (i) see
"Fund Performance" for more information about the performance of Buying Fund;
(ii) see "Fund Management" and "Portfolio Managers" for more information about
the management of Buying Fund; (iii) see "Share Price" for more information
about the pricing of shares of Buying Fund; (iv) see "Taxes" for more
information about tax consequences to shareholders of various transactions in
shares of Buying Fund; (v) see "Dividends And Capital Gain Distributions" for
more information about Buying Fund's policy with respect to dividends and
distributions; and (vi) see "How To Buy Shares", "How To Sell Shares" and "Your
Account Services" for more information about sales charges, including contingent
deferred sales charges, applicable to shares of Buying Fund, the purchase,
redemption and repurchase of shares of Buying Fund, distribution arrangements
and the multiple class structure of Buying Fund.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which Trust and
Buyer have filed with the SEC pursuant to the requirements of the 1933 Act and
the 1940 Act, to which reference is hereby made. The SEC file number of Trust's
registration statement containing the Selling Fund Prospectus and related
Statement of Additional Information is Registration No. 811-05426. Such Selling
Fund Prospectus is incorporated herein by reference. The SEC file number for
Buyer's registration statement containing the Buying Fund Prospectus and related
Statement of Additional Information is Registration No. 811-3826. Such Buying
Fund Prospectus is incorporated herein by reference.
Trust and Buyer are subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith
file reports and other information with the SEC. Reports, proxy material,
registration statements and other information filed by Trust and Buyer
(including the
19
Registration Statement of Buyer relating to Buying Fund on Form N-14 of which
this Proxy Statement/ Prospectus is a part) may be inspected without charge and
copied at the public reference facilities maintained by the SEC at Room 1014,
Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the
following regional office of the SEC: 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, NW, Washington, DC
20549, at the prescribed rates. The SEC maintains a website at www.sec.gov that
contains information regarding Trust and Buyer and other registrants that file
electronically with the SEC.
PROPOSAL 2 --
ELECTION OF TRUSTEES
BACKGROUND
In considering the integration initiative proposed by AMVESCAP, the
independent directors/trustees of the AIM Funds and the independent directors of
the INVESCO Funds determined that the shareholders of all the AIM Funds and the
INVESCO Funds would benefit if a unified board of directors/trustees was
responsible for overseeing the operation of both the AIM Funds and the INVESCO
Funds and the services provided by AIM, INVESCO and their affiliates.
Accordingly, the Boards of Directors/Trustees of the AIM Funds and the Boards of
Directors of the INVESCO Funds agreed to combine the separate boards and create
a unified board of directors/trustees.
You are being asked to approve Proposal 2 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to benefit from having
a combined board of trustees.
STRUCTURE OF THE BOARD OF TRUSTEES
The Board currently consists of 12 persons. Ten of the current trustees are
"independent," meaning they are not "interested persons" of Trust within the
meaning of the 1940 Act. Two of the current trustees are "interested persons"
because of their business and financial relationships with Trust and AIM, its
investment advisor, and/or AIM's parent, AMVESCAP.
NOMINEES FOR TRUSTEES
Trust's Committee on Directors/Trustees (which consists solely of
independent trustees) has approved the nomination of each of the 12 current
trustees, as set forth below, to serve as trustee until his or her successor is
elected and qualified. In addition, the Committee on Directors/Trustees has
approved the nomination of four new nominees, as set forth below, to serve as
trustee until his or her successor is elected and qualified. These four new
nominees were nominated to effect the proposed combination of the Boards of
Directors/Trustees of the AIM Funds and the Boards of Directors of the INVESCO
Funds.
Each nominee who is a current trustee serves as a director or trustee of
the 17 registered investment companies comprising the AIM Funds. Each nominee
who is a current trustee oversees 86 portfolios which comprise the AIM Funds.
The business address of each nominee who is a current trustee is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
Each new nominee serves as a director of the ten registered investment
companies comprising the INVESCO Funds. Each new nominee currently oversees 46
portfolios which comprise the INVESCO Funds. The business address of each new
nominee is 4350 South Monaco Street, Denver, Colorado 80237.
If elected, each nominee would oversee a total of 27 registered investment
companies currently comprising 132 portfolios.
20
NOMINEES WHO CURRENTLY ARE INDEPENDENT TRUSTEES
<Table>
<Caption>
TRUSTEE PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ------- ----------------------- --------------------------
Frank S. Bayley -- 1939........ 1987 Of Counsel, law firm of Baker Badgley Funds, Inc.
& McKenzie (registered investment
company)
Bruce L. Crockett -- 1944...... 2001 Chairman, Crockett Technology ACE Limited (insurance
Associates (technology company); Captaris, Inc.
consulting company) and (unified messaging provider)
Captaris, Inc. (unified
messaging provider)
Albert R. Dowden -- 1941....... 2001 Director of a number of public Cortland Trust, Inc.
and private business (Chairman) (registered
corporations, including the investment company); Annuity
Boss Group, Ltd. (private and Life Re (Holdings), Ltd.
investment and management) and (insurance company)
Magellan Insurance Company;
formerly President, Chief
Executive Officer and
Director, Volvo Group North
America, Inc.; Senior Vice
President, AB Volvo and
director of various affiliated
Volvo Group companies
Edward K. Dunn, Jr. -- 1935.... 2001 Formerly, Chairman, Mercantile None
Mortgage Corp.; President and
Chief Operating Officer,
Mercantile-Safe Deposit &
Trust Co.; and President,
Mercantile Bankshares Corp.
Jack M. Fields -- 1952......... 2001 Chief Executive Officer, Administaff
Twenty First Century Group,
Inc. (government affairs
company) and Texana Timber LP
Carl Frischling -- 1937........ 2001 Partner, law firm of Kramer Cortland Trust, Inc.
Levin Naftalis & Frankel LLP (registered investment
company)
Prema Mathai-Davis -- 1950..... 2001 Formerly, Chief Executive None
Officer, YWCA of the USA
Lewis F. Pennock -- 1942....... 2001 Partner, law firm of Pennock & None
Cooper
Ruth H. Quigley -- 1935........ 1987 Retired None
Louis S. Sklar -- 1939......... 2001 Executive Vice President, None
Development and Operations,
Hines Interests Limited
Partnership (real estate
development company)
</Table>
21
NOMINEES WHO CURRENTLY ARE INTERESTED PERSONS
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S)
POSITION(S) HELD WITH TRUST SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- --------------------------- ------- ----------------------- --------------------------
Robert H. Graham(1) -- 1946.... 1998 Director and Chairman, A I M None
Chairman and President Management Group Inc.
(financial services holding
company); and Director and
Vice Chairman, AMVESCAP PLC
(parent of AIM and a global
investment management firm)
and Chairman, AMVESCAP
PLC -- AIM Division; 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), A I M Fund
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 Director of each of the ten
Executive Vice President Executive Officer, A I M INVESCO Funds
Management Group Inc.;
Director, Chairman and
President, A I M Advisors,
Inc. (registered investment
advisor); Director, A I M
Distributors, Inc. (registered
broker dealer); and Chief
Executive Officer of the AIM
Division of AMVESCAP PLC
(2003-present); formerly,
Chief Executive Officer,
Managed Products Division,
AMVESCAP PLC (2001-2002);
Chairman of the Board
(1998-2002), President
(1998-2002) and Chief
Executive Officer (1998-2002)
of INVESCO Funds Group, Inc.
(registered investment
advisor) and INVESCO
Distributors, Inc. (registered
broker dealer); Chief
Operating Officer and Chairman
of the Board of INVESCO Global
Health Sciences Fund; Chairman
and Chief Executive Officer of
NationsBanc Advisors, Inc.;
and Chairman of NationsBanc
Investments, Inc.
</Table>
- ---------------
(1) Mr. Graham is considered an interested person of Trust because he is a
director of AMVESCAP PLC, parent of the advisor to, and principal
underwriter of, Trust.
(2) Mr. Williamson is considered an interested person of Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, Trust.
22
NEW NOMINEES WHO WILL BE INDEPENDENT TRUSTEES
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ----------------------- --------------------------
Bob R. Baker -- 1936........... Consultant (2000-present); None
formerly, President and Chief
Executive Officer (1988-2000) of
AMC Cancer Research Center, Denver,
Colorado; until mid-December 1988,
Vice Chairman of the Board of First
Columbia Financial Corporation,
Englewood, Colorado; formerly,
Chairman of the Board and Chief
Executive Officer of First Columbia
Financial Corporation.
James T. Bunch -- 1942......... Co-President and Founder of Green, None
Manning & Bunch Ltd., Denver,
Colorado (1988-present) (investment
banking firm); Director and Vice
President of Western Golf
Association and Evans Scholars
Foundation; Executive Committee,
United States Golf Association;
formerly, General Counsel and
Director of Boettcher & Co.,
Denver, Colorado; and formerly,
Chairman and Managing Partner, law
firm of Davis, Graham & Stubbs,
Denver, Colorado.
Gerald J. Lewis -- 1933........ Chairman of Lawsuit Resolution General Chemical Group, Inc.,
Services, San Diego, California Hampdon, New Hampshire (1996-
(1987-present); formerly, Associate present), Wheelabrator
Justice of the California Court of Technologies, Inc. (waste
Appeals; and Of Counsel, law firm management company), Fisher
of Latham & Watkins, San Diego, Scientific, Inc. (laboratory
California (1987-1997). supplies), Henley Manufacturing,
Inc., and California Coastal
Properties, Inc.
Larry Soll, Ph.D. -- 1942...... Retired; formerly, Chairman of the Synergen Inc. (since incorporation
Board (1987-1994), Chief Executive in 1982) and Isis Pharmaceuticals,
Officer (1982-1989 and 1993-1994) Inc.
and President (1982-1989) of
Synergen Inc. (biotechnology
company); and formerly, trustee of
INVESCO Global Health Sciences
Fund.
</Table>
THE BOARD'S RECOMMENDATION ON PROPOSAL 2
Your Board, including the independent trustees, unanimously recommends that
you vote "FOR" these 16 nominees.
COMMITTEES OF THE BOARD
The Board has four standing committees: an Audit Committee, an Investments
Committee, a Valuation Committee and a Committee on Directors/Trustees. These
committees will remain as part of the proposed combined board.
AUDIT COMMITTEE
The Audit Committee is comprised entirely of independent trustees. The
current members of the Audit Committee are Messrs. Frank S. Bayley, Bruce L.
Crockett, Albert R. Dowden (Vice Chair), Edward K. Dunn, Jr. (Chair), Jack M.
Fields, Lewis F. Pennock, Louis S. Sklar, Dr. Prema Mathai-Davis and Miss Ruth
H. Quigley. The Audit Committee is responsible for: (i) the appointment,
compensation and oversight of any independent auditors employed by your Fund
(including resolution of
23
disagreements between your Fund's management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or related
work; (ii) overseeing the financial reporting process of your Fund; (iii)
monitoring the process and the resulting financial statements prepared by
management to promote accuracy of financial reporting and asset valuation; and
(iv) pre-approving permissible non-audit services that are provided to your Fund
by its independent auditors.
COMMITTEE ON DIRECTORS/TRUSTEES
The Committee on Directors/Trustees is comprised entirely of independent
trustees. The current members of the Committee on Directors/Trustees are Messrs.
Bayley, Crockett (Chair), Dowden, Dunn, Fields (Vice Chair), Pennock and Sklar,
Dr. Mathai-Davis and Miss Quigley. The Committee on Directors/Trustees is
responsible for: (i) nominating persons who are not interested persons of Trust
for election or appointment: (a) as additions to the Board, (b) to fill
vacancies which, from time to time, may occur in the Board and (c) for election
by shareholders of Trust at meetings called for the election of trustees; (ii)
nominating persons who are not interested persons of Trust for selection as
members of each committee of the Board, including, without limitation, the Audit
Committee, the Committee on Directors/ Trustees, the Investments Committee and
the Valuation Committee, and to nominate persons for selection as chair and vice
chair of each such committee; (iii) reviewing from time to time the compensation
payable to the independent trustees and making recommendations to the Board
regarding compensation; (iv) reviewing and evaluating from time to time the
functioning of the Board and the various committees of the Board; (v) selecting
independent legal counsel to the independent trustees and approving the
compensation paid to independent legal counsel; and (vi) approving the
compensation paid to independent counsel and other advisers, if any, to the
Audit Committee of Trust.
The Committee on Directors/Trustees will consider nominees recommended by a
shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Committee on Directors/Trustees or the Board, as applicable, shall
make the final determination of persons to be nominated.
Notice procedures set forth in Trust's bylaws require that any shareholder
of your Fund desiring to nominate a trustee for election at a shareholder
meeting must submit to the Secretary of Trust 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 meeting and not earlier than the close of business
on the 120th day prior to the meeting. The notice must set forth: (i) as to each
person whom the shareholder proposes to nominate for election or reelection as a
trustee all information relating to such person that is required to be disclosed
in solicitations of proxies for election of trustees in an election contest, or
is otherwise required, in each case pursuant to Regulation 14A of the Securities
Exchange Act of 1934 (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a trustee if elected); and
(ii) as to the shareholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination is made: (a) the name and address of such
shareholder, as they appear on Trust's books, and of such beneficial owner; and
(b) the number of shares of each series portfolio of Trust which are owned of
record or beneficially by such shareholder and such beneficial owner.
INVESTMENTS COMMITTEE
The current members of the Investments Committee are Messrs. Bayley,
Crockett, Dowden, Dunn, Fields, Carl Frischling, Pennock and Sklar (Chair), Dr.
Mathai-Davis (Vice Chair) and Miss Quigley. The Investments Committee is
responsible for: (i) overseeing AIM's investment-related compliance systems and
procedures to ensure their continued adequacy; and (ii) considering and acting,
on an interim basis between meetings of the full Board, on investment-related
matters requiring Board consideration, including dividends and distributions,
brokerage policies and pricing matters.
24
VALUATION COMMITTEE
The current members of the Valuation Committee are Messrs. Dunn and Pennock
(Chair), and Miss Quigley (Vice Chair). The Valuation Committee is responsible
for: (i) periodically reviewing AIM's Procedures for Valuing Securities
("Procedures"), and making any recommendations to AIM with respect thereto; (ii)
reviewing proposed changes to the Procedures recommended by AIM from time to
time; (iii) periodically reviewing information provided by AIM regarding
industry developments in connection with valuation; (iv) periodically reviewing
information from AIM regarding fair value and liquidity determinations made
pursuant to the Procedures, and making recommendations to the full Board in
connection therewith (whether such information is provided only to the Committee
or to the Committee and the full Board simultaneously); and (v) if requested by
AIM, assisting AIM's internal valuation committee and/or the full Board in
resolving particular valuation anomalies.
BOARD AND COMMITTEE MEETING ATTENDANCE
During the fiscal year ended October 31, 2002, the Board met ten times, the
Audit Committee met six times, the Committee on Directors/Trustees met five
times, the Investments Committee met four times and the Valuation Committee met
one time. All of the current trustees then serving attended at least 75% of the
meetings of the Board or applicable committee during the most recent fiscal
year.
TRUSTEE'S COMPENSATION
Each trustee who is not affiliated with AIM is compensated for his or her
services according to a fee schedule which recognizes the fact that such trustee
also serves as a director or trustee of other AIM Funds. Each such trustee
receives a fee, allocated among the AIM Funds for which he or she serves as a
director or trustee, which consists of an annual retainer component and a
meeting fee component.
Information regarding compensation paid or accrued for each trustee of
Trust who was not affiliated with AIM during the year ended December 31, 2002 is
found in Exhibit D.
RETIREMENT PLAN FOR TRUSTEES
The trustees have adopted a retirement plan for the trustees of 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 Trust and/or the other AIM Funds (each, a "Covered Fund") who has at least
five years of credited service as a trustee (including service to a predecessor
fund) for a Covered Fund. The retirement benefits will equal 75% of the
trustee's annual retainer paid or accrued by any Covered Fund to such trustee
during the twelve-month period prior to retirement, including the amount of any
retainer deferred under a separate deferred compensation agreement between the
Covered Fund and the trustee. The annual retirement benefits are payable in
quarterly installments for a number of years equal to the lesser of (i) ten or
(ii) the number of such trustee's credited years of service. A death benefit is
also available under the plan that provides a surviving spouse with a quarterly
installment of 50% of a deceased trustee's retirement benefits for the same
length of time that the trustee would have received the benefits 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. Payment of benefits
under the plan is not secured or funded by Trust.
DEFERRED COMPENSATION AGREEMENTS
Messrs. Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (for
purposes of this paragraph only, the "Deferring Trustees") have each executed a
Deferred Compensation Agreement (collectively, the
25
"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 Trust, and such amounts are placed into a deferral
account. Currently, the Deferring Trustees have the option to select various AIM
Funds in which all or part of their deferral accounts shall be deemed to be
invested. Distributions from the Deferring Trustees' deferral accounts will be
paid in cash, generally in equal quarterly installments over a period of up to
ten (10) years (depending on the Compensation Agreement) beginning on the date
selected under the Compensation Agreement. The Board in its sole discretion, may
accelerate or extend the distribution of such deferral accounts after the
Deferring Trustees' 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 Trustees' termination of service as a
trustee of 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 Trust
and of each other AIM Fund from which they are deferring compensation.
OFFICERS OF TRUST
Information regarding the current officers of Trust can be found in Exhibit
E.
SECURITY OWNERSHIP OF MANAGEMENT
Information regarding the ownership of each class of your Fund's shares by
trustees, nominees, and current executive officers of Trust can be found in
Exhibit F.
TRUSTEE OWNERSHIP OF YOUR FUND'S SHARES
The dollar range of equity securities beneficially owned by each trustee
and nominee as of December 31, 2002 (i) in your Fund and (ii) on an aggregate
basis, in all registered investment companies overseen by the trustee within the
AIM Funds complex can be found in Exhibit G.
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
PROXY STATEMENT/PROSPECTUS
We are sending you this Proxy Statement/Prospectus and the enclosed proxy
card because the Board is soliciting your proxy to vote at the Special Meeting
and at any adjournments of the Special Meeting. This Proxy Statement/Prospectus
gives you information about the business to be conducted at the Special Meeting.
However, you do not need to attend the Special Meeting to vote your shares.
Instead, you may simply complete, sign and return the enclosed proxy card or
vote by telephone or through a website established for that purpose.
Trust intends to mail this Proxy Statement/Prospectus, the enclosed Notice
of Special Meeting of Shareholders and the enclosed proxy card on or about
August 25, 2003 to all shareholders entitled to vote. Shareholders of record as
of the close of business on July 25, 2003 (the "Record Date") are entitled to
vote at the Special Meeting. The number of shares outstanding of each class of
shares of your Fund on the Record Date can be found at Exhibit H.
Each share is entitled to one vote for each full share held, and a
fractional vote for a fractional share held.
TIME AND PLACE OF SPECIAL MEETING
We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 on October 21, 2003, at 3:00 p.m., Central Time.
26
VOTING IN PERSON
If you do attend the Special Meeting and wish to vote in person, we will
provide you with a ballot prior to the vote. However, if your shares are held in
the name of your broker, bank or other nominee, you must bring a letter from the
nominee indicating that you are the beneficial owner of the shares on the Record
Date and authorizing you to vote. Please call Trust at (800) 952-3502 if you
plan to attend the Special Meeting.
VOTING BY PROXY
Whether you plan to attend the Special Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the Special Meeting and vote.
If you properly fill in and sign your proxy card and send it to us in time
to vote at the Special Meeting, your "proxy" (the individual named on your proxy
card) will vote your shares as you have directed. If you sign your proxy card
but do not make specific choices, your proxy will vote your shares as
recommended by the Board as follows and in accordance with management's
recommendation on other matters:
- FOR the proposal to approve the Agreement.
- FOR the election of all 16 nominees for trustee.
Your proxy will have the authority to vote and act on your behalf at any
adjournment of the Special Meeting.
If you authorize a proxy, you may revoke it at any time before it is
exercised by sending in another proxy card with a later date or by notifying the
Secretary of Trust in writing to the address of Trust set forth on the cover
page of this Proxy Statement/Prospectus before the Special Meeting that you have
revoked your proxy. In addition, although merely attending the Special Meeting
will not revoke your proxy, if you are present at the Special Meeting you may
withdraw your proxy and vote in person. Shareholders may also transact any other
business not currently contemplated that may properly come before the Special
Meeting in the discretion of the proxies or their substitutes.
VOTING BY TELEPHONE OR THE INTERNET
You may vote your shares by telephone or through a website established for
that purpose by following the instructions that appear on the proxy card
accompanying this Proxy Statement/Prospectus.
QUORUM REQUIREMENT AND ADJOURNMENT
A quorum of shareholders is necessary to hold a valid meeting. A quorum
will exist for Proposal 1 if shareholders entitled to vote one-third of the
issued and outstanding shares of your Fund on the Record Date are present at the
Special Meeting in person or by proxy. A quorum will exist for Proposal 2 if
shareholders entitled to vote one-third of the issued and outstanding shares of
Trust on the Record Date are present at the Special Meeting in person or by
proxy.
Under the rules applicable to broker-dealers, if your broker holds your
shares in its name, the broker will not be entitled to vote your shares if it
has not received instructions from you. A "broker non-vote" occurs when a broker
has not received voting instructions from a shareholder and is barred from
voting the shares without shareholder instructions because the proposal is
non-routine.
Abstentions and broker non-votes will count as shares present at the
Special Meeting for purposes of establishing a quorum.
If a quorum is not present at the Special Meeting or a quorum is present
but sufficient votes to approve a Proposal are not received, the persons named
as proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies. Any such adjournment will require the
27
affirmative vote of a majority of those shares represented at the Special
Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR a Proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST such
Proposal against such adjournment. A shareholder vote may be taken on a Proposal
in this Proxy Statement/ Prospectus prior to any such adjournment if sufficient
votes have been received and it is otherwise appropriate.
VOTE NECESSARY TO APPROVE EACH PROPOSAL
PROPOSAL 1. Approval of Proposal 1 requires the lesser of (a) the
affirmative vote of 67% or more of the voting securities of your Fund present or
represented by proxy at the Special Meeting, if the holders of more than 50% of
the outstanding voting securities of your Fund are present or represented by
proxy, or (b) the affirmative vote of more than 50% of the outstanding voting
securities of your Fund. Abstentions and broker non-votes are counted as present
but are not considered votes cast at the Special Meeting. As a result, they have
the same effect as a vote against Proposal 1 because approval of Proposal 1
requires the affirmative vote of a percentage of the voting securities present
or represented by proxy or a percentage of the outstanding voting securities.
PROPOSAL 2. The affirmative vote of a plurality of votes cast at the
Special Meeting is necessary to elect trustees, meaning that the trustee nominee
with the most affirmative votes for a particular slot is elected for that slot.
In an uncontested election for trustees, the plurality requirement is not a
factor. Abstentions and broker non-votes will not count as votes cast and will
have no effect on the outcome of this proposal.
PROXY SOLICITATION
Trust has engaged the services of Georgeson Shareholder Communications Inc.
("Solicitor") to assist in the solicitation of proxies for the Special Meeting.
Solicitor's costs are estimated to be approximately $63,000. Trust expects to
solicit proxies principally by mail, but Trust or Solicitor may also solicit
proxies by telephone, facsimile or personal interview. Trust's officers will not
receive any additional or special compensation for any such solicitation. Your
Fund will bear the costs and expenses incurred in connection with the
Reorganization, including Solicitor's costs.
OTHER MATTERS
Management does not know of any matters to be presented at the Special
Meeting other than those discussed in this Proxy Statement/Prospectus. If any
other matters properly come before the Special Meeting, the shares represented
by proxies will be voted with respect thereto in accordance with management's
recommendation.
SHAREHOLDER PROPOSALS
As a general matter, your Fund does not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of your Fund, you should send such proposal to Trust at the address
set forth on the first page of this Proxy Statement/Prospectus. To be considered
for presentation at a meeting of shareholders, Trust must receive proposals a
reasonable time before proxy materials are prepared for the meeting. Your
proposal also must comply with applicable law.
For a discussion of procedures that you must follow if you want to propose
an individual for nomination as a trustee, please refer to the section of this
Proxy Statement/Prospectus entitled "Proposal 2 -- Committees of the
Board -- Committee on Directors/Trustees."
28
OWNERSHIP OF SHARES
A list of the name, address and percent ownership of each person who, as of
July 25, 2003 to the knowledge of Trust owned 5% or more of any class of the
outstanding shares of your Fund can be found at Exhibit I.
A list of the name, address and percent ownership of each person who, as of
July 25, 2003 to the knowledge of Buyer owned 5% or more of any class of the
outstanding shares of Buying Fund can be found at Exhibit J.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP
(the "Auditor") as Trust's independent public accountants for the fiscal year
ending October 31, 2003. A representative of the Auditor is expected to be
available at the Special Meeting and to have the opportunity to make a statement
and respond to appropriate questions from the shareholders. The Audit Committee
of the Board has considered whether the provision of the services below is
compatible with maintaining the Auditor's independence.
FEES PAID TO THE AUDITOR RELATED TO TRUST
The Auditor billed Trust (consisting of six separate series portfolios)
aggregate fees for professional services rendered for the 2002 fiscal year as
follows:
<Table>
Audit Fees.................................................. $166,720
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees*............................................. $ 78,103
--------
Total Fees.................................................. $244,823
</Table>
- ---------------
* All Other Fees includes fees billed for all other non-audit services,
including fees for tax-related services rendered to Trust.
FEES PAID TO THE AUDITOR NOT RELATED TO TRUST
The Auditor billed AIM aggregate fees for professional services rendered
for the 2002 fiscal year to AIM, or any affiliate that provided services to
Trust, as follows:
<Table>
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees**............................................ $346,364
--------
Total Fees.................................................. $346,364
</Table>
- ---------------
** As required by SEC rules, All Other Fees includes amounts paid to the Auditor
by your Fund's advisor and other related entities that provides support for
the operations of Trust. All Other Fees include business advisory services
performed for the selection of a transfer agent and its conversion. The
services provided benefited many legal entities of AIM, including many other
funds within the AIM Fund complex.
29
EXHIBIT A
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF SHARES OF YOUR FUND SHARES OF BUYING FUND
- ------------------------------ ------------------------
Class A shares.............................................. Class A shares
Class B shares.............................................. Class B shares
Class C shares.............................................. Class C shares
</Table>
A-1
EXHIBIT B
COMPARISON OF PERFORMANCE OF YOUR FUND AND BUYING FUND
AIM GLOBAL FINANCIAL SERVICES FUND (YOUR FUND)
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.
ANNUAL TOTAL RETURNS
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.
<Table>
<Caption>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
1995.................................................................. 19.06%
1996.................................................................. 15.21%
1997.................................................................. 30.32%
1998.................................................................. 13.13%
1999.................................................................. 24.24%
2000.................................................................. 26.43%
2001.................................................................. -9.21%
2002.................................................................. -17.48%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
24.04% (quarter ended December 31, 1998) and the lowest quarterly return was
- -21.49% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of
a broad-based securities market index. The fund's performance reflects payment
of sales loads.
Average Annual Total Returns (for the periods ended December 31, 2002)
<Table>
<Caption>
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
-------- ------- --------- ---------
Class A 05/31/94
Return Before Taxes................................ (21.41)% 4.86% 9.38%
Return After Taxes on Distributions................ (21.41)% 3.46% 8.08%
Return After Taxes on Distributions and Sale of
Fund Shares..................................... (13.15)% 3.39% 7.31%
MSCI AC World Free Index(1)
(reflects no deduction for fees, expenses, or
taxes)............................................. (18.98)% (1.94)% 4.24%(2) 05/31/94(2)
</Table>
- ---------------
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
B-1
hold their fund shares through tax-deferred arrangements, such as 401(k) plans
or individual retirement accounts.
(1) The Morgan Stanley Capital International All Country World Free Index
measures the performance of securities listed on the major world stock
exchanges of 47 markets, including both developed and emerging markets.
(2) The average annual total return given is since the inception date of the
class with the longest performance history.
INVESCO FINANCIAL SERVICES FUND (BUYING FUND)
Performance information in the bar chart below is that of the Fund's
Investor Class shares, which has the longest operating history of the Fund's
classes.
The bar chart below shows the Fund's Investor Class shares actual yearly
performance (commonly known as its "total return") for the years ended December
31 over the past decade. The table below shows the pre-tax and after-tax average
annual total return of Investor Class shares for various periods ended December
31, 2002 compared to the S&P 500 Index and the S&P 500 Financials Index.
After-tax returns are provided on a pre-redemption and post-redemption
basis. Pre-redemption returns assume you continue to hold your shares and pay
taxes on Fund distributions (i.e., dividends and capital gains) but do not
reflect taxes that may be incurred upon selling or exchanging shares.
Post-redemption returns assume payment of taxes on fund distributions and also
that you close your account and pay remaining federal taxes. After-tax returns
are calculated using the highest individual federal income tax rates in effect
at the time the distribution is paid. State and local taxes are not considered.
Actual after-tax returns depend on an investor's tax situation and may differ
from those shown. For investors holding their shares in tax-deferred
arrangements such as 401(k) plans or individual retirement accounts, the
after-tax return shown is not relevant.
The information in the chart and table illustrates the variability of the
Fund's total return and how its performance compared to a broad measure of
market performance. Remember, past performance (before and after taxes) does not
indicate how the Fund will perform in the future.
FINANCIAL SERVICES FUND -- INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1)(2)
<Table>
'93......................................................... 18.52%
'94......................................................... (5.89)%
'95......................................................... 39.81%
'96......................................................... 30.29%
'97......................................................... 44.79%
'98......................................................... 13.45%
'99......................................................... 0.73%
'00......................................................... 26.69%
'01......................................................... (10.17)%
'02......................................................... (15.56)%
</Table>
Best Calendar Qtr. 9/00 22.76%
Worst Calendar Qtr. 9/98 (18.20%)
B-2
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/02
-----------------------------
1 YEAR 5 YEARS 10 YEARS
-------- ------- --------
Financial Services Fund(1)(2)
Return Before Taxes....................................... (15.56)% 1.89% 12.44%
Return After Taxes on Distributions....................... (15.60)% 0.59% 9.48%
Return After Taxes on Distributions and Sale of Fund
Shares................................................. (9.53)% 1.43% 9.20%
S&P 500 Index(3) (reflects no deduction for fees, expenses
or taxes)................................................. (22.09)% (0.58)% 9.35%
S&P 500 Financials Index(3) (reflects no deduction for fees,
expenses or taxes)........................................ (14.64)% 2.53% 14.08%
</Table>
- ---------------
(1) Total return figures include reinvested dividends and capital gain
distributions and the effect of each class' expenses.
(2) Returns before taxes for Investor Class shares of Financial Services Funds
year-to-date as of the calendar quarter ended June 30, 2003 was 11.02%.
(3) The S&P 500 Index is an unmanaged index considered representative of the
performance of the broad U.S. stock market. The S&P 500 Financials Index is
an unmanaged index that contains companies involved in activities such as
banking, consumer finance, investment banking and brokerage, asset
management, insurance and investment, and real estate, including REITs.
Please keep in mind that the Indexes do not pay brokerage, management,
administrative, or distribution expenses, all of which are paid by the
classes and are reflected in their annual returns. Index returns also do not
include sales charges or CDSCs that may be paid by the shareholder.
B-3
EXHIBIT C
COMPARISON FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table compares the shareholder fees and annual operating expenses,
expressed as a percentage of net assets ("Expense Ratios"), of Class A, Class B,
and Class C shares of AIM Global Financial Services Fund ("Selling Fund"), and
of Class A, Class B, Class C, Class K, and Investor Class shares of INVESCO
Financial Services Fund ("Buying Fund"). Pro Forma Combined Expense Ratios of
Buying Fund giving effect to the reorganization of Selling Fund into Buying Fund
are also provided.
<Table>
<Caption>
SELLING FUND BUYING FUND
(AS OF 10/31/02) (AS OF 3/31/03)
----------------------------- ---------------------------------------------------
INVESTOR
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS K CLASS
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- ------- ------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 4.75% None None 5.50% None None None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(2)(3) 5.00% 1.00% None(3)(4) 5.00% 1.00% None(5) None
ANNUAL FUND OPERATING EXPENSES(6)
(expenses that are deducted from
fund asset)
Management Fees.................... 0.98% 0.98% 0.98% 0.66% 0.66% 0.66% 0.66% 0.66%
Distribution and/or Service (12b-1)
Fees(7)........................... 0.50% 1.00% 1.00% 0.35% 1.00% 1.00% 0.45% 0.25%
Other Expenses..................... 0.49% 0.49% 0.49% 0.50% 0.74% 0.79% 1.02% 0.49%
Total Annual Fund Operating
Expenses(8)(9).................... 1.97% 2.47% 2.47% 1.51% 2.40% 2.45% 2.13% 1.40%
<Caption>
BUYING FUND
PRO FORMA COMBINED
(AS OF 3/31/03)
--------------------------------------------------
INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS
SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 5.50% None None None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(3)(4) 5.00% 1.00% None(5) None
ANNUAL FUND OPERATING EXPENSES(6)
(expenses that are deducted from
fund asset)
Management Fees.................... 0.64% 0.64% 0.64% 0.64% 0.64%
Distribution and/or Service (12b-1)
Fees(7)........................... 0.35% 1.00% 1.00% 0.45% 0.25%
Other Expenses..................... 0.45% 0.47% 0.56% 0.88% 0.49%
Total Annual Fund Operating
Expenses(8)(9).................... 1.44% 2.11% 2.20% 1.97% 1.38%
</Table>
- ---------------
(1) For Selling Fund, calculated as a percentage of original purchase price or
redemption proceeds, whichever is less. For Buying Fund and Buying Fund Pro
Forma Combined, calculated as a percentage of original purchase price.
(2) Effective November 1, 2002, if you are a retirement plan participant and you
bought $1,000,000 or more of Class A shares, you may pay a 1% contingent
deferred sales charge (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 buy $1,000,000 or more of Class A shares and redeem those shares
within 18 months from the date of purchase, you may pay a 1% CDSC at the
time of redemption.
(4) For qualified plans investing in Class A shares, you may pay a CDSC of 1% on
your Class A shares if the plan is redeemed within 12 months from the
initial deposit in the plan's INVESCO account.
(5) For qualified plans investing in Class K shares, you may pay a CDSC of 0.70%
on your Class K shares if the plan is redeemed within 12 months from initial
deposit in the plan's INVESCO account.
C-1
(6) There is no guarantee that actual expenses will be the same as those shown
in the table.
(7) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares for a long period of time, you
may pay more than the economic equivalent of the maximum front-end sales
charge permitted for mutual funds by the National Association of Securities
Dealers, Inc.
(8) AIM has voluntarily agreed to limit Total Annual Fund Operating Expenses on
Selling Fund (excluding interest, taxes, dividend expense on short sales,
extraordinary items and increases in expenses due to expense offset
arrangements, if any) on Class A, Class B and Class C shares to 2.00%, 2.50%
and 2.50%, respectively. The limitation may be terminated at any time.
(9) INVESCO has contractually agreed to waive fees and bear any expenses on
Buying Fund through April 30, 2004 to limit Total Annual Operating Expenses
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases in expenses due to expense offset arrangements, if any) to
2.10%, 2.75%, 2.75% and 2.20% on Class A, Class B, Class C and Class K
shares, respectively. INVESCO has also voluntarily agreed to limit Total
Annual Operating Expenses (excluding interest, taxes, brokerage commissions,
extraordinary expenses and increases in expenses due to expense offset
arrangements, if any) to 1.40%, 2.05%, 2.75% and 1.50% on Class A, Class B,
Class C and Class K shares, respectively. The voluntary expense limitations
cannot be revoked by INVESCO prior to May 2004. Effective June 1, 2002,
INVESCO is entitled to reimbursement from the classes for fees and expenses
absorbed pursuant to voluntary and contractual limitation commitments
between INVESCO and Buying Fund if such reimbursement does not cause a class
to exceed expense limitations and the reimbursement is made within three
years after INVESCO incurred the expense.
C-2
EXPENSE EXAMPLE
This Example is intended to help you compare the costs of investing in
different classes of Selling Fund and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes
of Buying Fund giving effect to the reorganization of Selling Fund into Buying
Fund are also provided. All costs are based upon the information set forth in
the Fee Table above.
The Example assumes that you invest $10,000 for the time periods indicated
and shows the expenses that you would pay both if you redeem all of your shares
at the end of those periods and if you do not redeem your shares. The Example
also assumes that your investment has a 5% return each year and that the
operating expenses remain the same. The Example reflects fee waivers and/or
expense reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
SELLING FUND
Class A shares(1)
Assuming complete redemption at end of period..... $665 $1,064 $1,487 $2,662
Assuming no redemption............................ $665 $1,064 $1,487 $2,662
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $750 $1,070 $1,516 $2,683
Assuming no redemption(3)......................... $250 $ 770 $1,316 $2,683
Class C shares
Assuming complete redemption at end of
period(2)...................................... $350 $ 770 $1,316 $2,806
Assuming no redemption............................ $250 $ 770 $1,316 $2,806
BUYING FUND
Class A shares(1)
Assuming complete redemption at end of period..... $695 $1,001 $1,328 $2,252
Assuming no redemption............................ $695 $1,001 $1,328 $2,252
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $743 $1,048 $1,480 $2,515
Assuming no redemption(3)......................... $243 $ 748 $1,280 $2,515
Class C shares
Assuming complete redemption at end of
period(2)...................................... $348 $ 764 $1,306 $2,786
Assuming no redemption............................ $248 $ 764 $1,306 $2,786
Class K shares
Assuming complete redemption at end of period..... $216 $ 667 $1,144 $2,462
Assuming no redemption............................ $216 $ 667 $1,144 $2,462
Investor Class shares
Assuming complete redemption at end of period..... $143 $ 443 $ 766 $1,680
Assuming no redemption............................ $143 $ 443 $ 766 $1,680
BUYING FUND -- PRO FORMA COMBINED
Class A shares(1)
Assuming complete redemption at end of period..... $689 $ 980 $1,294 $2,179
Assuming no redemption............................ $689 $ 980 $1,294 $2,179
</Table>
C-3
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $714 $ 961 $1,334 $2,271
Assuming no redemption(3)......................... $214 $ 661 $1,134 $2,271
Class C shares
Assuming complete redemption at end of
period(2)...................................... $323 $ 688 $1,180 $2,534
Assuming no redemption............................ $223 $ 688 $1,180 $2,534
Class K shares
Assuming complete redemption at end of period..... $200 $ 618 $1,062 $2,296
Assuming no redemption............................ $200 $ 618 $1,062 $2,296
Investor Class shares
Assuming complete redemption at end of period..... $141 $ 437 $ 755 $1,657
Assuming no redemption............................ $141 $ 437 $ 755 $1,657
</Table>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class A shares at the end of the
eighth year.
THIS EXAMPLE IS NOT A REPRESENTATION OF PAST OF FUTURE EXPENSES. SELLING
FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND
DOES NOT REPRESENT SELLING FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-4
EXHIBIT D
TRUSTEE COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for
each trustee of Trust who was not affiliated with AIM during the year ended
December 31, 2002:
<Table>
<Caption>
TOTAL
ESTIMATED COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL FROM ALL
COMPENSATION ACCRUED BY ALL BENEFITS UPON AIM
NAME OF TRUSTEE FROM TRUST(1) AIM FUNDS(2) RETIREMENT(3) FUNDS(4)
- --------------- ------------- ------------------- ---------------- ------------
Frank S. Bayley.................... $7,460 $142,800 $90,000 $150,000
Bruce L. Crockett.................. 7,413 50,132 90,000 149,000
Owen Daly II(5).................... 1,047 40,045 75,000 -0-
Albert R. Dowden................... 7,460 57,955 90,000 150,000
Edward K. Dunn, Jr. ............... 7,413 94,149 90,000 149,000
Jack M. Fields..................... 7,460 29,153 90,000 153,000
Carl Frischling(6)................. 7,460 74,511 90,000 150,000
Prema Mathai-Davis................. 7,460 33,931 90,000 150,000
Lewis F. Pennock................... 7,676 54,802 90,000 154,000
Ruth H. Quigley.................... 7,460 142,502 90,000 153,000
Louis S. Sklar..................... 7,629 78,500 90,000 153,000
</Table>
- ---------------
(1) Amounts shown are based on the fiscal year ended October 31, 2002. The total
amount of compensation deferred by all trustees of Trust during the fiscal
year ended October 31, 2002, including earnings, was $34,109.
(2) During the fiscal year ended October 31, 2002, the total amount of expenses
allocated to Trust in respect of such retirement benefits was $3,876.
(3) Amounts shown assume each trustee serves until his or her normal retirement
date.
(4) All trustees currently serve as directors or trustees of 17 registered
investment companies advised by AIM.
(5) Mr. Daly was a trustee until December 31, 2001, when he retired.
(6) During the fiscal year ended October 31, 2002, Trust paid $25,413 in legal
fees to Kramer Levin Naftalis & Frankel LLP for services rendered by such
firm as counsel to the independent trustees of Trust. Mr. Frischling is a
partner of such firm.
D-1
EXHIBIT E
OFFICERS OF TRUST
The following table provides information with respect to the current
officers of Trust. Each officer is elected by the Board and serves until his or
her successor is chosen and qualified or until his or her resignation or removal
by the Board. The business address of all officers of Trust is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND OFFICER
POSITION(S) HELD WITH TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- --------------------------- ------- -------------------------------------------
Robert H. Graham -- 1946.......... 1998 Director and Chairman, A I M Management Group Inc.
Chairman and President (financial services holding company); and Director and
Vice Chairman, AMVESCAP PLC (parent of AIM and a global
investment management firm) and Chairman, AMVESCAP
PLC -- AIM Division; 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), A I M Fund Services, Inc. (registered transfer
agent), and Fund Management Company (registered broker
dealer); and Chief Executive Officer, AMVESCAP
PLC-Managed Products
Mark H. Williamson -- 1951........ 2003 Director, President and Chief Executive Officer, A I M
Executive Vice President Management Group Inc.; Director, Chairman and
President, A I M Advisors, Inc. (registered investment
advisor); Director, A I M Distributors, Inc.
(registered broker dealer); and Chief Executive Officer
of the AIM Division of AMVESCAP PLC (2003-present);
formerly, Chief Executive Officer, Managed Products
Division, AMVESCAP PLC (2001-2002); Chairman of the
Board (1998-2002), President (1998-2002) and Chief
Executive Officer (1998-2002) of INVESCO Funds Group,
Inc. (registered investment advisor) and INVESCO
Distributors, Inc. (registered broker dealer); Chief
Operating Officer and Chairman of the Board of INVESCO
Global Health Sciences Fund; Chairman and Chief
Executive Officer of NationsBanc Advisors, Inc.; and
Chairman of NationsBanc Investments, Inc.
Kevin M. Carome -- 1956........... 2003 Director, Senior Vice President and General Counsel,
Senior Vice President A I M Management Group Inc. (financial services holding
company) and A I M Advisors, Inc.; and Vice President,
A I M Capital Management, Inc., A I M Distributors,
Inc. and A I M Fund Services, Inc.; Director, Vice
President and General Counsel, Fund Management Company
Gary T. Crum -- 1947.............. 1998 Director, Chairman and Director of Investments, A I M
Senior Vice President Capital Management, Inc.; Director and Executive Vice
President, A I M Management Group Inc.; Director and
Senior Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP PLC;
formerly Chief Executive Officer and President, A I M
Capital Management, Inc.
Stuart W. Coco -- 1955............ 2002 Managing Director and Chief Research Officer -- Fixed
Vice President Income, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
</Table>
E-1
<Table>
<Caption>
NAME, YEAR OF BIRTH AND OFFICER
POSITION(S) HELD WITH TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- --------------------------- ------- -------------------------------------------
Melville B. Cox -- 1943........... 1998 Vice President and Chief Compliance Officer, A I M
Vice President Advisors, Inc. and A I M Capital Management, Inc.; and
Vice President, A I M Fund Services, Inc.
Edgar M. Larsen -- 1940........... 2002 Vice President, A I M Advisors, Inc.; and President,
Vice President Chief Executive Officer and Chief Investment Officer,
A I M Capital Management, Inc.
Dana R. Sutton -- 1959............ 1998 Vice President and Fund Treasurer, A I M Advisors, Inc.
Vice President and Treasurer
Nancy L. Martin -- 1957........... 2003 Vice President, A I M Advisors, Inc.; and Vice
Secretary President and General Counsel, A I M Capital
Management, Inc.
</Table>
E-2
EXHIBIT F
SECURITY OWNERSHIP OF MANAGEMENT
To the best knowledge of Trust, the following table sets forth certain
information regarding the ownership as of July 25, 2003 of the shares of
beneficial interest of each class of each series portfolio of Trust by the
trustees, nominees, and current executive officers of Trust.
<Table>
<Caption>
NUMBER OF SHARES
OWNED BENEFICIALLY AND
SERIES AND CLASS PERCENTAGE OF CLASS*
---------------- ------------------------
Frank S. Bayley...........................................
Bruce L. Crockett.........................................
Albert R. Dowden..........................................
Edward K. Dunn, Jr. ......................................
Jack M. Fields............................................
Carl Frischling...........................................
Robert H. Graham..........................................
Prema Mathai-Davis........................................
Lewis F. Pennock..........................................
Ruth H. Quigley...........................................
Louis S. Sklar............................................
Mark H. Williamson........................................
Bob R. Baker..............................................
James T. Bunch............................................
Gerald J. Lewis...........................................
Larry Soll, Ph.D. ........................................
Kevin M. Carome...........................................
Gary T. Crum..............................................
Stuart W. Coco............................................
Melville B. Cox...........................................
Edgar M. Larsen...........................................
Dana R. Sutton............................................
Nancy L. Martin...........................................
</Table>
- ---------------
* To the best knowledge of Trust, the ownership of shares of each series
portfolio of Trust by trustees, nominees, and current executive officers of
Trust as a group constituted less than 1% of each class of each series
portfolio of Trust as of July 25, 2003.
F-1
EXHIBIT G
TRUSTEE OWNERSHIP OF FUND SHARES
Set forth below is the dollar range of equity securities beneficially owned
by each trustee and nominee as of December 31, 2002 (i) in your Fund and (ii) on
an aggregate basis, in all registered investment companies overseen by the
trustee within the AIM Funds complex:
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
COMPANIES OVERSEEN
DOLLAR RANGE OF EQUITY BY TRUSTEE IN THE
NAME OF TRUSTEE SECURITIES IN YOUR FUND AIM FUNDS COMPLEX(1)
- --------------- ----------------------- -------------------------
INTERESTED TRUSTEES
Robert H. Graham.................................... None Over $100,000
Mark H. Williamson.................................. None $10,001-$50,000
INDEPENDENT TRUSTEES
Frank S. Bayley..................................... None $10,001-$50,000
Bruce L. Crockett................................... None $1-$10,000
Albert R. Dowden.................................... None $50,001-$100,000
Edward K. Dunn, Jr.(1).............................. None Over $100,000
Jack M. Fields(1)................................... None Over $100,000
Carl Frischling(1).................................. None Over $100,000
Prema Mathai-Davis(1)............................... None Over $100,000
Lewis F. Pennock.................................... None $50,001-$100,000
Ruth H. Quigley..................................... None $1-$10,000
Louis S. Sklar(1)................................... None Over $100,000
INDEPENDENT NOMINEES
Bob R. Baker........................................ None None
James T. Bunch...................................... None None
Gerald J. Lewis..................................... None None
Larry Soll, Ph.D.................................... None None
</Table>
- ---------------
(1) Includes the total amount of compensation deferred by the trustee at his or
her election pursuant to a deferred compensation plan. Such deferred
compensation is placed in a deferral account and deemed to be invested in
one or more of the AIM Funds.
G-1
EXHIBIT H
SHARES OUTSTANDING OF EACH CLASS OF YOUR FUND ON RECORD DATE
As of July 25, 2003, there were the following number of shares outstanding
of each class of your Fund:
<Table>
CLASS A SHARES
[ADD]
CLASS B SHARES
[ADD]
CLASS C SHARES
[ADD]
</Table>
H-1
EXHIBIT I
OWNERSHIP OF SHARES OF YOUR FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of Trust owned 5% or more of any
class of the outstanding shares of your Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of your Fund is presumed
to "control" your Fund as defined in the 1940 Act. Such control may affect the
voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- -------- ------------ -------------
</Table>
- ---------------
* Trust has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
I-1
EXHIBIT J
OWNERSHIP OF SHARES OF BUYING FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of Buyer owned 5% or more of any
class of the outstanding shares of Buying Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of Buying Fund is
presumed to "control" Buying Fund as defined in the 1940 Act. Such control may
affect the voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- -------- ------------ -------------
</Table>
- ---------------
* Buyer has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
J-1
APPENDIX I
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
AIM GLOBAL FINANCIAL SERVICES FUND,
A SEPARATE PORTFOLIO OF
AIM INVESTMENT FUNDS
AUGUST 13, 2003
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE 1 DEFINITIONS........................................................ I-1
SECTION 1.1. Definitions................................................. I-1
ARTICLE 2 TRANSFER OF ASSETS................................................. I-4
SECTION 2.1. Reorganization of Selling Fund.............................. I-4
SECTION 2.2. Computation of Net Asset Value.............................. I-4
SECTION 2.3. Valuation Date.............................................. I-4
SECTION 2.4. Delivery.................................................... I-5
SECTION 2.5. Termination of Series....................................... I-5
SECTION 2.6. Issuance of Buying Fund Shares.............................. I-5
SECTION 2.7. Investment Securities....................................... I-5
SECTION 2.8. Liabilities................................................. I-6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER........................... I-6
SECTION 3.1. Organization; Authority..................................... I-6
SECTION 3.2. Registration and Regulation of Seller....................... I-6
SECTION 3.3. Financial Statements........................................ I-6
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities......... I-6
SECTION 3.5. Selling Fund Shares; Business Operations.................... I-6
SECTION 3.6. Accountants................................................. I-7
SECTION 3.7. Binding Obligation.......................................... I-7
SECTION 3.8. No Breaches or Defaults..................................... I-7
SECTION 3.9. Authorizations or Consents.................................. I-7
SECTION 3.10. Permits..................................................... I-8
SECTION 3.11. No Actions, Suits or Proceedings............................ I-8
SECTION 3.12. Contracts................................................... I-8
SECTION 3.13. Properties and Assets....................................... I-8
SECTION 3.14. Taxes....................................................... I-8
SECTION 3.15. Benefit and Employment Obligations.......................... I-9
SECTION 3.16. Brokers..................................................... I-9
SECTION 3.17. Voting Requirements......................................... I-9
SECTION 3.18. State Takeover Statutes..................................... I-9
SECTION 3.19. Books and Records........................................... I-9
SECTION 3.20. Prospectus and Statement of Additional Information.......... I-9
SECTION 3.21. No Distribution............................................. I-9
SECTION 3.22. Liabilities of Selling Fund................................. I-9
SECTION 3.23. Value of Shares............................................. I-10
SECTION 3.24. Shareholder Expenses........................................ I-10
SECTION 3.25. Intercompany Indebtedness; Consideration.................... I-10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............................ I-10
SECTION 4.1. Organization; Authority..................................... I-10
SECTION 4.2. Registration and Regulation of Buyer........................ I-10
SECTION 4.3. Financial Statements........................................ I-10
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities......... I-10
SECTION 4.5. Registration of Buying Fund Shares.......................... I-11
</Table>
I-i
<Table>
<Caption>
PAGE
----
SECTION 4.6. Accountants................................................. I-11
SECTION 4.7. Binding Obligation.......................................... I-11
SECTION 4.8. No Breaches or Defaults..................................... I-11
SECTION 4.9. Authorizations or Consents.................................. I-12
SECTION 4.10. Permits..................................................... I-12
SECTION 4.11. No Actions, Suits or Proceedings............................ I-12
SECTION 4.12. Taxes....................................................... I-12
SECTION 4.13. Brokers..................................................... I-13
SECTION 4.14. Representations Concerning the Reorganization............... I-13
SECTION 4.15. Prospectus and Statement of Additional Information.......... I-13
SECTION 4.16. Value of Shares............................................. I-13
SECTION 4.17. Intercompany Indebtedness; Consideration.................... I-14
ARTICLE 5 COVENANTS.......................................................... I-14
SECTION 5.1. Conduct of Business......................................... I-14
SECTION 5.2. Announcements............................................... I-14
SECTION 5.3. Expenses.................................................... I-14
SECTION 5.4. Further Assurances.......................................... I-14
SECTION 5.5. Notice of Events............................................ I-14
SECTION 5.6. Access to Information....................................... I-15
SECTION 5.7. Consents, Approvals and Filings............................. I-15
SECTION 5.8. Submission of Agreement to Shareholders..................... I-15
SECTION 5.9. Delay of Consummation of Reorganization..................... I-15
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION......................... I-15
SECTION 6.1. Conditions Precedent of Buyer............................... I-15
SECTION 6.2. Mutual Conditions........................................... I-16
SECTION 6.3. Conditions Precedent of Seller.............................. I-17
ARTICLE 7 TERMINATION OF AGREEMENT........................................... I-17
SECTION 7.1 Termination................................................. I-17
SECTION 7.2. Survival After Termination.................................. I-17
ARTICLE 8 MISCELLANEOUS...................................................... I-18
SECTION 8.1. Survival of Representations, Warranties and Covenants....... I-18
SECTION 8.2. Governing Law............................................... I-18
SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment........... I-18
SECTION 8.4. Obligations of Buyer and Seller............................. I-18
SECTION 8.5. Amendments.................................................. I-18
SECTION 8.6. Enforcement................................................. I-18
SECTION 8.7. Interpretation.............................................. I-18
SECTION 8.8. Counterparts................................................ I-19
SECTION 8.9. Entire Agreement; Exhibits and Schedules.................... I-19
SECTION 8.10. Notices..................................................... I-19
SECTION 8.11. Representations by Seller Investment Adviser................ I-19
SECTION 8.12. Representations by Buyer Investment Adviser................. I-19
SECTION 8.13. Successors and Assigns; Assignment.......................... I-20
</Table>
I-ii
<Table>
<Caption>
PAGE
----
Exhibit A Excluded Liabilities of Selling Fund
Schedule 2.1 Classes of Shares of Selling Fund and Corresponding Classes
of Shares of Buying Fund
Schedule 3.4 Certain Contingent Liabilities of Selling Fund
Schedule 3.5(d) Permitted Restructurings and Redomestications of Funds
Schedule 4.4 Certain Contingent Liabilities of Buying Fund
Schedule 4.5(a) Portfolios of Buyer
Schedule 4.5(b) Classes of Shares of Buying Fund and Number of Shares of
Each Class Buyer is Authorized to Issue
Schedule 5.1 Permitted Combinations of Funds
Schedule 6.2(f) Tax Opinions
</Table>
I-iii
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 13, 2003 (this
"Agreement"), by and among AIM Investment Funds, a Delaware statutory trust
("Seller"), acting on behalf of AIM Global Financial Services Fund ("Selling
Fund"), a separate series of Seller, INVESCO Sector Funds, Inc., a Maryland
corporation ("Buyer"), acting on behalf of INVESCO Financial Services Fund
("Buying Fund"), a separate series of Buyer, A I M Advisors, Inc., a Delaware
corporation, and INVESCO Funds Group, Inc., a Delaware corporation.
WITNESSETH
WHEREAS, Seller is a management investment company registered with the SEC
(as defined below) under the Investment Company Act (as defined below) that
offers separate series of its shares representing interests in its investment
portfolios, including Selling Fund, for sale to the public; and
WHEREAS, Buyer is a management investment company registered with the SEC
under the Investment Company Act that offers separate series of its shares
representing interests in investment portfolios, including Buying Fund, for sale
to the public; and
WHEREAS, Buyer Investment Adviser (as defined below) provides investment
advisory services to Buyer; and
WHEREAS, Seller Investment Adviser (as defined below) provides investment
advisory services to Seller; and
WHEREAS, Selling Fund desires to provide for its reorganization through the
transfer of all of its assets to Buying Fund in exchange for the assumption by
Buying Fund of all of the Liabilities (as defined below) of Selling Fund and the
issuance by Buyer of shares of Buying Fund in the manner set forth in this
Agreement; and
WHEREAS, this Agreement is intended to be and is adopted by the parties
hereto as a Plan of Reorganization within the meaning of the regulations under
Section 368(a) of the Code (as defined below).
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and undertakings contained in this Agreement, Seller, Buyer, Buyer
Investment Adviser and Seller Investment Adviser agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. For all purposes in this Agreement, the
following terms shall have the respective meanings set forth in this Section 1.1
(such definitions to be equally applicable to both the singular and plural forms
of the terms herein defined):
"Advisers Act" means the Investment Advisers Act of 1940, as amended, and
all rules and regulations of the SEC adopted pursuant thereto.
"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.
"Agreement" means this Agreement and Plan of Reorganization, together with
all exhibits and schedules attached hereto and all amendments hereto and
thereof.
"Applicable Law" means the applicable laws of the state in which each of
Buyer and Seller has been organized and shall include, as applicable, the
Delaware Statutory Trust Act and the Maryland General Corporation Law.
I-1
"Benefit Plan" means any material "employee benefit plan" (as defined in
Section 3(3) of ERISA) and any material bonus, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, retirement, profit sharing, welfare plans or other plan, arrangement
or understanding maintained or contributed to by Seller on behalf of Selling
Fund, or otherwise providing benefits to any current or former employee, officer
or director/trustee of Seller.
"Buyer" means INVESCO Sector Funds, Inc., a Maryland corporation.
"Buyer Counsel" means Kirkpatrick & Lockhart LLP.
"Buyer Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of Buying Fund.
"Buyer Investment Adviser" means INVESCO Funds Group, Inc.
"Buyer Registration Statement" means the registration statement on Form
N-1A of Buyer, as amended, 1940 Act Registration No. 811-03826.
"Buying Fund" means INVESCO Financial Services Fund, a separate series of
Buyer.
"Buying Fund Auditors" means PricewaterhouseCoopers LLP.
"Buying Fund Financial Statements" means the audited financial statements
of Buying Fund for the fiscal year ended March 31, 2003.
"Buying Fund Shares" means shares of each class of Buying Fund issued
pursuant to Section 2.6 of this Agreement.
"Closing" means the transfer of the assets of Selling Fund to Buying Fund,
the assumption of all of Selling Fund's Liabilities by Buying Fund and the
issuance of Buying Fund Shares directly to Selling Fund Shareholders as
described in Section 2.1 of this Agreement.
"Closing Date" means October 27, 2003, or such other date as the parties
may mutually agree upon.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations adopted pursuant thereto.
"corresponding" means, when used with respect to a class of shares of
Selling Fund or Buying Fund, the classes of their shares set forth opposite each
other on Schedule 2.1.
"Effective Time" means 8:00 a.m. Eastern Time on the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations adopted pursuant thereto.
"Exchangeability Date" means the first date on which Buyer Investment
Adviser determines that shares of retail mutual funds advised by Buyer
Investment Adviser and shares of retail mutual funds advised by Seller
Investment Adviser generally may be exchanged for shares of the same or a
similar class of each other.
"Governing Documents" means the organic documents which govern the business
and operations of each of Buyer and Seller and shall include, as applicable, the
Charter, Amended and Restated Agreement and Declaration of Trust, Amended and
Restated Bylaws and Bylaws.
"Governmental Authority" means any foreign, United States or state
government, government agency, department, board, commission (including the SEC)
or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the NASD Regulation, Inc., the
Commodity Futures Trading
I-2
Commission, the National Futures Association, the Investment Management
Regulatory Organization Limited and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Liabilities" means all of the liabilities of any kind of Selling Fund,
including without limitation all liabilities included in the calculation of the
net asset value per share of each class of Selling Fund Shares on the Closing
Date, but not including the excluded liabilities set forth on Exhibit A.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a change in the
condition (financial or otherwise), properties, assets or prospects of an entity
having an adverse monetary effect in an amount equal to or greater than $50,000.
"NYSE" means the New York Stock Exchange.
"Permits" shall have the meaning set forth in Section 3.10 of this
Agreement.
"Person" means an individual or a corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of the assets of Selling Fund by
Buying Fund in consideration of the assumption by Buying Fund of all of the
Liabilities of Selling Fund and the issuance by Buyer of Buying Fund Shares
directly to Selling Fund Shareholders as described in this Agreement, and the
termination of Selling Fund's status as a designated series of shares of Seller.
"Required Shareholder Vote" means the lesser of (a) the affirmative vote of
67% or more of the voting securities of Selling Fund present or represented by
proxy at the Shareholders Meeting, if the holders of more than 50% of the
outstanding voting securities of Selling Fund are present or represented by
proxy, or (b) the affirmative vote of more than 50% of the outstanding voting
securities of Selling Fund.
"Return" means any return, report or form or any attachment thereto
required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
"Seller" means AIM Investment Funds, a Delaware statutory trust.
"Seller Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of Selling Fund.
"Seller Investment Adviser" means A I M Advisors, Inc.
"Seller Registration Statement" means the registration statement on Form
N-1A of Seller, as amended, 1940 Act Registration No. 811-05426.
"Selling Fund" means AIM Global Financial Services Fund, a separate series
of Seller.
"Selling Fund Auditors" means PricewaterhouseCoopers LLP.
"Selling Fund Financial Statements" means the audited financial statements
of Selling Fund for the fiscal year ended October 31, 2002 and the unaudited
financial statements of Selling Fund for the period ended April 30, 2003
"Selling Fund Shareholders" means the holders of record of the outstanding
shares of each class of Selling Fund as of the close of regular trading on the
NYSE on the Valuation Date.
I-3
"Selling Fund Shares" means the outstanding shares of each class of Selling
Fund.
"Shareholders Meeting" means a meeting of the shareholders of Selling Fund
convened in accordance with Applicable Law and the Governing Documents of Seller
to consider and vote upon the approval of this Agreement and, in connection
therewith, the sale of all of Selling Fund's assets and the termination of
Selling Fund as a designated series of Seller.
"Tax" means any tax or similar governmental charge, impost or levy
(including income taxes (including alternative minimum tax and estimated tax),
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes, or windfall
profit taxes), together with any related penalties, fines, additions to tax or
interest, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof.
"Termination Date" means December 31, 2003, or such later date as the
parties may mutually agree upon.
"Treasury Regulations" means the Federal income tax regulations adopted
pursuant to the Code.
"Valuation Date" shall have the meaning set forth in Section 2.2 of this
Agreement.
ARTICLE 2
TRANSFER OF ASSETS
SECTION 2.1. Reorganization of Selling Fund. At the Effective Time, all
of the assets of Selling Fund shall be delivered to Buyer Custodian for the
account of Buying Fund in exchange for the assumption by Buying Fund of all of
the Liabilities of Selling Fund and delivery by Buyer directly to the holders of
record as of the Effective Time of the issued and outstanding shares of each
class of Selling Fund of a number of shares of each corresponding class of
Buying Fund, as set forth on Schedule 2.1 (including, if applicable, fractional
shares rounded to the nearest thousandth), having an aggregate net asset value
equal to the value of the net assets of Selling Fund so transferred, assigned
and delivered, all determined and adjusted as provided in Section 2.2 below.
Upon delivery of such assets, Buying Fund will receive good and marketable title
to such assets free and clear of all Liens.
SECTION 2.2. Computation of Net Asset Value.
(a) The net asset value per share of each class of Buying Fund Shares, and
the value of the assets and the amount of the Liabilities of Selling Fund,
shall, in each case, be determined as of the close of regular trading on the
NYSE on the business day next preceding the Closing Date (the "Valuation Date").
(b) The net asset value per share of each class of Buying Fund Shares shall
be computed in accordance with the policies and procedures of Buying Fund as
described in the Buyer Registration Statement.
(c) The value of the assets and the amount of the Liabilities of Selling
Fund to be transferred to Buying Fund pursuant to this Agreement shall be
computed in accordance with the policies and procedures of Selling Fund as
described in the Seller Registration Statement.
(d) Subject to Sections 2.2(b) and (c) above, all computations of value
regarding the assets and Liabilities of Selling Fund and the net asset value per
share of each class of Buying Fund Shares to be issued pursuant to this
Agreement shall be made by agreement of Seller and Buyer. The parties agree to
use commercially reasonable efforts to resolve any material pricing differences
between the prices of portfolio securities determined in accordance with their
respective pricing policies and procedures.
SECTION 2.3. Valuation Date. The share transfer books of Selling Fund
will be permanently closed as of the close of business on the Valuation Date and
only requests for the redemption of shares of Selling Fund received in proper
form prior to the close of regular trading on the NYSE on the Valuation Date
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shall be accepted by Selling Fund. Redemption requests thereafter received by
Selling Fund shall be deemed to be redemption requests for Buying Fund Shares of
the corresponding class (assuming that the transactions contemplated by this
Agreement have been consummated), to be distributed to Selling Fund Shareholders
under this Agreement.
SECTION 2.4. Delivery.
(a) No later than three (3) business days preceding the Closing Date,
Seller shall instruct Seller Custodian to transfer all assets held by Selling
Fund to the account of Buying Fund maintained at Buyer Custodian. Such assets
shall be delivered by Seller to Buyer Custodian on the Closing Date. The assets
so delivered shall be duly endorsed in proper form for transfer in such
condition as to constitute a good delivery thereof, in accordance with the
custom of brokers, and shall be accompanied by all necessary state stock
transfer stamps, if any, or a check for the appropriate purchase price thereof.
Cash held by Selling Fund shall be delivered on the Closing Date and shall be in
the form of currency or wire transfer in Federal funds, payable to the order of
the account of Buying Fund at Buyer Custodian.
(b) If, on the Closing Date, Selling Fund is unable to make delivery in the
manner contemplated by Section 2.4(a) of securities held by Selling Fund for the
reason that any of such securities purchased prior to the Closing Date have not
yet been delivered to Selling Fund or its broker, then Buyer shall waive the
delivery requirements of Section 2.4(a) with respect to said undelivered
securities if Selling Fund has delivered to Buyer Custodian by or on the Closing
Date, and with respect to said undelivered securities, executed copies of an
agreement of assignment and escrow and due bills executed on behalf of said
broker or brokers, together with such other documents as may be required by
Buyer or Buyer Custodian, including brokers' confirmation slips.
SECTION 2.5. Termination of Series. Following receipt of the Required
Shareholder Vote and as soon as reasonably practicable after the Closing Date,
the status of Selling Fund as a designated series of Seller shall be terminated;
provided, however, that the termination of Selling Fund as a designated series
of Seller shall not be required if the Reorganization shall not have been
consummated.
SECTION 2.6. Issuance of Buying Fund Shares. At the Effective Time,
Selling Fund Shareholders holding shares of a class of Selling Fund shall be
issued that number of full and fractional shares of the corresponding class of
Buying Fund having a net asset value equal to the net asset value of such shares
of such class of Selling Fund held by Selling Fund Shareholders on the Valuation
Date. All issued and outstanding shares of Selling Fund shall thereupon be
canceled on the books of Seller. Seller shall provide instructions to the
transfer agent of Buyer with respect to the shares of each class of Buying Fund
to be issued to Selling Fund Shareholders. Buyer shall have no obligation to
inquire as to the validity, propriety or correctness of any such instruction,
but shall, in each case, assume that such instruction is valid, proper and
correct. Buyer shall record on its books the ownership of the shares of each
class of Buying Fund by Selling Fund Shareholders and shall forward a
confirmation of such ownership to Selling Fund Shareholders. No redemption or
repurchase of such shares credited to former Selling Fund Shareholders in
respect of Selling Fund Shares represented by unsurrendered share certificates
shall be permitted until such certificates have been surrendered to Buyer for
cancellation, or if such certificates are lost or misplaced, until lost
certificate affidavits have been executed and delivered to Buyer.
SECTION 2.7. Investment Securities. On or prior to the Valuation Date,
Seller shall deliver a list setting forth the securities Selling Fund then owned
together with the respective Federal income tax bases thereof and holding
periods therefor. Seller shall provide to Buyer on or before the Valuation Date
detailed tax basis accounting records for each security to be transferred to it
pursuant to this Agreement. Such records shall be prepared in accordance with
the requirements for specific identification tax lot accounting and clearly
reflect the bases used for determination of gain and loss realized on the sale
of any security transferred to Buying Fund hereunder. Such records shall be made
available by Seller prior to the Valuation Date for inspection by the Treasurer
(or his or her designee) or the auditors of Buyer upon reasonable request.
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SECTION 2.8. Liabilities. Selling Fund shall use reasonable best efforts
to discharge all of its known liabilities, so far as may be possible, prior to
the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, on behalf of Selling Fund, represents and warrants to Buyer as
follows:
SECTION 3.1. Organization; Authority. Seller is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 3.2. Registration and Regulation of Seller. Seller is duly
registered with the SEC as an investment company under the Investment Company
Act and all Selling Fund Shares which have been or are being offered for sale
have been duly registered under the Securities Act and have been duly
registered, qualified or are exempt from registration or qualification under the
securities laws of each state or other jurisdiction in which such shares have
been or are being offered for sale, and no action has been taken by Seller to
revoke or rescind any such registration or qualification. Selling Fund is in
compliance in all material respects with all applicable laws, rules and
regulations, including, without limitation, the Investment Company Act, the
Securities Act, the Exchange Act and all applicable state securities laws.
Selling Fund is in compliance in all material respects with the investment
policies and restrictions applicable to it set forth in the Seller Registration
Statement. The value of the net assets of Selling Fund is determined using
portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the policies of Selling Fund and
all purchases and redemptions of Selling Fund Shares have been effected at the
net asset value per share calculated in such manner.
SECTION 3.3. Financial Statements. The books of account and related
records of Selling Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited Selling Fund Financial
Statements previously delivered to Buyer present fairly in all material respects
the financial position of Selling Fund as of the date(s) indicated and the
results of operations and changes in net assets for the period(s) then ended in
accordance with generally accepted accounting principles applied on a consistent
basis for the period(s) then ended.
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Selling Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Selling
Fund or the status of Selling Fund as a regulated investment company under the
Code, other than changes resulting from any change in general conditions in the
financial or securities markets or the performance of any investments made by
Selling Fund or occurring in the ordinary course of business of Selling Fund or
Seller. Except as set forth on Schedule 3.4, there are no contingent liabilities
of Selling Fund not disclosed in the Selling Fund Financial Statements and no
contingent liabilities of Selling Fund have arisen since the date of the most
recent financial statements included in the Selling Fund Financial Statements.
SECTION 3.5. Selling Fund Shares; Business Operations.
(a) Selling Fund Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(b) During the five-year period ending on the date of the Reorganization,
neither Selling Fund nor any person related to Selling Fund (as defined in
Section 1.368-1(e)(3) of the Treasury Regulations without regard to Section
1.368-1(e)(3)(i)(A)) will have directly or through any transaction, agreement,
or arrangement with any other person, (i) acquired shares of Selling Fund for
consideration other than shares of Selling Fund, except for shares redeemed in
the ordinary course of Selling Fund's business as an open-end investment company
as required by the Investment Company Act, or (ii) made distributions with
respect to Selling Fund's shares, except for (a) distributions necessary to
satisfy the requirements of
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Sections 852 and 4982 of the Code for qualification as a regulated investment
company and avoidance of excise tax liability and (b) additional distributions,
to the extent such additional distributions do not exceed 50 percent of the
value (without giving effect to such distributions) of the proprietary interest
in Selling Fund on the Effective Date.
(c) At the time of its Reorganization, Selling Fund shall not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any Person could acquire Selling Fund Shares, except for
the right of investors to acquire Selling Fund Shares at net asset value in the
normal course of its business as a series of an open-end management investment
company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the Closing Date,
Selling Fund will have conducted its historic business within the meaning of
Section 1.368-1(d)(2) of the Treasury Regulations in a substantially unchanged
manner. In anticipation of its Reorganization, Selling Fund will not dispose of
assets that, in the aggregate, will result in less than fifty percent (50%) of
its historic business assets (within the meaning of Section 1.368-1(d)(3) of the
Treasury Regulations) being transferred to Buying Fund; provided, however, that
this Section 3.5(d) shall not preclude any of the restructurings or
redomestications of funds set forth on Schedule 3.5(d).
(e) Seller does not have, and has not had during the six (6) months prior
to the date of this Agreement, any employees, and shall not hire any employees
from and after the date of this Agreement through the Closing Date.
SECTION 3.6. Accountants. Selling Fund Auditors, which have reported upon
the Selling Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Selling Fund Financial Statements are independent public accountants as
required by the Securities Act and the Exchange Act.
SECTION 3.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Seller on behalf of Selling Fund and, assuming this
Agreement has been duly executed and delivered by Buyer and approved by the
shareholders of Selling Fund, constitutes the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms
from and with respect to the revenues and assets of Selling Fund, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization
or similar laws relating to or affecting creditors rights generally, or by
general equity principles (whether applied in a court of law or a court of
equity and including limitations on the availability of specific performance or
other equitable remedies).
SECTION 3.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Seller on behalf of Selling Fund and performance by Seller of its
obligations hereunder has been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Seller, other than approval by the
shareholders of Selling Fund, and (i) do not, and on the Closing Date will not,
result in any violation of the Governing Documents of Seller and (ii) do not,
and on the Closing Date will not, result in a breach of any of the terms or
provisions of, or constitute (with or without the giving of notice or the lapse
of time or both) a default under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation or imposition of any Lien upon any
property or assets of Selling Fund (except for such breaches or defaults or
Liens that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect) under (A) any indenture, mortgage or loan
agreement or any other material agreement or instrument to which Seller is a
party or by which it may be bound and which relates to the assets of Selling
Fund or to which any property of Selling Fund may be subject; (B) any Permit (as
defined below); or (C) any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over Seller or
any property of Selling Fund. Seller is not under the jurisdiction of a court in
a proceeding under Title 11 of the United States Code or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.9. Authorizations or Consents. Other than those which shall
have been obtained or made on or prior to the Closing Date and those that must
be made after the Closing Date to comply with
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Section 2.5 of this Agreement, no authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority will be required to
be obtained or made by Seller in connection with the due execution and delivery
by Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby.
SECTION 3.10. Permits. Seller has in full force and effect all approvals,
consents, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights of Governmental Authorities (collectively, "Permits")
necessary for it to conduct its business as presently conducted as it relates to
Selling Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of Seller there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 3.11. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of Seller, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Seller before any Governmental Authority which
questions the validity or legality of this Agreement or of the actions
contemplated hereby or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of Seller, threatened in
writing or, if probable of assertion, orally, against Seller affecting any
property, asset, interest or right of Selling Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Selling Fund. There are not in existence on the date hereof any
plea agreements, judgments, injunctions, consents, decrees, exceptions or orders
that were entered by, filed with or issued by any Governmental Authority
relating to Seller's conduct of the business of Selling Fund affecting in any
significant respect the conduct of such business. Seller is not, and has not
been, to the knowledge of Seller, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Selling Fund.
SECTION 3.12. Contracts. Seller is not in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party and which involves or affects the assets of Selling Fund,
by which the assets, business, or operations of Selling Fund may be bound or
affected, or under which it or the assets, business or operations of Selling
Fund receives benefits, and which default could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and, to the
knowledge of Seller there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
SECTION 3.13. Properties and Assets. Selling Fund has good and marketable
title to all properties and assets reflected in the Selling Fund Financial
Statements as owned by it, free and clear of all Liens, except as described in
the Selling Fund Financial Statements.
SECTION 3.14. Taxes.
(a) Selling Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Selling Fund has qualified for treatment as a
regulated investment company for each taxable year since inception that has
ended prior to the Closing Date and will have satisfied the requirements of Part
I of Subchapter M of the Code to maintain such qualification for the period
beginning on the first day of its current taxable year and ending on the Closing
Date. Selling Fund has no earnings and profits accumulated in any taxable year
in which the provisions of Subchapter M of the Code did not apply to it. In
order to (i) ensure continued qualification of Selling Fund for treatment as a
"regulated investment company" for tax purposes and (ii) eliminate any tax
liability of Selling Fund arising by reason of undistributed investment company
taxable income or net capital gain, Seller will declare on or prior to the
Valuation Date to the shareholders of Selling Fund a dividend or dividends that,
together with all previous such dividends, shall have the
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effect of distributing (A) all of Selling Fund's investment company taxable
income (determined without regard to any deductions for dividends paid) for the
taxable year ended October 31, 2002 and for the short taxable year beginning on
November 1, 2002 and ending on the Closing Date and (B) all of Selling Fund's
net capital gain recognized in its taxable year ended October 31, 2002 and in
such short taxable year (after reduction for any capital loss carryover).
(b) Selling Fund has timely filed all Returns required to be filed by it
and all Taxes with respect thereto have been paid, except where the failure so
to file or so to pay, would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Adequate provision has been made
in the Selling Fund Financial Statements for all Taxes in respect of all periods
ended on or before the date of such financial statements, except where the
failure to make such provisions would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. No deficiencies for any
Taxes have been proposed, assessed or asserted in writing by any taxing
authority against Selling Fund, and no deficiency has been proposed, assessed or
asserted, in writing, where such deficiency would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No waivers
of the time to assess any such Taxes are outstanding nor are any written
requests for such waivers pending and no Return of Selling Fund is currently
being or has been audited with respect to income taxes or other Taxes by any
Federal, state, local or foreign Tax authority.
SECTION 3.15. Benefit and Employment Obligations. As of the Closing Date,
Selling Fund will have no obligation to provide any post-retirement or
post-employment benefit to any Person, including but not limited to under any
Benefit Plan, and will have no obligation to provide unfunded deferred
compensation or other unfunded or self-funded benefits to any Person.
SECTION 3.16. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Seller in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Seller or any action taken by it.
SECTION 3.17. Voting Requirements. The Required Shareholder Vote is the
only vote of the holders of any class of shares of Selling Fund necessary to
approve this Agreement and, in connection therewith, the sale of all of Selling
Fund's assets and the termination of Selling Fund as a designated series of
Seller.
SECTION 3.18. State Takeover Statutes. No state takeover statute or
similar statute or regulation applies or purports to apply to this Agreement or
any of the transactions contemplated by this Agreement.
SECTION 3.19. Books and Records. The books and records of Seller relating
to Selling Fund, reflecting, among other things, the purchase and sale of
Selling Fund Shares, the number of issued and outstanding shares owned by each
Selling Fund Shareholder and the state or other jurisdiction in which such
shares were offered and sold, are complete and accurate in all material
respects.
SECTION 3.20. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Selling Fund as
of the date on which they were issued did not contain, and as supplemented by
any supplement thereto dated prior to or on the Closing Date do not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 3.21. No Distribution. Buying Fund Shares are not being acquired
for the purpose of any distribution thereof, other than in accordance with the
terms of this Agreement.
SECTION 3.22. Liabilities of Selling Fund. The Liabilities of Selling
Fund that are to be assumed by Buying Fund in connection with the
Reorganization, or to which the assets of Selling Fund to be transferred in the
Reorganization are subject, were incurred by Selling Fund in the ordinary course
of its business. The fair market value of the assets of Selling Fund to be
transferred to Buying Fund in the Reorganization will equal or exceed the sum of
the Liabilities to be assumed by Buying Fund, plus the
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amount of liabilities, if any, to which such transferred assets will be subject.
The total adjusted basis of the assets of Selling Fund to be transferred to
Buying Fund in the Reorganization will equal or exceed the sum of the
Liabilities to be assumed by Buying Fund, plus the amount of liabilities, if
any, to which such transferred assets will be subject.
SECTION 3.23. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
SECTION 3.24. Shareholder Expenses. Selling Fund Shareholders will pay
their own expenses, if any, incurred in connection with the Reorganization.
SECTION 3.25. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration other than Buying Fund
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including
for this purpose any liabilities to which the assets of Selling Fund are
subject) will be given in exchange for the assets of Selling Fund acquired by
Buying Fund in connection with the Reorganization.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer, on behalf of Buying Fund, represents and warrants to Seller as
follows:
SECTION 4.1. Organization; Authority. Buyer is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 4.2. Registration and Regulation of Buyer. Buyer is duly
registered with the SEC as an investment company under the Investment Company
Act. Buying Fund is in compliance in all material respects with all applicable
laws, rules and regulations, including, without limitation, the Investment
Company Act, the Securities Act, the Exchange Act and all applicable state
securities laws. Buying Fund is in compliance in all material respects with the
applicable investment policies and restrictions set forth in the Buyer
Registration Statement. The value of the net assets of Buying Fund is determined
using portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the policies of Buying Fund and
all purchases and redemptions of Buying Fund Shares have been effected at the
net asset value per share calculated in such manner.
SECTION 4.3. Financial Statements. The books of account and related
records of Buying Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited Buying Fund Financial
Statements previously delivered to Seller present fairly in all material
respects the financial position of Buying Fund as of the date(s) indicated and
the results of operations and changes in net assets for the period(s) then ended
in accordance with generally accepted accounting principles applied on a
consistent basis for the period(s) then ended.
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Buying Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Buying Fund
or the status of Buying Fund as a regulated investment company under the Code,
other than changes resulting from any change in general conditions in the
financial or securities markets or the performance of any investments made by
Buying Fund or occurring in the ordinary course of business of Buying Fund or
Buyer. There are no contingent liabilities of Buying Fund not disclosed in the
Buying Fund Financial Statements which are required to be disclosed in
accordance with generally accepted accounting principles. Except as set forth on
Schedule 4.4, no contingent liabilities of Buying Fund have arisen since the
date of
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the most recent financial statements included in the Buying Fund Financial
Statements which are required to be disclosed in accordance with generally
accepted accounting principles.
SECTION 4.5. Registration of Buying Fund Shares.
(a) The shares of Buyer are divided into those portfolios, including Buying
Fund, that are set forth on Schedule 4.5(a).
(b) Buying Fund currently has those classes of shares that are set forth on
Schedule 4.5(b). Under its Governing Documents, Buyer is authorized to issue the
number of shares of each such class that is set forth on Schedule 4.5(b).
(c) Buying Fund Shares to be issued pursuant to Section 2.6 shall on the
Closing Date be duly registered under the Securities Act by a Registration
Statement on Form N-14 of Buyer then in effect.
(d) Buying Fund Shares to be issued pursuant to Section 2.6 are duly
authorized and on the Closing Date will be validly issued and fully paid and
non-assessable and will conform to the description thereof contained in the
Registration Statement on Form N-14 then in effect. At the time of its
Reorganization, Buying Fund shall not have outstanding any warrants, options,
convertible securities or any other type of right pursuant to which any Person
could acquire shares of Buying Fund, except for the right of investors to
acquire shares of Buying Fund at net asset value in the normal course of its
business as a series of an open-end management investment company operating
under the Investment Company Act.
(e) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus"), which forms a part of Buyer's Registration Statement on
Form N-14, shall be furnished to the shareholders of Selling Fund entitled to
vote at the Shareholders Meeting. The Combined Proxy Statement/Prospectus and
related Statement of Additional Information of Buying Fund, when they become
effective, shall conform to the applicable requirements of the Securities Act
and the Investment Company Act and shall not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading, provided, however, that no
representation or warranty is made with respect to written information provided
by Seller for inclusion in the Combined Proxy Statement/Prospectus.
(f) The shares of Buying Fund which have been or are being offered for sale
(other than the Buying Fund Shares to be issued in connection with the
Reorganization) have been duly registered under the Securities Act by the Buyer
Registration Statement and have been duly registered, qualified or are exempt
from registration or qualification under the securities laws of each state or
other jurisdiction in which such shares have been or are being offered for sale,
and no action has been taken by Buyer to revoke or rescind any such registration
or qualification.
SECTION 4.6. Accountants. Buying Fund Auditors, which have reported upon
the Buying Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Buying Fund Financial Statements are independent public accountants as
required by the Securities Act and the Exchange Act.
SECTION 4.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Buyer on behalf of Buying Fund and, assuming this
Agreement has been duly executed and delivered by Seller, constitutes the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms from and with respect to the revenues and assets of Buying Fund,
except as the enforceability hereof may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting creditors' rights
generally, or by general equity principles (whether applied in a court or law or
a court of equity and including limitations on the availability of specific
performance or other equitable remedies).
SECTION 4.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Buyer on behalf of Buying Fund and performance by Buyer of its
obligations hereunder have been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Buyer and (i) do not, and on the
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Closing Date will not, result in any violation of the Governing Documents of
Buyer and (ii) do not, and on the Closing Date will not, result in a breach of
any of the terms or provisions of, or constitute (with or without the giving of
notice or the lapse of time or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation or imposition of any Lien upon
any property or assets of Buying Fund (except for such breaches or defaults or
Liens that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect) under (A) any indenture, mortgage or loan
agreement or any other material agreement or instrument to which Buyer is a
party or by which it may be bound and which relates to the assets of Buying Fund
or to which any properties of Buying Fund may be subject; (B) any Permit; or (C)
any existing applicable law, rule, regulation, judgment, order or decree of any
Governmental Authority having jurisdiction over Buyer or any property of Buying
Fund. Buyer is not under the jurisdiction of a court in a proceeding under Title
11 of the United States Code or similar case within the meaning of Section
368(a)(3)(A) of the Code.
SECTION 4.9. Authorizations or Consents. Other than those which shall
have been obtained or made on or prior to the Closing Date, no authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority will be required to be obtained or made by Buyer in connection with
the due execution and delivery by Buyer of this Agreement and the consummation
by Buyer of the transactions contemplated hereby.
SECTION 4.10. Permits. Buyer has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
Buying Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of Buyer there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 4.11. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of Buyer, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Buyer before any Governmental Authority which
questions the validity or legality of this Agreement or of the transactions
contemplated hereby, or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of Buyer, threatened in
writing or, if probable of assertion, orally, against Buyer, affecting any
property, asset, interest or right of Buying Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Buying Fund. There are not in existence on the date hereof any
plea agreements, judgments, injunctions, consents, decrees, exceptions or orders
that were entered by, filed with or issued by any Governmental Authority
relating to Buyer's conduct of the business of Buying Fund affecting in any
significant respect the conduct of such business. Buyer is not, and has not
been, to the knowledge of Buyer, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Buying Fund.
SECTION 4.12. Taxes.
(a) Buying Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Buying Fund has qualified for treatment as a
regulated investment company for each taxable year since inception that has
ended prior to the Closing Date and will satisfy the requirements of Part I of
Subchapter M of the Code to maintain such qualification for its current taxable
year. Buying Fund has no earnings or profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it.
(b) Buying Fund has timely filed all Returns required to be filed by it and
all Taxes with respect thereto have been paid, except where the failure so to
file or so to pay, would not reasonably be expected,
I-12
individually or in the aggregate, to have a Material Adverse Effect. Adequate
provision has been made in the Buying Fund Financial Statements for all Taxes in
respect of all periods ending on or before the date of such financial
statements, except where the failure to make such provisions would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No deficiencies for any Taxes have been proposed, assessed or
asserted in writing by any taxing authority against Buying Fund, and no
deficiency has been proposed, assessed or asserted, in writing, where such
deficiency would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. No waivers of the time to assess any such Taxes
are outstanding nor are any written requests for such waivers pending and no
Return of Buying Fund is currently being or has been audited with respect to
income taxes or other Taxes by any Federal, state, local or foreign Tax
authority.
SECTION 4.13. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Buyer in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Buyer or any action taken by it.
SECTION 4.14. Representations Concerning the Reorganization.
(a) Buyer has no plan or intention to reacquire any Buying Fund Shares
issued in the Reorganization, except to the extent that Buying Fund is required
by the Investment Company Act to redeem any of its shares presented for
redemption at net asset value in the ordinary course of its business as an
open-end, management investment company.
(b) Buying Fund has no plan or intention to sell or otherwise dispose of
any of the assets of Selling Fund acquired in the Reorganization, other than in
the ordinary course of its business and to the extent necessary to maintain its
status as a "regulated investment company" under the Code; provided, however,
that this Section 4.14(b) shall not preclude any of the restructurings or
redomestications of funds set forth on Schedule 3.5(d).
(c) Following the Reorganization, Buying Fund will continue an "historic
business" of Selling Fund or use a significant portion of Selling Fund's
"historic business assets" in a business. For purposes of this representation,
the terms "historic business" and "historic business assets" shall have the
meanings ascribed to them in Section 1.368-1(d) of the Treasury Regulations;
provided, however, that this Section 4.14(c) shall not preclude any of the
restructurings or redomestications of funds set forth on Schedule 3.5(d).
(d) Prior to or in the Reorganization, neither Buying Fund nor any person
related to Buying Fund (for purposes of this paragraph as defined in Section
1.368-1(e)(3) of the Treasury Regulations) will have acquired directly or
through any transaction, agreement or arrangement with any other person, shares
of Selling Fund with consideration other than shares of Buying Fund. There is no
plan or intention by Buying Fund or any person related to Buying Fund to acquire
or redeem any of the Buying Fund Shares issued in the Reorganization either
directly or through any transaction, agreement, or arrangement with any other
person, other than redemptions in the ordinary course of Buying Fund's business
as an open-end investment company as required by the Investment Company Act.
SECTION 4.15. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Buying Fund as of
the date on which it was issued does not contain, and as supplemented by any
supplement thereto dated prior to or on the Closing Date does not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 4.16. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
I-13
SECTION 4.17. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration other than Buying Fund
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including
for this purpose any liabilities to which the assets of Selling Fund are
subject) will be given in exchange for the assets of Selling Fund acquired by
Buying Fund in connection with the Reorganization. The fair market value of the
assets of Selling Fund transferred to Buying Fund in the Reorganization will
equal or exceed the sum of the Liabilities assumed by Buying Fund, plus the
amount of liabilities, if any, to which such transferred assets are subject.
ARTICLE 5
COVENANTS
SECTION 5.1. Conduct of Business.
(a) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), Seller shall conduct the business of Selling Fund only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business operations of Selling Fund in the
ordinary course in all material respects; provided, however, that this Section
5.1(a) shall not preclude any of the restructurings or redomestications of funds
set forth on Schedule 3.5(d) or any of the combinations of funds set forth on
Schedule 5.1.
(b) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), Buyer shall conduct the business of Buying Fund only in the ordinary
course and substantially in accordance with past practices, and shall use its
reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business operations of Buying Fund in the
ordinary course in all material respects; provided, however, that this Section
5.1(b) shall not preclude any of the restructurings or redomestications of funds
set forth on Schedule 3.5(d) or any of the combinations of funds set forth on
Schedule 5.1.
SECTION 5.2. Announcements. Seller and Buyer shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement and the transactions contemplated by this
Agreement, and neither Seller nor Buyer shall issue any such press release or
make any public statement without the prior written approval of the other party
to this Agreement, such approval not to be unreasonably withheld, except as may
be required by law.
SECTION 5.3. Expenses. Selling Fund shall bear the costs and expenses
incurred in connection with this Agreement and the Reorganization and other
transactions contemplated hereby.
SECTION 5.4. Further Assurances. Each of the parties hereto shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall, on or prior to the Closing Date, use
its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to the consummation of the Reorganization, including the
execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the Reorganization.
SECTION 5.5. Notice of Events. Buyer shall give prompt notice to Seller,
and Seller shall give prompt notice to Buyer, of (a) the occurrence or
non-occurrence of any event which to the knowledge of Buyer or to the knowledge
of Seller, the occurrence or non-occurrence of which would be likely to result
in any of the conditions specified in (i) in the case of Seller, Sections 6.1
and 6.2 or (ii) in the case of Buyer, Sections 6.2 and 6.3, not being satisfied
so as to permit the consummation of the Reorganization and (b) any material
failure on its part, or on the part of the other party hereto of which it has
knowledge, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it
I-14
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.5 shall not limit or otherwise affect the remedies available hereunder
to any party.
SECTION 5.6. Access to Information.
(a) Seller will, during regular business hours and on reasonable prior
notice, allow Buyer and its authorized representatives reasonable access to the
books and records of Seller pertaining to the assets of Selling Fund and to
officers of Seller knowledgeable thereof; provided, however, that any such
access shall not significantly interfere with the business or operations of
Seller.
(b) Buyer will, during regular business hours and on reasonable prior
notice, allow Seller and its authorized representatives reasonable access to the
books and records of Buyer pertaining to the assets of Buying Fund and to
officers of Buyer knowledgeable thereof; provided, however, that any such access
shall not significantly interfere with the business or operations of Buyer.
SECTION 5.7. Consents, Approvals and Filings. Each of Seller and Buyer
shall make all necessary filings, as soon as reasonably practicable, including,
without limitation, those required under the Maryland General Corporation Law,
the Securities Act, the Exchange Act, the Investment Company Act and the
Advisers Act, in order to facilitate prompt consummation of the Reorganization
and the other transactions contemplated by this Agreement. In addition, each of
Seller and Buyer shall use its reasonable best efforts, and shall cooperate
fully with each other (i) to comply as promptly as reasonably practicable with
all requirements of Governmental Authorities applicable to the Reorganization
and the other transactions contemplated herein and (ii) to obtain as promptly as
reasonably practicable all necessary permits, orders or other consents of
Governmental Authorities and consents of all third parties necessary for the
consummation of the Reorganization and the other transactions contemplated
herein. Each of Seller and Buyer shall use reasonable efforts to provide such
information and communications to Governmental Authorities as such Governmental
Authorities may request.
SECTION 5.8. Submission of Agreement to Shareholders. Seller shall take
all action necessary in accordance with applicable law and its Governing
Documents to convene the Shareholders Meeting. Seller shall, through its Board
of Directors/Trustees, recommend to the shareholders of Selling Fund approval of
this Agreement and, in connection therewith, the sale of all of Selling Fund's
assets and the termination of Selling Fund as a designated series of Seller.
Seller shall use its reasonable best efforts to hold a Shareholders Meeting as
soon as practicable after the date hereof.
SECTION 5.9. Delay of Consummation of Reorganization. The parties
acknowledge and agree that if the Exchangeability Date has not occurred prior to
the Closing Date, consummation of the Reorganization shall not occur on the
Closing Date but instead shall be postponed until a mutually acceptable date
occurring subsequent to the Exchangeability Date; provided, however, that in no
event shall the consummation of the Reorganization occur on a date subsequent to
the Termination Date. In the case of such postponement of the consummation of
the Reorganization, the parties agree that the term "Closing Date" in this
Agreement shall mean in each instance such mutually acceptable date subsequent
to the Exchangeability Date as the parties may choose to consummate the
Reorganization.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
SECTION 6.1. Conditions Precedent of Buyer. The obligation of Buyer to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by Buyer.
(a) The representations and warranties of Seller on behalf of Selling Fund
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date with the same effect
as though all such representations and warranties had been made as of the
Closing Date.
I-15
(b) Seller shall have complied with and satisfied in all material respects
all agreements and conditions relating to Selling Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Buyer shall have received at the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Seller, in such individual's capacity
as an officer of Seller and not as an individual, to the effect that the
conditions specified in Sections 6.1(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Seller certifying as to the accuracy and completeness of the
attached Governing Documents of Seller, and resolutions, consents and
authorizations of or regarding Seller with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
(d) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
(e) Buyer shall have received from Seller confirmations or other adequate
evidence as to the tax costs and holding periods of the assets and property of
Selling Fund transferred to Buying Fund in accordance with the terms of this
Agreement.
(f) To the extent applicable, Seller Investment Adviser shall have
terminated or waived, in either case in writing, any rights to reimbursement
from Selling Fund to which it is entitled for fees and expenses absorbed by
Seller Investment Adviser pursuant to voluntary and contractual fee waiver or
expense limitation commitments between Seller Investment Adviser and Selling
Fund.
SECTION 6.2. Mutual Conditions. The obligations of Seller and Buyer to
consummate the Reorganization are subject to the satisfaction, at or prior to
the Closing Date, of all of the following further conditions, any one or more of
which may be waived in writing by Seller and Buyer, but only if and to the
extent that such waiver is mutual.
(a) All filings required to be made prior to the Closing Date with, and all
consents, approvals, permits and authorizations required to be obtained on or
prior to the Closing Date from Governmental Authorities in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by Seller and Buyer shall have been made or
obtained, as the case may be; provided, however, that such consents, approvals,
permits and authorizations may be subject to conditions that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) This Agreement, the Reorganization of Selling Fund and related matters
shall have been approved and adopted at the Shareholders Meeting by the
shareholders of Selling Fund on the record date by the Required Shareholder
Vote.
(c) The assets of Selling Fund to be acquired by Buying Fund shall
constitute at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets held by Selling Fund
immediately prior to the Reorganization. For purposes of this Section 6.2(c),
assets used by Selling Fund to pay the expenses it incurs in connection with
this Agreement and the Reorganization and to effect all shareholder redemptions
and distributions (other than regular, normal dividends and regular, normal
redemptions pursuant to the Investment Company Act, and not in excess of the
requirements of Section 852 of the Code, occurring in the ordinary course of
Selling Fund's business as a series of an open-end management investment
company) after the date of this Agreement shall be included as assets of Selling
Fund held immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent injunction or
other order issued by any Governmental Authority preventing the consummation of
the Reorganization on the Closing Date shall be in effect; provided, however,
that the party or parties invoking this condition shall use reasonable efforts
to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by Buyer with respect to
Buying Fund Shares to be issued to Selling Fund Shareholders in connection with
the Reorganization shall have become effective
I-16
under the Securities Act and no stop order suspending the effectiveness thereof
shall have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the Securities Act.
(f) Seller and Buyer shall have received on or before the Closing Date an
opinion of Buyer Counsel in form and substance reasonably acceptable to Seller
and Buyer, as to the matters set forth on Schedule 6.2(f). In rendering such
opinion, Buyer Counsel may request and rely upon representations contained in
certificates of officers of Seller, Buyer and others, and the officers of Seller
and Buyer shall use their best efforts to make available such truthful
certificates.
SECTION 6.3. Conditions Precedent of Seller. The obligation of Seller to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by Seller.
(a) The representations and warranties of Buyer on behalf of Buying Fund
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date with the same effect
as though all such representations and warranties had been made as of the
Closing Date.
(b) Buyer shall have complied with and satisfied in all material respects
all agreements and conditions relating to Buying Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Seller shall have received on the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Buyer, in such individual's capacity
as an officer of Buyer and not as an individual, to the effect that the
conditions specified in Sections 6.3(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Buyer certifying as to the accuracy and completeness of the
attached Governing Documents of Buyer and resolutions, consents and
authorizations of or regarding Buyer with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
ARTICLE 7
TERMINATION OF AGREEMENT
SECTION 7.1. Termination. This Agreement may be terminated on or prior to
the Closing Date as follows:
(a) by mutual written consent of Seller and Buyer; or
(b) at the election of Seller or Buyer, to be effectuated by the delivery
by the terminating party to the other party of a written notice of such
termination:
(i) if the Closing Date shall not be on or before the Termination
Date, unless the failure to consummate the Reorganization is the result of
a willful and material breach of this Agreement by the party seeking to
terminate this Agreement;
(ii) if, upon a vote at the Shareholders Meeting or any final
adjournment thereof, the Required Shareholder Vote shall not have been
obtained as contemplated by Section 5.8; or
(iii) if any Governmental Authority shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Reorganization and such order, decree, ruling or
other action shall have become final and nonappealable.
SECTION 7.2. Survival After Termination. If this Agreement is terminated
in accordance with Section 7.1 hereof and the Reorganization of Selling Fund is
not consummated, this Agreement shall become void and of no further force and
effect with respect to the Reorganization and Selling Fund, except for the
provisions of Section 5.3.
I-17
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Survival of Representations, Warranties and Covenants. The
representations and warranties in this Agreement, and the covenants in this
Agreement that are required to be performed at or prior to the Closing Date,
shall terminate upon the consummation of the transactions contemplated
hereunder. The covenants in this Agreement that are required to be performed in
whole or in part subsequent to the Closing Date shall survive the consummation
of the transactions contemplated hereunder for a period of one (1) year
following the Closing Date.
SECTION 8.2. Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state.
SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns of the parties and such Persons.
Nothing in this Agreement is intended or shall be construed to confer upon any
entity or Person other than the parties hereto and their respective successors
and permitted assigns any right, remedy or claim under or by reason of this
Agreement or any part hereof. Without the prior written consent of the parties
hereto, this Agreement may not be assigned by any of the parties hereto.
SECTION 8.4. Obligations of Buyer and Seller.
(a) Seller and Buyer hereby acknowledge and agree that Buying Fund is a
separate investment portfolio of Buyer, that Buyer is executing this Agreement
on behalf of Buying Fund, and that any amounts payable by Buyer under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Buying Fund.
(b) Seller and Buyer hereby acknowledge and agree that Selling Fund is a
separate investment portfolio of Seller, that Seller is executing this Agreement
on behalf of Selling Fund and that any amounts payable by Seller under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Selling Fund. Buyer further acknowledges and agrees that this
Agreement has been executed by a duly authorized officer of Seller in his or her
capacity as an officer of Seller intending to bind Seller as provided herein,
and that no officer, trustee or shareholder of Seller shall be personally liable
for the liabilities or obligation of Seller incurred hereunder. Finally, Buyer
acknowledges and agrees that the liabilities and obligations of Selling Fund
pursuant to this Agreement shall be enforceable against the assets of Selling
Fund only and not against the assets of Seller generally or assets belonging to
any other series of Seller.
SECTION 8.5. Amendments. This Agreement may not be amended, altered or
modified except by a written instrument executed by Seller and Buyer.
SECTION 8.6. Enforcement. The parties agree irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
any state having jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity.
SECTION 8.7. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or a Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." Each representation and warranty contained in Article 3 or 4 that
relates to a general category of a subject matter shall be deemed superseded by
a specific representation and warranty relating to a subcategory thereof to the
extent of such specific representation or warranty.
I-18
SECTION 8.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and each of which shall
constitute one and the same instrument.
SECTION 8.9. Entire Agreement; Exhibits and Schedules. This Agreement,
including the Exhibits, Schedules, certificates and lists referred to herein,
and any documents executed by the parties simultaneously herewith or pursuant
thereto, constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, written or oral, between the parties with respect
to such subject matter.
SECTION 8.10. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand or by overnight courier, two days after being
sent by registered mail, return receipt requested, or when sent by telecopier
(with receipt confirmed), provided, in the case of a telecopied notice, a copy
is also sent by registered mail, return receipt requested, or by courier,
addressed as follows (or to such other address as a party may designate by
notice to the other):
(a) If to Seller:
AIM Investment Funds
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Kevin M. Carome
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attn: Martha J. Hays
(b) If to Buyer:
INVESCO Sector Funds, Inc.
4350 South Monaco Street
Denver, Colorado 80237
Attn: Glen A. Payne
with a copy to:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue N.W., 2nd Floor
Washington, D.C. 20036-1800
Attn: Clifford J. Alexander
SECTION 8.11. Representations by Seller Investment Adviser. In its
capacity as investment adviser to Seller, Seller Investment Adviser represents
to Buyer that to the best of its knowledge the representations and warranties of
Seller and Selling Fund contained in this Agreement are true and correct as of
the date of this Agreement. For purposes of this Section 8.11, the best
knowledge standard shall be deemed to mean that the officers of Seller
Investment Adviser who have substantive responsibility for the provision of
investment advisory services to Seller do not have actual knowledge to the
contrary after due inquiry.
SECTION 8.12. Representations by Buyer Investment Adviser. In its
capacity as investment adviser to Buyer, Buyer Investment Adviser represents to
Seller that to the best of its knowledge the representations and warranties of
Buyer and Buying Fund contained in this Agreement are true and correct as of the
date of this Agreement. For purposes of this Section 8.12, the best knowledge
standard shall be deemed to mean that the officers of Buyer Investment Adviser
who have substantive responsibility for the provision of investment advisory
services to Buyer do not have actual knowledge to the contrary after due
inquiry.
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SECTION 8.13. Successors and Assigns; Assignment. This Agreement shall be
binding upon and inure to the benefit of Seller, on behalf of Selling Fund, and
Buyer, on behalf of Buying Fund, and their respective successors and assigns.
The parties hereto expressly acknowledge and agree that this Agreement shall be
binding upon and inure to the benefit of those Delaware statutory trusts that
are the resulting entities in the permitted restructurings and redomestications
of funds set forth on Schedule 3.5(d).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM INVESTMENT FUNDS, acting on behalf
of
AIM GLOBAL FINANCIAL SERVICES FUND
By: /s/ RAYMOND R. CUNNINGHAM
------------------------------------
INVESCO SECTOR FUNDS, INC., acting on
behalf of INVESCO FINANCIAL SERVICES
FUND
By: /s/ ROBERT H. GRAHAM
------------------------------------
A I M ADVISORS, INC.
By: /s/ MARK H. WILLIAMSON
------------------------------------
INVESCO FUNDS GROUP, INC.
By: /s/ RAYMOND R. CUNNINGHAM
------------------------------------
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EXHIBIT A
EXCLUDED LIABILITIES OF SELLING FUND
None.
SCHEDULE 2.1
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF SHARES OF SELLING FUND SHARES OF BUYING FUND
- --------------------------------- ------------------------
Class A shares.............................................. Class A shares
Class B shares.............................................. Class B shares
Class C shares.............................................. Class C shares
</Table>
SCHEDULE 3.4
CERTAIN CONTINGENT LIABILITIES OF SELLING FUND
None.
SCHEDULE 3.5(d)
PERMITTED RESTRUCTURINGS AND REDOMESTICATIONS OF FUNDS
<Table>
<Caption>
CURRENT FUNDS CORRESPONDING NEW FUNDS
- ------------- -----------------------
AIM ADVISOR FUNDS................................ AIM INVESTMENT SECURITIES FUNDS
(DELAWARE STATUTORY TRUST) (DELAWARE STATUTORY TRUST)
AIM International Core Equity Fund............... AIM International Core Equity Fund
AIM Real Estate Fund............................. AIM Real Estate Fund
AIM INTERNATIONAL FUNDS, INC. ................... AIM INTERNATIONAL MUTUAL FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
AIM European Growth Fund......................... AIM European Growth Fund
INVESCO BOND FUNDS, INC. ........................ AIM BOND FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO High Yield Fund.......................... INVESCO High Yield Fund
INVESCO Select Income Fund....................... INVESCO Select Income Fund
INVESCO Tax-Free Bond Fund....................... INVESCO Tax-Free Bond Fund
INVESCO U.S. Government Securities Fund.......... INVESCO U.S. Government Securities Fund
INVESCO COMBINATION STOCK & BOND FUNDS, INC. .... AIM COMBINATION STOCK & BOND FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Balanced Fund............................ INVESCO Balanced Fund
INVESCO Total Return Fund........................ INVESCO Total Return Fund
INVESCO COUNSELOR SERIES FUNDS, INC. ............ AIM COUNSELOR SERIES TRUST
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Advantage Fund........................... INVESCO Advantage Fund
INVESCO INTERNATIONAL FUNDS, INC. ............... AIM INTERNATIONAL MUTUAL FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO European Fund............................ INVESCO European Fund
INVESCO International Blue Chip Value Fund....... INVESCO International Blue Chip Value Fund
INVESCO MONEY MARKET FUNDS, INC. ................ AIM TREASURER'S SERIES TRUST
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Cash Reserves Fund....................... INVESCO Cash Reserves Fund
INVESCO Tax-Free Money Fund...................... INVESCO Tax-Free Money Fund
INVESCO SECTOR FUNDS, INC. ...................... AIM SECTOR FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Energy Fund.............................. INVESCO Energy Fund
INVESCO Financial Services Fund.................. INVESCO Financial Services Fund
INVESCO Real Estate Opportunity Fund............. INVESCO Real Estate Opportunity Fund
INVESCO Technology Fund.......................... INVESCO Technology Fund
INVESCO Telecommunications Fund.................. INVESCO Telecommunications Fund
INVESCO Utilities Fund........................... INVESCO Utilities Fund
INVESCO STOCK FUNDS, INC. ....................... AIM STOCK FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Growth Fund.............................. INVESCO Growth Fund
INVESCO Growth & Income Fund..................... INVESCO Growth & Income Fund
INVESCO Value Equity Fund........................ INVESCO Value Equity Fund
</Table>
SCHEDULE 4.4
CERTAIN CONTINGENT LIABILITIES OF BUYING FUND
None.
SCHEDULE 4.5(a)
PORTFOLIOS OF BUYER
<Table>
INVESCO Energy Fund
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Real Estate Opportunity Fund
INVESCO Technology Fund
INVESCO Telecommunications Fund
INVESCO Utilities Fund
</Table>
SCHEDULE 4.5(b)
<Table>
<Caption>
NUMBER OF SHARES OF EACH CLASS
CLASSES OF SHARES OF BUYING FUND BUYER IS AUTHORIZED TO ISSUE
- -------------------------------- ------------------------------
Class A shares.............................................. 100,000,000
Class B shares.............................................. 100,000,000
Class C shares.............................................. 100,000,000
Class K shares.............................................. 100,000,000
Investor Class shares....................................... 300,000,000
</Table>
SCHEDULE 5.1
PERMITTED COMBINATIONS OF FUNDS
<Table>
INVESCO Advantage Fund into AIM Opportunities III Fund
INVESCO Growth Fund into AIM Large Cap Growth Fund
INVESCO Growth & Income Fund into AIM Blue Chip Fund
INVESCO European Fund into AIM European Growth Fund
AIM International Core Equity Fund into INVESCO
International Blue Chip Value Fund
AIM New Technology Fund into INVESCO Technology Fund
AIM Global Science and Technology Fund into INVESCO
Technology Fund
INVESCO Telecommunications Fund into INVESCO Technology Fund
AIM Global Financial Services Fund into INVESCO Financial
Services Fund
AIM Global Energy Fund into INVESCO Energy Fund
AIM Global Utilities Fund into INVESCO Utilities Fund
INVESCO Real Estate Opportunity Fund into AIM Real Estate
Fund
INVESCO Tax-Free Bond Fund into AIM Municipal Bond Fund
INVESCO High Yield Fund into AIM High Yield Fund
INVESCO Select Income Fund into AIM Income Fund
INVESCO U.S. Government Securities Fund into AIM
Intermediate Government Fund
INVESCO Cash Reserves Fund into AIM Money Market Fund
INVESCO Tax-Free Money Fund into AIM Tax-Exempt Cash Fund
INVESCO Balanced Fund into INVESCO Total Return Fund
INVESCO Value Equity Fund into AIM Large Cap Basic Value
Fund
AIM Premier Equity Fund II into AIM Premier Equity Fund
</Table>
SCHEDULE 6.2(f)
TAX OPINIONS
(i) The transfer of the assets of Selling Fund to Buying Fund in exchange
solely for Buying Fund Shares distributed directly to Selling Fund Shareholders
and Buying Fund's assumption of the Liabilities, as provided in the Agreement,
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code and Selling Fund and Buying Fund will be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
(ii) In accordance with Section 361(a) and Section 361(c)(1) of the Code,
no gain or loss will be recognized by Selling Fund on the transfer of its assets
to Buying Fund solely in exchange for Buying Fund Shares and Buying Fund's
assumption of the Liabilities or on the distribution of Buying Fund Shares to
Selling Fund Shareholders; provided that, no opinion is expressed as to the
effect of the Reorganization on Selling Fund or any Selling Fund Shareholder
with respect to any asset as to which any unrealized gain or loss is required to
be recognized for Federal income tax purposes at the end of a taxable year (or
on the termination or transfer of a taxpayer's rights (or obligations) with
respect to such asset) under a mark-to-market system of accounting.
(iii) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange
for Buying Fund Shares issued directly to Selling Fund Shareholders.
(iv) In accordance with Section 354(a)(1) of the Code, no gain or loss will
be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares
in exchange for Selling Fund Shares.
(v) In accordance with Section 362(b) of the Code, the basis to Buying Fund
of the assets of Selling Fund will be the same as the basis of such assets in
the hands of Selling Fund immediately prior to the Reorganization.
(vi) In accordance with Section 358(a) of the Code, a Selling Fund
Shareholder's basis for Buying Fund Shares received by the Selling Fund
Shareholder will be the same as his or her basis for Selling Fund Shares
exchanged therefor.
(vii) In accordance with Section 1223(1) of the Code, a Selling Fund
Shareholder's holding period for Buying Fund Shares will be determined by
including such Selling Fund Shareholder's holding period for Selling Fund Shares
exchanged therefor, provided that such Selling Fund Shareholder held such
Selling Fund Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the Code, the holding period
with respect to the assets of Selling Fund transferred to Buying Fund in the
Reorganization will include the holding period for such assets in the hands of
Selling Fund.
(ix) In accordance with Section 381(a)(2) of the Code, Buying Fund will
succeed to and take into account the items of Selling Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381 through 384 of the Code and the Treasury Regulations thereunder.
APPENDIX II
INVESCO SECTOR FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & Precious Metals Fund--Investor Class, Class A, B, and C
INVESCO Real Estate Opportunity Fund--Investor Class, Class A, B, and C
INVESCO Utilities Fund--Investor Class, Class A, B, and C
Supplement dated August 1, 2003 to the Prospectus dated August 1, 2003
INVESCO REAL ESTATE OPPORTUNITY FUND
The Board of Directors of INVESCO Sector Funds, Inc. ("Seller") unanimously
approved, on June 9, 2003, an Agreement and Plan of Reorganization (the "Plan")
pursuant to which INVESCO Real Estate Opportunity Fund ("Selling Fund"), a
series of Seller, would transfer all of its assets and liabilities to AIM Real
Estate Fund ("Buying Fund"), a series of AIM Advisor Funds (the
"Reorganization"). As a result of the Reorganization, shareholders of Selling
Fund would receive shares of Buying Fund in exchange for their shares of Selling
Fund, and Selling Fund would cease operations.
INVESCO Funds Group, Inc. ("INVESCO") serves as the investment advisor to
Selling Fund and A I M Advisors, Inc. ("AIM") serves as the investment advisor
to Buying Fund. Both investment advisors are wholly owned subsidiaries of
AMVESCAP PLC ("AMVESCAP"), an independent global investment management company.
The Reorganization is part of an integration initiative announced on March 27,
2003, by AMVESCAP, with respect to its North American mutual fund operations.
One component of AMVESCAP's integration initiative is the rationalization and
streamlining of the various funds within The AIM Family of Funds(R) and the
INVESCO Family of Funds. In that regard, AMVESCAP has undertaken an extensive
review of these funds and concluded that it would be appropriate to reduce the
number of smaller and less efficient funds that compete in the same space for
shareholder assets and to consolidate certain funds having similar investment
objectives and strategies. Reducing the number of funds both within The AIM
Family of Funds(R) and the INVESCO Family of Funds will allow AIM and INVESCO to
concentrate on managing their core products.
In AMVESCAP's view, AIM has best developed the expertise and resources for
managing funds with an investment objective and strategies similar to those of
Selling Fund and should therefore manage the combined fund. AMVESCAP's belief is
that the Reorganization will allow Buying Fund the best available opportunities
for investment management, growth prospects and potential economies of scale.
The Board of Directors of Seller, including the independent directors, has
determined that the Reorganization is advisable and in the best interests of
Selling Fund and that the interests of the shareholders of Selling Fund will not
be diluted as a result of the Reorganization.
The investment objectives of Selling Fund and Buying Fund are similar. Selling
Fund's investment objective is capital growth and income. Buying Fund's
investment objective is high total return.
The Plan requires approval of Selling Fund shareholders and will be submitted to
the shareholders for their consideration at a meeting to be held on or around
October 21, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
It is anticipated that Selling Fund will be closed to new investors during the
fourth quarter of 2003.
INVESCO TELECOMMUNICATIONS FUND
The Board of Directors of INVESCO Sector Funds, Inc. ("Seller") unanimously
approved, on June 9, 2003, an Agreement and Plan of Reorganization (the "Plan")
pursuant to which INVESCO Telecommunications Fund ("Selling Fund"), would
transfer all of its assets and liabilities to INVESCO Technology Fund ("Buying
Fund"), both of which are series of Seller (the "Reorganization"). As a result
of the Reorganization, shareholders of Selling Fund would receive shares of
Buying Fund in exchange for their shares of Selling Fund, and Selling Fund would
cease operations.
INVESCO Funds Group, Inc. ("INVESCO") serves as the investment advisor to both
Selling Fund and Buying Fund. The investment advisor is a wholly owned
subsidiary of AMVESCAP PLC ("AMVESCAP"), an independent global investment
management company. The Reorganization is part of an integration initiative
announced on March 27, 2003, by AMVESCAP, with respect to its North American
mutual fund operations.
One component of AMVESCAP's integration initiative is the rationalization and
streamlining of various funds within the INVESCO Family of Funds. In that
regard, AMVESCAP has undertaken an extensive review of these funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete in the same space for shareholder assets and to consolidate
certain funds having similar investment objectives and strategies. Reducing the
number of funds within the INVESCO Family of Funds will allow INVESCO to
concentrate on managing its core products.
AMVESCAP's belief is that the Reorganization will allow Buying Fund the best
available opportunities for investment management, growth prospects and
potential economies of scale.
The Board of Directors of Seller, including the independent directors, has
determined that the Reorganization is advisable and in the best interests of
Selling Fund and that the interests of the shareholders of Selling Fund will not
be diluted as a result of the Reorganization.
The investment objectives of Selling Fund and Buying Fund are the same. Selling
Fund's investment objective is capital growth and income. Buying Fund's
investment objective is capital growth.
The Plan requires approval of Selling Fund shareholders and will be submitted to
the shareholders for their consideration at a meeting to be held on or around
October 21, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
It is anticipated that Selling Fund will be closed to new investors during the
fourth quarter of 2003.
Effective August 18, 2003, the section of the Prospectus entitled "Fees And
Expenses" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Investor Class Class A Class B Class C Class K
Maximum Front-End Sales Charge
on purchases as a percentage of
offering price None 5.50% None None None
Maximum Contingent Deferred Sales
Charge (CDSC) as a percentage of
the lower of the total original cost or
current market value of the shares None None(1) 5.00%(2) 1.00%(2) None(1)
Maximum Sales Charge on reinvested
dividends/distributions None None None None None
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares
within eighteen months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) A 5% and 1% CDSC may
be charged on Class B and Class C shares, respectively. Please see the section
entitled "How To Buy Shares."
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
With the exception of Class A shares, there is no charge to invest directly
through INVESCO. Class A shares are subject to a front-end sales charge. For
more information on this charge, please see the subsection entitled "Sales
Charges." If you buy $1,000,000 or more of Class A shares and redeem the shares
within eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the lower of the total original
cost or current market value of the shares may be assessed. With respect to
redemption of Class C shares held twelve months or less, a CDSC of 1% of the
lower of the total original cost or current market value of the shares may be
assessed. With respect to Class K shares, if you are a qualified plan and elect
to receive a dealer concession, you may pay a CDSC of 0.70% on your Class K
shares if the plan is redeemed within twelve months from initial deposit in the
plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. For a non-qualified plan, in
determining whether a CDSC applies to a redemption, it is assumed that the
shares being redeemed first are any shares in the shareholder's Fund account
that are not subject to a CDSC, followed by shares held the longest in the
shareholder's account. These charges are not assessed upon Class A, B, C, or K
shares acquired through reinvestment of dividends or other distributions, or
Class A, B, C, or K shares exchanged for the same class of another INVESCO Fund.
For more information on CDSC charges, please see the subsection of the
Prospectus entitled "Choosing A Share Class" and the section of the Statement of
Additional Information entitled "Distributor - Sales Charges and Dealer
Concessions."
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares - Choosing A Share Class" is amended to (i) delete the second paragraph
in its entirety and (ii) substitute the following in its place:
In addition, you should also consider the factors below:
Investor
Class Class A Class B Class C Class K
Initial Sales Charge None 5.50% None None None
CDSC(1) None 1% on certain 1%-5% for 1% for shares 0.70% on certain
purchases held shares held held less than purchases
less than 18 less than 12 months held less than
months 6 years 12 months
12b-1 Fee 0.25% 0.35% 1.00% 1.00% 0.45%
12b-1 Fee
(Utilities Fund Only) 0.25% 0.25% 1.00% 1.00% None
Conversion No No Yes(2) No No
Purchase Order
Maximum None None $250,000 $1,000,000 None
(1) Please see the subsection entitled "Sales Charges" below and the section of
the Funds' Statement of Additional Information entitled "Distributor - Sales
Charges and Dealer Concessions" for more information regarding CDSC charges and
dealer concessions.
(2) Class B shares, along with the pro rata portion of the shares' reinvested
dividends and distributions, automatically convert to Class A shares at the end
of the month which is eight years after the date on which such Class B shares
were purchased.
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares - Sales Charges (Class A, B, C And K Only)" is amended to (i) delete the
third, fourth, seventh, eighth, and tenth paragraphs in their entirety and (ii)
substitute the following, respectively, in their place:
CONTINGENT DEFERRED SALES CHARGE (CDSC) for Class A and Class K Shares. You
can purchase $1,000,000 or more of Class A shares at net asset value, and
the distributor may pay a dealer concession and/or a service fee for
purchases of $1,000,000 or more. However, if you purchase shares worth
$1,000,000 or more, they may be subject to a CDSC of 1% if you redeem them
prior to eighteen months after the date of purchase. We will use the
"first-in, first-out" method to determine your holding period. Under this
method, the date of redemption will be compared with the earliest purchase
date of shares held in your account. If your holding period is less than
eighteen months, the CDSC may be assessed on the amount of the lower of the
total original cost or current market value of the shares. For qualified
plans investing in Class A shares, you may pay a CDSC of 1% if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. For qualified plans investing in Class K shares, you may pay a
CDSC of 0.70% if the plan is redeemed within twelve months from initial
deposit in the plan's INVESCO account.
CDSC 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 CDSC in the following percentages. If your holding
period is less than six years for Class B shares and twelve months for
Class C shares, the CDSC may be assessed on the amount of the lower of the
total original cost or current market value of the shares.
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(1) None
(1) Class B shares, along with the pro rata portion of the shares'
reinvested dividends and distributions, automatically convert to Class A
shares at the end of the month which is eight years after the date on which
such Class B shares were purchased.
RIGHTS OF ACCUMULATION. You may combine your new purchases of Class A
shares with shares currently owned (Class A, B, C, or K) for the purpose of
qualifying for the lower initial sales charge rates that apply to larger
purchases. The applicable initial sales charge for the new purchase is
based on the total of your current purchase and the current value of all
other shares you own.
LETTER OF INTENT. Under a Letter of Intent (LOI), you commit to purchase a
specified dollar amount of Class A shares of a Fund during a thirteen-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 thirteen-month period, your account will be adjusted to the
higher initial sales charge level for the amount actually invested.
You will not pay a CDSC:
|X| if you purchase less than $1,000,000 of Class A shares;
|X| if you purchase $1,000,000 or more of Class A shares and hold
those shares for more than eighteen months;
|X| if you redeem Class B shares you held for more than six years;
|X| if you redeem Class C shares you held for more than twelve
months;
|X| if you participate in the periodic withdrawal program and
withdraw up to 12% of the value of your shares that are subject
to a CDSC in any twelve-month period. The value of your shares,
and applicable twelve-month period, will be calculated based upon
the value of your account on, and the date of, the first periodic
withdrawal;
|X| if you redeem shares acquired through reinvestment of dividends
and distributions;
|X| if you are a participant in a qualified retirement plan and
redeem Class C shares or Class K shares in order to fund a
distribution;
|X| if you are a qualified plan investing in Class A shares or Class
K shares and elect to forego any dealer concession;
|X| on increases in the net asset value of your shares;
|X| to pay account fees;
|X| for IRA distributions due to death or disability or periodic
distribution based on life expectancy;
|X| to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
|X| for redemptions following the death of a shareholder or
beneficial owner.
Effective August 18, 2003, the section of the Prospectus entitled "How To Sell
Shares" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
Various fees may apply to Fund redemptions. You may be charged a CDSC at
the time of redemption depending how long you have held your shares. If you
buy $1,000,000 or more of Class A shares and redeem the shares within
eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a
dealer concession, you may pay a CDSC of 1% on your Class A shares if the
plan is redeemed within twelve months from initial deposit in the plan's
INVESCO account. If you are a qualified plan and elect to forego the dealer
concession, you will not be charged a CDSC. With respect to redemption of
Class B shares held six years or less, a CDSC of 1% - 5% of the lower of
the total original cost or current market value of the shares may be
assessed. With respect to redemption of Class C shares held twelve months
or less, a CDSC of 1% of the lower of the total original cost or current
market value of the shares may be assessed. With respect to Class K shares,
if you are a qualified plan and elect to receive a dealer concession, you
may pay a CDSC of 0.70% on your Class K shares if the plan is redeemed
within twelve months from initial deposit in the plan's INVESCO account. If
you are a qualified plan and elect to forego the dealer concession, you
will not be charged a CDSC. For a non-qualified plan, in determining
whether a CDSC applies to a redemption, it is assumed that the shares being
redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the
shareholder's account. These charges are not assessed upon Class A, B, C,
or K shares acquired through reinvestment of dividends or other
distributions, or Class A, B, C, or K shares exchanged for the same class
of another INVESCO Fund. For more information on CDSC charges, please see
the subsection of the Prospectus entitled "Choosing A Share Class" and the
section of the Statement of Additional Information entitled "Distributor -
Sales Charges and Dealer Concessions."
INVESCO HEALTH SCIENCES FUND
Effective August 1, 2003, the section of the Prospectus entitled "Portfolio
Managers" is amended to add:
ANDY SUMMERS is a Portfolio Manager for all INVESCO Health Sciences portfolios.
Andy joined the INVESCO Health Sciences investment team in 1998. He is a CFA
charterholder. Prior to joining INVESCO, Andy worked as an analyst assistant for
Denver Investment Advisors. He received his master's degree in finance from the
University of Wisconsin at Madison in 1998. He received his bachelor's degree in
finance from the University of Wisconsin at Whitewater in 1996.
INVESCO TECHNOLOGY FUND
Effective August 1, 2003, the section of the Prospectus entitled "Portfolio
Managers" is amended to add:
CHRIS DRIES is a Portfolio Manager for the INVESCO Technology Fund. Chris
joined INVESCO in 1993, and was promoted to the investment division in 1995. He
previously held the position of manager of investment operations for the
investment division at INVESCO. Chris received his master's degree in finance
from the University of Colorado at Denver and his bachelor's degree in finance
from the University of Colorado at Boulder.
MICHELLE FENTON is a Portfolio Manager of INVESCO Dynamics Fund and INVESCO
Mid-Cap Growth Fund. Michelle is also a Portfolio Manager for the INVESCO
Technology Fund. She is a CFA charterholder. Michelle has more than eight years
of investment industry experience. Before joining the investment division of
INVESCO in 1998, Michelle worked at Berger Funds as an equity analyst. Prior to
that, she was a research analyst at Smith Barney. Michelle received her
bachelor's degree in finance from Montana State University.
PROSPECTUS | AUGUST 1, 2003
- --------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS(R)
- --------------------------------------------------------------------------------
INVESCO SECTOR
FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & PRECIOUS METALS FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO REAL ESTATE OPPORTUNITY FUND--INVESTOR CLASS, CLASS A, B AND C
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO UTILITIES FUND--INVESTOR CLASS, CLASS A, B, AND C
NINE MUTUAL FUNDS DESIGNED FOR INVESTORS SEEKING CAPITAL GROWTH THROUGH TARGETED
INVESTMENT OPPORTUNITIES.
INVESTOR CLASS SHARES OFFERED BY THIS PROSPECTUS ARE OFFERED ONLY TO
GRANDFATHERED INVESTORS. PLEASE SEE THE SECTION OF THE PROSPECTUS ENTITLED "HOW
TO BUY SHARES."
CLASS A, B, AND C SHARES ARE SOLD PRIMARILY THROUGH FINANCIAL INTERMEDIARIES.
CLASS K SHARES ARE SOLD TO QUALIFIED RETIREMENT PLANS, RETIREMENT SAVINGS
PROGRAMS, EDUCATIONAL SAVINGS PROGRAMS, AND WRAP PROGRAMS PRIMARILY THROUGH
FINANCIAL INTERMEDIARIES.
TABLE OF CONTENTS
Investment Goals, Strategies, And Risks....................2
Fund Performance...........................................5
Fees And Expenses.........................................10
Investment Risks..........................................14
Principal Risks Associated With The Funds.................14
Temporary Defensive Positions.............................16
Portfolio Turnover........................................16
Fund Management...........................................17
Portfolio Managers........................................17
Potential Rewards.........................................18
Share Price...............................................18
How To Buy Shares.........................................19
Your Account Services.....................................23
How To Sell Shares........................................24
Taxes.....................................................26
Dividends And Capital Gain Distributions..................26
Financial Highlights......................................27
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.
[INVESCO ICON] INVESCO(R)
The Securities and Exchange Commission has not approved or disapproved the
shares of these Funds. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is committing
a federal crime. INVESCO Funds Group, Inc. ("INVESCO") is the investment advisor
for the Funds. Together with our affiliated companies, we at INVESCO direct all
aspects of the management and sale of the Funds.
INVESCO Funds Group, Inc. ("INVESCO") is the investment advisor for the Funds.
Together with our affiliated companies, we at INVESCO direct all aspects of the
management and sale of the Funds.
This Prospectus contains important information about the Funds' Investor Class,
Class A, B, C, and, if applicable, K shares. Class A, B, and C shares are sold
primarily through financial intermediaries. Class K shares are sold to qualified
retirement plans, retirement savings programs, educational savings programs, and
wrap programs primarily through financial intermediaries. If you invest through
a financial intermediary, please contact your financial intermediary or, with
respect to Class K shares, your plan or program sponsor, for detailed
information on suitability and transactional issues (i.e., how to purchase or
sell shares, minimum investment amounts, and fees and expenses). INVESCO
Technology Fund also offers an additional class of shares through a separate
Prospectus. Each of the Fund's classes has varying expenses, with resulting
effects on their performance. You can choose the class of shares that is best
for you, based on how much you plan to invest and other relevant factors
discussed in "How To Buy Shares." To obtain additional information about the
other class of Technology Fund's shares, contact A I M Distributors, Inc.
("ADI") at 1-800-347-4246.
THIS PROSPECTUS WILL TELL YOU MORE ABOUT:
[KEY ICON] INVESTMENT GOALS & STRATEGIES
[ARROWS ICON] POTENTIAL INVESTMENT RISKS
[GRAPH ICON] PAST PERFORMANCE
[INVESCO ICON] WORKING WITH INVESCO
- --------------------------------------------------------------------------------
[KEY ICON] [ARROWS ICON] INVESTMENT GOALS, STRATEGIES, AND RISKS
FACTORS COMMON TO ALL THE FUNDS
FOR MORE DETAILS ABOUT EACH FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK,
PLEASE SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.
The Funds seek capital growth; Real Estate Opportunity, Telecommunications, and
Utilities Funds also attempt to earn income for you. The Funds are actively
managed. They invest primarily in equity securities that INVESCO believes will
rise in price faster than other securities, as well as in options and other
investments whose values are based upon the values of equity securities.
Each Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies doing business in the
economic sector described by its name. At any given time, 20% of each Fund's
assets is not required to be invested in the sector. To determine whether a
potential investment is truly doing business in a particular sector, a company
must meet at least one of the following tests:
o At least 50% of its gross income or its net sales must come from activities
in the sector;
o At least 50% of its assets must be devoted to producing revenues from the
sector;
o or Based on other available information, we determine that its primary
business is within the sector.
INVESCO uses a research oriented "bottom-up" investment approach to create each
Fund's investment portfolio, focusing on company fundamentals and growth
prospects when selecting securities. In general, the Funds emphasize companies
that INVESCO believes are strongly managed and will generate above-average
long-term capital appreciation.
Growth investing may be more volatile than other investment styles because
growth stocks are more sensitive to investor perceptions of an issuing company's
growth potential. Growth-oriented funds typically will underperform
value-oriented funds when investor sentiment favors the value investing style.
Value investing seeks securities, particularly stocks, that are currently
undervalued by the market -- companies that are performing well, or have solid
management and products, but whose stock prices do not reflect that value.
Through our value process, we seek to provide reasonably consistent returns over
a variety of market cycles. Value-oriented funds typically will underperform
growth-oriented funds when investor sentiment favors the growth investing style.
As sector funds, each portfolio is concentrated in a comparatively narrow
segment of the economy. This means a Fund's investment concentration in a sector
is higher than most mutual funds and the broad securities markets. Consequently,
the Funds tend to be more volatile than other mutual funds, and the value of
their portfolio investments and consequently the value of an investment in a
Fund tend to go up and down more rapidly.
The Funds are subject to other principal risks, as applicable, such as market,
foreign securities, liquidity, derivatives, counterparty, lack of timely
information, and portfolio turnover risks. These risks are described and
discussed later in the Prospectus under the headings "Investment Risks" and
"Principal Risks Associated With The Funds." An investment in a Fund is not a
deposit of any bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") or any other government agency. As with any
mutual fund, there is always a risk that you may lose money on your investment
in a Fund.
The Funds are concentrated in these sectors:
[KEY ICON] INVESCO ENERGY FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies within the energy sector.
These companies include, but are not limited to, oil companies, oil and gas
exploration companies, natural gas pipeline companies, refinery companies,
energy conservation companies, coal, alternative energy companies, and
innovative energy technology companies.
Generally, we prefer to keep the Fund's investments divided among the four main
energy subsectors: major oil companies, energy services, oil and gas
exploration/production companies, and natural gas pipeline companies. We adjust
portfolio weightings depending on current economic conditions. Although
individual security selection drives the performance of the Fund, short-term
fluctuations in commodity prices may influence Fund returns and increase price
fluctuations in the Fund's shares. The businesses in which we invest may be
adversely affected by foreign government, federal, or state regulations on
energy production, distribution, and sale.
[KEY ICON] INVESCO FINANCIAL SERVICES FUND -- INVESTOR CLASS, CLASS A, B, C,
AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies involved in the financial
services sector. These companies include, but are not limited to, banks
(regional and money-centers), insurance companies (life, property and casualty,
and multiline), investment and miscellaneous industries (asset managers,
brokerage firms, and government-sponsored agencies), and suppliers to financial
services companies.
We place a greater emphasis on companies that are increasing their revenue
streams along with their earnings. We seek companies that we believe can grow
their revenues and earnings in a variety of interest rate environments --
although securities prices of financial services companies generally are
interest rate sensitive. We seek companies with successful sales and marketing
cultures and that leverage technologies in their operations and distribution. We
adjust portfolio weightings depending on current economic conditions and
relative valuations of securities.
This sector generally is subject to extensive governmental regulation, which may
change frequently. In addition, the profitability of businesses in these
industries depends heavily upon the availability and cost of money, and may
fluctuate significantly in response to changes in interest rates, as well as
changes in general economic conditions. From time to time, severe competition
may also affect the profitability of these industries.
[KEY ICON] INVESCO GOLD & PRECIOUS METALS FUND -- INVESTOR CLASS, CLASS A, B,
AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies involved in exploring
for, mining, processing, or dealing and investing in gold, gold bullion, and
other precious metals, such as silver, platinum, and palladium, as well as
diamonds. The securities of these companies are highly dependent on the price of
precious metals at any given time.
Fluctuations in the price of gold directly -- and often dramatically -- affect
the profitability and market value of companies in this sector. Changes in
political or economic climate for the two largest gold producers -- South Africa
and the former Soviet Union -- may have a direct impact on the price of gold
worldwide. Up to 10% at the time of purchase of the Fund's assets may be
invested in gold bullion. The Fund's investments directly in gold bullion will
earn no income return; appreciation in the market price of gold is the sole
manner in which the Fund can realize gains on bullion investments. The Fund may
have higher storage and custody costs in connection with its ownership of
bullion than those associated with the purchase, holding and sale of more
traditional types of investments.
The Fund primarily focuses on those gold companies that have the ability to
increase production capacity at low costs, while having the potential to make
major gold discoveries around the world. Additionally, we try to identify
companies that leverage increasing gold prices; that is, companies that do not
hedge gold prices on the market. While the Fund may take positions in mid- to
small-sized exploration companies that may be more volatile than investments in
large, more established companies, it will primarily focus on major gold stocks
that are leaders in their fields. Up to 100% of the Fund's assets may be
invested in foreign companies.
[KEY ICON] INVESCO HEALTH SCIENCES FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies that develop, produce, or
distribute products or services related to health care. These companies include,
but are not limited to, medical equipment or supplies, pharmaceuticals,
biotechnology, and health care providers and services companies.
We focus on the dominant players in fast-growing therapeutic areas or companies
on the verge of exciting medical breakthroughs. We seek companies with strong,
commercially successful products as well as promising product pipelines. This
strategy may lead us to invest in both well-established health care firms and
faster-growing, more dynamic entities. Well-established health care companies
typically provide liquidity and earnings visibility for the portfolio and
represent core holdings in the Fund. The Fund also may invest in high growth,
earlier stage companies whose future profitability could be dependent upon
increasing market shares from one or a few key products. Such companies often
have limited operating histories and their potential profitability may be
dependent on regulatory approval of their products, which increases the
volatility of these companies' securities prices and could have an adverse
impact upon the companies' future growth and profitability.
Changes in government regulation could also have an adverse impact. Continuing
technological advances may mean rapid obsolescence of products and services.
[KEY ICON] INVESCO LEISURE FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in the design,
production, and distribution of products related to the leisure activities.
These industries include, but are not limited to, hotels/gaming, publishing,
advertising, beverages, audio/video, broadcasting-radio/TV, cable & satellite
operators, cable & satellite programmers, motion pictures & TV, recreation
services/entertainment, retail, and toys.
We seek firms that can grow their businesses regardless of the economic
environment. INVESCO attempts to keep the portfolio well diversified across the
leisure sector, adjusting portfolio weightings depending on prevailing economic
conditions and relative valuations of securities. This sector depends on
consumer discretionary spending, which generally falls during economic
downturns. Securities of gambling casinos often are subject to high price
volatility and are considered speculative. Video and electronic games are
subject to risks of rapid obsolescence.
[KEY ICON] INVESCO REAL ESTATE OPPORTUNITY FUND -- INVESTOR CLASS, CLASS A,
B, AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies doing business in the
real estate industry, including real estate investment trusts ("REITS"), which
invest in real estate or interests in real estate. No one property type will
represent more than 50% of the Fund's total assets. The companies in which the
Fund invests may also include, but are not limited to, real estate brokers, home
builders or real estate developers, companies with substantial real estate
holdings, and companies with significant involvement in the real estate industry
or other real estate-related companies.
The real estate industry is highly cyclical, and the value of securities issued
by companies doing business in that sector may fluctuate widely. The real estate
industry -- and, therefore, the performance of the Fund -- is highly sensitive
to national, regional and local economic conditions, interest rates, property
taxes, overbuilding, decline in value of real estate, and changes in rental
income. REITS are companies or trusts that own and/or operate income-producing
real estate. Shares of REITS are publicly traded and are subject to the same
risks as any other security, as well as risks specific to the real estate
industry.
[KEY ICON] INVESCO TECHNOLOGY FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in
technology-related industries. These include, but are not limited to, various
applied technologies, hardware, software, semiconductors, telecommunications
equipment and services, and service-related companies in information technology.
Many of these products and services are subject to rapid obsolescence, which may
lower the market value of the securities of the companies in this sector.
A core portion of the Fund's portfolio is invested in market-leading technology
companies among various subsectors in the technology universe that we believe
will maintain or improve their market share regardless of overall economic
conditions. These companies are leaders in their field and are believed to have
a strategic advantage over many of their competitors. The remainder of the
Fund's portfolio consists of faster-growing, more volatile technology companies
that INVESCO believes to be emerging leaders in their fields. The market prices
of these companies tend to rise and fall more rapidly than those of larger, more
established companies.
[KEY ICON] INVESCO TELECOMMUNICATIONS FUND -- INVESTOR CLASS, CLASS A, B, C,
AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in the design,
development, manufacture, distribution, or sale of communications services and
equipment, and companies that are involved in supplying equipment or services to
such companies. The telecommunications sector includes, but is not limited to,
companies that offer telephone services, wireless communications, satellite
communications, television and movie programming, broadcasting, and Internet
access. Many of these products and services are subject to rapid obsolescence,
which may lower the market value of the securities of the companies in this
sector.
We select stocks based on projected total return for individual companies, while
also analyzing country specific factors that might affect stock performance or
influence company valuation. Normally, the Fund will invest primarily in
companies located in at least three different countries, although U.S. issuers
will often dominate the portfolio. The Fund's portfolio emphasizes strongly
managed market leaders, with a lesser weighting on smaller, faster growing
companies that offer new products or services and/or are increasing their market
share.
[KEY ICON] INVESCO UTILITIES FUND -- INVESTOR CLASS, CLASS A, B, AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in
utilities-related industries. These include, but are not limited to, companies
that produce, generate, transmit, or distribute natural gas or electricity, as
well as companies that provide telecommunications services, including local,
long distance and wireless.
Governmental regulation, difficulties in obtaining adequate financing and
investment return, environmental issues, prices of fuel for generation of
electricity, availability of natural gas, risks associated with power marketing
and trading, and risks associated with nuclear power facilities may adversely
affect the market value of the Fund's holdings. The recent trend towards
deregulation in the utility industries presents special risks. Some companies
may be faced with increased competition and may become less profitable.
Normally, INVESCO seeks to keep the portfolio divided among the electric
utilities, natural gas, and telecommunications industries. Weightings within the
various industry segments are continually monitored, and INVESCO adjusts the
portfolio weightings depending on the prevailing economic conditions.
[GRAPH ICON] FUND PERFORMANCE
Performance information in the bar charts below is that of the Funds' Investor
Class shares, which has the longest operating history of the Funds' classes.
Information included in the table is that of Investor Class, Class C, and, if
applicable, Class K shares. Performance information for Class A and B shares is
not shown in the table as those classes do not yet have a full calendar year of
performance. Investor Class and Class A, B, C, and K returns would be similar
because all classes of shares invest in the same portfolio of securities. The
returns of the classes would differ, however, to the extent of differing levels
of expenses. In this regard, the returns reflected in the bar charts and table
reflect only the applicable total expenses of the class shown. If the effect of
the other classes' total expenses were reflected, the returns would be lower
than those shown because the other classes have higher total expenses.
The bar charts below show the Funds' Investor Class actual yearly performance
(commonly known as their "total return") for the years ended December 31 over
the past decade or since inception. The returns in the bar charts do not reflect
a 12b-1 fee in excess of 0.25%, the sales charge for Class A shares, or the
applicable contingent deferred sales charge (CDSC) for Class B or Class C
shares; if they did, the total returns shown would be lower. The table below
shows the pre-tax and after-tax average annual total returns of Investor Class
and pre-tax average annual total returns for Class C shares, and, if applicable,
Class K shares for various periods ended December 31, 2002 compared to the S&P
500 Index, the S&P 500 Financials Index with respect to Financial Services Fund,
and the NAREIT -- Equity REIT Index with respect to Real Estate Opportunity
Fund. The after-tax returns are shown only for the Investor Class shares.
After-tax returns for other classes of shares offered in this Prospectus will
vary.
After-tax returns are provided on a pre-redemption and post-redemption basis.
Pre-redemption returns assume you continue to hold your shares and pay taxes on
Fund distributions (i.e., dividends and capital gains) but do not reflect taxes
that may be incurred upon selling or exchanging shares. Post-redemption returns
assume payment of taxes on fund distributions and also that you close your
account and pay remaining federal taxes. After-tax returns are calculated using
the highest individual federal income tax rates in effect at the time the
distribution is paid. State and local taxes are not considered. Actual after-tax
returns depend on an investor's tax situation and may differ from those shown.
For investors holding their shares in tax-deferred arrangements such as 401(k)
plans or individual retirement accounts, the after-tax returns shown are not
relevant.
The information in the bar charts and table illustrates the variability of each
Fund's total return and how its performance compared to a broad measure of
market performance. Remember, past performance (before and after taxes) does not
indicate how a Fund will perform in the future.
- --------------------------------------------------------------------------------
ENERGY FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
16.71% (7.25%) 19.80% 38.84% 19.09% (27.83%) 41.88% 58.17% (16.81%) (4.32)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/97 28.24%
Worst Calendar Qtr. 9/98 (18.34%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
18.52% (5.89%) 39.81% 30.29% 44.79% 13.45% 0.73% 26.69% (10.17%) (15.56%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/00 22.76%
Worst Calendar Qtr. 9/98 (18.20%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLD & PRECIOUS METALS FUND--
INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
72.47% (27.85%) 12.72% 40.64% (55.50%) (22.54%) (8.99%) (12.98%) 17.12% 59.65%
- --------------------------------------------------------------------------------
Best Calendar Qtr. 3/96 46.17%
Worst Calendar Qtr. 12/97 (37.51%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
(8.41%) 0.94% 58.89% 11.41% 18.46% 43.40% 0.59% 25.80% (14.68%) (25.24%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/95 19.53%
Worst Calendar Qtr. 3/01 (22.91%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEISURE FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
35.73% (4.98%) 15.79% 9.08% 26.46% 29.78% 65.59% (7.97%) 4.10% (15.41%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 25.59%
Worst Calendar Qtr. 9/01 (24.06%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND--
INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(3)
================================================================================
[GRAPHIC OMITTED]
1997 1998 1999 2000 2001 2002
21.50% (23.48%) (5.50%) 24.72% (1.91%) 5.81%
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/97 14.19%
Worst Calendar Qtr. 9/98 (20.46%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TECHNOLOGY FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
15.03% 5.27% 45.80% 21.75% 8.85% 30.12% 144.94% (22.77%) (45.51%) (47.22%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 66.77%
Worst Calendar Qtr. 9/01 (41.44%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(4)
================================================================================
[GRAPHIC OMITTED]
1995 1996 1997 1998 1999 2000 2001 2002
27.37% 16.81% 30.29% 40.98% 144.28% (26.91%) (54.19%) (50.96%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 62.22%
Worst Calendar Qtr. 9/01 (41.40%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UTILITIES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
21.20% (9.94%) 25.25% 12.75% 24.38% 24.30% 19.88% 4.14% (33.98%) (22.29%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/98 16.33%
Worst Calendar Qtr. 9/01 (23.67%)
- --------------------------------------------------------------------------------
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
INVESTOR CLASS
Energy Fund(1),(2)
Return Before Taxes (4.32%) 5.21% 10.70%
Return After Taxes on Distributions (4.32%) 4.86% 9.21%
Return After Taxes on Distributions
and Sale of Fund Shares (2.65%) 4.24% 8.34%
Gold & Precious Metals Fund(1),(2)
Return Before Taxes 59.65% 2.78% 0.07%
Return After Taxes on Distributions 59.65% 2.58% (1.25%)
Return After Taxes on Distributions
and Sale of Fund Shares 36.62% 2.12% (0.26%)
Health Sciences Fund(1),(2)
Return Before Taxes (25.24%) 2.97% 8.42%
Return After Taxes on Distributions (25.24%) 0.99% 6.14%
Return After Taxes on Distributions
and Sale of Fund Shares (15.50%) 2.36% 6.54%
Leisure Fund(1),(2)
Return Before Taxes (15.41%) 11.73% 13.63%
Return After Taxes on Distributions (15.41%) 10.02% 11.35%
Return After Taxes on Distributions
and Sale of Fund Shares (9.46%) 9.43% 10.73%
Technology Fund(1),(2)
Return Before Taxes (47.22%) (6.67%) 5.18%
Return After Taxes on Distributions (47.22%) (7.16%) 2.46%
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
Return After Taxes on Distributions
and Sale of Fund Shares (28.99%) (4.64%) 3.64%
Utilities Fund(1),(2)
Return Before Taxes (22.29%) (4.46%) 4.32%
Return After Taxes on Distributions (23.10%) (5.55%) 2.14%
Return After Taxes on Distributions
and Sale of Fund Shares (13.67%) (3.41%) 2.79%
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.35%
Financial Services Fund(1),(2)
Return Before Taxes (15.56%) 1.89% 12.44%
Return After Taxes on Distributions (15.60%) 0.59% 9.48%
Return After Taxes on Distributions
and Sale of Fund Shares (9.53%) 1.43% 9.20%
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.35%
S&P 500 Financials Index6
(reflects no deduction for fees, expenses
or taxes) (14.64%) 2.53% 14.08%
Real Estate Opportunity Fund(1),(2)
Return Before Taxes 5.81% (1.32%) 2.17%(3)
Return After Taxes on Distributions 4.56% (3.55%) (0.55%)(3)
Return After Taxes on Distributions
and Sale of Fund Shares 3.58% (2.21%) 0.35%(3)
NAREIT-- Equity REIT Index(6)
(reflects no deduction for fees, expenses
or taxes) 3.82% 3.30% 5.95%(3)
Telecommunications Fund(1),(2)
Return Before Taxes (50.96%) (10.78%) 1.69%(4)
Return After Taxes on Distributions (50.96%) (11.09%) 0.21%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (31.29%) (7.89%) 1.12%(4)
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.96%(4)
CLASS C - RETURN BEFORE TAXES (INCLUDING CDSC)
Energy Fund(1),(7) (6.01%) N/A 7.54%(8)
Gold & Precious Metals Fund(1),(7) 56.69% N/A 19.78%(8)
Health Sciences Fund(1),(7) (27.28%) N/A (12.12%)(8)
Leisure Fund(1),(7) (17.21%) N/A (6.36%)(8)
Technology Fund(1),(7) (48.74%) N/A (44.62%)(8)
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
Telecommunications Fund(1),(7) (52.53%) N/A (49.61%)(8)
Utilities Fund(1),(7) (24.11%) N/A (23.09%)(8)
S&P 500 Index(6) (22.09%) N/A (13.19%)(8)
Financial Services Fund(1),(7) (17.36%) N/A 2.05%(8)
S&P 500 Index(6) (22.09%) N/A (13.19%)(8)
S&P 500 Financials Index(6) (14.64%) N/A 4.45%(8)
Real Estate Opportunity Fund(1),(7) 3.94% N/A 7.99%(8)
NAREIT-- Equity REIT Index(6) 3.82% N/A 15.58%(8)
CLASS K - RETURN BEFORE TAXES
Energy Fund(1),(9) (7.29%) N/A (4.04%)(10)
Health Sciences Fund(1),(9) (25.71%) N/A (17.67%)(10)
Technology Fund(1),(9) (47.20%) N/A (45.27%)(10)
Telecommunications Fund(1),(9) (51.03%) N/A (51.38%)(10)
S&P 500 Index(6) (22.09%) N/A (16.32%)(10)
Financial Services Fund(1),(9) (15.88%) N/A (8.84%)(10)
S&P 500 Index(6) (22.09%) N/A (16.32%)(10)
S&P 500 Financials Index(6) (14.64%) N/A (7.64%)(10)
Leisure Fund(1),(9) (15.52%) N/A (11.49%)(11)
S&P 500 Index(6) (22.09%) N/A (22.09%)(11)
(1) Total return figures include reinvested dividends and capital gain distributions and the effect of each class's expenses.
(2) Returns before taxes for Investor Class shares of Energy, Financial Services, Gold & Precious Metals, Health Sciences, Leisure,
Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds year-to-date as of the calendar quarter ended June
30, 2003 were 10.05%, 11.02%, 0.37%, 16.16%, 12.19%, 15.14%, 17.80%, 15.21%, and 9.35%, respectively.
(3) The Fund (Investor Class shares) commenced investment operations on January 2, 1997. Index comparison begins on January 2,
1997.
(4) The Fund (Investor Class shares) commenced investment operations on August 1, 1994. Index comparison begins on August 1, 1994.
(5) The total returns are for those classes of shares with a full calendar year of performance. If the effect of the other classes'
total expenses, including 12b-1 fees, front-end sales charge for Class A, and CDSC for Class B were reflected, returns for
those classes would be lower than those shown.
(6) The S&P 500 Index is an unmanaged index considered representative of the performance of the broad U.S. stock market. The S&P
500 Financials Index is an unmanaged index that contains companies involved in activities such as banking, consumer finance,
investment banking and brokerage, asset management, insurance and investment, and real estate, including REITs. The NAREIT --
Equity REIT Index is an unmanaged index considered representative of the U.S. real estate investment trust equity market.
Please keep in mind that the Indexes do not pay brokerage, management, administrative, or distribution expenses, all of which
are paid by the classes and are reflected in their annual returns. Index returns also do not include sales charges or CDSCs
that may be paid by the shareholder.
(7) Returns before taxes, including CDSC, for Class C shares of Energy, Financial Services, Gold & Precious Metals, Health
Sciences, Leisure, Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds year-to-date as of the calendar
quarter ended June 30, 2003 were 8.76%, 9.38%, (1.00%), 14.43%, 10.69%, 13.73%, 16.57%, 13.90%, and 7.72%, respectively.
(8) Since inception of Class C shares on February 15, 2000. Index comparison begins on February 29, 2000.
(9) Returns before taxes for Class K shares of Energy, Financial Services, Health Sciences, Leisure, Technology, and
Telecommunications Funds year-to-date as of the calendar quarter ended June 30, 2003 were 10.01%, 11.00%, 15.74%, 11.82%,
17.56%, and 15.06%, respectively.
(10) Since inception of Class K shares on December 1, 2000. Index comparisons begin on December 1, 2000.
(11) Since inception of Class K shares on December 17, 2001. Index comparison begins on December 31, 2001.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class, Class A, Class B, Class C, or, if applicable, Class K shares of
the Funds. If you invest in the Funds through a financial intermediary, you may
be charged a commission or transaction fee by the financial intermediary for
purchases and sales of Fund shares.
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Investor Class Class A Class B Class C Class K
Maximum Front-End Sales Charge
on purchases as a percentage of
offering price None 5.50% None None None
Maximum Contingent Deferred
Sales Charge (CDSC) as a percentage
of the total original cost of the shares None None(1) 5.00%(2) 1.00%(2) None(1)
Maximum Sales Charge on reinvested
dividends/distributions None None None None None
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
ENERGY FUND Investor Class Class A Class B Class C Class K
Management Fees 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.69% 0.36% 0.66%(6) 0.78%(7) 4.16%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.69% 1.46% 2.41%(6) 2.53%(7) 5.36%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 3.16%
Net Expenses(5),(9) 1.69% 1.46% 2.41%(6) 2.53%(7) 2.20%(8)
==== ==== ==== ==== ====
FINANCIAL SERVICES FUND Investor Class Class A Class B Class C Class K
Management Fees 0.66% 0.66% 0.66% 0.66% 0.66%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.49% 0.50%(10) 0.74%(6) 0.79% 1.02%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.40% 1.51%(10) 2.40%(6) 2.45% 2.13%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 0.00%
Net Expenses(5),(9) 1.40% 1.51%(10) 2.40%(6) 2.45% 2.13%(8)
==== ==== ==== ==== ====
GOLD & PRECIOUS METALS FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00%
Other Expenses(4),(5) 0.88% 1.01%(10) 0.43% 0.90%
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.88% 2.11%(10) 2.18% 2.65%
==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.01% 0.00% 0.00%
Net Expenses(5),(9) 1.88% 2.10%(10) 2.18% 2.65%
==== ==== ==== ====
HEALTH SCIENCES FUND Investor Class Class A Class B Class C Class K
Management Fees 0.64% 0.64% 0.64% 0.64% 0.64%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.55% 0.89%(10) 0.87%(6) 1.63%(7) 0.98%
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.44% 1.88%(10) 2.51%(6) 3.27%(7) 2.07%
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.52% 0.00%
Net Expenses(5),(9) 1.44% 1.88%(10) 2.51%(6) 2.75%(7) 2.07%
==== ==== ==== ==== ====
LEISURE FUND Investor Class Class A Class B Class C Class K
Management Fees 0.69% 0.69% 0.69% 0.69% 0.69%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.56% 0.38% 0.54%(6) 0.75% 1.07%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.50% 1.42% 2.23%(6) 2.44% 2.21%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 0.01%
Net Expenses(5),(9) 1.50% 1.42% 2.23%(6) 2.44% 2.20%(8)
==== ==== ==== ==== ====
REAL ESTATE OPPORTUNITY FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00%
Other Expenses(4),(5) 1.43%(11) 0.56% 1.98%(6) 1.99%(7)
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 2.43%(11) 1.66% 3.73%(6) 3.74%(7)
==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.98% 0.99%
Net Expenses(5),(9) 2.43%(11) 1.66% 2.75%(6) 2.75%(7)
==== ==== ==== ====
TECHNOLOGY FUND Investor Class Class A Class B Class C Class K
Management Fees 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.92% 0.56%(10) 1.14%(6) 2.35%(7) 1.44%(8)
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.77% 1.51%(10) 2.74%(6) 3.95%(7) 2.49%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 1.20% 0.29%
Net Expenses(5),(9) 1.77% 1.51%(10) 2.74%(6) 2.75%(7) 2.20%(8)
==== ==== ==== ==== ====
TELECOMMUNICATIONS FUND Investor Class Class A Class B Class C Class K
Management Fees 0.65% 0.65% 0.65% 0.65% 0.65%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 1.86%(11) 0.66% 10.50%(6) 4.11%(7) 2.20%(8)
---- ---- ----- ---- ----
Total Annual Fund Operating Expenses(4),(5) 2.76%(11) 1.66% 12.15%(6) 5.76%(7) 3.30%(8)
==== ==== ===== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 9.40% 3.01% 1.10%
Net Expenses(5),(9) 2.76%(11) 1.66% 2.75%(6) 2.75%(7) 2.20%(8)
==== ==== ===== ==== ====
UTILITIES FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.25%(12) 1.00% 1.00%
Other Expenses(4),(5) 0.90%(11) 0.64%(10) 0.94%(6) 1.95%(7)
---- ---- ----- ----
Total Annual Fund Operating Expenses(4),(5) 1.90%(11) 1.64%(10),(12)2.69%(6) 3.70%(7)
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.95%
==== ==== ===== ====
Net Expenses(5),(9) 1.90%(11) 1.64%(10),(12)2.69%(6) 2.75%(7)
==== ==== ===== ====
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares within eighteen months from the date of purchase, you
may pay a 1% contingent deferred sales charge (CDSC) at the time of redemption. For qualified plans investing in Class A
shares, you may pay a CDSC of 1% on your Class A shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. For qualified plans investing in Class K shares, you may pay a CDSC of 0.70% on your Class K shares
if the plan is redeemed within twelve months from initial deposit in the plan's INVESCO account. Please see the sections
entitled "How to Buy Shares" and "How To Sell Shares."
(2) A 5% and 1% CDSC may be charged on Class B and Class C shares, respectively. Please see the section entitled "How To Buy
Shares."
(3) Because each class pays a 12b-1 distribution and service fee which is based upon each class's assets, if you own shares of a
Fund for a certain period of time, you may pay more than the economic equivalent of the maximum front-end sales charge
permitted for mutual funds by the National Association of Securities Dealers, Inc.
(4) Each Fund's actual Other Expenses and Total Annual Fund Operating Expenses were lower than the figures shown, because their
custodian fees were reduced under expense offset arrangements.
(5) INVESCO is entitled to reimbursement from the classes for fees and expenses absorbed pursuant to voluntary and contractual
expense limitation commitments between INVESCO and the Funds if such reimbursements do not cause a class to exceed expense
limitations and the reimbursement is made within three years after INVESCO incurred the expense. The voluntary expense
limitations may be changed at any time following consultation with the board of directors.
(6) Certain expenses of Class B shares of Energy, Financial Services, Health Sciences, Leisure, Real Estate Opportunity,
Technology, Telecommunications, and Utilities Funds were absorbed voluntarily by INVESCO pursuant to commitments between the
Funds and INVESCO. These commitments may be changed at any time following consultation with the board of directors. After
absorption, but excluding any expense offset arrangements, Energy Fund's Class B shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.58% and 2.33%, respectively, of the Fund's average net assets attributable to Class B shares;
Financial Services Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.43% and 2.09%,
respectively, of the Fund's average net assets attributable to Class B shares; Health Sciences Fund's Class B shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.42% and 2.06%, respectively, of the Fund's average net assets
attributable to Class B shares; Leisure Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were
0.45% and 2.14%, respectively, of the Fund's average net assets attributable to Class B shares; Real Estate Opportunity Fund's
Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.61% and 2.36%, respectively, of the Fund's
average net assets attributable to Class B shares; Technology Fund's Class B shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.55% and 2.15%, respectively, of the Fund's average net assets attributable to Class B shares;
Telecommunications Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.92% and 2.57%,
respectively, of the Fund's average net assets attributable to Class B shares; and Utilities Fund's Class B shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.39% and 2.14%, respectively, of the Fund's average net assets
attributable to Class B shares.
(7) Certain expenses of Class C shares of Energy, Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds were
absorbed voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any
time following consultation with the board of directors. Certain expenses of Class C shares of Health Sciences Fund were
absorbed by INVESCO pursuant to a contractual agreement between the Fund and INVESCO. After absorption, but excluding any
expense offset arrangements, Energy Fund's Class C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.58%
and 2.33%, respectively, of the Fund's average net assets attributable to Class C shares; Real Estate Opportunity Fund's Class
C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.60% and 2.35%, respectively, of the Fund's average net
assets attributable to Class C shares; Technology Fund's Class C shares' Other Expenses and Total Annual Fund Operating
Expenses were 1.09% and 2.69%, respectively, of the Fund's average net assets attributable to Class C shares;
Telecommunications Fund's Class C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.98% and 2.63%,
respectively, of the Fund's average net assets attributable to Class C shares; and Utilities Fund's Class C shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.30% and 2.05%, respectively, of the Fund's average net assets
attributable to Class C shares.
(8) Certain expenses of Class K shares of Energy, Financial Services, and Telecommunications Funds were absorbed voluntarily by
INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time following
consultation with the board of directors. Certain expenses of Class K shares of Leisure and Technology Funds were absorbed by
INVESCO pursuant to contractual agreements between the Funds and INVESCO. After absorption, but excluding any expense offset
arrangement, Energy Fund's Class K shares' Other Expenses and Total Annual Fund Operating Expenses were 0.87% and 2.07%,
respectively, of the Fund's average net assets attributable to Class K shares; Financial Services Fund's Class K shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.67% and 1.78%, respectively, of the Fund's average net assets
attributable to Class K shares; and Telecommunications Fund's Class K shares' Other Expenses and Total Annual Fund Operating
Expenses were 0.96% and 2.06%, respectively, of the Fund's average net assets attributable to Class K shares.
(9) To limit expenses, INVESCO has contractually obligated itself to waive fees and bear expenses through March 31, 2004 that would
cause the ratio of expenses to average net assets to exceed 2.10% for Class A shares, 2.75% for each of Class B and Class C
shares, and 2.20% for Class K shares.
(10) Certain expenses of Class A shares of Financial Services, Health Sciences, Technology, and Utilities Funds were absorbed
voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time
following consultation with the board of directors. Certain expenses of Class A shares of Gold & Precious Metals Fund were
absorbed by INVESCO pursuant to a contractual agreement between the Fund and INVESCO. After absorption, but excluding any
expense offset arrangements, Financial Services Fund's Class A shares' Other Expenses and Total Annual Fund Operating Expenses
were 0.37% and 1.38%, respectively, of the Fund's average net assets attributable to Class A shares; Health Sciences Fund's
Class A shares' Other Expenses and Total Annual Fund Operating Expenses were 0.42% and 1.41%, respectively, of the Fund's
average net assets attributable to Class A shares; Technology Fund's Class A shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.52% and 1.47%, respectively, of the Fund's average net assets attributable to Class A shares; and
Utilities Fund's Class A shares' Other Expenses and Total Annual Fund Operating Expenses were 0.41% and 1.41%, respectively, of
the Fund's average net assets attributable to Class A shares.
(11) Certain expenses of Investor Class shares of Real Estate Opportunity, Telecommunications, and Utilities Funds were absorbed
voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time
following consultation with the board of directors. After absorption, but excluding any expense offset arrangements, Real
Estate Opportunity Fund's Investor Class shares' Other Expenses and Total Annual Fund Operating Expenses were 0.60% and 1.60%,
respectively, of the Fund's average net assets attributable to Investor Class shares; Telecommunications Fund's Investor Class
shares' Other Expenses and Total Annual Fund Operating Expenses were 0.91% and 1.81%, respectively, of the Fund's average net
assets attributable to Investor Class shares; and Utilities Fund's Investor Class shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.30% and 1.30%, respectively, of the Fund's average net assets attributable to Investor Class shares.
(12 )Effective July 1, 2003, the Distribution and Service (12b-1) Fees have been reduced from 0.35% to 0.25%. Total Annual Fund
Operating Expenses have been restated for the current fiscal year end.
EXPENSE EXAMPLE
The Example is intended to help you compare the cost of investing in the
Investor Class, Class A, Class B, Class C, and, if applicable, Class K shares of
the Funds to the cost of investing in other mutual funds.
The Example assumes that you invested $10,000 in Investor Class, Class A, Class
B, Class C, or Class K shares of a Fund for the time periods indicated. Within
each Example, there is an assumption that you redeem all of your shares at the
end of those periods and that you keep your shares. The Example also assumes
that your investment had a hypothetical 5% return each year, and that a Fund's
Investor Class, Class A, Class B, Class C, and Class K shares' operating
expenses remain the same. Although the actual costs and performance of a Fund's
Investor Class, Class A, Class B, Class C, and Class K shares may be higher or
lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
ENERGY FUND
Investor Class $172 $ 533 $ 918 $1,998
Class A(1) $690 $ 986 $1,304 $2,200
Class B - With Redemption(1) $744 $1,051 $1,485 $2,511(2)
Class B - Without Redemption $244 $ 751 $1,285 $2,511(2)
Class C - With Redemption1 $356 $ 788 $1,345 $2,866
Class C - Without Redemption $256 $ 788 $1,345 $2,866
Class K(3) $223 $1,321 $2,411 $5,103
FINANCIAL SERVICES FUND
Investor Class $143 $ 443 $ 766 $1,680
Class A(1) $695 $1,001 $1,328 $2,252
Class B - With Redemption(1) $743 $1,048 $1,480 $2,515(2)
Class B - Without Redemption $243 $ 748 $1,280 $2,515(2)
Class C - With Redemption(1) $348 $ 764 $1,306 $2,786
Class C - Without Redemption $248 $ 764 $1,306 $2,786
Class K $216 $ 667 $1,144 $2,462
GOLD & PRECIOUS METALS FUND
Investor Class $191 $ 591 $1,016 $2,201
Class A(1),(3) $751 $1,174 $1,621 $2,856
Class B - With Redemption(1) $721 $ 982 $1,369 $2,496(2)
Class B - Without Redemption $221 $ 682 $1,169 $2,496(2)
Class C - With Redemption(1) $368 $ 823 $1,405 $2,983
Class C - Without Redemption $268 $ 823 $1,405 $2,983
HEALTH SCIENCES FUND
Investor Class $147 $ 456 $ 787 $1,724
Class A(1) $730 $1,108 $1,510 $2,630
Class B - With Redemption(1) $754 $1,082 $1,535 $2,691(2)
Class B - Without Redemption $254 $ 782 $1,335 $2,691(2)
Class C - With Redemption(1),(3) $378 $ 958 $1,663 $3,532
Class C - Without Redemption(3) $278 $ 958 $1,663 $3,532
Class K $210 $ 649 $1,114 $2,400
LEISURE FUND
Investor Class $153 $ 474 $ 818 $1,791
Class A(1) $687 $ 975 $1,284 $2,158
Class B - With Redemption(1) $726 $ 997 $1,395 $2,361(2)
Class B - Without Redemption $226 $ 697 $1,195 $2,361(2)
Class C - With Redemption(1) $347 $ 761 $1,301 $2,776
Class C - Without Redemption $247 $ 761 $1,301 $2,776
Class K(3) $223 $ 690 $1,184 $2,543
REAL ESTATE OPPORTUNITY FUND
Investor Class $246 $ 758 $1,296 $2,766
Class A(1) $709 $1,045 $1,403 $2,407
Class B - With Redemption(1),(3) $778 $1,351 $2,043 $3,454(2)
Class B - Without Redemption(3) $278 $1,051 $1,843 $3,454(2)
Class C - With Redemption(1),(3) $378 $1,053 $1,847 $3,921
Class C - Without Redemption(3) $278 $1,053 $1,847 $3,921
TECHNOLOGY FUND
Investor Class $180 $ 557 $ 959 $2,084
Class A(1) $695 $1,001 $1,328 $2,252
Class B - With Redemption(1) $777 $1,150 $1,650 $2,773(2)
Class B - Without Redemption $277 $ 850 $1,450 $2,773(2)
Class C - With Redemption(1),(3) $378 $1,094 $1,928 $4,089
Class C - Without Redemption(3) $278 $1,094 $1,928 $4,089
Class K(3) $223 $ 748 $1,300 $2,804
TELECOMMUNICATIONS FUND
Investor Class $279 $ 856 $1,459 $3,090
Class A(1) $709 $1,045 $1,403 $2,407
Class B - With Redemption(1),(3) $778 $2,888 $4,780 $7,273(2)
Class B - Without Redemption(3) $278 $2,588 $4,580 $7,273(2)
Class C - With Redemption(1),(3) $378 $1,447 $2,598 $5,401
Class C - Without Redemption(3) $278 $1,447 $2,598 $5,401
Class K(3) $223 $ 913 $1,627 $3,520
UTILITIES FUND
Investor Class $193 $ 597 $1,026 $2,222
Class A(1) $708 $1,039 $1,393 $2,387
Class B - With Redemption(1) $772 $1,135 $1,625 $2,768(2)
Class B - Without Redemption $272 $ 835 $1,425 $2,768(2)
Class C - With Redemption(1),(3) $378 $1,045 $1,831 $3,889
Class C - Without Redemption(3) $278 $1,045 $1,831 $3,889
(1) Based on initial sales charge for Class A shares at the beginning of each period shown and CDSC
charges for Class B and C shares based on redemption at the end of each period shown. Please see "How
To Buy Shares."
(2) Assumes conversion of Class B to Class A at the end of the eighth year. Please see "How To Buy
Shares."
(3) Class expenses remain the same for each period (except that the Example reflects the contractual
expense reimbursements by INVESCO for the one-year period and the first year of the three-, five-, and
ten-year periods).
[ARROWS ICON] INVESTMENT RISKS
BEFORE INVESTING IN A FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH WHICH
YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER, INCOME
LEVEL, AND TIME HORIZON.
You should determine the level of risk with which you are comfortable before you
invest. The principal risks of investing in any mutual fund, including these
Funds, are:
NOT INSURED. Mutual funds are not insured by the FDIC or any other government
agency, unlike bank deposits such as CDs or savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its performance, nor
assure you that the market value of your investment will increase. You may lose
the money you invest, and the Funds will not reimburse you for any of these
losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease with
changes in the value of a Fund's underlying investments and changes in the
equity markets as a whole.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Funds are designed to be only a part
of your personal investment plan.
[ARROWS ICON] PRINCIPAL RISKS ASSOCIATED WITH THE FUNDS
You should consider the special risk factors discussed below associated with the
Funds' policies in determining the appropriateness of investing in a Fund. See
the Statement of Additional Information for a discussion of additional risk
factors.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of a Fund's
investments. Certain stocks selected for any Fund's portfolio may decline in
value more than the overall stock market. In general, the securities of small
companies are more volatile than those of mid-size companies or large companies.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory, and diplomatic risks. Energy, Financial
Services, Health Sciences, Leisure, Real Estate Opportunity, Technology, and
Utilities Funds may invest up to 25% of their respective assets in securities of
non-U.S. issuers. Securities of Canadian issuers and American Depositary
Receipts are not subject to this 25% limitation. Foreign securities risks are
potentially greater for Gold & Precious Metals and Telecommunications Funds,
since those Funds have the ability to invest more than 25% of their respective
assets in the securities of non-U.S. issuers.
CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of a Fund's investment in a security
valued in the foreign currency, or based on that currency value.
POLITICAL RISK. Political actions, events, or instability may result in
unfavorable changes in the value of a security.
REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.
DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
LIQUIDITY RISK
A Fund's portfolio is liquid if the Fund is able to sell the securities it owns
at a fair price within a reasonable time. Liquidity is generally related to the
market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some manner,
from the price of another security, index, asset, or rate. Derivatives include
options and futures contracts, among a wide range of other instruments. The
principal risk of investments in derivatives is that the fluctuations in their
values may not correlate perfectly with the overall securities markets. Some
derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk,
described below.
Options and futures are common types of derivatives that a Fund may occasionally
use to hedge its investments. An option is the right to buy and sell a security
or other instrument, index, or commodity at a specific price on or before a
specific date. A future is an agreement to buy or sell a security or other
instrument, index, or commodity at a specific price on a specific date. The use
of options and futures may increase the performance of the Fund, but also may
increase market risk. Other types of derivatives include swaps, caps, floors,
and collars.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with a
Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete, or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
PORTFOLIO TURNOVER RISK
A Fund's investments may be bought and sold relatively frequently. A high
turnover rate may affect a Fund's performance because it results in higher
brokerage commissions and may result in taxable gain distributions to a Fund's
shareholders.
----------------------------------------------
Although each Fund generally invests in equity securities of companies in the
economic sector described by its name, the Funds also may invest in other types
of securities and other financial instruments, indicated in the chart below.
Although these investments typically are not part of any Fund's principal
investment strategy, they may constitute a significant portion of a Fund's
portfolio, thereby possibly exposing a Fund and its investors to the following
additional risks.
- --------------------------------------------------------------------------------
INVESTMENT RISKS APPLIES TO THESE FUNDS
- --------------------------------------------------------------------------------
AMERICAN DEPOSITARY RECEIPTS
(ADRs)
These are securities issued Market, Information, All Funds
by U.S. banks that represent Political, Regulatory,
shares of foreign corpora- Diplomatic, Liquidity,
tions held by those banks. and Currency Risks
Although traded in U.S.
securities markets and
valued in U.S. dollars, ADRs
carry most of the risks of
investing directly in
foreign securities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT RISKS APPLIES TO THESE FUNDS
- --------------------------------------------------------------------------------
FUTURES
A futures contract is an Market, Liquidity, Technology
agreement to buy or sell a and Derivatives Risks Telecommunications
specific amount of a
financial instrument (such
as an index option) at a
stated price on a stated
date. A Fund may use futures
contracts to pro- vide
liquidity and to hedge
portfolio value.
- --------------------------------------------------------------------------------
OPTIONS
The obligation or right to Information, Liquidity, Technology
deliver or receive a and Derivatives Risks Telecommunications
security or other
instrument, index, or
commodity, or cash payment
depending on the price of
the underlying security or
the performance of an index
or other benchmark. Includes
options on specific
securities and stock
indices, and options on
stock index futures. May be
used in a Fund's portfolio
to provide liquidity and
hedge portfolio value.
- --------------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS
These may include forward Counterparty, Currency, Technology
contracts, swaps, caps, Liquidity, Market, and Telecommunications
floors, and collars. They Regulatory Risks
may be used to try to manage
a Fund's foreign currency
exposure and other
investment risks, which can
cause its net asset value to
rise or fall. A Fund may use
these financial instruments,
commonly known as
"derivatives," to increase
or decrease its exposure to
changing securities prices,
interest rates, currency
exchange rates, or other
factors.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A contract under which the Counterparty Risk All Funds
seller of a security agrees
to buy it back at an
agreed-upon price and time
in the future.
- --------------------------------------------------------------------------------
[ARROWS ICON] TEMPORARY DEFENSIVE POSITIONS
When securities markets or economic conditions are unfavorable or unsettled, we
might try to protect the assets of a Fund by investing in securities that are
highly liquid, such as high-quality money market instruments like shortterm U.S.
government obligations, commercial paper, or repurchase agreements, even though
that is not the normal investment strategy of any Fund. We have the right to
invest up to 100% of a Fund's assets in these securities, although we are
unlikely to do so. Even though the securities purchased for defensive purposes
often are considered the equivalent of cash, they also have their own risks.
Investments that are highly liquid or comparatively safe tend to offer lower
returns. Therefore, a Fund's performance could be comparatively lower if it
concentrates in defensive holdings.
[ARROWS ICON] PORTFOLIO TURNOVER
We actively manage and trade the Funds' portfolios. Therefore, some of the Funds
may have a higher portfolio turnover rate compared to many other mutual funds.
The Funds with higher-than-average portfolio turnover rates for the fiscal year
ended March 31, 2003, were:
Energy 144%
Health Sciences 179%
Real Estate Opportunity 248%
Technology 107%(1)
Telecommunications 137%(1)
(1) The increase in the Funds' portfolio turnover rates was greater than
expected during the year due to active trading undertaken in response to
market conditions.
A portfolio turnover rate of 200%, for example, is equivalent to a Fund buying
and selling all of the securities in its portfolio two times in the course of a
year. A comparatively high turnover rate may affect a Fund's performance because
it results in higher brokerage commissions and may result in taxable capital
gain distributions to a Fund's shareholders.
[INVESCO ICON] FUND MANAGEMENT
INVESTMENT ADVISOR
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT MANAGEMENT
COMPANY THAT MANAGES MORE THAN $318.5 BILLION IN ASSETS WORLDWIDE. AMVESCAP IS
BASED IN LONDON, WITH MONEY M ANAGERS LOCATED IN EUROPE, NORTH AND SOUTH AMEICA,
AND THE FAR EAST.
INVESCO, located at 4350 South Monaco Street, Denver, Colorado, is the
investment advisor of the Funds. INVESCO was founded in 1932 and manages over
$17 billion for 2,848,927 shareholder accounts in 47 INVESCO mutual funds as of
March 31, 2003. INVESCO performs a wide variety of other services for the Funds,
including administrative and transfer agency functions (the processing of
purchases, sales, and exchanges of Fund shares).
ADI is the Funds' distributor and is responsible for the sale of the Funds'
shares.
INVESCO and ADI are subsidiaries of AMVESCAP PLC.
The following table shows the fees the Funds paid to INVESCO for its advisory
services in the fiscal year ended March 31, 2003.
- --------------------------------------------------------------------------------
ADVISORY FEE AS A PERCENTAGE OF
FUND AVERAGE ANNUAL NET ASSETS UNDER MANAGEMENT
- --------------------------------------------------------------------------------
Energy 0.75%
Financial Services 0.66%
Gold & Precious Metals 0.75%
Health Sciences 0.64%
Leisure 0.69%
Real Estate Opportunity 0.75%
Technology 0.60%
Telecommunications 0.65%
Utilities 0.75%
- --------------------------------------------------------------------------------
[INVESCO ICON] PORTFOLIO MANAGERS
The following individuals are primarily responsible for the daytoday management
of their respective Fund's or Funds' portfolio holdings:
FUND PORTFOLIO MANAGER
Energy John S. Segner
Financial Services Joseph W. Skornicka
Gold & Precious Metals John S. Segner
Health Sciences Thomas R. Wald
Andy Summers
Leisure Mark D. Greenberg
Real Estate Opportunity Joe V. Rodriguez, Jr.
Mark Blackburn
James W. Trowbridge
Technology William R. Keithler
Chris Dries
Telecommunications William R. Keithler
Utilities Jeffrey G. Morris
MARK BLACKBURN, Portfolio Manager, has been responsible for INVESCO Real Estate
Opportunity Fund since July 1, 2003. He has been responsible for A I M Real
Estate Fund since 2000 and has been associated with the subadvisor and/or its
affiliates since 1998. From 1995 to 1997, he was Senior Analyst and Associate
Director of Research for Southwest Securities.
CHRIS DRIES is the Assistant Portfolio Manager for the INVESCO Technology Fund.
Chris joined INVESCO in 1993, and was promoted to the investment division in
1995. He previously held the position of manager of investment operations for
the investment division at INVESCO. Chris received his master's degree in
finance from the University of Colorado at Denver and his bachelor's degree in
finance from University of Colorado at Boulder.
MARK D. GREENBERG, a senior vice president of INVESCO, is the portfolio manager
of Leisure Fund. Before joining INVESCO in 1996, Mark was a vice president and
global media and entertainment analyst with Scudder, Stevens & Clark. He is a
CFA charterholder. Mark holds a B.S.B.A. from Marquette University.
WILLIAM R. KEITHLER, Director of Sector Management and a senior vice president
of INVESCO, is the lead portfolio manager of Technology Fund and heads the
Technology Team at INVESCO. Before rejoining INVESCO in 1998, Bill was a
portfolio manager with Berger Associates, Inc. He is a CFA charterholder. Bill
holds an M.S. from the University of Wisconsin--Madison and a B.A. from Webster
College.
JEFFREY G. MORRIS, a vice president of INVESCO, is the portfolio manager of
Utilities Fund. Jeff joined INVESCO in 1991 and is a CFA charterholder. He holds
an M.S. in Finance from the University of Colorado--Denver and a B.S. in
Business Administration from Colorado State University.
JOE V. RODRIGUEZ, JR., (lead manager), Portfolio Manager, has been responsible
for INVESCO Real Estate Opportunity Fund since July 1, 2003. He has been
responsible for A I M Real Estate Fund since 1995 and has been associated with
the subadvisor and/or its affiliates since 1990.
JOHN S. SEGNER, a senior vice president of INVESCO, is the portfolio manager of
Energy and Gold & Precious Metals Funds. Before joining INVESCO in 1997, John
was a managing director and principal with The Mitchell Group, Inc. He holds an
M.B.A. in Finance from the University of Texas-Austin and a B.S. in Civil
Engineering from the University of Alabama.
JOSEPH W. SKORNICKA, a vice president of INVESCO, is the portfolio manager of
Financial Services Fund. Before joining INVESCO in 2001, Joe was a senior equity
analyst and fund manager with Munder Capital Management and an assistant vice
president for Comerica Incorporated. He is a CFA charterholder. Joe holds an
M.B.A. from the University of Michigan and a B.A. from Michigan State
University.
ANDY SUMMERS is an Assistant Portfolio Manager for all INVESCO Health Sciences
portfolios. Andy joined the INVESCO Health Sciences investment team in 1998. He
is a CFA charterholder. Prior to joining INVESCO, Andy worked as an analyst for
Denver Investment Advisors. He received his master's degree in finance from the
University of Wisconsin at Madison in 1998. He received hid bachelor's degree in
finance from the University of Wisconsin at Whitewater in 1996.
JAMES W. TROWBRIDGE, Portfolio Manager, has been responsible for INVESCO Real
Estate Opportunity Fund since July 1, 2003. He has been responsible for A I M
Real Estate Fund since 1995 and has been associated with the subadvisor and/or
its affiliates since 1989.
THOMAS R. WALD, a vice president of INVESCO, is the portfolio manager of Health
Sciences Fund. Before joining INVESCO in 1997, Tom was an analyst with Munder
Capital Management, Duff & Phelps and Prudential Investment Corp. He is a CFA
charterholder. Tom holds an M.B.A. from the Wharton School at the University of
Pennsylvania and a B.A. from Tulane University.
Effective July 1, 2003, Messrs. Blackburn, Rodriguez, and Trowbridge are dual
employees of INVESCO Funds Group, Inc. (the "advisor") and INVESCO Institutional
(N.A.) Inc. (the "subadvisor").
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD YOU
ATTEMPT TO USE THE FUNDS FOR SHORT-TERM TRADING PURPOSES.
The Funds offer shareholders the potential to increase the value of their
capital over time; Real Estate Opportunity, Telecommunications, and Utilities
Funds also offer the opportunity for current income. Like most mutual funds,
each Fund seeks to provide higher returns than the market or its competitors,
but cannot guarantee that performance. While each Fund invests in a single
targeted market sector, each seeks to minimize risk by investing in many
different companies.
SUITABILITY FOR INVESTORS
Only you can determine if an investment in a Fund is right for you based upon
your own economic situation, the risk level with which you are comfortable and
other factors. In general, the Funds are most suitable for investors who:
o are willing to grow their capital over the long-term (at least five years)
o can accept the additional risks and volatility associated with sector
investing
o understand that shares of a Fund can, and likely will, have daily price
fluctuations
o are investing through tax-deferred retirement accounts, such as traditional
and Roth Individual Retirement Accounts ("IRAs"), as well as
employer-sponsored qualified retirement plans, including 401(k)s and
403(b)s, all of which have longer investment horizons.
You probably do not want to invest in the Funds if you are:
o primarily seeking current dividend income (although Real Estate Opportunity,
Telecommunications, and Utilities Funds do seek to provide income in
addition to capital growth)
o unwilling to accept potentially significant changes in the price of Fund
shares
o speculating on short-term fluctuations in the stock markets.
[INVESCO ICON] SHARE PRICE
CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- --------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV)
The value of your Fund shares is likely to change daily. This value is known as
the Net Asset Value per share, or NAV. INVESCO determines the market value of
each investment in each Fund's portfolio each day that the New York Stock
Exchange ("NYSE") is open, at the close of the regular trading day on that
exchange (normally 4:00 p.m. Eastern time), except that securities traded
primarily on the Nasdaq Stock Market ("Nasdaq") are normally valued by a Fund at
the Nasdaq Official Closing Price provided by Nasdaq each business day. Shares
of the Funds are not priced on days when the NYSE is closed, which generally is
on weekends, most national holidays in the U.S., and Good Friday.
NAV is calculated by adding together the current market price of all of a Fund's
investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares. Because
their expenses vary, NAV is calculated separately for each class.
All purchases, sales, and exchanges of Fund shares are made by INVESCO at the
NAV next calculated after INVESCO receives proper instructions from you, your
financial intermediary, or your plan or program sponsor. Instructions must be
received by INVESCO no later than the close of the NYSE to effect transactions
at that day's NAV. If INVESCO receives instructions from you, your financial
intermediary, or your plan or program sponsor after that time, the instructions
will be processed at the NAV next calculated after receipt of these
instructions. Financial institutions that process customer transactions through
the National Securities Clearing Corporation's Fund/SERV and Networking
facilities must obtain their customers' permission for each transaction, and
each financial institution retains responsibility to its customers for any
errors or irregularities related to these transactions.
Foreign securities exchanges, which set the prices for foreign securities held
by the Funds, are not always open the same days as the NYSE, and may be open for
business on days the NYSE is not. For example, Thanksgiving Day is a holiday
observed by the NYSE and not by overseas exchanges. In this situation, the Funds
would not calculate NAV on Thanksgiving Day (and INVESCO would not buy, sell, or
exchange shares for you on that day), even though activity on foreign exchanges
could result in changes in the value of investments held by the Funds on that
day.
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE CLOSE
OF THE NYSE, NORMALLY 4:00 P.M. EASTERN TIME.
The Funds offer multiple classes of shares. The chart in this section shows
several convenient ways to invest in the shares of the Funds if you invest
directly through INVESCO. If you invest in a Fund through a financial
intermediary, please consult the financial intermediary, or with respect to
Class K shares, the plan or program sponsor, for more information on how to
purchase shares of a Fund. You may be charged a commission or transaction fee by
the financial intermediary or plan or program sponsor for purchases of Fund
shares.
With the exception of Class A shares, there is no charge to invest directly
through INVESCO. Class A shares are subject to a front-end sales charge. For
more information on this charge, please see the subsection entitled "Sales
Charges." If you buy $1,000,000 or more of Class A shares and redeem the shares
within eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the total original cost of the
shares may be assessed. With respect to redemption of Class C shares held
thirteen months or less, a CDSC of 1% of the total original cost of the shares
may be assessed. With respect to Class K shares, if you are a qualified plan and
elect to receive a dealer concession, you may pay a CDSC of 0.70% on your Class
K shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. In determining whether a CDSC
applies to a redemption from a non-qualified plan, it is assumed that the shares
being redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the shareholder's
account. These charges are not assessed upon Class A, B, C, or K shares acquired
through reinvestment of dividends or other distributions, or Class A, B, C, or K
shares exchanged for the same class of another INVESCO Fund. For more
information on CDSC charges, please see the subsection of the Prospectus
entitled "Choosing A Share Class" and the section of the Statement of Additional
Information entitled "Distributor - Sales Charges and Dealer Concessions."
For all new accounts, please send a completed application form, and specify the
fund or funds and class or classes of shares you wish to purchase. If you do not
specify a fund or funds, your initial investment and any subsequent purchases
will automatically go into INVESCO Cash Reserves Fund - Class A, a series of
INVESCO Money Market Funds, Inc. You will receive a confirmation of this
transaction and may contact INVESCO to exchange into the fund you choose.
A share of each class represents an identical interest in a Fund and has the
same rights, except that each class bears its own distribution and shareholder
servicing charges, and other expenses. The income attributable to each class and
the dividends payable on the shares of each class will be reduced by the amount
of the distribution fee, if applicable, and the other expenses payable by that
class.
INVESCO reserves the right to increase, reduce, or waive each Fund's minimum
investment requirements in its sole discretion, if it determines this action is
in the best interests of that Fund's shareholders. INVESCO also reserves the
right in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.
Please remember that if you pay by check, Automated Clearing House ("ACH"), or
wire and your funds do not clear, you will be responsible for any related loss
to a Fund or INVESCO. If you are already an INVESCO funds shareholder, the Fund
may seek reimbursement for any loss from your existing account(s).
MINIMUM INITIAL INVESTMENT. $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.
MINIMUM SUBSEQUENT INVESTMENT. $50 (Minimums are lower for certain retirement
plans.)
The following chart shows several ways to invest in a Fund if you invest
directly through INVESCO.
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY CHECK $1,000 for regular INVESCO does not
Mail to: accounts; $250 for an accept cash, credit
INVESCO Funds Group, Inc. IRA; $50 for each cards, travelers'
P.O. Box 173706 subsequent investment. cheques, credit card
Denver, CO 80217-3706. checks, instant loan
You may send your check by checks, money orders,
overnight courier to: 4350 or third party checks
South Monaco Street Denver, unless they are from
CO 80237. another financial
institution related to
a retirement plan
transfer.
- --------------------------------------------------------------------------------
BY WIRE $1,000 for regular
You may send your payment by accounts; $250 for an
bank wire (call IRA; $50 for each
1-800-525-8085 for subsequent investment.
instructions).
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $1,000 for regular You must provide your
Call 1-800-525-8085 to accounts; $250 for an bank account
request your purchase. Upon IRA; $50 for each information to INVESCO
your telephone instructions, subsequent investment. prior to using this
INVESCO will move money from option.
your designated bank/ credit
union checking or savings
account in order to purchase
shares.
- --------------------------------------------------------------------------------
BY INTERNET (INVESTOR CLASS - $1,000 for regular You will need a Web
GRANDFATHERED INVESTORS ONLY) accounts; $250 for an browser to use this
Go to the INVESCO Web site IRA; $50 for each service. Internet
at invescofunds.com. subsequent investment. transactions are
limited to a maximum
of $25,000.
- --------------------------------------------------------------------------------
REGULAR INVESTING WITH EASIVEST $50 per month for Like all regular
OR DIRECT PAYROLL PURCHASE EasiVest; $50 per pay investment plans,
You may enroll on your fund period for Direct neither EasiVest nor
application, or call us for Payroll Purchase. You Direct Payroll
a separate form and more may start or stop your Purchase ensures a
details. Investing the same regular investment profit or protects
amount on a monthly basis plan at any time, with against loss in a
allows you to buy more two weeks' notice to falling market.
shares when prices are low INVESCO. Because you'll invest
and fewer shares when prices continually,
are high. This "dollar cost regardless of varying
averaging" may help offset price levels, consider
market fluctuations. Over a your financial ability
period of time, your average to keep buying through
cost per share may be less low price levels. And
than the actual average net remember that you will
asset value per share. lose money if you
redeem your shares
when the market value
of all your shares is
less than their cost.
- --------------------------------------------------------------------------------
BY PERSONAL ACCOUNT LINE $50 for subsequent You must provide your
WITH ACH investments. bank account
Automated transactions by information to INVESCO
telephone are available for prior to using this
subsequent purchases and option. Automated
exchanges 24 hours a day. transactions are
Simply call 1-800-424-8085. limited to a maximum
of $25,000.
- --------------------------------------------------------------------------------
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000 for regular See "Exchange Policy."
Between the same class of accounts; $250 for an
any two INVESCO funds. Call IRA; $50 for each
1-800-525-8085 for subsequent investment.
prospectuses of other
INVESCO funds. Exchanges may
be made by phone or at our
Web site at
invescofunds.com. You may
also establish an automatic
monthly exchange service
between two INVESCO funds;
call us for further details
and the correct form.
GRANDFATHERED INVESTORS. Investor Class shares of a Fund can be purchased only
by:
o Persons or entities who had established an account in any of the funds
managed and distributed by INVESCO (the "INVESCO Funds") in Investor Class
shares prior to April 1, 2002 and have continuously maintained such account
in Investor Class shares since April 1, 2002;
o Any person or entity listed in the account registration for any INVESCO Funds
account in Investor Class shares that has been established prior to April 1,
2002 and continuously maintained since April 1, 2002, such as joint owners,
trustees, custodians, and designated beneficiaries;
o Customers of certain financial institutions, wrap accounts or other fee-based
advisory programs, or insurance company separate accounts, which have had
relationships with INVESCO and/or any of the INVESCO Funds' Investor Class
shares prior to April 1, 2002 and continuously maintained such relationships
since April 1, 2002;
o Defined benefit, defined contribution, and deferred compensation plans; and
o INVESCO employees, INVESCO Funds directors, AMVESCAP employees, AMVESCAP
directors, and their immediate families.
For more detailed information about eligibility, please call 1-800-525-8085. If
you hold INVESCO Funds Investor Class shares through a broker/dealer or other
financial institution, your eligibility to purchase Investor Class shares may
differ depending on that institution's policies.
EXCHANGE POLICY. You may exchange your shares in any of the Funds for shares of
the same class in another INVESCO fund on the basis of their respective NAVs at
the time of the exchange.
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR INVESTMENTS, OR
TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately followed by the purchase of
shares in another. Therefore, any gain or loss realized on the exchange is
recognizable for federal income tax purposes (unless, of course, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.
You will not pay a sales charge when exchanging Class B shares for other Class B
shares, Class C shares for other Class C shares, or Class K shares for other
Class K shares. If you make an exchange involving Class B, Class C, or Class K
shares, the amount of time you held the original shares will be added to the
holding period of the Class B, Class C, or Class K shares, respectively, into
which you exchanged for the purpose of calculating any CDSC that may be assessed
upon a subsequent redemption.
We have the following policies governing exchanges:
o Both fund accounts involved in the exchange must be registered in exactly the
same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of each Fund per twelve-month period.
o Each Fund reserves the right to reject any exchange request, or to modify or
terminate the exchange policy, if it is in the best interests of the Fund.
Notice of all such modifications or terminations that affect all shareholders
of the Fund will be given at least sixty days prior to the effective date of
the change, except in unusual instances, including a suspension of redemption
of the exchanged security under Section 22(e) of the Investment Company Act
of 1940.
In addition, the ability to exchange may be temporarily suspended at any time
that sales of the Fund into which you wish to exchange are temporarily stopped.
CHOOSING A SHARE 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 applicable to the
class, if any, (iii) the eligibility requirements that apply to purchases of a
particular class, and (iv) any services you may receive in making your
investment determination. Your financial intermediary can help you decide among
the various classes. Please contact your financial intermediary for several
convenient ways to invest in a Fund. Class A, B, C, and K shares of the Funds
are available primarily through financial intermediaries.
In addition, you should also consider the factors below:
Investor Class Class A Class B Class C Class K
-------------- ------- ------- ------- -------
Initial Sales Charge None 5.50% None None None
CDSC(1) None 1% on certain 1%-5% for 1% for 0.70% on cer-
purchases held shares held shares held tain purchases
less than 18 months less than 6 less than 13 held less than
years months 12 months
12b-1 Fee 0.25% 0.35% 1.00% 1.00% 0.45%
12b-1 Fee (Utilities Fund only)(3) 0.25% 0.25% 1.00% 1.00% 0.45%
Conversion No No Yes(2) No No
Purchase Order Maximum None None $250,000 $1,000,000 None
(1) Please see the subsection entitled "Sales Charges" below and the section of the Funds' Statement of Additional Information
entitled "Distributor - Sales Charges and Dealer Concessions" for more information regarding CDSC charges and dealer
concessions.
(2) Class B shares, along with the pro rata portion of the shares' reinvested dividends and distributions, automatically convert to
Class A shares at the end of the month which is eight years after the date on which such Class B shares were purchased.
(3) Effective July 1, 2003.
INTERNET TRANSACTIONS (INVESTOR CLASS - GRANDFATHERED INVESTORS ONLY). Investors
may open new accounts and exchange and redeem Investor Class shares of any
INVESCO fund through the INVESCO Web site. To use this service, you will need a
web browser (presently Netscape version 4.0 or higher, Microsoft Internet
Explorer version 4.0 or higher, or AOL version 5.0 or higher) and the ability to
use the INVESCO Web site. INVESCO will accept Internet purchase instructions
only for exchanges or if the purchase price is paid to INVESCO through debiting
your bank account, and any Internet cash redemptions will be paid only to the
same bank account from which the payment to INVESCO originated. INVESCO imposes
a limit of $25,000 on Internet purchase and redemption transactions. Other
minimum transaction amounts are discussed in this Prospectus. You may also
download an application to open an account from the Web site, complete it by
hand, and mail it to INVESCO, along with a check.
INVESCO employs reasonable procedures to confirm that transactions entered into
over the Internet are genuine. These procedures include the use of alphanumeric
passwords, secure socket layering, encryption, and other precautions reasonably
designed to protect the integrity, confidentiality, and security of shareholder
information. In order to enter into a transaction on the INVESCO Web site, you
will need an account number, your Social Security number, and an alphanumeric
password. If INVESCO follows these procedures, neither INVESCO, its affiliates
nor any INVESCO fund will be liable for any loss, liability, cost, or expense
for following instructions communicated via the Internet that are reasonably
believed to be genuine or that follow INVESCO's security procedures. By entering
into the user's agreement with INVESCO to open an account through our Web site,
you lose certain rights if someone gives fraudulent or unauthorized instructions
to INVESCO that result in a loss to you.
SALES CHARGES (CLASS A, B, C, AND K ONLY)
Sales charges on Class A shares of the Funds are detailed below. As used below,
the term "offering price" with respect to Class A shares includes the initial
sales charge.
INITIAL SALES CHARGES. Class A shares of the Funds are subject to the following
initial sales charges:
Investor's Sales Charge
Amount of investment As a % of As a % of
in a 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%
$1,000,000 or more NAV NAV
CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS A AND CLASS K SHARES. You can
purchase $1,000,000 or more of Class A shares at net asset value, and the
distributor may pay a dealer concession and/or a service fee for purchases of
$1,000,000 or more. However, if you purchase shares worth $1,000,000 or more,
they may be subject to a CDSC of 1% if you redeem them prior to eighteen months
after the date of purchase. We will use the "first-in, first-out" method to
determine your holding period. Under this method, the date of redemption will be
compared with the earliest purchase date of shares held in your account. If your
holding period is less than eighteen months, the CDSC may be assessed on the
amount of the total original cost of the shares. For qualified plans investing
in Class A shares, you may pay a CDSC of 1% if the plan is redeemed within
twelve months from initial deposit in the plan's INVESCO account. For qualified
plans investing in Class K shares, you may pay a CDSC of 0.70% if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account.
CDSC 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. If your holding period is less
than six years for Class B shares and thirteen months for Class C shares, the
CDSC may be assessed on the amount of the total original cost of the shares.
Year Since
Purchase Made Class B Class C
First 5% 1%(1)
Second 4% None
Third 3% None
Fourth 3% None
Fifth 2% None
Sixth 1% None
Seventh and following None(2) None
(1) The first year will consist of the first thirteen months.
(2) Class B shares, along with the pro rata portion of the shares' reinvested
dividends and distributions, automatically convert to Class A shares at the
end of the month which is eight years after the date on which such Class B
shares were purchased.
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 intermediary must provide sufficient
information at the time of purchase to verify that your purchase qualifies for
such treatment.
REDUCED SALES CHARGES. You may be eligible to buy Class A shares at reduced
initial sales charge rates under Right of Accumulation or Letter of Intent
under certain circumstances.
RIGHTS OF ACCUMULATION. You may combine your new purchases of Class A
shares with Class A shares that were previously purchased for the
purpose of qualifying for the lower initial sales charge rates that
apply to larger purchases. The applicable initial sales charge for the
new purchase is based on the total of your current purchase and the
current value of all Class A shares you own.
LETTER OF INTENT. Under a Letter of Intent (LOI), you commit to
purchase a specified dollar amount of Class A shares of the Fund
during a thirteen-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 thirteen-month period,
your account will be adjusted to the higher initial sales charge level
for the amount actually invested.
INITIAL SALES CHARGE/CDSC EXCEPTIONS.
You will not pay initial sales charges:
o on shares purchased by reinvesting dividends and distributions;
o when exchanging shares of the same class among certain INVESCO
funds;
o when using the reinstatement privilege;
o when a merger, consolidation, or acquisition of assets of an
INVESCO fund occurs; and
o upon automatic conversion of Class B to Class A.
You will not pay a CDSC:
o if you purchase less than $1,000,000 of Class A shares;
o if you purchase $1,000,000 or more of Class A shares and hold those
shares for more than eighteen months;
o if you redeem Class B shares you held for more than six years;
o if you redeem Class C shares you held for more than thirteen
months;
o if you participate in the periodic withdrawal program and withdraw
up to 10% of the value of your shares that are subject to a CDSC in
any twelve-month period. The value of your shares, and applicable
twelve-month period, will be calculated based upon the value of
your account on, and the date of, the first periodic withdrawal;
o if you redeem shares acquired through reinvestment of dividends and
distributions;
o if you are a qualified plan investing in Class A or Class K shares
and elect to forego any dealer concession;
o on increases in the net asset value of your shares;
o to pay account fees;
o for IRA distributions due to death or disability or periodic
distributions based on life expectancy;
o to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
o for redemptions following the death of a shareholder or beneficial
owner.
There may be other situations when you may be able to purchase or redeem shares
at reduced or no sales charges. Consult the Funds' Statement of Additional
Information for further details.
DISTRIBUTION EXPENSES. We have adopted a Master Distribution Plan and Agreement
(commonly known as a "12b-1 Plan") for each class of shares of the Funds. The
12b-1 fees paid by each Fund's classes of shares are used to pay distribution
and service fees to ADI for the sale and distribution of the Funds' shares and
to pay for services provided to shareholders. These services include
compensation to financial intermediaries that sell Fund shares and/or service
shareholder accounts. Because each Fund's shares pay these fees out of their
assets on an ongoing basis, these fees increase the cost of your investment.
Under each Plan, payments are limited to an amount computed at each class's
applicable 12b-1 fee. If distribution expenses for a class exceed these computed
amounts, ADI pays the difference. Conversely, if distribution fees are less than
computed amounts, ADI retains the difference.
[INVESCO ICON] YOUR ACCOUNT SERVICES
With the exception of householding, the following information pertains only to
shareholders who hold their shares directly through INVESCO.
SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains your
current Fund holdings. The Funds do not issue share certificates.
INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL, OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.
QUARTERLY INVESTMENT SUMMARIES. Each calendar quarter, you receive a written
statement which consolidates and summarizes account activity and value at the
beginning and end of the period for each of your INVESCO funds.
TRANSACTION CONFIRMATIONS. You receive detailed confirmations of individual
purchases, exchanges, and sales. If you choose certain recurring transaction
plans (for instance, EasiVest), your transactions are confirmed on your
quarterly Investment Summaries.
TELEPHONE TRANSACTIONS. You and your financial intermediary or plan or program
sponsor may buy, exchange, and sell Fund shares by telephone, unless these
privileges are specifically declined when the INVESCO new account Application is
filled out.
YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, INVESCOFUNDS.COM.
Unless you decline the telephone transaction privileges, when you fill out and
sign the new account Application, a Telephone Transaction Authorization Form, or
use your telephone transaction privileges, you lose certain rights if someone
gives fraudulent or unauthorized instructions to INVESCO that result in a loss
to you. In general, if INVESCO has followed reasonable procedures, such as
recording telephone instructions and sending written transaction confirmations,
INVESCO is not liable for following telephone instructions that it believes to
be genuine. Therefore, you have the risk of loss due to unauthorized or
fraudulent instructions.
HOUSEHOLDING. To save money for the Funds, you may receive only one copy of a
prospectus or financial report to each household address. This process, known as
"householding," is used for most required shareholder mailings. It does not
apply to account statements. You may, of course, request an additional copy of a
prospectus or financial report at any time by calling or writing INVESCO. You
may also request that householding be eliminated from all your required
mailings.
IRAS AND OTHER RETIREMENT PLANS. Shares of any INVESCO mutual fund may be
purchased for IRAs and many other types of tax-deferred retirement plans. Please
call INVESCO for information and forms to establish or transfer your existing
retirement plan or account.
[INVESCO ICON] HOW TO SELL SHARES
The chart in this section shows several convenient ways to sell your Fund shares
if you invest directly through INVESCO. If you invest in a Fund through a
financial intermediary, please consult the financial intermediary, or with
respect to Class K shares, the plan or program sponsor, for information on how
to sell shares of a Fund. You may be charged a commission or transaction fee by
your financial intermediary or plan or program sponsor for sales of Fund shares.
Shares of the Funds may be sold at any time at the next NAV calculated after
your request to sell is received by INVESCO in proper form. Depending on Fund
performance, the NAV at the time you sell your shares may be more or less than
the price you paid to purchase your shares.
Various fees may apply to Fund redemptions. You may be charged a CDSC at the
time of redemption depending on how long you have held your shares.If you buy
$1,000,000 or more of Class A shares and redeem the shares within eighteen
months from the date of purchase, you may pay a 1% CDSC at the time of
redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the total original cost of the
shares may be assessed. With respect to redemption of Class C shares held
thirteen months or less, a CDSC of 1% of the total original cost of the shares
may be assessed. With respect to Class K shares, if you are a qualified plan and
elect to receive a dealer concession, you may pay a CDSC of 0.70% on your Class
K shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. In determining whether a CDSC
applies to a redemption from a non-qualified plan, it is assumed that the shares
being redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the shareholder's
account. These charges are not assessed upon Class A, B, C, or K shares acquired
through reinvestment of dividends or other distributions, or Class A, B, C, or K
shares exchanged for the same class of another INVESCO Fund. For more
information on CDSC charges, please see the subsection of the Prospectus
entitled "Choosing A Share Class" and the section of the Statement of Additional
Information entitled "Distributor - Sales Charges and Dealer Concessions."
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00 P.M.
EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell and specify the class of shares. Remember that any sale
or exchange of shares in a non-retirement account will likely result in a
taxable gain or loss.
While INVESCO attempts to process telephone redemptions promptly, there may be
times -- particularly in periods of severe economic or market disruption -- when
you may experience delays in redeeming shares by telephone.
INVESCO usually forwards the proceeds from the sale of fund shares within seven
days after we receive your request to sell in proper form. However, payment may
be postponed under unusual circumstances -- for instance, if normal trading is
not taking place on the NYSE, or during an emergency as defined by the
Securities and Exchange Commission. If your INVESCO fund shares were purchased
by a check which has not yet cleared, payment will be made promptly when your
purchase check does clear; that can take up to twelve business days.
If you participate in EasiVest, the Funds' automatic monthly investment program,
and sell all of the shares in your account, we will not make any additional
EasiVest purchases unless you give us other instructions.
Because of the Funds' expense structures, it costs as much to handle a small
account as it does to handle a large one. If the value of your account in a Fund
falls below $250 as a result of your actions (for example, sale of your Fund
shares), the Fund reserves the right to sell all of your shares, send the
proceeds of the sale to you and close your account. Before this is done, you
will be notified and given sixty days to increase the value of your account to
$250 or more.
REDEMPTION FEES. Except for any applicable CDSC, we will not charge you any fees
to redeem your shares; however, your financial intermediary may charge service
fees for handling these transactions.
REINSTATEMENT PRIVILEGE (CLASS A AND CLASS B ONLY). You may, within ninety days
after you sell Class A or Class B shares, reinvest all or part of your
redemption proceeds in Class A shares of a Fund at net asset value in an
identically registered account. You will not pay any sales charges on the amount
reinvested. You must notify INVESCO in writing at the time you reinstate that
you are exercising your reinstatement privilege. You may exercise this privilege
only once per calendar year.
The following chart shows several ways to sell your shares of the Funds if you
invest directly through INVESCO.
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY TELEPHONE Any amount. You must provide an IRA
Call us toll-free at: redemption form to
1-800-525-8085. INVESCO prior to making
an IRA redemption by
telephone. INVESCO's
telephone redemption
privileges may be
modified or terminated in
the future at INVESCO's
discretion. The maximum
amount which may be
redeemed by telephone is
generally $25,000.
- --------------------------------------------------------------------------------
IN WRITING Any amount. The redemption request
Mail your request to: must be signed by all
INVESCO Funds Group, Inc. registered account
P.O. Box 173706 owners. Payment will be
Denver, CO 80217-3706. mailed to your address as
You may also send your it appears on INVESCO's
request by overnight records, or to a bank
courier to: designated by you in
4350 South Monaco Street writing.
Denver, CO 80237.
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH Any amount. You must provide your
Call 1-800-525-8085 to bank account information
request your redemption. or IRA redemption form to
INVESCO prior to using
this option. INVESCO will
automatically pay the
proceeds into your
designated bank account.
- --------------------------------------------------------------------------------
BY INTERNET (INVESTOR Any amount. IRA You will need a Web
CLASS - GRANDFATHERED redemptions are not browser to use this
INVESTORS ONLY) permitted via the service. Internet
Go to the INVESCO Web site internet. transactions are limited
at invescofunds.com. to a maximum of $25,000.
INVESCO will
automatically pay the
proceeds into your
designated bank account.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BY PERSONAL ACCOUNT LINE $50. Be sure to write down the
WITH ACH (INVESTOR CLASS - confirmation number
GRANDFATHERED INVESTORS provided to you. You must
ONLY) provide your bank account
Automated transactions by information to INVESCO
telephone are available prior to using this
for redemptions and option.
exchanges 24 hours a day.
Simply call 1-800-424-8085.
- --------------------------------------------------------------------------------
PERIODIC WITHDRAWAL PLAN $100 per payment on a You must have at least
You may call us to request monthly or quarterly $10,000 total invested
the appropriate form and basis. The redemption with the INVESCO funds
more information at check may be made with at least $5,000 of
1-800-525-8085. payable to any party that total invested in
you designate. the fund from which
withdrawals will be made.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD PARTY Any amount. All registered account
Mail your request to: owners must sign the
INVESCO Funds Group, Inc. request, with signature
P.O. Box 173706 guarantees from an
Denver, CO 80217-3706. eligible guarantor
financial institution,
such as a commercial bank
or a recognized national
or regional securities
firm.
[GRAPH ICON] TAXES
Everyone's tax status is unique. We manage the Funds in an effort to provide
maximum total returns to all shareholders of the Funds. INVESCO generally
focuses on pre-tax results and ordinarily does not manage a Fund to minimize
taxes. We may, nevertheless, take advantage of opportunities to mitigate taxes
through management of capital gains and losses. We encourage you to consult your
own tax adviser on the tax impact to you of investing directly or indirectly in
the Funds.
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.
Each Fund customarily distributes to its shareholders substantially all of its
net investment income, net capital gains and net gains from foreign currency
transactions, if any. You receive a proportionate part of these distributions,
depending on the percentage of a Fund's shares that you own. These distributions
are required under federal tax laws governing mutual funds. It is the policy of
each Fund to distribute all investment company taxable income and net capital
gains. As a result of this policy and each Fund's qualification as a regulated
investment company, it is anticipated that none of the Funds will pay any
federal income or excise taxes. Instead, each Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
However, unless you are (or your account is) exempt from income taxes, you must
include all dividends and capital gain distributions paid to you by a Fund in
your taxable income for federal, state, and local income tax purposes. You also
may realize capital gains or losses when you sell shares of a Fund at more or
less than the price you originally paid. An exchange is treated as a sale, and
is a taxable event. Dividends and other distributions usually are taxable
whether you receive them in cash or automatically reinvest them in shares of the
distributing Fund(s) or other INVESCO funds.
If you have not provided INVESCO with complete, correct tax information, the
Funds are required by law to withhold from your distributions, and any money
that you receive from the sale of shares of the Funds, a backup withholding tax
at the rate in effect on the date of the transaction.
Unless your account is held through a financial intermediary, we will provide
you with detailed information every year about your dividends and capital gain
distributions. Depending on the activity in your individual account, we may also
be able to assist with cost basis figures for shares you sell.
[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Funds earn ordinary or investment income from dividends and interest on
their investments. Energy, Financial Services, Gold & Precious Metals, Health
Sciences, Leisure, Technology, and Telecommunications Funds expect to distribute
their respective investment income, less Fund expenses, to shareholders
annually. Real Estate Opportunity and Utilities Funds expect to make such
distributions quarterly. All Funds can make distributions at other times, if
they choose to do so. Please note that classes with higher expenses are expected
to have lower dividends.
NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN
ADDITIONAL SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT OR TAX-DEFERRED
ACCOUNTS).
Each Fund also realizes capital gains or losses when it sells securities in its
portfolio for more or less than it had paid for them. If total gains on sales
exceed total losses (including losses carried forward from previous years), a
Fund has a net realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually, usually in November or December.
Dividends and capital gain distributions are paid to you if you hold shares on
the record date of the distribution regardless of how long you have held your
shares.
Under present federal income tax laws, capital gains may be taxable at different
rates, depending on how long a Fund has held the underlying investment.
Short-term capital gains, which are derived from the sale of assets held one
year or less, are taxed as ordinary income. Long-term capital gains, which are
derived from the sale of assets held for more than one year, are taxed at up to
the maximum capital gains rate, currently 20% for individuals.
A Fund's daily NAV reflects all realized capital gains that have not yet been
distributed to shareholders. Therefore, a Fund's NAV will drop by the amount of
a distribution, net of market fluctuations, on the day the distribution is
declared. If you buy shares of a Fund just before a distribution is declared,
you may wind up "buying a distribution." This means that if the Fund declares a
dividend or capital gain distribution shortly after you buy, you will receive
some of your investment back as a taxable distribution. Although purchasing your
shares at the resulting higher NAV may mean a smaller capital gain or greater
loss upon sale of the shares, most shareholders want to avoid the purchase of
shares immediately before the distribution record date. However, keep in mind
that your basis in the Fund will be increased to the extent such distributions
are reinvested in the Fund. If you sell your shares of a Fund at a loss for tax
purposes and then replace those shares with a substantially identical investment
either thirty days before or after that sale, the transaction is usually
considered a "wash sale" and you will not be able to claim a tax loss.
Dividends and capital gain distributions paid by each Fund are automatically
reinvested in additional Fund shares at the NAV on the ex-distribution date,
unless you choose to have them automatically reinvested in another INVESCO fund
or paid to you by check or electronic funds transfer. If you choose to be paid
by check, the minimum amount of the check must be at least $10; amounts less
than that will be automatically reinvested. Dividends and other distributions,
whether received in cash or reinvested in additional Fund shares, are generally
subject to federal income tax.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the various classes of each Fund for the past five years (or, if
shorter, the period of the class's operations). Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the annual percentages that an investor would have earned (or lost) on
an investment in a Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the financial statements, is
included in INVESCO Sector Funds, Inc.'s 2003 Annual Report to Shareholders,
which is incorporated by reference into the Statement of Additional Information.
This Report is available without charge by contacting ADI at the address or
telephone number on the back cover of this Prospectus.
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
ENERGY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30 $ 19.38
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.10) (0.07) (0.08) (0.00) (0.00) 0.00
Net Investment Income(Loss)(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.35) (0.40) 3.84 3.72 2.39 (5.04)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.45) (0.47) 3.76 3.72 2.39 (5.04)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00 0.01 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.81 $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30
====================================================================================================================================
TOTAL RETURN (12.72%) (2.38%) 23.09% 27.19%(d) 21.19% (28.51%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 231,023 $ 358,439 $ 445,845 $ 221,432 $ 196,136 $ 137,455
Ratio of Expenses to Average Net Assets(e) 1.69% 1.53% 1.41% 1.60%(f) 1.68% 1.58%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.57%) (0.34%) (0.35%) (0.26%)(f) (0.05%) 0.01%
Portfolio Turnover Rate 144% 144% 166% 109%(d) 279% 192%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001.
(c) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis for the period ended March 31, 2000 and the years
ended October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 19.26 $ 19.26
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.05) (0.17)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (2.36) (2.38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.41) (2.55)
====================================================================================================================================
Net Asset Value--End of Period $ 16.85 $ 16.71
====================================================================================================================================
TOTAL RETURN(c)
RATIOS (12.51%) (13.24%)
Net Assets--End of Period ($000 Omitted) $ 9,131 $ 1,502
Ratio of Expenses to Average Net Assets(d)(e) 1.46% 2.33%
Ratio of Net Investment Loss to Average Net Assets(e) (0.33%) (1.16%)
Portfolio Turnover Rate 144% 144%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charge for Class A or CDSC for Class B is not included in the Total Return Calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 2.41% and ratio of net investment
loss to average net assets would have been (1.24%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------------
2003 2002 2001 2000(a)
ENERGY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 18.98 $ 19.58 $ 17.39 $ 14.35
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.11) (0.07) (0.05) (0.01)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (2.42) (0.53) 3.67 3.05
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.53) (0.60) 3.62 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.45 $ 18.98 $ 19.58 $ 17.39
====================================================================================================================================
TOTAL RETURN(c) (13.33%) (3.06%) 22.35% 21.11%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 9,566 $ 12,324 $ 8,704 $ 16
Ratio of Expenses to Average Net Assets(e)(f) 2.33% 2.27% 2.05% 2.05%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.22%) (1.08%) (1.10%) (1.11%)(g)
Portfolio Turnover Rate 144% 144% 166% 109%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.53% and ratio of net investment loss to
average net assets would have been (1.42%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
--------------------------------------------------------
2003 2002 2001(a)
ENERGY FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 17.98 $ 19.62 $ 16.76
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.14) (0.05) (0.15)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (2.29) (1.59) 3.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.43) (1.64) 2.86
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 15.55 $ 17.98 $ 19.62
====================================================================================================================================
TOTAL RETURN (13.52%) (8.36%) 17.06%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 289 $ 37 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 2.07% 11.62% 3.11%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.90%) (10.45%) (2.34%)(f)
Portfolio Turnover Rate 144% 144% 166%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2003.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 5.36% and ratio of net investment loss to
average net assets would have been (4.19%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-----------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
FINANCIAL SERVICES FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45 $ 29.14
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.10 0.07 0.10 0.03 0.08 0.25
Net Investment Income
Net Gains or (Losses) on Securities (Both
Realized and Unrealized) (6.42) 0.94 2.97 0.05 3.52 3.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.32) 1.01 3.07 0.08 3.60 3.26
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.13 1.67 1.32 2.68 2.32 3.95
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.77 $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45
====================================================================================================================================
TOTAL RETURN (22.39%) 3.82% 11.25% 0.60%(b) 13.52% 11.76%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 734,440 $ 1,234,230 $ 1,368,583 $ 1,133,350 $ 1,242,555 $ 1,417,655
Ratio of Expenses to Average Net Assets(c) 1.40% 1.27% 1.25% 1.29%(d) 1.26% 1.05%
Ratio of Net Investment Income to
Average Net Assets 0.38% 0.24% 0.36% 0.25%(d) 0.25% 0.85%
Portfolio Turnover Rate 60% 81% 99% 38%(b) 83% 52%
(a) From November 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(d) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 28.22 $ 28.22
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.06 (0.03)
Net Investment Income (Loss)
Net Losses on Securities (Both Realized and Unrealized) (6.37) (6.30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.31) (6.33)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.23 0.15
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.68 $ 21.74
====================================================================================================================================
TOTAL RETURN(b) (22.36%) (22.48%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,311 $ 990
Ratio of Expenses to Average Net Assets(c)(d) 1.38% 2.09%
Ratio of Net Investment Income (Loss) to Average Net Assets(d) 0.49% (0.20%)
Portfolio Turnover Rate 60% 60%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of each Class were absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been 1.51% for Class A and 2.40% for Class B and ratio
of net investment income (loss) to average net assets would have been 0.36% for Class A and (0.51%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------
2003 2002 2001 2000(a)
FINANCIAL SERVICES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 27.89 $ 28.72 $ 27.06 $ 23.66
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.25) (0.10) (0.09) 0.00
Net Investment Income (Loss)(c)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.22) 0.87 3.05 3.48
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.47) 0.77 2.96 3.48
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.04 1.60 1.30 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.38 $ 27.89 $ 28.72 $ 27.06
====================================================================================================================================
TOTAL RETURN(d) (23.22%) 2.98% 10.87% 14.72%(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 10,026 $ 16,880 $ 12,221 $ 138
Ratio of Expenses to Average Net Assets(f) 2.45% 2.07% 1.85% 1.63%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.68%) (0.57%) (0.31%) 0.39%(g)
Portfolio Turnover Rate 60% 81% 99% 38%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Income aggregated less than $0.01 on a per share basis for the period ended March 31, 2000.
(d) The applicable CDSC is not included in the Total Return Calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------
2003 2002 2001(a)
FINANCIAL SERVICES FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 27.69 $ 28.67 $ 29.35
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) 0.15 (0.03) (0.17)
Net Investment Income (Loss)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.14) 0.90 (0.38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.26) 0.87 (0.55)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.16 1.85 0.13
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.27 $ 27.69 $ 28.67
====================================================================================================================================
TOTAL RETURN (22.62%) 3.38% (1.97%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,348 $ 1,033 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.78% 1.63% 3.35%(f)
Ratio of Net Investment Loss to Average Net Assets(e) 0.18% (0.12%) (1.80%)(f)
Portfolio Turnover Rate 60% 81% 99%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.13% and ratio of net investment loss to
average net assets would have been (0.17%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
GOLD & PRECIOUS METALS
FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90 $ 3.21
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.02) (0.01) (0.01) (0.01) (0.03) 0.01
OPERATIONS(b)
Net Investment Income (Loss)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.13) 0.87 (0.12) (0.22) (0.04) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.11 0.86 (0.13) (0.23) (0.07) (1.28)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00 0.00 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.40 $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90
====================================================================================================================================
TOTAL RETURN 4.80% 60.14% (8.38%) (12.58%)(c) (3.68%) (39.98%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 98,388 $ 104,831 $ 64,429 $ 81,470 $ 99,753 $ 107,249
Ratio of Expenses to Average Net Assets(d) 1.88% 2.10% 2.34% 2.08%(e) 2.20% 1.90%
Ratio of Net Investment
Loss to Average Net Assets (0.79%) (0.80%) (0.99%) (0.76%)(e) (1.60%) (0.93%)
Portfolio Turnover Rate 84% 46% 90% 37%(c) 141% 133%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003 and 2001 and October 31, 1999.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(e) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
--------------------------------------------------
GOLD & PRECIOUS METALS FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.29 $ 2.29
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.02) (0.02)
Net Investment Loss
Net Gains on Securities (Both Realized and Unrealized) 0.12 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.39 $ 2.39
====================================================================================================================================
TOTAL RETURN(c) 4.37% 4.37%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,514 $ 2,315
Ratio of Expenses to Average Net Assets(d)(e) 2.09% 2.18%
Ratio of Net Investment Loss to Average Net Assets(e) (1.09%) (1.12%)
Portfolio Turnover Rate 84% 84%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of Class A were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class A, ratio of expenses to average net assets would have been 2.11% and ratio of net investment
loss to average net assets would have been (1.11%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------
2003 2002 2001 2000(a)
GOLD & PRECIOUS METALS FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.42 $ 1.53 $ 1.60 $ 1.75
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.00) (0.07) (0.01) (0.00)
Net Investment Loss(c)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.10) 0.96 (0.02) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.89 (0.03) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.52 $ 2.42 $ 1.53 $ 1.60
====================================================================================================================================
TOTAL RETURN(d) 4.13% 58.17% (1.95%) ( 8.57%)(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,459 $ 515 $ 57 $ 1
Ratio of Expenses to Average Net Assets(f) 2.65% 3.33% 3.38% 3.54%(g)
Ratio of Net Investment Loss to Average Net Assets (1.60%) (1.67%) (1.41%) (0.82%)(g)
Portfolio Turnover Rate 84% 46% 90% 37%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2003 and the period ended March
31, 2000.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
----------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
HEALTH SCIENCES FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12 $ 57.50
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS(b)
Net Investment Income (Loss) (0.28) (0.38) (0.12) (0.06) 0.14 0.13
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (8.75) 2.18 (0.51) 3.53 5.02 13.55
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.03) 1.80 (0.63) 3.47 5.16 13.68
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 9.11 6.34 8.89 9.06
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 38.53 $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12
====================================================================================================================================
TOTAL RETURN (18.99%) 3.95% (4.12%) 6.30%(d) 8.44% 28.58%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 954,765 $ 1,475,313 $ 1,580,378 $ 1,622,624 $ 1,574,020 $ 1,328,196
Ratio of Expenses to Average Net Assets(e) 1.44% 1.31% 1.23% 1.18%(f) 1.22% 1.12%
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.68%) (0.75%) (0.20%) (0.22%)(f) 0.07% 0.25%
Portfolio Turnover Rate 179% 160% 177% 107%(d) 127% 92%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 47.56 $ 47.56
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.22) (0.44)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (8.78) (8.78)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.00) (9.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 38.56 $ 38.34
====================================================================================================================================
TOTAL RETURN(c) (18.92%) (19.39)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 3,731 $ 621
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.06%
Ratio of Net Investment Loss to Average Net Assets(e) (0.69%) (1.22%)
Portfolio Turnover Rate 179% 179%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.88% for Class A and 2.51% for Class B and
ratio of net investment loss to average net assets would have been (1.16%) for Class A and (1.67%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------------
2003 2002 2001 2000(a)
HEALTH SCIENCES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 46.68 $ 45.40 $ 55.50 $ 62.05
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (1.20) (0.35) (0.05) (0.03)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.21) 1.65 (0.94) (6.52)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.41) 1.30 (0.99) (6.55)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS (0.00) 0.02(c) 9.11 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 37.27 $ 46.68 $ 45.40 $ 55.50
====================================================================================================================================
TOTAL RETURN(d) (20.16%) 2.85% (4.79%) (10.56%)(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,846 $ 15,892 $ 10,767 $ 470
Ratio of Expenses to Average Net Assets(f)(g) 2.81% 2.26% 2.03% 1.65%(h)
Ratio of Net Investment Loss to Average Net Assets(g) (2.04%) (1.70%) (1.08%) (0.54%)(h)
Portfolio Turnover Rate 179% 160% 177% 107%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 3.27% and ratio of net investment loss to
average net assets would have been (2.50%).
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-----------------------------------------------------------
2003 2002 2001(a)
HEALTH SCIENCES FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 46.98 $ 45.43 $ 55.84
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.23) (0.48) (0.22)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.94) 2.05 (10.19)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.17) 1.57 (10.41)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 37.81 $ 46.98 $ 45.43
====================================================================================================================================
TOTAL RETURN (19.50%) 3.42% (18.64%)(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,990 $ 2,405 $ 1
Ratio of Expenses to Average Net Assets(e) 2.07% 1.71% 3.62%(f)
Ratio of Net Investment Loss to Average Net Assets (1.29%) (1.09%) (2.75%)(f)
Portfolio Turnover Rate 179% 160% 177%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
LEISURE FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92 $ 27.21
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.23) (0.03) (0.00) (0.13) (0.00) (0.00)
OPERATIONS(b)
Net Investment Loss(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (7.89) 2.21 (3.05) 7.27 17.20 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.12) 2.18 (3.05) 7.14 17.20 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 3.23 1.91 2.98
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.83 $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92
====================================================================================================================================
TOTAL RETURN (20.87%) 6.01% (5.50%) 17.34%(d) 65.13% 15.16%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 536,108 $ 799,465 $ 607,428 $ 549,523 $ 443,348 $ 228,681
Ratio of Expenses to Average Net Assets(e) 1.50% 1.40% 1.36% 1.28%(f) 1.44% 1.41%
Ratio of Net Investment Loss
to Average Net Assets (0.69%) (0.64%) (0.51%) (0.65%)(f) (0.68%) (0.09%)
Portfolio Turnover Rate 20% 27% 28% 23%(d) 35% 31%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2003 and the period ended March 31,
2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001 and the years ended
October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
LEISURE FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.96 $ 38.96
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.17) (0.38)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (7.91) (7.93)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.08) (8.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.88 $ 30.65
====================================================================================================================================
TOTAL RETURN(c) (20.74%) (21.33%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 27,175 $ 8,268
Ratio of Expenses to Average Net Assets(d)(e) 1.42% 2.14%
Ratio of Net Investment Loss to Average Net Assets(e) (0.56%) (1.29%)
Portfolio Turnover Rate 20% 20%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return Calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expenses
offset arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 2.23% and ratio of net investment
loss to average net assets would have been (1.38%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------
2003 2002 2001 2000(a)
LEISURE FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.29 $ 36.80 $ 47.09 $ 45.51
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.18) (0.17) (0.13) (0.02)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.11) 2.02 (3.22) 1.60
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.29) 1.85 (3.35) 1.58
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.00 $ 38.29 $ 36.80 $ 47.09
====================================================================================================================================
TOTAL RETURN(c) (21.65%) 5.10% (6.18%) 3.47%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 17,768 $ 16,307 $ 5,388 $ 84
Ratio of Expenses to Average Net Assets(e) 2.44% 2.26% 2.08% 1.71%(f)
Ratio of Net Investment Loss to Average Net Assets (1.62%) (1.48%) (1.08%) (0.42%)(f)
Portfolio Turnover Rate 20% 27% 28% 23%(g)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED PERIOD ENDED
MARCH 31 MARCH 31
---------------------------------------------
2003 2002(a)
LEISURE FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.98 $ 36.11
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.06) (0.09)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.18) 2.96
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.24) 2.87
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.74 $ 38.98
====================================================================================================================================
TOTAL RETURN (21.14%) 7.95%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 67,465 $ 62,226
Ratio of Expenses to Average Net Assets(d)(e) 1.87% 1.23%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.05%) (0.48%)(f)
Portfolio Turnover Rate 20% 27%(g)
(a) From December 17, 2001, inception of Class, to March 31, 2002.
(b) The per share information was computed based on average shares for the period ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.21% and ratio of net investment loss to
average net assets would have been (1.39%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2002.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
----------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
REAL ESTATE OPPORTUNITY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15 $ 10.99
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.24 0.26 0.27 0.33 0.38
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.37) 0.78 0.48 (0.28) (1.56) (0.96)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.09) 1.02 0.74 (0.01) (1.23) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.27 0.25 0.25 0.26 1.02 1.26
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.53 $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15
====================================================================================================================================
TOTAL RETURN (1.12%) 14.67% 11.05% (0.03%)(b) (13.29%) (6.49%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 20,313 $ 20,345 $ 28,546 $ 20,046 $ 17,406 $ 23,548
Ratio of Expenses to Average Net Assets(c)(d) 1.60% 1.61% 1.60% 1.34%(e) 1.34% 1.22%
Ratio of Net Investment Income to Average Net Assets(d) 3.92% 3.58% 3.52% 5.54%(e) 4.23% 3.53%
Portfolio Turnover Rate 248% 196% 338%(f) 272%(b)(f) 697%(f) 258%
(a) From August 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001, the
period ended March 31, 2000 and the years ended July 31, 1999 and 1998. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.43%, 2.25%, 2.03%, 2.73% (annualized), 2.76%, and 1.97%, respectively,
and ratio of net investment income to average net assets would have been 3.09%, 2.94%, 3.09%, 4.15% (annualized), 2.81%, and
2.78%, respectively.
(e) Annualized
(f) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.89 $ 7.89
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.28 0.21
Net Investment Income
Net Losses on Securities (Both Realized and Unrealized) (0.39) (0.36)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.11) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.34 0.32
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.44 $ 7.42
====================================================================================================================================
TOTAL RETURN(b) (1.45%) (1.94%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,409 $ 133
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.36%
Ratio of Net Investment Income to Average Net Assets(d) 4.57% 3.49%
Portfolio Turnover Rate 248% 248%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expense had not been
voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 3.73% and ratio of net investment
income to average net assets would have been 2.12%.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------
2003 2002 2001 2000(a)
REAL ESTATE OPPORTUNITY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.95 $ 7.10 $ 6.62 $ 6.58
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.14 0.14 0.20 0.08
Net Investment Income
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.28) 0.82 0.48 0.06
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.14) 0.96 0.68 0.14
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.08 0.11 0.20 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.73 $ 7.95 $ 7.10 $ 6.62
====================================================================================================================================
TOTAL RETURN(b) (1.81%) 13.69% 10.20% 2.10%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 838 $ 484 $ 1,336 $ 143
Ratio of Expenses to Average Net Assets(d)(e) 2.35% 2.37% 2.26% 1.77%(f)
Ratio of Net Investment Income to Average Net Assets(e) 3.25% 2.72% 2.90% 19.13%(f)
Portfolio Turnover Rate 248% 196% 338%(g) 272%(g)(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The applicable CDSC is not included in the Total Return Calculation.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 3.74%, 2.72%, 2.26%, and 2.04% (annualized), respectively, and ratio of net investment income to average net assets
would have been 1.86%, 2.37%, 2.90%, and 18.86% (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
---------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
TECHNOLOGY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07 $ 35.97
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.41) (0.08) (0.10) (0.03) (0.07) (0.00)
OPERATIONS
Net Investment Loss(b)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (13.37) (5.11) (63.58) 47.69 30.17 (1.45)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.51) (5.19) (63.68) 47.66 30.10 (1.45)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 3.91 0.00 6.45
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.90 $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07
====================================================================================================================================
TOTAL RETURN (44.43% (14.58%) (63.54%) 85.87%(c) 107.23% (2.47%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 853,530 $ 1,865,251 $ 2,181,879 $ 5,034,087 $ 2,081,613 $ 1,008,771
Ratio of Expenses to Average Net Assets(d) 1.77% 1.37% 0.98% 0.88%(e) 1.20% 1.17%
Ratio of Net Investment Loss
to Average Net Assets (1.46% (1.08%) (0.47%) (0.48%)(e) (0.79%) (0.49%)
Portfolio Turnover Rate 107% 79% 85% 28%(c) 143% 178%
(a) From November 1, 1999 to March 31, 2000.
(b) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended October 31, 1998.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(e) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.41 $ 30.41
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.20) (0.27)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (13.23) (13.30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.43) (13.57)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.98 $ 16.84
====================================================================================================================================
TOTAL RETURN(c) (44.16%) (44.62%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 4,460 $ 532
Ratio of Expenses to Average Net Assets(d)(e) 1.47% 2.15%
Ratio of Net Investment Loss to Average Net Assets(e) (1.12%) (1.71%)
Portfolio Turnover Rate 107% 107%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of each Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.51% for Class A and 2.74% for Class B and
ratio of net investment loss to average net assets would have been (1.16%) for Class A and (2.30%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------------
2003 2002 2001 2000(a)
TECHNOLOGY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 29.73 $ 35.22 $ 101.85 $ 95.51
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.62) (0.22) (0.18) (0.15)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (12.72) (5.27) (63.81) 6.49
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.34) (5.49) (63.99) 6.34
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.39 $ 29.73 $ 35.22$ 101.85
====================================================================================================================================
TOTAL RETURN(c) (44.87%) (15.59%) (63.89%) 6.63%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,759 $ 18,910 $ 15,919 $ 2,970
Ratio of Expenses to Average Net Assets(e)(f) 2.69% 2.54% 1.86% 1.45%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (2.39%) (2.26%) (1.30%) (1.03%)(g)
Portfolio Turnover Rate 107% 79% 85% 28%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 3.95%, and ratio of net investment loss to
average net assets would have been (3.65%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
----------------------------------------------------------
2003 2002 2001(a)
TECHNOLOGY FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.22 $ 35.09 $ 60.01
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.07) (0.27) (0.82)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (13.37) (4.60) (24.10)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.44) (4.87) (24.92)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.78 $ 30.22 $ 35.09
====================================================================================================================================
TOTAL RETURN (44.47%) (13.85%) (41.54%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 22,156 $ 27,147 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.88% 1.28% 5.18%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.55%) (1.15%) (4.67%)(f)
Portfolio Turnover Rate 107% 79% 85%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO , if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.49%, and ratio of net investment loss to
average net assets would have been (2.16%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
--------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
TELECOMMUNICATIONS FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60 $ 15.31
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS(b)
Net Investment Income (Loss)(c) (0.04) (0.11) (0.16) (0.10) (0.00) 0.01
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (4.36) (11.42) (38.91) 32.87 12.57 5.32
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.53) (39.07) 32.77 12.57 5.33
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.15 0.37 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.96 $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60
====================================================================================================================================
TOTAL RETURN (35.60%) (48.26%) (61.42%) 103.25%(d) 65.52% 36.79%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 274,947 $ 573,969 $ 1,486,660 $ 4,125,890 $ 1,029,256 $ 276,577
Ratio of Expenses to Average Net Assets(e)(f) 1.81% 1.70% 1.10% 0.99%(g) 1.24% 1.32%
Ratio of Net Investment Loss to Average
Net Assets(f) (0.49%) (0.57%) (0.32%) (0.32%)(g) (0.49%) (0.16%)
Portfolio Turnover Rate 137% 91% 61% 24%(d) 62% 55%
(a) From August 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended July 31, 1999.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian, distribution, and transfer agent fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.76%, and ratio of net investment loss to
average net assets would have been (1.44%).
(g) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.36 $ 12.36
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS (0.08) (0.03)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (4.36) (4.44)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.44) (4.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.92 $ 7.89
====================================================================================================================================
TOTAL RETURN(b) (35.92%) (36.17%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 326 $ 16
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.57%
Ratio of Net Investment Loss to Average Net Assets(d) (0.65%) (1.44%)
Portfolio Turnover Rate 137% 137%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 12.15% and ratio of net
investment loss to average net assets would have been (11.02%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------
2003 2002 2001 2000(a)
TELECOMMUNICATIONS FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.10 $ 23.70 $ 64.37 $ 59.28
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.34) (0.04) (0.13) (0.06)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (4.04) (11.56) (39.08) 5.15
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.38) (11.60) (39.21) 5.09
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.72 $ 12.10 $ 23.70 $ 64.37
====================================================================================================================================
TOTAL RETURN(c) (36.20%) (48.95%) (61.69%) 8.59%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,188 $ 10,392 $ 11,980 $ 2,530
Ratio of Expenses to Average Net Assets(e)(f) 2.63% 2.60% 1.99% 1.49%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.18%) (1.52%) (1.18%) (0.86%)(g)
Portfolio Turnover Rate 137% 91% 61% 24%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed , ratio of expenses to average net assets would have been 5.76% and ratio of net investment loss to
average net assets would have been (4.31%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-----------------------------------------------------
2003 2002 2001(a)
TELECOMMUNICATIONS FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.30 $ 23.80 $ 36.43
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.02) (0.15) (0.19)
Net Losses on Securities (Both Realized and Unrealized) (4.38) (11.35) (12.44)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.50) (12.63)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.90 $ 12.30 $ 23.80
====================================================================================================================================
TOTAL RETURN (35.77%) (48.32%) (34.67%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 666 $ 864 $ 1
Ratio of Expenses to Average Net Assets(d)(e) $ 2.06% 2.21% 2.30%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.77%) (1.32%) (1.52%)(f)
Portfolio Turnover Rate 137% 91% 61%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003 and 2002 and the period
ended March 31, 2001. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have
been 3.30%, 2.42% and 3.38% (annualized), respectively, and ratio of net investment loss to average net assets would have been
(2.01%), (1.53%) and (2.60%) (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-----------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
UTILITIES FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73 $ 12.42
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT 0.23 0.15 0.13 0.04 0.17 0.30
OPERATIONS
Net Investment Income
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.46) (5.54) (3.22) 3.95 3.20 2.56
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.23) (5.39) (3.09) 3.99 3.37 2.86
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.24(b) 0.15 1.13 1.25 0.42 0.55
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.19 $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73
====================================================================================================================================
TOTAL RETURN (20.99%) (33.34%) (15.18%) 23.99%(c) 23.22% 23.44%
RATIOS
Net Assets--End of Period ($000
Omitted) $ 72,749 $ 124,578 $ 232,877 $ 260,554 $ 223,334 $ 177,309
Ratio of Expenses to Average Net Assets(d)(e) 1.30% 1.30% 1.30% 1.24%(f) 1.26% 1.29%
Ratio of Net Investment Income to
Average Net Assets(e) 2.63% 1.09% 0.74% 0.50%(f) 1.02% 1.82%
Portfolio Turnover Rate 64% 56% 49% 18%(c) 32% 47%
(a) From November 1, 1999 to March 31, 2000.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian, distribution, and transfer agent fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002 and 2001, the period
ended March 31, 2000 and the years ended October 31, 1999, and 1998. If such expenses had not been voluntarily absorbed, ratio
of expenses to average net assets would have been 1.90%, 1.57%, 1.40%, 1.33% (annualized), 1.43% and 1.36%, respectively, and
ratio of net investment income to average net assets would have been 2.03%, 0.82%, 0.64%, 0.41% (annualized), 0.85% and 1.75%,
respectively.
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.66 $ 10.66
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.16 0.13
Net Investment Income
Net Losses on Securities (Both Realized and Unrealized) (2.40) (2.43)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.24) (2.30)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENTS AND DISTRIBUTIONS 0.29(b) 0.21(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.13 $ 8.15
====================================================================================================================================
TOTAL RETURN(c) (21.05%) (21.67%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 450 $ 193
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.14%
Ratio of Net Investment Income to Average Net Assets(e) 2.79% 1.84%
Portfolio Turnover Rate 64% 64%
(a) Class commenced operations on April 1, 2002.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expenses offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.74% for Class A and 2.69% for Class B and
ratio of net investment income to average net assets would have been 2.46% for Class A and 1.29% for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------
2003 2002 2001 2000(a)
UTILITIES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.63 $ 16.08 $ 20.40 $ 19.91
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) 0.15 0.03 (0.00) (0.01)
Net Investment Income (Loss)(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.47) (5.48) (3.22) 0.52
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.32) (5.45) (3.22) 0.51
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.09 0.00 1.10 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.22 $ 10.63 $ 16.08 $ 20.40
====================================================================================================================================
TOTAL RETURN(d) (21.85%) (33.87%) (15.83%) 2.58%(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 667 $ 1,799 $ 3,579 $ 248
Ratio of Expenses to Average Net Assets(f)(g) 2.05% 2.04% 2.07% 1.83%(h)
Ratio of Net Investment Income (Loss) to Average Net Assets(g) 1.75% 0.32% (0.02%) (0.32%)(h)
Portfolio Turnover Rate 64% 56% 49% 18%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001.
(d) The applicable CDSC is included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 3.70%, 2.45%, 2.11% and 1.83% (annualized), respectively, and ratio of net investment income (loss) to average net
assets would have been 0.10% (0.09%), (0.06%) and (0.32%) (annualized), respectively.
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
JULY 31, 2003
INVESCO SECTOR FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & PRECIOUS METALS FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO REAL ESTATE OPPORTUNITY FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO UTILITIES FUND--INVESTOR CLASS, CLASS A, B, AND C
You may obtain additional information about the Funds from several sources:
FINANCIAL REPORTS. Although this Prospectus describes the Funds' anticipated
investments and operations, the Funds also prepare annual and semiannual reports
that detail the Funds' actual investments at the report date. These reports
include discussion of each Fund's recent performance, as well as the effect of
market and general economic trends and a Fund's investment strategy on each
Fund's performance. The annual report also includes the report of the Funds'
independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI dated July 31, 2003 is a supplement
to this Prospectus and has detailed information about the Funds and their
investment policies and practices. A current SAI for the Funds is on file with
the Securities and Exchange Commission and is incorporated into this Prospectus
by reference; in other words, the SAI is legally a part of this Prospectus, and
you are considered to be aware of the contents of the SAI.
INTERNET. The current Prospectuses of the Funds may be accessed through the
INVESCO Web site at invescofunds.com. In addition, the Prospectuses, SAI, annual
report, and semiannual report of the Funds are available on the SEC Web site at
www.sec.gov.
To obtain a free copy of the current Prospectuses, SAI, annual report, or
semiannual report, write to A I M Fund Services, Inc., P.O. Box 4739, Houston,
Texas 77210-4739; or call 1-800-347-4246. Copies of these materials are also
available (with a copying charge) from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information on
the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 1-202-942-8090. This information can be
obtained by electronic request at the following E-mail address:
publicinfo@sec.gov. The SEC file numbers for the Funds are 811-3826 and
002-85905.
811-3826
APPENDIX III
YOUR FUND'S REPORT
FINANCIAL SERVICES FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
Market conditions for stocks were punishing during the annual period ended March
31, 2003, as evidenced by double-digit losses for the major stock indexes.
Corporate accounting fraud was the dominant theme in the first part of the
period, with news of earnings inflation perpetrated by WorldCom (not a fund
holding) and other high-profile companies deepening investors' distrust of
corporate America. Although these headlines faded somewhat as summer came to an
end, the economy's progress remained slow through fall and winter, as a host of
geopolitical concerns kept investors on edge. Particularly influential was the
uncertainty surrounding the situation with Iraq, which by mid-March culminated
in war.
In this unfavorable climate, all sectors -- including financial services --
retreated. As a result, Financial Services Fund-Investor Class shares lost
22.39% during the one-year period ended March 31, 2003. Although the fund
outperformed the broader S&P 500 Index,(R) which lost 24.75%, it slightly lagged
the S&P 500 Financials Index,(R) which declined by 21.71% during that same
period. (Of course, past performance is not a guarantee of future
results.)(3),(4) For performance of other share classes, please see page 2.
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Bank of America..............................................6.14%
Wells Fargo & Co.............................................5.45%
Citigroup Inc................................................5.37%
Merrill Lynch & Co...........................................5.08%
American International Group.................................4.80%
Wachovia Corp................................................3.79%
Lehman Brothers Holdings.....................................3.10%
Fifth Third Bancorp..........................................2.81%
American Express.............................................2.71%
Ambac Financial Group........................................2.68%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
REGIONAL BANKS, INSURERS OUTPERFORM ON RELATIVE BASIS
Although all financial industry groups were down for the year, regional banks,
property/casualty insurers, and reinsurers fared the best on a relative basis.
Some stocks representing these areas managed gains despite the difficult
conditions. For example, Bank of America, the fund's largest holding as of
3/31/03, advanced over the course of the year. The company is a successful
turnaround story, as it has moved from an acquisition-oriented approach to a
strategy centered on internal growth and strong customer service. During the
annual period, the company's core businesses of consumer and commercial banking
(constituting two-thirds of profits) contributed to solid earnings growth in a
challenging environment. Furthermore, we believe that Bank of America's more
market-sensitive businesses, such as asset management, equity investments, and
global corporate investment banking, are positioned to perform well once the
economy finally stabilizes.
On the other hand, despite strong fundamentals, fund holding Fifth Third Bancorp
underperformed its banking industry peers this past year due to regulatory
scrutiny. This past March, Fifth Third announced that it had entered into a
written agreement with the Federal Reserve aimed at strengthening internal
controls and risk management processes. Given that the fundamentals of the
company remain strong, the agreement does not impair Fifth Third's day-to-day
operations, and the agreement does not restrict dividends and buy-backs, we
remain shareholders.
In the property/casualty insurance and reinsurance industries, a combination of
significant price increases and a low level of catastrophes during the fund's
fiscal year helped a number of holdings. An especially strong stock for the fund
was reinsurance company RenaissanceRe Holdings Ltd, which delivered earnings
growth well ahead of expectations. In addition, the company has been
capitalizing on the turmoil in the marketplace to grow new lines of business.
The fund also benefited from our opportunistic purchase of St Paul in the summer
when the company's valuation was attractive due to concerns over asbestos claims
and their capital position.
LINE GRAPH: INVESCO FINANCIAL SERVICES FUND - INVESTOR CLASS, GROWTH OF
$10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Financial
Services Fund - Investor Class to the value of a $10,000 investment in the S&P
500 Index(R)(4), and to the value of a $10,000 investment in the S&P Financials
Index(R)(4), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO FINANCIAL SERVICES S&P 500 INDEX(R)(4) S&P FINANCIALS INDEX(R)(4)
FUND - INVESTOR CLASS
3/93 $10,000 $10,000 $10,000
3/94 $ 9,766 $10,146 $ 9,636
3/95 $10,467 $11,723 $10,945
3/96 $14,873 $15,482 $16,230
3/97 $18,105 $18,551 $21,144
3/98 $28,526 $27,448 $33,668
3/99 $30,208 $32,523 $35,880
3/00 $29,955 $38,354 $35,593
3/01 $33,326 $30,043 $39,494
3/02 $34,598 $30,115 $41,168
3/03 $26,850 $22,661 $32,230
LINE GRAPH: INVESCO FINANCIAL SERVICES FUND - CLASS A & B, GROWTH OF $10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Financial
Services Fund - Class A and the value of a $10,000 investment in INVESCO
Financial Services Fund - Class B to the value of a $10,000 investment in the
S&P 500 Index(R)(4), and to the value of a $10,000 investment in the S&P
Financials Index(R)(4) assuming in each case reinvestment of all dividends and
capital gain distributions, and in the cases of INVESCO Financial Services Fund
- - Class A and Class B inclusion of front-end sales charge and contingent
deferred sales charge, respectively, for the period since inception (4/02)
through 3/31/03.
INVESCO FINANCIAL INVESCO FINANCIAL S&P 500 INDEX(R)(4) S&P FINANCIALS INDEX(R)(4)
SERVICES FUND - CLASS A SERVICES FUND - CLASS B
4/02 $10,000 $10,000 $10,000 $10,000
3/03 $ 7,338 $ 7,252 $ 7,525 $ 7,829
LINE GRAPH: INVESCO FINANCIAL SERVICES FUND - CLASS C, GROWTH OF $10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Financial
Services Fund - Class C to the value of a $10,000 investment in the S&P 500
Index(R)(4), and to the value of a $10,000 investment in the S&P Financials
Index(R)(4), assuming in each case reinvestment of all dividends and capital
gain distributions, and in the case of INVESCO Financial Services Fund - Class
C, inclusion of contingent deferred sales charge, for the period since inception
(2/00) through 3/31/03.
INVESCO FINANCIAL SERVICES S&P 500 INDEX(R)(4) S&P FINANCIALS INDEX(R)(4)
FUND - CLASS C
2/00 $10,000 $10,000 $10,000
3/00 $11,472 $10,978 $11,855
3/01 $12,718 $ 8,599 $13,154
3/02 $13,098 $ 8,620 $13,712
3/03 $10,056 $ 6,471 $10,776
Select holdings within financial services bolstered the fund's performance as
well. One key positive contributor was SLM Corp (Sallie Mae), which posted a
double-digit gain for the year on strong earnings and sound fundamentals in the
non-cyclical student lending industry.
MARKET-SENSITIVE FINANCIALS ENCOUNTER FUNDAMENTAL AND REGULATORY ROADBLOCKS
During the year, heightened regulatory scrutiny and investor skepticism took a
toll on a variety of companies across the sector. The companies most affected
were those involved with the investment banking and brokerage businesses.
However, even better performing groups like insurers encountered increased
pressure from rating agencies, and commercial banking and consumer finance
companies also faced more stringent regulatory standards. Throughout the period,
anemic capital markets also pressured firms with market-sensitive revenues.
Indeed, year-over-year global equity issuance as of March 31, 2003, was down by
40%, mergers and acquisition activity fell off by 25%, and broad equity market
indexes, such as the S&P 500(R) and the Nasdaq Composite Index, were down over
20%.
Meanwhile, political and regulatory problems presented a host of obstacles.
Investigations by the Securities and Exchange Commission (SEC) and New York
Attorney General -- as well as a Congressional inquiry last July related to
investment banks' research practices and their involvement in companies like
Enron and WorldCom (not fund holdings) -- created bad publicity for investment
banks.
PIE CHART: FINANCIAL SERVICES FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Banks.........................................39.50%
Diversified Financial Services................14.19%
Investment Adviser/Broker
Dealer Services...............................13.55%
Multi-Line Insurance...........................6.78%
Property & Casualty Insurance..................5.79%
Consumer Finance...............................5.17%
Reinsurance....................................4.58%
Life & Health Insurance........................2.88%
Insurance Brokers..............................2.23%
Real Estate Investment Trusts..................1.67%
Data Processing Services.......................0.17%
Net Cash & Cash Equivalents....................3.49%
FUND MANAGEMENT
[PHOTOGRAPH OF JOSEPH W. SKORNICKA OMITTED]
JOSEPH W. SKORNICKA, CFA
JOE SKORNICKA IS A VICE PRESIDENT OF INVESCO FUNDS GROUP. PRIOR TO JOINING
INVESCO, JOE WAS A SENIOR EQUITY ANALYST AND FUND MANAGER WITH MUNDER CAPITAL
MANAGEMENT AND AN ASSISTANT VICE PRESIDENT FOR COMERICA INCORPORATED. HE IS A
CHARTERED FINANCIAL ANALYST CHARTERHOLDER, AND HOLDS AN MBA FROM THE UNIVERSITY
OF MICHIGAN AND A BA FROM MICHIGAN STATE UNIVERSITY.
Although some progress has been made in resolving these troubles, holdings like
Merrill Lynch & Co and Citigroup Inc weighed on the fund's performance during
the period. Merrill was subjected to its share of bad press as the New York
Attorney General singled it out in his campaign to reform investment banks. As
for Citigroup, its diversity worked against it. Almost every negative headline
seemed to have some relevance to Citigroup, since the company operates such a
wide array of financial businesses. Nevertheless, we opted to stay invested in
these companies, since we believe that they are strong enough to prosper over
time.
FINANCIALS STILL APPEAR ATTRACTIVE
We still believe the financial services sector remains attractive for three
primary reasons: demographics, consolidation and valuation. On demographics, the
aging of the Baby Boomers is well known. We believe this trend will continue to
benefit many industries within the sector including asset management, investment
banking and brokerage, life insurance, and commercial banking. As for
consolidation, after seeing a slowing in 2001 and 2002 due to economic and
market weakness, as well as corporate scandals, we have seen an increase in
activity over the past six months. This includes Household International selling
to HSBC Holdings PLC, Skandia AB selling its U.S. annuity business to Prudential
Financial Inc, Credit Suisse Group selling its clearing business to the Bank of
New York, and two regional bank acquisitions by BB&T Corp and Mercantile
Bankshares (not fund holdings). As the economy stabilizes, we believe
consolidation will accelerate in the sector, as the benefits of scale are just
too important. Finally, on valuation, despite the fund outperforming the S&P 500
Index(R) for the trailing 1-, 5- and 10-year periods as of 3/31/03, financials
still sold at a significant discount on a forward price-earnings basis to the
S&P 500.(R)
LINE GRAPH: INVESCO FINANCIAL SERVICES FUND - CLASS K, GROWTH OF $10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Financial
Services Fund - Class K to the value of a $10,000 investment in the S&P 500
Index(R)(4), and to the value of a $10,000 investment in the S&P Financials
Index(R)(4), assuming in each case reinvestment of all dividends and capital
gain distributions, for the period since inception (12/00) through 3/31/03.
INVESCO FINANCIAL SERVICES S&P 500 INDEX(R)(4) S&P FINANCIALS INDEX(R)(4)
FUND - CLASS K
12/00 $10,000 $10,000 $10,000
3/01 $ 9,803 $ 8,858 $ 9,853
3/02 $10,135 $ 8,879 $10,271
3/03 $ 7,842 $ 6,682 $ 8,041
DIVERSIFICATION AND A LONG-TERM FOCUS CRUCIAL IN AN UNCERTAIN MARKET
Although we believe the economy will gradually strengthen once the conflict with
Iraq is resolved, we are exercising caution. Above all else, we remain committed
to maintaining our focus on long-term corporate fundamentals. Industry
diversification is an important part of our strategy as well. While we will
overweight and underweight industries based on our bottom-up individual company
research and top-down industry views, we will also stay diversified across the
major industries within the sector. As we see more sure signs of an economic
recovery, we may choose to position the fund more aggressively into the sector's
more market- and economically-sensitive industries.
(3)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEXES DO NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED THEIR PERFORMANCE.
(4)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE S&P 500 FINANCIALS INDEX(R)
REFLECTS THE FINANCIAL SERVICES SECTOR OF THE S&P 500 Index(R). THE INDEXES ARE
NOT MANAGED; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND
OTHER EXPENSES ASSOCIATED WITH THE FUND INCLUDING FRONT-END SALES CHARGES AND
CDSC. INVESTORS CANNOT INVEST DIRECTLY IN ANY MARKET INDEX.
(AIM LOGO)
AIM GLOBAL SCIENCE AND
TECHNOLOGY FUND,
A PORTFOLIO OF
AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
August 25, 2003
Dear Shareholder:
As you may be aware, AMVESCAP PLC, the parent company of your Fund's
investment advisor, has undertaken an integration initiative for its North
American mutual fund operations.
In the first phase of the integration initiative, A I M Distributors, Inc.
became the sole distributor for all AMVESCAP PLC mutual funds in the United
States. A I M Distributors, Inc. is now the distributor for all INVESCO Funds
and the AIM Funds (including your Fund).
AMVESCAP PLC also reviewed all AIM Funds and INVESCO Funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete for limited shareholder assets and to consolidate certain
funds having similar investment objectives and strategies. Your Fund is one of
the funds that AMVESCAP PLC recommended, and your Board of Trustees approved, be
consolidated with another fund. The attached proxy statement/prospectus seeks
your approval of this consolidation.
Finally, the independent trustees of your Board believe that your interests
would best be served if the AIM Funds and the INVESCO Funds had a unified board
of directors/trustees. The attached proxy statement/prospectus seeks your vote
in favor of the persons nominated to serve as trustees.
Your vote is important. Please take a moment after reviewing the enclosed
materials to sign and return your proxy card in the enclosed postage paid return
envelope. If you attend the meeting, you may vote your shares in person. If you
expect to attend the meeting in person, or have questions, please notify us by
calling (800) 952-3502. You may also vote your shares by telephone or through a
website established for that purpose by following the instructions that appear
on the enclosed proxy card. If we do not hear from you after a reasonable amount
of time, you may receive a telephone call from our proxy solicitor, Georgeson
Shareholder Communications Inc., reminding you to vote your shares.
Sincerely,
-s- Robert H. Graham
Robert H. Graham
Chairman and President
(AIM LOGO)
AIM NEW TECHNOLOGY FUND,
A PORTFOLIO OF
AIM FUNDS GROUP
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
August 25, 2003
Dear Shareholder:
As you may be aware, AMVESCAP PLC, the parent company of your Fund's
investment advisor, has undertaken an integration initiative for its North
American mutual fund operations.
In the first phase of the integration initiative, A I M Distributors, Inc.
became the sole distributor for all AMVESCAP PLC mutual funds in the United
States. A I M Distributors, Inc. is now the distributor for all INVESCO Funds
and the AIM Funds (including your Fund).
AMVESCAP PLC also reviewed all AIM Funds and INVESCO Funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete for limited shareholder assets and to consolidate certain
funds having similar investment objectives and strategies. Your Fund is one of
the funds that AMVESCAP PLC recommended, and your Board of Trustees approved, be
consolidated with another fund. The attached proxy statement/prospectus seeks
your approval of this consolidation.
Finally, the independent trustees of your Board believe that your interests
would best be served if the AIM Funds and the INVESCO Funds had a unified board
of directors/trustees. The attached proxy statement/prospectus seeks your vote
in favor of the persons nominated to serve as trustees.
Your vote is important. Please take a moment after reviewing the enclosed
materials to sign and return your proxy card in the enclosed postage paid return
envelope. If you attend the meeting, you may vote your shares in person. If you
expect to attend the meeting in person, or have questions, please notify us by
calling (800) 952-3502. You may also vote your shares by telephone or through a
website established for that purpose by following the instructions that appear
on the enclosed proxy card. If we do not hear from you after a reasonable amount
of time, you may receive a telephone call from our proxy solicitor, Georgeson
Shareholder Communications Inc., reminding you to vote your shares.
Sincerely,
-s- Robert H. Graham
Robert H. Graham
Chairman and President
(INVESCO LOGO)
INVESCO TELECOMMUNICATIONS FUND,
A PORTFOLIO OF
INVESCO SECTOR FUNDS, INC.
4350 SOUTH MONACO STREET
DENVER, COLORADO 80237
August 25, 2003
Dear Shareholder:
As you may be aware, AMVESCAP PLC, the parent company of your Fund's
investment advisor, has undertaken an integration initiative for its North
American mutual fund operations.
In the first phase of the integration initiative, A I M Distributors, Inc.
became the sole distributor for all AMVESCAP PLC mutual funds in the United
States. A I M Distributors, Inc. is now the distributor for all INVESCO Funds
(including your Fund) and the AIM Funds.
AMVESCAP PLC also reviewed all INVESCO Funds and AIM Funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete for limited shareholder assets and to consolidate certain
funds having similar investment objectives and strategies. Your Fund is one of
the funds that AMVESCAP PLC recommended, and your Board of Directors approved,
be consolidated with another fund. The attached proxy statement/prospectus seeks
your approval of this consolidation.
As part of the integration initiative, AMVESCAP PLC has recommended
restructuring the advisory and administrative servicing arrangements so that
A I M Advisors, Inc. is the advisor and administrator for all INVESCO Funds and
AIM Funds. Your Board has approved a new advisory agreement under which A I M
Advisors, Inc. will serve as the investment advisor for your Fund, and a new
sub-advisory agreement, under which INVESCO Institutional (N.A.), Inc., an
affiliate of INVESCO Funds Group, Inc., which is currently serving as your
Fund's investment advisor, will serve as sub-advisor. The portfolio management
team for your Fund will not change as a result of this restructuring. The
attached proxy statement/prospectus seeks your approval of these new investment
advisory and sub-advisory agreements. If approved, these new agreements will
become effective only if shareholders do not approve the proposal to consolidate
your Fund.
The integration initiative also calls for changing the organizational
structure of the INVESCO Funds and the AIM Funds. To accomplish this goal,
AMVESCAP PLC has recommended that all INVESCO Funds and AIM Funds organized as
Maryland corporations change their form and state of organization to Delaware
statutory trusts. Your Board has approved redomesticating your Fund as a series
of a Delaware statutory trust. The attached proxy statement/prospectus seeks
your approval of this redomestication. If approved, the redomestication will
occur prior to the consolidation of your Fund.
Finally, the independent directors of your Board believe that your
interests would best be served if the INVESCO Funds and the AIM Funds had a
unified board of directors/trustees. The attached proxy statement/prospectus
seeks your vote in favor of the persons nominated to serve as directors.
Your vote is important. Please take a moment after reviewing the enclosed
materials to sign and return your proxy card in the enclosed postage paid return
envelope. If you attend the meeting, you may vote your shares in person. If you
expect to attend the meeting in person, or have questions, please notify us by
calling (800) 952-3502. You may also vote your shares by telephone or through a
website established for that purpose by following the instructions that appear
on the enclosed proxy card. If we do not hear from you after a reasonable amount
of time, you may receive a telephone call from our proxy solicitor, Georgeson
Shareholder Communications Inc., reminding you to vote your shares.
Sincerely,
-s- Raymond R. Cunningham
Raymond R. Cunningham
Chairman
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND,
A PORTFOLIO OF
AIM INVESTMENT FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 21, 2003
To the Shareholders of AIM Global Science and Technology Fund:
We cordially invite you to attend our Special Meeting of Shareholders to:
1. Approve an Agreement and Plan of Reorganization (the "Agreement")
under which all of the assets of your Fund, an investment portfolio of AIM
Investment Funds ("Trust"), will be transferred to INVESCO Technology Fund
("Buying Fund"), an investment portfolio of INVESCO Sector Funds, Inc.
("Company"), Buying Fund will assume the liabilities of your Fund and
Company will issue shares of each class of Buying Fund to shareholders of
the corresponding class of shares of your Fund and, in connection
therewith, the sale of all of your Fund's assets and the termination of
your Fund as a designated series of Trust.
2. Elect 16 trustees to the Board of Trustees of Trust, each of whom
will serve until his or her successor is elected and qualified.
3. Transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.
We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,
Houston, Texas, 77046-1173 on October 21, 2003, at 3:00 p.m., Central Time.
Shareholders of record as of the close of business on July 25, 2003 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment of
the Special Meeting.
WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF
TRUST. YOU MAY ALSO VOTE YOUR SHARES BY TELEPHONE OR THROUGH A WEBSITE
ESTABLISHED FOR THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY
MATERIALS. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE
SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY
EXECUTING AND SUBMITTING A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION
TO THE SECRETARY OF TRUST OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
/s/ NANCY L. MARTIN
--------------------------------------
Nancy L. Martin
Secretary
August 25, 2003
AIM NEW TECHNOLOGY FUND,
A PORTFOLIO OF
AIM FUNDS GROUP
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 21, 2003
To the Shareholders of AIM New Technology Fund:
We cordially invite you to attend our Special Meeting of Shareholders to:
1. Approve an Agreement and Plan of Reorganization (the "Agreement")
under which all of the assets of your Fund, an investment portfolio of AIM
Funds Group ("Trust"), will be transferred to INVESCO Technology Fund
("Buying Fund"), an investment portfolio of INVESCO Sector Funds, Inc.
("Company"), Buying Fund will assume the liabilities of your Fund and
Company will issue shares of each class of Buying Fund to shareholders of
the corresponding class of shares of your Fund and, in connection
therewith, the sale of all of your Fund's assets and the termination of
your Fund as a designated series of Trust.
2. Elect 16 trustees to the Board of Trustees of Trust, each of whom
will serve until his or her successor is elected and qualified.
3. Transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.
We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,
Houston, Texas, 77046-1173 on October 21, 2003, at 3:00 p.m., Central Time.
Shareholders of record as of the close of business on July 25, 2003 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment of
the Special Meeting.
WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF
TRUST. YOU MAY ALSO VOTE YOUR SHARES BY TELEPHONE OR THROUGH A WEBSITE
ESTABLISHED FOR THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY
MATERIALS. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE
SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY
EXECUTING AND SUBMITTING A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION
TO THE SECRETARY OF TRUST OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
/s/ NANCY L. MARTIN
--------------------------------------
Nancy L. Martin
Secretary
August 25, 2003
INVESCO TELECOMMUNICATIONS FUND,
A PORTFOLIO OF
INVESCO SECTOR FUNDS, INC.
4350 SOUTH MONACO STREET
DENVER, COLORADO 80237
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 21, 2003
To the Shareholders of INVESCO Telecommunications Fund:
We cordially invite you to attend our Special Meeting of Shareholders to:
1. Approve an Agreement and Plan of Reorganization (the "Agreement")
under which all of the assets of your Fund, an investment portfolio of
INVESCO Sector Funds, Inc. ("Company"), will be transferred to INVESCO
Technology Fund ("Buying Fund"), another investment portfolio of Company,
Buying Fund will assume the liabilities of your Fund and Company will issue
shares of each class of Buying Fund to shareholders of the corresponding
class of shares of your Fund.
2. Elect 16 directors to the Board of Directors of Company, each of
whom will serve until his or her successor is elected and qualified.
3. Approve a new investment advisory agreement with A I M Advisors,
Inc. ("AIM") for your Fund.
4. Approve a new sub-advisory agreement between AIM and INVESCO
Institutional (N.A.), Inc. for your Fund.
5. Approve an Agreement and Plan of Reorganization (the "Plan") which
provides for the redomestication of Company as a Delaware statutory trust
and, in connection therewith, the sale of all of Company's assets and the
dissolution of Company as a Maryland corporation.
6. Transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.
We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 on October 21, 2003, at 3:00 p.m., Central Time.
Shareholders of record as of the close of business on July 25, 2003 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment of
the Special Meeting.
WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF
COMPANY. YOU MAY ALSO VOTE YOUR SHARES BY TELEPHONE OR THROUGH A WEBSITE
ESTABLISHED FOR THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY
MATERIALS. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE
SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY
EXECUTING AND SUBMITTING A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION
TO THE SECRETARY OF COMPANY OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
/s/ GLEN A. PAYNE
--------------------------------------
Glen A. Payne
Secretary
August 25, 2003
<Table>
AIM NEW TECHNOLOGY FUND, AIM GLOBAL SCIENCE AND TECHNOLOGY FUND,
A PORTFOLIO OF A PORTFOLIO OF
AIM FUNDS GROUP AIM INVESTMENT FUNDS
11 GREENWAY PLAZA SUITE 100 11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173 HOUSTON, TEXAS 77046-1173
(800) 347-4246 (800) 347-4246
</Table>
INVESCO TELECOMMUNICATIONS FUND
AND
INVESCO TECHNOLOGY FUND,
EACH A PORTFOLIO OF
INVESCO SECTOR FUNDS, INC.
4350 SOUTH MONACO STREET
DENVER, COLORADO 80237
(800) 525-8085
COMBINED PROXY STATEMENT AND PROSPECTUS
AUGUST 25, 2003
This document is a combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus"). We are sending you this Proxy Statement/Prospectus in
connection with the Special Meeting of Shareholders (the "Special Meeting") of
each of AIM New Technology Fund, AIM Global Science and Technology Fund and
INVESCO Telecommunications Fund (each a "Fund"; the AIM New Technology Fund and
AIM Global Science and Technology Fund collectively, "AIM Funds"; and the
INVESCO Telecommunications Fund, "INVESCO Fund"). Each Special Meeting will be
held on October 21, 2003. We intend to mail this Proxy Statement/Prospectus, the
enclosed Notice of Special Meeting of Shareholders and the enclosed proxy card
on or about August 25, 2003 to all shareholders entitled to vote.
This Proxy Statement/Prospectus includes information regarding three
separate reorganizations (described below). The consummation of any one
Reorganization (defined below) is not conditioned upon the consummation of any
other Reorganization. The Reorganization of your Fund is contingent only upon
your Fund receiving the requisite number of votes FOR approval of its
reorganization. The requests for approval of all three Reorganizations have been
included in one Proxy Statement/Prospectus because it is proposed that each of
the three Funds be combined with INVESCO Technology Fund ("Buying Fund"). We
have indicated in the Proxy Statement/Prospectus where there are differences in
the information applicable to each Fund.
At the Special Meetings, we are asking shareholders of AIM Funds to vote on
two Proposals and shareholders of INVESCO Fund to vote on five Proposals. The
first Proposal to be voted on is an Agreement and Plan of Reorganization (each
an "Agreement") which provides for each of the following combinations:
(1) AIM New Technology Fund, an investment portfolio of AIM Funds
Group (an "AIM Trust" and collectively, with AIM Investment Funds, "AIM
Trusts"), with Buying Fund, an investment portfolio of INVESCO Sector
Funds, Inc. ("Company");
(2) AIM Global Science and Technology Fund, an investment portfolio of
AIM Investment Funds, with Buying Fund; and
(3) INVESCO Telecommunications Fund, an investment portfolio of
Company, with Buying Fund (each a "Reorganization" and collectively, the
"Reorganizations").
i
Under the Agreement for your Fund, all of the assets your Fund will be
transferred to Buying Fund, Buying Fund will assume the liabilities of your Fund
and Company will issue shares of each class of Buying Fund to shareholders of
the corresponding class of shares of your Fund, as set forth on Exhibit A.
The value of your account with Buying Fund immediately after the
Reorganization will be the same as the value of your account with your Fund
immediately prior to the Reorganization. The Reorganization has been structured
as a tax-free transaction. No sales charges will be imposed in connection with
the Reorganization.
The Board of Trustees of each AIM Trust (each a "Board of Trustees" and
collectively, the "Boards of Trustees") has approved the Agreement and related
Reorganization of the applicable AIM Fund as being in the best interests of such
AIM Fund. The Board of Directors of Company (the "Board of Directors") has
approved Agreement and related Reorganization of INVESCO Fund as being advisable
and in the best interests of INVESCO Fund.
AIM Trusts and Company are each registered open-end management investment
companies that issue their shares in separate series. AIM New Technology Fund is
a series of AIM Funds Group, AIM Global Science and Technology Fund is a series
of AIM Investment Funds, and INVESCO Fund and Buying Fund are each a series of
Company. A I M Advisors, Inc. ("AIM") serves as the investment advisor to AIM
Funds and INVESCO Funds Group, Inc. ("INVESCO") serves as the investment advisor
to INVESCO Fund and Buying Fund. Both AIM and INVESCO are wholly owned
subsidiaries of AMVESCAP PLC ("AMVESCAP"), an independent global investment
management company.
The investment objective of Buying Fund is similar to that of your Fund.
See "Comparison of Investment Objectives and Principal Strategies."
This Proxy Statement/Prospectus sets forth the information that you should
know before voting on the Agreement for your Fund and the other Proposals
described below. It is both the Proxy Statement of your Fund and the Prospectus
of Buying Fund. You should read and retain this Proxy Statement/ Prospectus for
future reference.
The Prospectuses of AIM New Technology Fund dated May 1, 2003, as
supplemented May 1, 2003 and June 12, 2003; AIM Global Science and Technology
Fund dated March 3, 2003, as supplemented June 12, 2003; and INVESCO
Telecommunications Fund dated July 31, 2003, as supplemented August 14, 2003
(each a "Selling Fund Prospectus"), together with the related Statements of
Additional Information of AIM New Technology Fund dated May 1, 2003; AIM Global
Science and Technology Fund dated March 3, 2003, as supplemented May 2, 2003,
and INVESCO Telecommunications Fund dated July 31, 2003, as supplemented August
14, 2003, are on file with the Securities and Exchange Commission (the "SEC").
Each Selling Fund Prospectus is incorporated by reference into this Proxy
Statement/Prospectus. The Prospectus of Buying Fund dated July 31, 2003 (the
"Buying Fund Prospectus"), and the related Statement of Additional Information
dated July 31, 2003, as supplemented August 14, 2003, and the Statement of
Additional Information relating to the Reorganization, dated August 15, 2003,
are on file with the SEC. The Buying Fund Prospectus is incorporated by
reference into this Proxy Statement/Prospectus. A copy of the Buying Fund
Prospectus is attached as Appendix II to this Proxy Statement/Prospectus. The
Statement of Additional Information relating to the Reorganization dated August
15, 2003 also is incorporated by reference into this Proxy Statement. The SEC
maintains a website at www.sec.gov that contains the Prospectuses and Statements
of Additional Information described above, material incorporated by reference,
and other information about AIM Trusts and Company.
Copies of the Buying Fund Prospectus and each Selling Fund Prospectus and
the related Statements of Additional Information are available without charge by
writing to A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739,
or by calling (800) 347-4246. Additional information about INVESCO Fund and
Buying Fund may be obtained on the internet at www.aiminvestments.com.
If you are a shareholder of either of the AIM Funds, the remaining Proposal
to be voted on by you is the election of 16 trustees to the Board of Trustees of
each AIM Trust. The Board of Trustees of each
ii
AIM Trust has approved the nomination of the persons set forth in this Proxy
Statement/Prospectus for election as trustees of such AIM Trust.
If you are a shareholder of INVESCO Fund, the remaining four Proposals to
be voted on are: the election of 16 directors to the Board of Directors; the
approval of a new advisory agreement with AIM for your Fund; the approval of a
new sub-advisory agreement between AIM and INVESCO Institutional (N.A.), Inc.
("INVESCO Institutional") for your Fund; and the approval of an Agreement and
Plan of Reorganization (the "Plan") which provides for the redomestication of
Company as a Delaware statutory trust and, in connection therewith, the sale of
all of Company's assets and the dissolution of Company as a Maryland
corporation. The Board of Directors has approved the nomination of the persons
set forth in this Proxy Statement/Prospectus for election as directors of
Company and has approved the new advisory agreement with AIM and the new
sub-advisory agreement between AIM and INVESCO Institutional. Finally, the Board
of Directors has approved the Plan as being advisable.
The Proposals are being submitted to you to implement an integration
initiative undertaken by AMVESCAP with respect to its North American mutual fund
operations, which includes your Fund.
Shareholders previously have been sent the most recent annual report for
your Fund, including financial statements, and the most recent semiannual report
succeeding the annual report, if any. If you have not received such report(s) or
would like to receive an additional copy, please contact A I M Fund Services,
Inc., P.O. Box 4739, Houston, Texas 77210-4739, or call (800) 347-4246. Such
report(s) will be furnished free of charge.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
iii
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
INTRODUCTION................................................ 1
PROPOSAL 1 -- APPROVAL OF THE AGREEMENT TO COMBINE YOUR FUND
AND BUYING FUND........................................... 2
Which Funds' Shareholders Will Vote on Proposal 1?........ 2
SUMMARY..................................................... 2
The Reorganizations....................................... 3
Comparison of Investment Objectives and Principal
Strategies............................................. 3
Comparison of Principal Service Providers................. 6
Comparison of Performance................................. 6
Comparison of Fees and Expenses........................... 7
Comparison of Multiple Class Structures................... 7
Comparison of Sales Charges............................... 7
Comparison of Distribution, Purchase and Redemption
Procedures and Exchange Rights......................... 8
The Boards' Recommendation on Proposal 1.................. 8
RISK FACTORS................................................ 9
Risks Associated with Buying Fund......................... 9
Comparison of Risks of Buying Fund and Your Fund.......... 11
INFORMATION ABOUT BUYING FUND............................... 14
Description of Buying Fund Shares......................... 14
Management's Discussion of Fund Performance............... 14
Financial Highlights...................................... 14
Pending Shareholder Proposals for Buying Fund............. 14
ADDITIONAL INFORMATION ABOUT THE AGREEMENTS................. 14
Terms of the Reorganizations.............................. 14
The Reorganizations....................................... 14
Board Considerations...................................... 15
Other Terms............................................... 16
Federal Income Tax Consequences........................... 17
Accounting Treatment...................................... 18
RIGHTS OF SHAREHOLDERS...................................... 18
General................................................... 18
Liability of Shareholders................................. 19
Election of Directors/Trustees; Terms..................... 19
Removal of Directors/Trustees............................. 19
Meetings of Shareholders.................................. 19
Liability of Directors/Trustees and Officers;
Indemnification........................................ 20
Dissolution and Termination............................... 20
Voting Rights of Shareholders............................. 20
Dissenters' Rights........................................ 21
Amendments to Organization Documents...................... 21
CAPITALIZATION.............................................. 22
INTERESTS OF CERTAIN PERSONS................................ 23
LEGAL MATTERS............................................... 23
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND...... 23
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION................................................ 23
</Table>
iv
<Table>
<Caption>
PAGE
----
PROPOSAL 2 -- ELECTION OF TRUSTEES.......................... 24
Which Funds' Shareholders Will Vote on Proposal 2?........ 24
Background................................................ 24
Structure of the Boards of Trustees....................... 24
Nominees for Trustees..................................... 24
The Boards' Recommendation on Proposal 2.................. 27
Current Committees of the Boards.......................... 28
Board and Committee Meeting Attendance.................... 29
Trustee's Compensation.................................... 29
Retirement Plan for Trustees.............................. 29
Deferred Compensation Agreements.......................... 30
Officers of Trust......................................... 30
Security Ownership of Management.......................... 30
Trustee Ownership of Your Fund's Shares................... 30
PROPOSAL 3 -- ELECTION OF DIRECTORS......................... 31
Which Funds' Shareholders Will Vote on Proposal 3?........ 31
Background................................................ 31
Structure of the Board of Directors....................... 31
Nominees for Directors.................................... 31
The Board's Recommendation on Proposal 3.................. 34
Committees of the Board................................... 34
Board and Committee Meeting Attendance.................... 36
Future Committee Structure................................ 36
Director's Compensation................................... 37
Current Retirement Plan for Directors..................... 37
Current Deferred Compensation Plan........................ 38
New Retirement Plan for Directors......................... 39
New Deferred Compensation Agreements...................... 39
Officers of Company....................................... 40
Security Ownership of Management.......................... 40
Director Ownership of Your Fund's Shares.................. 40
PROPOSAL 4 -- APPROVAL OF A NEW INVESTMENT ADVISORY
AGREEMENT................................................. 40
Which Funds' Shareholders Will Vote on Proposal 4?........ 40
Background................................................ 40
Your Fund's Current Investment Advisor.................... 41
The Proposed New Investment Advisor for Your Fund......... 41
Positions with AIM Held by Company's Directors or
Executive Officers..................................... 41
Terms of the Current Advisory Agreement................... 41
Additional Services Provided by INVESCO and its
Affiliates............................................. 43
Advisory Fees Charged by AIM for Similar Funds it
Manages................................................ 43
Terms of the Proposed Advisory Agreement.................. 43
Factors the Directors Considered in Approving the Advisory
Agreement.............................................. 47
The Board's Recommendation on Proposal 4.................. 49
PROPOSAL 5 -- APPROVAL OF NEW SUB-ADVISORY AGREEMENT........ 49
Which Funds' Shareholders Will Vote on Proposal 5?........ 49
Background................................................ 49
The Proposed Sub-Advisor for Your Fund.................... 49
Positions with INVESCO Institutional Held by Company's
Directors or Executive Officers........................ 49
</Table>
v
<Table>
<Caption>
PAGE
----
Terms of the Proposed Sub-Advisory Agreement.............. 49
Advisory Fees Charged by INVESCO Institutional for Similar
Funds for which it Serves as Advisor................... 50
Factors the Directors Considered in Approving the Proposed
Sub-Advisory Agreement................................. 50
The Board's Recommendation on Proposal 5.................. 52
PROPOSAL 6 -- APPROVAL OF THE PLAN TO REDOMESTICATE COMPANY
AS A DELAWARE STATUTORY TRUST............................. 52
Which Funds' Shareholders Will Vote on Proposal 6?........ 52
Background................................................ 52
Reasons for the Proposed Redomestication.................. 52
What the Proposed Redomestication Will Involve............ 53
The Federal Income Tax Consequences of the
Redomestication........................................ 55
Appraisal Rights.......................................... 55
The New Trust Compared to Company......................... 55
The Board's Recommendation on Proposal 6.................. 56
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING............ 56
Proxy Statement/Prospectus................................ 56
Time and Place of Special Meetings........................ 56
Voting in Person.......................................... 56
Voting by Proxy........................................... 56
Voting by Telephone or the Internet....................... 57
Quorum Requirement and Adjournment........................ 57
Vote Necessary to Approve Each Proposal................... 58
Proxy Solicitation........................................ 58
Other Matters............................................. 58
Shareholder Proposals..................................... 58
Ownership of Shares....................................... 59
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 59
Fees Paid to PwC Related to AIM Investment Funds.......... 59
Fees Paid to PwC Not Related to AIM Investment Funds...... 60
Fees Paid to PwC Related to AIM Funds Group............... 60
Fees Paid to PwC Not Related to AIM Funds Group........... 60
Fees Paid to PwC Related to Company....................... 61
Fees Paid to PwC Not Related to Company................... 61
</Table>
<Table>
EXHIBIT A -- Classes of Shares of Each Selling Fund and Corresponding
Classes of Shares of Buying Fund............................ A-1
EXHIBIT B -- Comparison of Performance of Each Selling Fund and Buying
Fund........................................................ B-1
EXHIBIT C -- Comparison Fee Table and Expense Example.................... C-1
EXHIBIT D -- Trustee Compensation Table.................................. D-1
EXHIBIT E -- Officers of AIM Trusts...................................... E-1
EXHIBIT F -- Security Ownership of Management of AIM Trusts.............. F-1
EXHIBIT G -- Trustee Ownership of Fund Shares............................ G-1
EXHIBIT H -- Director Compensation Table................................. H-1
EXHIBIT I -- Officers of Company......................................... I-1
EXHIBIT J -- Security Ownership of Management of Company................. J-1
EXHIBIT K -- Director Ownership of Fund Shares........................... K-1
EXHIBIT L -- Principal Executive Officer and Directors of A I M Advisors,
Inc. ....................................................... L-1
</Table>
vi
<Table>
EXHIBIT M -- Compensation to INVESCO Funds Group, Inc. .................. M-1
EXHIBIT N -- Fees Paid to INVESCO Funds Group, Inc. and Affiliates in
Most Recent Fiscal Year..................................... N-1
EXHIBIT O -- Advisory Fee Schedules for other AIM Funds.................. O-1
EXHIBIT P -- Proposed Compensation to A I M Advisors, Inc. .............. P-1
EXHIBIT Q -- Principal Executive Officer and Directors of INVESCO
Institutional (N.A.), Inc. ................................. Q-1
EXHIBIT R -- Proposed Compensation to INVESCO Institutional (N.A.),
Inc. ....................................................... R-1
EXHIBIT S -- Advisory Fee Schedules for Other INVESCO Institutional
(N.A.), Inc. Advised Funds.................................. S-1
EXHIBIT T -- Shares Outstanding of Each Fund on Record Date.............. T-1
EXHIBIT U -- Ownership of Shares of AIM New Technology Fund on Record
Date........................................................ U-1
EXHIBIT V -- Ownership of Shares of AIM Global Science and Technology
Fund........................................................ V-1
EXHIBIT W -- Ownership of Shares of INVESCO Telecommunications Fund...... W-1
EXHIBIT X -- Ownership of Shares of INVESCO Technology Fund (Buying
Fund)....................................................... X-1
APPENDIX I -- Agreements and Plans of Reorganization for AIM New
Technology Fund, AIM Global Science and Technology Fund and
INVESCO Telecommunications Fund (to Effect the
Reorganizations)
APPENDIX II -- Prospectus of Buying Fund
APPENDIX III -- Discussion of Performance of Buying Fund
APPENDIX IV -- Form of Investment Advisory Agreement with A I M Advisors,
Inc.
APPENDIX V -- Form of Sub-Advisory Agreement
APPENDIX VI -- Agreement and Plan of Reorganization for INVESCO
Telecommunications Fund (to Effect the Redomestication)
</Table>
THE AIM FAMILY OF FUNDS, AIM AND DESIGN, AIM, AIM FUNDS, AIM FUNDS AND
DESIGN, AIM INVESTOR, AIM LIFETIME AMERICA, AIM LINK, AIM INSTITUTIONAL FUNDS,
AIMFUNDS.COM, LA FAMILIA AIM DE FONDOS, LA FAMILIA AIM DE FONDOS AND DESIGN,
INVIERTA CON DISCIPLINA AND INVEST WITH DISCIPLINE ARE REGISTERED SERVICE MARKS
AND AIM BANK CONNECTION, AIM INTERNET CONNECT, AIM PRIVATE ASSET MANAGEMENT, AIM
PRIVATE ASSET MANAGEMENT AND DESIGN, AIM STYLIZED AND/OR DESIGN, AIM ALTERNATIVE
ASSETS AND DESIGN, AIM INVESTMENTS, AIM INVESTMENTS AND DESIGN, MYAIM.COM, THE
AIM COLLEGE SAVINGS PLAN, AIM SOLO 401(k) AND YOUR GOALS. OUR SOLUTIONS. ARE
SERVICE MARKS OF A I M MANAGEMENT GROUP INC.
INVESCO, THE OPEN CIRCLE DESIGN, INVESCO FUNDS, INVESCO FUNDS GROUP,
INVESCO -- YOUR GLOBAL INVESTMENT PARTNER AND YOU SHOULD KNOW WHAT INVESCO KNOWS
ARE REGISTERED SERVICE MARKS OF AMVESCAP PLC.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this
Proxy Statement/Prospectus, and you should not rely on such other information or
representations.
vii
INTRODUCTION
Each AIM Fund is one of 86 portfolios advised by AIM and each of INVESCO
Fund and Buying Fund is one of 46 portfolios advised by INVESCO. The Proposals
you are being asked to vote on relate to or result from an integration
initiative announced on March 27, 2003, by AMVESCAP, the parent company of AIM
and INVESCO, with respect to its North American mutual fund operations. The
primary components of AMVESCAP's integration initiative are:
- Using a single distributor for all AMVESCAP mutual funds in the United
States. To that end, A I M Distributors, Inc., the distributor for the
retail mutual funds advised by AIM (the "AIM Family of Funds"), replaced
INVESCO Distributors, Inc. as the distributor for the retail mutual funds
advised by INVESCO (the "INVESCO Family of Funds") effective July 1,
2003.
- Integrating of back office support and creating a single platform for
back office support of AMVESCAP's mutual fund operations in the United
States, including such support services as transfer agency and
information technology. One result of this integration will be that
shares of the AIM Family of Funds and shares of the INVESCO Family of
Funds generally will be able to be exchanged for shares of the same or a
similar class of each other.
- Rationalizing and streamlining of the various funds within the AIM Family
of Funds and the INVESCO Family of Funds. In that regard, AMVESCAP has
undertaken an extensive review of these funds and concluded that it would
be appropriate to reduce the number of smaller and less efficient funds
that compete for limited shareholder assets and to consolidate certain
funds having similar investment objectives and strategies. Reducing the
number of funds within both the AIM Family of Funds and the INVESCO
Family of Funds will allow AIM and INVESCO to concentrate on managing
their core products. The Reorganizations are three of a number of fund
reorganizations proposed by AMVESCAP as a result of this review process.
AMVESCAP's belief is that the Reorganizations will allow Buying Fund the
best available opportunities for investment management, growth prospects
and potential economies of scale. Proposal 1 relates to this component of
AMVESCAP's integration initiative.
- Rationalizing the contractual arrangements for the provision of
investment advisory and administrative services to the AIM Family of
Funds and the INVESCO Funds. The objective of this component is to have
AIM assume primary responsibility for the investment advisory,
administrative, accounting and legal and compliance services for the
INVESCO Family of Funds. To implement this component, each INVESCO Fund,
including Buying Fund, is seeking shareholder approval to enter into a
new investment advisory agreement with AIM. These changes will simplify
AMVESCAP's mutual fund operations in the United States in that there will
be a uniform arrangement for investment management for both the AIM
Family of Funds and the INVESCO Family of Funds. Proposals 4 and 5, which
are applicable only to INVESCO Fund, relate to this component of
AMVESCAP's integration initiative.
- Simplifying the organizational structure of the AIM Family of Funds and
the INVESCO Family of Funds so that they are all organized as Delaware
statutory trusts, using as few entities as practicable. To implement this
component, each AIM Fund and each INVESCO Fund that currently is
organized as a Maryland corporation is seeking shareholder approval to
redomesticate as a new Delaware statutory trust, which also should
provide these Funds with greater flexibility in conducting their business
operations. In addition, certain series portfolios of funds within the
AIM Family of Funds with few portfolios are seeking shareholder approval
to be restructured as new series portfolios of existing funds within the
AIM Family of Funds that are organized as Delaware statutory trusts.
Proposal 6, which is applicable only to INVESCO Fund, relates to this
component of AMVESCAP's integration initiative.
In considering the integration initiative proposed by AMVESCAP, the
directors of the INVESCO Family of Funds and the directors/trustees of the AIM
Family of Funds who are not "interested persons" (as defined in the Investment
Company Act of 1940 (the "1940 Act")) of the Funds or their advisors
1
determined that the shareholders of both the AIM Family of Funds and the INVESCO
Family of Funds would benefit if one set of directors/trustees was responsible
for overseeing the operation of both the AIM Family of Funds and the INVESCO
Family of Funds and the services provided by AIM, INVESCO and their affiliates.
Accordingly, these directors/trustees agreed to combine the separate boards and
create a unified board of directors/trustees. Proposal 2 relates to the election
of trustees of each AIM Trust. Proposal 3 relates to the election of directors
of Company.
You are being asked to approve Proposals 2 through 6, as applicable, so
that, in the event that Proposal 1 is not approved for your Fund, your Fund will
still be able to take advantage of these other benefits of AMVESCAP's
integration initiative. If Proposal 1 is approved with respect to the
Reorganization of INVESCO Fund, but Proposal 6 is not approved, INVESCO Fund
will be combined with Buying Fund but will not be redomesticated as a new series
portfolio of a Delaware statutory trust. We will not be able to determine
whether a particular Proposal other than Proposal 1, if approved, should go
forward until we have determined whether Proposal 1 has been approved.
Therefore, even if you vote in favor of Proposal 1, it is still important that
you vote on each remaining Proposal. For information about the Special Meeting
and voting on Proposals 1 through 6, see "Information About the Special Meeting
and Voting." For a description of the vote necessary to approve each of
Proposals 1 through 6, see "Information About the Special Meeting and
Voting -- Vote Necessary to Approve Each Proposal."
The following table summarizes each proposal to be presented at the Special
Meetings and the Funds whose shareholders the Boards of Trustees or the Board of
Directors, as applicable, are soliciting with respect to each proposal:
<Table>
<Caption>
PROPOSAL AFFECTED FUNDS
-------- --------------
1. Approving the Agreement to combine your All Funds
Fund with Buying Fund
2. Electing trustees AIM New Technology Fund and AIM Global
Science and Technology Fund only
3. Electing directors INVESCO Telecommunications Fund only
4. Approving a new investment advisory INVESCO Telecommunications Fund only
agreement with AIM
5. Approving a new sub-advisory agreement INVESCO Telecommunications Fund only
between AIM and INVESCO Institutional
6. Approving the Plan to redomesticate Company INVESCO Telecommunications Fund only
as a Delaware statutory trust
7. Considering other matters All Funds
</Table>
PROPOSAL 1 --
APPROVAL OF THE AGREEMENT
TO COMBINE YOUR FUND AND BUYING FUND
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON PROPOSAL 1?
Proposal 1 applies to the shareholders of INVESCO Fund and each AIM Fund.
SUMMARY
The Board of Trustees of each AIM Trust, including the independent
trustees, has determined that the Reorganization of the applicable AIM Fund is
in the best interests of such AIM Fund and that the interests of the
shareholders of such AIM Fund will not be diluted as a result of the
Reorganization. Similarly, the Board of Directors, including the independent
directors, has determined that the Reorganization of INVESCO Fund is advisable
and in the best interests of INVESCO Fund and that the interests of the
shareholders of INVESCO Fund will not be diluted as a result of the
Reorganization. Both
2
Boards believe that a larger combined fund should be more viable and have
greater market presence and should have greater investment leverage in that
portfolio managers should have broader investment opportunities and lower
trading costs. Both Boards also believe that a larger combined fund also should
result in greater operating efficiencies by providing economies of scale to the
combined fund in that certain fixed costs, such as legal, accounting,
shareholder services and director/trustee expenses, will be spread over the
greater assets of the combined fund. For additional information concerning the
factors considered by the Boards of Trustees and the Board of Directors,
respectively, in approving the Agreements, see "Additional Information About the
Agreements -- Board Considerations."
The following summary discusses some of the key features of the
Reorganization and highlights certain differences between your Fund and Buying
Fund. This summary is not complete and does not contain all of the information
that you should consider before voting on whether to approve the Agreement. For
more complete information, please read this entire Proxy Statement/Prospectus.
THE REORGANIZATIONS
The Reorganization of your Fund will result in the combination of your Fund
with Buying Fund. Each AIM Fund is a series of the applicable AIM Trust, each of
which is a Delaware statutory trust. INVESCO Fund and Buying Fund are each a
series of Company, a Maryland corporation. The Board of Directors is soliciting
the proxies of the shareholders of Company's series portfolios to vote on an
agreement and plan of reorganization to redomesticate Company as a Delaware
statutory trust in order to provide Company with greater flexibility in
conducting its business operations. If approved by Company's shareholders, the
consummation of the redomestication of Company as a Delaware statutory trust
will occur prior to the consummation of the Reorganization of INVESCO Fund.
If shareholders of your Fund approve the Agreement for your Fund and other
closing conditions are satisfied, all of the assets of your Fund will be
transferred to Buying Fund and Buying Fund will assume the liabilities of your
Fund, and Company will issue shares of each class of Buying Fund to shareholders
of the corresponding class of shares of your Fund, as set forth on Exhibit A.
For a description of certain of the closing conditions that must be satisfied,
see "Additional Information About the Agreements -- Other Terms."
The shares of Buying Fund issued in the Reorganization of your Fund will
have an aggregate net asset value equal to the net value of the assets of your
Fund transferred to Buying Fund. The value of your account with Buying Fund
immediately after the Reorganization will be the same as the value of your
account with your Fund immediately prior to the Reorganization. A copy of the
Agreement for your Fund is attached as Appendix I to this Proxy
Statement/Prospectus. See "Additional Information About the Agreements."
Each AIM Trust and Company will receive an opinion of Kirkpatrick &
Lockhart LLP to the effect that each Reorganization will constitute a tax-free
reorganization for Federal income tax purposes. Thus, you will not have to pay
additional Federal income tax as a result of the Reorganization of your Fund
except to the extent your Fund disposes of securities at a net gain in
anticipation of the Reorganization, which gain would be included in a taxable
distribution. See "Additional Information About the Agreements -- Federal Income
Tax Consequences."
No sales charges will be imposed in connection with the Reorganizations.
The consummation of any one Reorganization is not conditioned upon the
consummation of any other Reorganization.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
Your Fund and Buying Fund pursue similar investment objectives and invest
in similar types of securities. As a result, the Reorganization of your Fund is
not expected to cause significant portfolio turnover or transaction expenses
from the sale of securities that are incompatible with the investment objective
of Buying Fund.
3
The investment objectives or goals of Buying Fund and INVESCO Fund are
classified as fundamental, which means that the Board of Directors cannot change
them without shareholder approval. The investment objectives of AIM Funds are
not classified as fundamental, which means that the Boards of Trustees can
change them without shareholder approval.
A description of the fundamental and non-fundamental restrictions and
policies applicable to your Fund and Buying Fund can be found in each Fund's
Statement of Additional Information. While your Fund and Buying Fund may have
slightly different approaches to disclosing and characterizing these
restrictions and policies, in substance your Fund and Buying Fund operate under
the same general restrictions and are subject to the same general policies.
The chart below provides a summary for comparison purposes of the
investment objectives and principal investment strategies of each Fund,
including your Fund, and Buying Fund. You can find more detailed information
about the investment objectives, strategies and other investment policies of
your Fund and Buying Fund in the applicable Selling Fund Prospectus and the
Buying Fund Prospectus, respectively.
<Table>
<Caption>
AIM GLOBAL SCIENCE AND INVESCO INVESCO TECHNOLOGY FUND
AIM NEW TECHNOLOGY FUND TECHNOLOGY FUND TELECOMMUNICATIONS FUND (BUYING FUND)
- ----------------------- ---------------------- ----------------------- -----------------------
INVESTMENT OBJECTIVE
- - long-term growth of - long-term growth of - capital growth - capital growth
capital capital
INVESTMENT STRATEGIES
- - invests at least 80% of - invests at least 80% of - invests at least 80% of - invests at least 80% of
its assets in securities its assets in securities its net assets, in the its net assets in the
of technology and science of science and technology equity securities and equity securities and
companies that the industry companies. Fund equity-related equity-related
portfolio managers will invest primarily in instruments of companies instruments of companies
believe are likely to marketable equity engaged in the design, engaged in technology-
benefit from new or securities, including development, manufacture, related industries
innovative products, convertible securities, distribution, or sale of
services or processes. but its investments may communications services
Fund will invest include synthetic and equipment and
primarily in marketable instruments such as companies that are
equity securities, warrants, futures, involved in supplying
including convertible options, exchange-traded equipment or services to
securities, but its funds and American such companies
investments may include Depositary Receipts
synthetic instruments
such as warrants,
futures, options,
exchange-traded funds and
American Depositary
Receipts
- - technology and science - science and technology - telecommunications sector - technology related
companies include those industry companies includes, but is not industries include, but
that develop, include those that limited to, companies are not limited to,
manufacture, or sell develop, manufacture or that offer telephone hardware, software,
computer and electronic sell computer and service, wireless semiconductors,
components and equipment, electronic components and communications, satellite telecommunications
software, semiconductors, equipment, software, communications, equipment and services,
Internet technology, semiconductors, Internet television and movie and service-related
communications services technology, programming, companies in information
and equipment, mobile communications services broadcasting, and technology
communications, and equipment, mobile Internet access
broadcasting, healthcare communications,
and medical technology, broadcasting,
and biotechnology and biotechnology,
medical devices healthcare, medical
equipment and devices,
aerospace and defense,
media, and environmental
services
</Table>
4
<Table>
<Caption>
AIM GLOBAL SCIENCE AND INVESCO INVESCO TECHNOLOGY FUND
AIM NEW TECHNOLOGY FUND TECHNOLOGY FUND TELECOMMUNICATIONS FUND (BUYING FUND)
- ----------------------- ---------------------- ----------------------- -----------------------
- - looks for several of the - looks for several of the - utilizes - utilizes
following following research-oriented "bottom research-oriented "bottom
characteristics: characteristics: up" investment approach up" investment approach
above-average per share above-average per share focusing on company focusing on company
earnings growth; high earnings growth; high fundamentals and growth fundamentals and growth
return on invested return on invested prospects prospects
capital; a healthy capital; a healthy
balance sheet; sound balance sheet; sound
financial and accounting financial and accounting
policies and overall policies and overall
financial strength; financial strength;
strong competitive strong competitive
advantages; effective advantages; effective
research; product research and product
development and development and
marketing; development of marketing; development of
new technologies, new technologies,
efficient service; efficient service;
pricing flexibility; pricing flexibility;
strong management; and strong management; and
general operating general operating
characteristics that will characteristics that will
enable the companies to enable the companies to
compete successfully in compete successfully in
their respective markets their respective markets
- - invests without regard to - no corresponding strategy - emphasizes strongly - core portion of the
market capitalization; managed market leaders, portfolio is invested in
however, Fund expects to with a lesser weighting market-leading technology
invest a significant on smaller, faster companies among various
portion of its assets in growing companies that sub-sectors in the
securities of small cap offer new products or technology universe that
companies services and/or are will maintain or improve
increasing their market their market share
share regardless of overall
economic conditions
- selects stocks based on - remainder of Buying
projected total return Fund's portfolio consists
for individual companies, of faster- growing, more
while also analyzing volatile technology
country specific factors companies believed to be
that might affect stock emerging leaders in their
performance or influence fields
stock valuation
- - may invest up to 25% of - will normally invest in - normally, will invest - may invest up to 25% of
its total assets in the securities of primarily in companies its assets in securities
foreign securities companies located in at located in at least three of non- U.S. issuers
least three countries different countries, (securities of Canadian
including the U.S., and although U.S. issuers issuers and American
may invest a significant will dominate the Depositary Receipts are
portion of its assets in portfolio not subject to this 25%
the securities of U.S. limitation)
issuers. However, Fund
will invest no more than
40% of its total assets
in the securities of
issuers in any one
country, other than the
U.S.
- may invest more than 25%
of its assets in
securities of non-U.S.
issuers (securities of
Canadian issuers and
American Depositary
Receipts are not subject
to this limitation)
FUNDAMENTAL RESTRICTIONS
- - will not concentrate - although not a - will concentrate; Fund - will concentrate; Buying
fundamental restriction, will invest 25% or more Fund will invest 25% or
Fund has a non- of its assets in one or more of its assets in one
fundamental policy which more or more
requires Fund to telecommunications-related technology-related
concentrate its industries industries
investment in the
securities of domestic
and foreign issuers in
the science and
technology industries
</Table>
5
COMPARISON OF PRINCIPAL SERVICE PROVIDERS
The following is a list of the current principal service providers for the
Funds, including your Fund, and Buying Fund:
<Table>
<Caption>
SERVICE PROVIDERS
----------------------------------------------------------------------------------------------
AIM GLOBAL INVESCO
AIM NEW TECHNOLOGY SCIENCE AND TECHNOLOGY TELECOMMUNICATIONS INVESCO TECHNOLOGY
SERVICE FUND FUND FUND FUND (BUYING FUND)
- ------- ---------------------- ---------------------- ---------------------- ----------------------
Investment A I M Advisors, Inc. A I M Advisors, Inc. INVESCO Funds Group, INVESCO Funds Group,
Advisor............. 11 Greenway Plaza, 11 Greenway Plaza, Inc.* Inc.*
Suite 100 Suite 100 4350 South Monaco 4350 South Monaco
Houston, Texas Houston, Texas Street Street
77048-1173 77048-1173 Denver, Colorado 80237 Denver, Colorado 80237
Distributor......... A I M Distributors, A I M Distributors, A I M Distributors, A I M Distributors,
Inc. 11 Greenway Inc. 11 Greenway Inc.** Inc.**
Plaza, Suite 100 Plaza, Suite 100 11 Greenway Plaza, 11 Greenway Plaza
Houston, Texas Houston, Texas Suite 100 Suite 100
77048-1173 77048-1173 Houston, TX Houston, TX
77048-1173 77048-1173
Administrator....... A I M Advisors, Inc. A I M Advisors, Inc. INVESCO Funds Group, INVESCO Funds Group,
11 Greenway Plaza, 11 Greenway Plaza, Inc.*** Inc.***
Suite 100 Suite 100 4350 South Monaco 4350 South Monaco
Houston, Texas Houston, Texas Street Denver, Street Denver,
77048-1173 77048-1173 Colorado 80237 Colorado 80237
Custodian........... State Street Bank and State Street Bank and State Street Bank and State Street Bank and
Trust Company Trust Company Trust Company Trust Company
Transfer Agent
and Dividend
Disbursing A I M Fund Services, A I M Fund Services, INVESCO Funds Group, INVESCO Funds Group,
Agent........... Inc. Inc. Inc.**** Inc.****
Independent Auditors PricewaterhouseCoopers PricewaterhouseCoopers PricewaterhouseCoopers PricewaterhouseCoopers
LLP LLP LLP LLP
</Table>
- ---------------
* If Proposal 4 is approved by shareholders of your Fund and Proposal 1 is
not, AIM will replace INVESCO as investment advisor for your Fund effective
November 5, 2003. If the shareholders of Buying Fund approve a new
investment advisory agreement with AIM, AIM will replace INVESCO as
investment advisory for your Fund effective November 5, 2003.
** A I M Distributors, Inc. replaced INVESCO Distributors, Inc. as distributor
of Buying Fund and INVESCO Fund effective July 1, 2003.
*** If Proposal 4 is approved by shareholders of your Fund and Proposal 1 is
not, AIM will replace INVESCO as administrator for your Fund effective
November 5, 2003. If the shareholders of Buying Fund approve a new
investment advisory agreement with AIM, AIM will replace INVESCO as
administrator for Buying Fund effective November 5, 2003.
**** A I M Fund Services, Inc. will replace INVESCO as transfer agent and
dividend disbursing agent for Buying Fund and INVESCO Fund on or about
October 1, 2003.
COMPARISON OF PERFORMANCE
A bar chart showing the annual total returns for calendar years ended
December 31 for Class A shares of AIM Funds, Investor Class shares of INVESCO
Fund and Investor Class shares of Buying Fund can be found as Exhibit B. Also
included as part of Exhibit B is a table showing the average annual total
returns for the periods indicated for AIM Funds, INVESCO Fund and Buying Fund,
including sales charges. For more information regarding the total return of your
Fund, see the "Financial Highlights" section of the relevant Selling Fund
Prospectus, which has been made a part of this Proxy Statement/ Prospectus by
reference. For more information regarding the total return of Buying Fund, see
"Information About Buying Fund -- Financial Highlights." Past performance cannot
guarantee comparable future results.
6
COMPARISON OF FEES AND EXPENSES
A comparison of shareholder fees and annual operating expenses of each
class of shares of each AIM Fund, INVESCO Fund and Buying Fund as of each Fund's
fiscal year-end, expressed as a percentage of net assets ("Expense Ratio"), can
be found at Exhibit C. Pro forma estimated Expense Ratios for each class of
shares of Buying Fund after giving effect to the Reorganizations are also
provided as of March 31, 2003 as part of Exhibit C.
COMPARISON OF MULTIPLE CLASS STRUCTURES
A comparison of the share classes of your Fund that are available to
investors and the corresponding share classes of Buying Fund that shareholders
of your Fund will receive in the Reorganization of your Fund can be found as
Exhibit A. In addition to the share classes of Buying Fund listed on Exhibit A,
Institutional Class shares of Buying Fund are available to investors. This class
is not involved in any Reorganization. For information regarding the features of
the various share classes of each Fund and Buying Fund, see the applicable
Selling Fund Prospectus and the Buying Fund Prospectus, respectively.
COMPARISON OF SALES CHARGES
No initial sales charges are applicable to shares of Buying Fund received
by holders of your Fund's shares in connection with the Reorganization of your
Fund. No redemption of your Fund's shares that could cause the imposition of a
contingent deferred sales charge ("CDSC") will result in connection with the
Reorganization of your Fund. The holding period for purposes of determining
whether to charge a CDSC upon redemptions of shares of Buying Fund received by
holders of your Fund's shares in connection with the Reorganization of your Fund
will begin at the time your Fund's shares were originally purchased.
The chart below provides a summary for comparison purposes of the initial
sales charges and CDSCs applicable to each class of shares of your Fund and
Buying Fund. The fee tables at Exhibit C include comparative information about
maximum initial sales charges on purchases of Class A shares of your Fund and
Buying Fund and the maximum CDSC on redemptions of certain classes of shares of
your Fund and Buying Fund. For more detailed information on initial sales
charges, including volume purchase breakpoints and waivers, and reductions of
CDSCs over time, see the applicable Selling Fund Prospectus and the Buying Fund
Prospectus.
<Table>
<Caption>
CLASS A CLASS B CLASS C
------- ------- -------
- - subject to an initial sales - not subject to an initial - not subject to an initial
charge* sales charge sales charge
- - may be subject to a CDSC on - subject to a CDSC on - subject to a CDSC on
redemptions made within 18 certain redemptions made certain redemptions made
months from the date of within 6 years from the within 12 months from the
certain large purchases** date of purchase date of purchase***
</Table>
<Table>
<Caption>
CLASS K INVESTOR CLASS
(INVESCO FUND AND (INVESCO FUND AND INSTITUTIONAL CLASS
BUYING FUND ONLY) BUYING FUND ONLY) (BUYING FUND ONLY)
----------------- ----------------- -------------------
- - not subject to an initial - not subject to an initial - not subject to an initial
sales charge sales charge sales charge
- - may be subject to a CDSC on - not subject to a CDSC - not subject to a CDSC
redemptions made within 12
months from the date of
certain purchases
</Table>
- ---------------
* Each Fund and Buying Fund waive initial sales charges on Class A shares for
certain categories of investors, including certain of their affiliated
entities and certain of their employees, officers and directors/trustees and
those of their investment advisor.
7
** For qualified plans investing in Class A shares of Buying Fund, this period
is 12 months rather than 18 months.
*** Prior to August 18, 2003, Class C shares of INVESCO Fund and Buying Fund are
subject to a CDSC on certain redemptions made within 13 months from the date
of purchase. This 13 month period changes to 12 months effective August 18,
2003.
The CDSC on redemptions of shares of AIM Funds is computed based on the
lower of their original purchase price or current market value. Prior to August
18, 2003, the CDSC on redemptions of shares of Buying Fund and INVESCO Fund is
computed based on their original purchase price. This method of computation
changes to conform to AIM Funds' method of computation effective August 18,
2003.
COMPARISON OF DISTRIBUTION, PURCHASE AND REDEMPTION PROCEDURES AND EXCHANGE
RIGHTS
Shares of your Fund and Buying Fund are distributed by A I M Distributors,
Inc. ("AIM Distributors"), a registered broker-dealer and wholly owned
subsidiary of AIM. AIM Distributors replaced INVESCO Distributors, Inc. as
distributor of Buying Fund and INVESCO Fund effective July 1, 2003.
Your Fund and Buying Fund have adopted a distribution plan that allows the
payment of distribution and service fees for the sale and distribution of the
shares of each of their respective classes other than Institutional Class shares
of Buying Fund. Both your Fund and Buying Fund have engaged AIM Distributors to
provide such services either directly or through third parties. The fee tables
at Exhibit C include comparative information about the distribution and service
fees payable by each class of shares of your Fund and Buying Fund. Overall, each
class of shares of Buying Fund has the same or lower aggregate distribution and
service fees as the corresponding class of shares of your Fund.
Although there are differences between the purchase, redemption and
exchange procedures of AIM Funds and those of INVESCO Fund and Buying Fund as of
the date of this Proxy Statement/Prospectus, it is currently anticipated that
the purchase, redemption and exchange procedures of AIM Funds and/or INVESCO
Fund and Buying Fund will be changed so that they are substantially the same
prior to the consummation of the Reorganization. For information regarding the
current purchase, redemption and exchange procedures of AIM Funds, INVESCO Fund
and Buying Fund, see the applicable Selling Fund Prospectus and the Buying Fund
Prospectus.
As of the date of this Proxy Statement/Prospectus, shares of AIM Funds
generally may be exchanged for shares of the same or a similar class of funds
within The AIM Family of Funds(R) and shares of INVESCO Fund and Buying Fund
generally may be exchanged for shares of the same or a similar class of funds
within the INVESCO Family of Funds. It is currently anticipated that, prior to
the consummation of the Reorganizations, shares of The AIM Family of Funds(R)
and shares of the INVESCO Family of Funds generally will be able to be exchanged
for shares of the same or a similar class of each other. If this exchangeability
feature is not offered to shareholders prior to the consummation of the
Reorganizations, the consummation of the Reorganizations will be delayed until
such time as it is offered. See "Additional Information About the
Agreements -- The Reorganizations." For more detailed information regarding the
current exchange rights of your Fund and Buying Fund, see the applicable Selling
Fund Prospectus and the Buying Fund Prospectus, respectively.
THE BOARDS' RECOMMENDATION ON PROPOSAL 1
Your Board, including the independent directors or trustees, as applicable,
unanimously recommends that you vote "FOR" this Proposal.
8
RISK FACTORS
RISKS ASSOCIATED WITH BUYING FUND
The following is a discussion of the principal risks associated with Buying
Fund.
SECTOR RISK
As a sector fund, Buying Fund's portfolio is concentrated in a
comparatively narrow segment of the economy. This means Buying Fund's investment
concentration in a sector is higher than most mutual funds and the broad
securities markets. Consequently, Buying Fund tends to be more volatile than
other mutual funds, and the value of its portfolio investments and consequently
the value of an investment in Buying Fund tends to go up and down more rapidly.
Buying Fund invests in companies engaged in technology-related industries.
These include, but are not limited to, hardware, software, semiconductors,
telecommunications equipment and services, and service-related companies in
information technology. Many of these products are subject to rapid
obsolescence, which may lower the market value of the securities of the
companies in this sector.
A core portion of Buying Fund's portfolio is invested in market-leading
technology companies among various subsectors in the technology universe that
Buying Fund believes will maintain or improve their market share regardless of
overall economic conditions. These companies are leaders in their field and are
believed to have a strategic advantage over many of their competitors. The
remainder of Buying Fund's portfolio consists of faster-growing, more volatile
technology companies that INVESCO believes to be emerging leaders in their
fields. The market prices of these companies tend to rise and fall more rapidly
than those of larger, more established companies.
RISK OF GROWTH INVESTING
Growth investing may be more volatile than other investment styles because
growth stocks are more sensitive to investor perceptions of an issuing company's
growth potential. Growth-oriented funds typically will underperform
value-oriented funds when investor sentiment favors the value investing style.
Value investing seeks securities, particularly stocks, that are currently
undervalued by the market -- companies that are performing well, or have solid
management and products, but whose stock prices do not reflect that value.
Through our value process, we seek to provide reasonably consistent returns over
a variety of market cycles. Value-oriented funds typically will underperform
growth-oriented funds when investor sentiment favors the growth investing style.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of Buying
Fund's investments. Certain stocks selected for Buying Fund's portfolio may
decline in value more than the overall stock market. In general, the securities
of small companies have more volatility than those of mid-size companies or
large companies.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory, and diplomatic risks. Buying Fund may invest up
to 25% of its assets in securities of non-U.S. issuers. Securities of Canadian
issuers and American Depository Receipts are not subject to this 25% limitation.
Currency Risk. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of Buying Fund's investment in a security
valued in the foreign currency, or based on that currency value.
9
Political Risk. Political actions, events, or instability may result in
unfavorable changes in the value of a security.
Regulatory Risk. Government regulations may affect the value of a
security. In foreign countries, securities markets that are less regulated than
those in the U.S. may permit trading practices that are not allowed in the U.S.
Diplomatic Risk. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
European Economic and Monetary Union. Austria, Belgium, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, and
Spain are presently members of the European Economic and Monetary Union (the
"EMU"), which has adopted the euro as a common currency. Other European
countries may adopt the euro in the future.
As the euro is implemented, there may be changes in the relative strength
and value of the U.S. dollar and other major currencies, as well as possible
adverse tax consequences. The euro transition by EMU countries may affect the
fiscal and monetary levels of those participating countries. The outcome of
these and other uncertainties could have unpredictable effects on trade and
commerce and result in increased volatility for all financial markets.
LIQUIDITY RISK
Buying Fund's portfolio is liquid if Buying Fund is able to sell the
securities it owns at a fair price within a reasonable time. Liquidity is
generally related to the market trading volume for a particular security.
Investments in smaller companies or in foreign companies or companies in
emerging markets are subject to a variety of risks, including potential lack of
liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some
manner, from the price of another security, index, asset, or rate. Derivatives
include options and futures contracts, among a wide range of other instruments.
The principal risk of investments in derivatives in that the fluctuations in
their values may not correlate perfectly with the overall securities markets.
Some derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk,
described below.
Options and futures are common types of derivatives that Buying Fund may
occasionally use to hedge its investments. An option is the right to buy and
sell a security or other instrument, index, or commodity at a specific price on
or before a specific date. A future is an agreement to buy or sell a security or
other instrument, index, or commodity at a specific price on a specific date.
The use of options and futures may increase the performance of Buying Fund, but
also may increase market risk. Other types of derivatives include swaps, caps,
floors, and collars.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with
Buying Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
10
PORTFOLIO TURNOVER RISK
Buying Fund's investments may be bought and sold relatively frequently. A
high turnover rate may affect Buying Fund's performance because it results in
higher brokerage commissions and may result in taxable gain distributions to
Buying Fund's shareholders.
GENERAL RISKS
Not Insured. Mutual funds are not insured by the FDIC or any other
government agency, unlike bank deposits such as CDs or savings accounts.
No Guarantee. No mutual fund can guarantee that it will meet its
investment objectives.
Possible Loss of Investment. A mutual fund cannot guarantee its
performance, nor assure you that the market value of your investment will
increase. You may lose the money you invest, and Buying Fund will not reimburse
you for any of these losses.
Volatility. The price of your mutual fund shares will increase or decrease
with changes in the value of Buying Fund's underlying investments and changes in
the equity markets as a whole.
Not a Complete Investment Plan. An investment in any mutual fund does not
constitute a complete investment plan. Buying Fund is designed to be only a part
of your personal investment plan.
COMPARISON OF RISKS OF BUYING FUND AND YOUR FUND
The risks associated with an investment in your Fund are similar to those
described above for Buying Fund because of the similarities in their investment
objectives and strategies. The chart below provides a discussion of certain
risks that differ between each Fund, including your Fund, and Buying Fund. You
can find more detailed descriptions of specific risks associated with your Fund
in the applicable Selling Fund Prospectus.
<Table>
<Caption>
AIM GLOBAL SCIENCE AND TECHNOLOGY INVESCO
AIM NEW TECHNOLOGY FUND FUND TELECOMMUNICATIONS FUND
----------------------- --------------------------------- -----------------------
PRINCIPAL RISKS
- - Fund is subject to the same - Fund is subject to the same - Fund is subject to the same
principal risks as Buying principal risks as Buying Fund, principal risks as Buying
Fund, except for the except for the following: Fund.
following:
- - Fund will not concentrate - Fund may concentrate up to 40%
in a particular industry. of its total assets in one
Buying Fund may concentrate particular country, which would
in a particular industry subject Fund to additional
sector. risks unique to that country.
</Table>
11
<Table>
<Caption>
AIM GLOBAL SCIENCE AND TECHNOLOGY INVESCO
AIM NEW TECHNOLOGY FUND FUND TELECOMMUNICATIONS FUND
----------------------- --------------------------------- -----------------------
PRINCIPAL RISKS
- - Buying Fund, as a sector - Buying Fund, as a sector fund,
fund, is concentrated in a is concentrated in a
comparatively narrow comparatively narrow segment of
segment of the economy. the economy. This means Buying
This means Buying Fund's Fund's investment concentration
investment concentration in in a sector is higher than most
a sector is higher than mutual funds and the broad
most mutual funds and the securities markets.
broad securities markets. Consequently, Buying Fund tends
Consequently, Buying Fund to be more volatile than other
tends to be more volatile mutual funds, and the value of
than other mutual funds, its portfolio investments and
and the value of its consequently the value of an
portfolio investments and investment in Buying Fund tend
consequently the value of to go up and down more rapidly.
an investment in Buying
Fund tend to go up and down
more rapidly.
- - Fund has the ability to - Fund has the ability to invest
invest a significant a significant portion of its
portion of its assets in assets in companies with small
companies with small capitalization, whereas Buying
capitalization, whereas Fund may invest in companies of
Buying Fund may invest in all sizes of capitalization.
companies of all sizes of The prices of securities of
capitalization. The prices smaller capitalization
of securities of smaller companies may go up and down
capitalization companies more than the prices of larger,
may go up and down more more established companies. In
than the prices of larger, addition, securities of smaller
more established companies. capitalization companies may
In addition, securities of not be traded as often as
smaller capitalization securities of larger
companies may not be traded capitalization companies, and
as often as securities of it may be more difficult to
larger capitalization sell securities of smaller
companies, and it may be capitalization companies at a
more difficult to sell desired price.
securities of smaller
capitalization companies at
a desired price.
- - Fund may invest to a - Fund has a greater ability to
greater extent in debt invest in foreign securities
securities and synthetic compared to Buying Fund, which
securities. Debt securities can only invest up to 25% of
are particularly vulnerable its total assets in foreign
to credit risk and interest securities. Because Fund has no
rate fluctuations. Interest such restrictions, it may be
rate increases can cause subject to greater foreign
the price of a debt securities exposure than Buying
security to decrease. Fund.
</Table>
12
<Table>
<Caption>
AIM GLOBAL SCIENCE AND TECHNOLOGY INVESCO
AIM NEW TECHNOLOGY FUND FUND TELECOMMUNICATIONS FUND
----------------------- --------------------------------- -----------------------
PRINCIPAL RISKS
- - Fund may participate in the - Fund may invest to a greater
IPO market in some market extent in debt securities and
cycles, while Buying Fund synthetic securities. Debt
generally will not purchase securities are particularly
IPOs as part of its vulnerable to credit risk and
principal investment interest rate fluctuations.
strategy and therefore is Interest rate increases can
generally not subject to cause the price of a debt
the risks of IPOs. security to decrease.
- Fund may participate in the IPO
market in some market cycles,
while Buying Fund generally
will not purchase IPOs as part
of its principal investment
strategy and therefore is
generally not subject to the
risks of IPOs.
</Table>
13
INFORMATION ABOUT BUYING FUND
DESCRIPTION OF BUYING FUND SHARES
Shares of Buying Fund 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 Company in certain circumstances. Each share
of Buying Fund represents an equal proportionate interest in Buying Fund with
each other share and is entitled to such dividends and distributions out of the
income belonging to Buying Fund as are declared by the Board of Directors. Each
share of Buying Fund generally has the same voting, dividend, liquidation and
other rights; however, each class of shares of Buying Fund is subject to
different sales loads, conversion features, exchange privileges and
class-specific expenses. When issued, shares of Buying 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.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Buying Fund taken from its annual report
to shareholders for the fiscal year ended March 31, 2003 is set forth in
Appendix III to this Proxy Statement/Prospectus.
FINANCIAL HIGHLIGHTS
For more information about Buying Fund's financial performance, see the
"Financial Highlights" section of the Buying Fund Prospectus, which is attached
to this Proxy Statement/Prospectus as Appendix II.
PENDING SHAREHOLDER PROPOSALS FOR BUYING FUND
As previously discussed, the Board of Directors of Company is soliciting
the shareholders of Buying Fund to vote on a new investment advisory agreement
between AIM and Buying Fund, a new sub-advisory agreement between AIM and
INVESCO Institutional (N.A.), Inc., an affiliate of INVESCO, for Buying Fund,
and an agreement and plan of reorganization to redomesticate Company as a
Delaware statutory trust.
ADDITIONAL INFORMATION ABOUT THE AGREEMENTS
TERMS OF THE REORGANIZATIONS
The terms and conditions under which the Reorganizations may be consummated
are set forth in the Agreement. Significant provisions of the Agreements are
summarized below; however, this summary is qualified in its entirety by
reference to the Agreements, copies of which are attached as Appendix I to this
Proxy Statement/Prospectus.
THE REORGANIZATIONS
Consummation of each Reorganization (each, a "Closing") is expected to
occur on October 27, 2003, at 8:00 a.m., Eastern Time (the "Effective Time") on
the basis of values calculated as of the close of regular trading on the New
York Stock Exchange on October 24, 2003 (the "Valuation Date"). At the Effective
Time, all of the assets of your Fund will be delivered to Company's custodian
for the account of Buying Fund in exchange for the assumption by Buying Fund of
the liabilities of your Fund and delivery by Company directly to the holders of
record as of the Effective Time of the issued and outstanding shares of each
class of your Fund of a number of shares of each corresponding class of Buying
Fund (including, if applicable, fractional shares rounded to the nearest
thousandth), having an aggregate net asset value equal to the value of the
assets of your Fund so transferred, assigned and delivered, all determined and
14
adjusted as provided in the Agreement for your Fund. Upon delivery of such
assets, Buying Fund will receive good and marketable title to such assets free
and clear of all liens.
In order to ensure continued qualification of your Fund for treatment as a
"regulated investment company" for tax purposes and to eliminate any tax
liability of your Fund arising by reason of undistributed investment company
taxable income or net capital gain, AIM Trusts and Company, as applicable, will
declare on or prior to the Valuation Date to the shareholders of your Fund a
dividend or dividends that, together with all previous such dividends, shall
have the effect of distributing (a) all of your Fund's investment company
taxable income (determined without regard to any deductions for dividends paid)
for the taxable year ended October 31, 2002 (for AIM Global Science and
Technology Fund), December 31, 2002 (for AIM New Technology Fund) and March 31,
2003 (for INVESCO Telecommunications Fund), and for the short taxable year
beginning on November 1, 2002 (for AIM Global Science and Technology Fund),
January 1, 2003 (for AIM New Technology Fund) and April 1, 2003 (for INVESCO
Telecommunications Fund), and ending on the Closing and (b) all of your Fund's
net capital gain recognized in its taxable year ended October 31, 2002 (for AIM
Global Science and Technology Fund), December 31, 2002 (for AIM New Technology
Fund) and March 31, 2003 (for INVESCO Telecommunications Fund), and in such
short taxable year (after reduction for any capital loss carryover).
Buying Fund will proceed with the Reorganization of your Fund if the
shareholders of your Fund approve the Agreement for your Fund. The consummation
of each Reorganization is not conditioned upon the consummation of any other
Reorganization.
It is anticipated that, prior to the Closing, shares of The AIM Family of
Funds(R) and shares of the INVESCO Family of Funds generally will be able to be
exchanged for shares of the same or a similar class of each other. If this
exchangeability feature is not offered to shareholders prior to the Closing, the
Closing will be postponed until a mutually acceptable date not later than
December 31, 2003 (the "Termination Date").
Following receipt of the requisite shareholder vote and as soon as
reasonably practicable after the Closing, Company will redeem the outstanding
shares of INVESCO Fund from INVESCO Fund shareholders in accordance with its
Charter and the Maryland General Corporation Law.
BOARD CONSIDERATIONS
AMVESCAP initially proposed that the Board of Trustees of each AIM Trust
consider the Reorganization of the applicable AIM Fund at an in-person meeting
of each Board of Trustees held on May 13-14, 2003, at which preliminary
discussions of such Reorganization took place. The Board of Trustees of each AIM
Trust determined that the Reorganization of the applicable AIM Fund is in the
best interests of such AIM Fund and will not dilute the interests of such AIM
Fund's shareholders, and approved the applicable Agreement and related
Reorganization, at an in-person meeting of the Board of Trustees of each AIM
Trust held on June 10-11, 2003.
AMVESCAP initially proposed that the Board of Directors consider the
Reorganization of INVESCO Fund at a telephone meeting of the Board of Directors
held on May 5, 2003. Preliminary discussions of the Reorganization of INVESCO
Fund took place at the May 5, 2003 telephone meeting and at an in-person meeting
of the Board of Directors held on May 13-15, 2003. A special task force of the
Board of Directors met to consider the Reorganization of INVESCO Fund on June 3,
2003.
The Board of Trustees of each AIM Trust determined that the Reorganization
of the applicable AIM Fund is in the best interests of such AIM Fund and will
not dilute the interests of shareholders of such AIM Fund, and approved the
applicable Agreement and related Reorganization, at an in-person meeting of each
Board of Trustees held on June 10-11, 2003. The Board of Directors determined
that the Reorganization of INVESCO Fund is advisable and in the best interests
of INVESCO Fund and will not dilute the interests of shareholders of INVESCO
Fund, and approved the Agreement and the
15
Reorganization of INVESCO Fund, at an in-person meeting of the Board of
Directors held on June 9, 2003.
Over the course of the Board meetings, your Board received from AIM and
INVESCO written materials that contained information concerning your Fund and
Buying Fund, including comparative total return and fee and expense information,
a comparison of investment objectives and strategies of your Fund and Buying
Fund and pro forma expense ratios for Buying Fund. AIM and INVESCO also provided
your Board with written materials concerning the structure of the proposed
Reorganization of your Fund and the Federal tax consequences of the
Reorganization of your Fund.
In evaluating the Reorganization of your Fund, your Board considered a
number of factors, including:
- The investment objective and principal investment strategies of your Fund
and Buying Fund.
- The comparative expenses of your Fund and Buying Fund and the pro forma
expenses of Buying Fund after giving effect to the Reorganization of your
Fund.
- The comparative performance of your Fund and Buying Fund.
- The comparative sizes of your Fund and Buying Fund.
- The consequences of the Reorganization of your Fund for Federal income
tax purposes, including the treatment of capital loss carryforwards, if
any, available to offset future capital gains of your Fund and Buying
Fund.
- Any fees and expenses that will be borne directly or indirectly by your
Fund or Buying Fund in connection with the Reorganization of your Fund.
Your Board noted that AMVESCAP, on behalf of either AIM or INVESCO, will
bear all of the costs and expenses incurred in connection with the
Reorganizations.
Your Board also noted that no sales charges or other charges would be
imposed on any of the shares of Buying Fund issued to the shareholders of your
Fund in connection with the Reorganization of your Fund.
Based on the foregoing and the information presented at the Board meetings
discussed above, the Board of Trustees of each AIM Trust determined that the
Reorganization of the applicable AIM Fund is in the best interests of such AIM
Fund and will not dilute the interests of shareholders of such AIM Fund. The
Board of Directors likewise determined that the Reorganization of INVESCO Fund
is in the best interests of INVESCO Fund and will not dilute the interests of
shareholders of INVESCO Fund. Therefore, the Board of Trustees of each AIM Trust
recommends the approval of the Agreement for the applicable AIM Fund by the
shareholders such AIM Fund, and the Board of Directors recommends approval of
the Agreement for INVESCO Fund by the shareholders of INVESCO Fund, at the
Special Meetings.
AMVESCAP initially proposed that the Board of Directors consider the
Reorganizations, on behalf of Buyer, at a telephone meeting of the Board of
Directors held on May 5, 2003. Preliminary discussion of the Reorganizations
took place at the May 5, 2003 telephone meeting and at an in-person meeting of
the Board of Directors held on May 13-15, 2003. The Board of Directors
determined that each Reorganizations is in the best interests of Buying Fund and
will not dilute the interests of Buying Fund shareholders, and approved the
Agreements and the Reorganizations, at an in-person meeting of the Board of
Directors held on June 9, 2003.
OTHER TERMS
If any amendment is made to an Agreement which would have a material
adverse effect on shareholders, such change will be submitted to the affected
shareholders for their approval. However, the Agreements may be amended without
shareholder approval by mutual agreement of the parties.
16
AIM Trusts and Company have made representations and warranties in the
Agreements on behalf of each of their respective Funds that are customary in
matters such as the Reorganizations. The obligations of AIM Trusts and Company,
as applicable, pursuant to the Agreement for your Fund are subject to various
conditions, including the following mutual conditions:
- the assets of your Fund to be acquired by Buying Fund shall constitute at
least 90% of the fair market value of the net assets and at least 70% of
the fair market value of the gross assets held by your Fund immediately
prior to the Reorganization;
- Company's Registration Statement on Form N-14 under the Securities Act of
1933 (the "1933 Act") shall have been filed with the SEC and such
Registration Statement shall have become effective, and no stop-order
suspending the effectiveness of the Registration Statement shall have
been issued, and no proceeding for that purpose shall have been initiated
or threatened by the SEC (and not withdrawn or terminated);
- the shareholders of your Fund shall have approved the Agreement for your
Fund; and
- AIM Trusts and Company shall have received an opinion from Kirkpatrick &
Lockhart LLP that the consummation of the transactions contemplated by
the Agreement for your Fund will not result in the recognition of gain or
loss for Federal income tax purposes for your Fund, Buying Fund or their
shareholders.
The Board of Directors and each Board of Trustees may waive without
shareholder approval any default by an AIM Trust or Company or any failure by an
AIM Trust or Company to satisfy any of the above conditions as long as such a
waiver is mutual and will not have a material adverse effect on the benefits
intended under the applicable Agreement for the shareholders of the applicable
Fund. Each Agreement may be terminated and the related Reorganization may be
abandoned at any time by mutual agreement of the parties, or by either party if
the shareholders of the applicable Fund do not approve the Agreement or if the
Closing does not occur on or before the Termination Date.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Reorganization of your Fund and is based upon the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
existing U.S. Treasury regulations thereunder, current administrative rulings of
the Internal Revenue Service ("IRS") and published judicial decisions, all of
which are subject to change. The principal Federal income tax consequences that
are expected to result from Reorganization of your Fund, under currently
applicable law, are as follows:
- the Reorganization of your Fund will qualify as a "reorganization" within
the meaning of Section 368(a) of the Code;
- no gain or loss will be recognized by any your Fund upon the transfer of
its assets to Buying Fund solely in exchange for shares of Buying Fund
and Buying Fund's assumption of the liabilities of your Fund or on the
distribution of those shares to your Fund's shareholders; notwithstanding
the foregoing, no conclusion is expressed as to the effect of the
Reorganization of your Fund on your Fund or any of your Fund's
shareholders with respect to any asset as to which any unrealized gain or
loss is required to be recognized for Federal income tax purposes at the
end of a taxable year (or on the termination or transfer of a taxpayer's
rights (or obligations) with respect to such asset) under a
mark-to-market system of accounting;
- no gain or loss will be recognized by Buying Fund on its receipt of
assets of your Fund in exchange for shares of Buying Fund issued directly
to Fund's shareholders;
- no gain or loss will be recognized by any shareholder of your Fund upon
the exchange of shares of your Fund for shares of Buying Fund;
17
- the tax basis of the shares of Buying Fund to be received by a
shareholder of any your Fund will be the same as the shareholder's tax
basis of the shares of any your Fund surrendered in exchange therefor;
- the holding period of the shares of Buying Fund to be received by a
shareholder of your Fund will include the period for which such
shareholder held the shares of your Fund exchanged therefor, provided
that such shares of your Fund are capital assets in the hands of such
shareholder as of the Closing; and
- the tax year of your Fund will end on the date of the Closing, and Buying
Fund will thereafter succeed to and take into account any capital loss
carryover and certain other tax attributes of your Fund, subject to all
relevant conditions and limitations on the use of such tax benefits.
None of AIM Trusts or Company has requested or will request an advance
ruling from the IRS as to the Federal tax consequences of the Reorganizations.
As a condition to Closing, Kirkpatrick & Lockhart LLP will render a favorable
opinion to AIM Trusts and Company as to the foregoing Federal income tax
consequences of the Reorganizations, which opinion will be conditioned upon,
among other things, the accuracy, as of the Effective Time, of certain
representations of AIM Trusts and Company upon which Kirkpatrick & Lockhart LLP
will rely in rendering its opinion. The conclusions reached in that opinion
could be jeopardized if the representations of AIM Trusts or Company are
incorrect in any material respect.
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION OF YOUR FUND IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND
CIRCUMSTANCES OF ANY SHAREHOLDER OF YOUR FUND. YOUR FUND'S SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM
OF THE REORGANIZATION OF YOUR FUND, INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Reorganizations will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Buying Fund of the assets of your Fund will
be the same as the book cost basis of such assets to your Fund.
RIGHTS OF SHAREHOLDERS
The following section outlines the rights of shareholders of each Fund and
Buying Fund. Because INVESCO Fund and Buying Fund are each an investment
portfolio of Company, the shareholders of INVESCO Fund and Buying Fund have
identical rights.
GENERAL
Company is a Maryland corporation. AIM Trusts are Delaware statutory
trusts. There is much that is similar between Maryland corporations and Delaware
statutory trusts. For example, the responsibilities, powers and fiduciary duties
of the directors of Company are substantially similar to those of the trustees
of AIM Trusts.
There are, however, certain differences between the two forms of
organization. The operations of Company, as a Maryland corporation, are governed
by its Articles of Incorporation, and any restatements, amendments and
supplements thereto (the "Articles of Incorporation"), and applicable Maryland
law. The operations of each AIM Trust, as a Delaware statutory trust, are
governed by its Amended and Restated Agreement and Declaration of Trust, as
amended (each, a "Declaration of Trust"), and applicable Delaware law.
As discussed above under "Summary -- The Reorganizations," if approved by
Company's shareholders, Company will be redomesticated as a Delaware statutory
trust prior to the consummation of the
18
Reorganization of Company. If such redomestication occurs, the discussion below
of the rights of shareholders of a Maryland corporation will be inapplicable to
Company.
LIABILITY OF SHAREHOLDERS
Shareholders of a Maryland corporation generally do not have personal
liability for the corporation's obligations, except that a shareholder may be
liable to the extent that he or she receives any distribution which exceeds the
amount which he or she could properly receive under Maryland law or where such
liability is necessary to prevent fraud.
The Delaware Statutory Trust Act provides that 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, however, a remote
possibility that, under certain circumstances, shareholders of a Delaware
statutory trust might be held personally liable for the trust's obligations to
the extent the courts of another state that does not recognize such limited
liability were to apply the laws of such state to a controversy involving such
obligations. The Declarations of Trust provide that shareholders of the AIM
Trusts shall not be subject to any personal liability for acts or obligations of
the AIM Trusts and that every written agreement, obligation or other undertaking
made or issued by the AIM Trusts shall contain a provision to the effect that
shareholders are not personally liable thereunder. In addition, the Declarations
of Trust provide for indemnification out of each AIM Trust's property for any
shareholder held personally liable solely by reason of his or her being or
having been a shareholder. Therefore, the risk of any shareholder incurring
financial loss beyond his or her investment due to shareholder liability is
limited to circumstances in which an AIM Trust itself is unable to meet its
obligations and the express disclaimer of shareholder liabilities is determined
not to be effective. Given the nature of the assets and operations of an AIM
Trust, the possibility of an AIM Trust being unable to meet its obligations is
considered remote, and even if a claim were brought against an AIM Trust and a
court determined that shareholders were personally liable, it would likely not
impose a material obligation on a shareholder.
ELECTION OF DIRECTORS/TRUSTEES; TERMS
The shareholders of Company have elected a majority of the directors of
Company. Each director serves until a successor is elected, subject to his or
her earlier death, resignation or removal in the manner provided by law (see
below). In the case of a vacancy on the Board of Directors (other than a vacancy
created by removal by the shareholders), a majority of the directors may appoint
a successor to fill such vacancy. The right of the Board of Directors to appoint
directors to fill vacancies without shareholder approval is subject to the
provisions of the 1940 Act.
The shareholders of each AIM Trust have elected a majority of the trustees
of such AIM Trust. Such trustees serve for the life of the AIM Trust, subject to
their earlier death, incapacitation, resignation, retirement or removal (see
below). In the case of any vacancy on the Boards of Trustees, a majority of the
trustees may appoint a successor to fill such vacancy. The right of the Boards
of Trustees to appoint trustees to fill vacancies without shareholder approval
is subject to the provisions of the 1940 Act.
REMOVAL OF DIRECTORS/TRUSTEES
A director of Company may be removed by the holders of a majority of the
outstanding shares of Company.
A trustee of an AIM Trust may be removed at any time by a written
instrument signed by at least two-thirds of the trustees or by vote of
two-thirds of the outstanding shares the AIM Trust.
MEETINGS OF SHAREHOLDERS
Company is not required to hold annual meetings of shareholders and does
not intend to do so unless required by the 1940 Act. The bylaws of Company
provide that a special meeting of shareholders may be called by the president
or, in his or her absence, the vice-president or by a majority of the Board of
19
Directors or holders of shares entitled to cast at least 10% of the votes
entitled to be cast at the special meeting. Requests for special meetings must,
among other things, state the purpose of such meeting and the matters to be
voted upon. No special meeting need be called to consider any matter previously
voted upon at a special meeting called by the shareholders during the preceding
twelve months, unless requested by a majority of all shares entitled to vote at
such meeting.
AIM Trusts are not required to hold annual meetings of shareholders unless
required by the 1940 Act and do not intend to do so. The bylaws of each AIM
Trust provide that any trustee may call a special meeting of shareholders and
the trustees shall call a special meeting of the shareholders solely for the
purpose of removing one or more trustees upon written request of the holders of
not less than 10% of the outstanding shares of such AIM Trust. Special meetings
may be called for the purpose of electing trustees or for any other action
requiring shareholder approval, or for any matter deemed by the trustees to be
necessary or desirable.
LIABILITY OF DIRECTORS/TRUSTEES AND OFFICERS; INDEMNIFICATION
Maryland law permits a corporation to eliminate liability of its directors
and officers to the corporation or its stockholders, except for liability
arising from receipt of an improper benefit or profit and from active and
deliberate dishonesty. The Articles of Incorporation eliminate director and
officer liability to the fullest extent permitted under Maryland law. Under
Maryland law, indemnification of a corporation's directors and officers is
mandatory if a director or officer has been successful on the merits or
otherwise in the defense of certain proceedings. Maryland law permits
indemnification for other matters unless it is established that the act or
omission giving rise to the proceeding was committed in bad faith, a result of
active and deliberate dishonesty, or one in which a director or officer actually
received an improper benefit.
Delaware law provides that trustees of a statutory trust shall not be
liable to the statutory trust or its shareholders for acting in good faith
reliance on the provisions of its governing instrument and that the trustee's
liabilities may be expanded or restricted by such instrument. Under the
Declarations of Trust, the trustees and officers of AIM Trusts are not liable
for any act or omission or any conduct whatsoever in their capacity as trustees,
except for liability to the trust or shareholders due to willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of trustee. Delaware law allows a statutory trust to
indemnify and hold harmless any trustee or other person against any and all
claims and demands. The Declarations of Trust provide for the indemnification of
its trustees and officers to the extent that such trustees and officers act in
good faith and reasonably believe that their conduct is in the best interests of
AIM Trusts, except with respect to any matter in which it has been determined
that such trustee acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.
DISSOLUTION AND TERMINATION
Maryland law provides that Company may be dissolved by the vote of a
majority of the Board of Directors and two-thirds of the shares entitled to vote
on the dissolution; however the Articles of Incorporation reduce the required
shareholder vote from two-thirds to a majority of the shares entitled to vote on
the dissolution.
Pursuant to the Declarations of Trust, each AIM Trust or any series or
class of shares of beneficial interest in such AIM Trust may be terminated by:
(1) a majority shareholder vote of such AIM Trust or the affected series or
class, respectively; or (2) if there are fewer than 100 shareholders of record
of such AIM Trust or of such terminating series or class, the trustees pursuant
to written notice to the shareholders of such AIM Trust or the affected series
or class.
VOTING RIGHTS OF SHAREHOLDERS
Shareholders of a Maryland corporation such as Company are entitled to vote
on, among other things, those matters which effect fundamental changes in the
corporate structure (such as a merger, consolidation or sale of substantially
all of the assets of the corporation) as provided by Maryland law.
20
The Declarations of Trust grant shareholders power to vote only with
respect to the following: (i) election of trustees, provided that a meeting of
shareholders has been called for that purpose; (ii) removal of trustees,
provided that a meeting of shareholders has been called for that purpose; (iii)
termination of AIM Trusts or a series or class of its shares of beneficial
interest, provided that a meeting of shareholders has been called for that
purpose; (iv) sale of all or substantially all of the assets of AIM Trusts or
one of its investment portfolios; (v) merger or consolidation of AIM Trusts or
any of its investment portfolios, with certain exceptions; (vi) approval of any
amendments to shareholders' voting rights under the Declaration of Trust, and
(vii) approval of such additional matters as may be required by law or as the
trustees, in their sole discretion, shall determine.
DISSENTERS' RIGHTS
Under Maryland law, shareholders may not demand the fair value of their
shares from the successor company in a transaction involving the transfer of the
corporation's assets and are, therefore, bound by the terms of the transaction
if the stock is that of an open-end investment company registered with the SEC
under the 1940 Act and the value placed on the stock in the transaction is its
net asset value.
Neither Delaware law nor the Declarations of Trust confers upon
shareholders rights of appraisal or dissenters' rights.
AMENDMENTS TO ORGANIZATION DOCUMENTS
Consistent with Maryland law, Company reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation in the
manner prescribed by statute, including any amendment that alters the contract
rights, as expressly set forth in the Articles of Incorporation, of any
outstanding stock, and all rights conferred on shareholders are granted subject
to this reservation. The Board of Directors may approve amendments to the
Articles of Incorporation to classify or reclassify unissued shares of a class
of stock without shareholder approval. Other amendments to the Articles of
Incorporation may be adopted if approved by the affirmative vote of a majority
of all the votes entitled to be cast on the matter. The directors shall have the
power to alter, amend or repeal the bylaws of Company or adopt new bylaws at any
time.
Consistent with Delaware law, the Boards of Trustees may, without
shareholder approval, amend the Declarations of Trust at any time, except to
eliminate any voting rights pertaining to the shares of an AIM Trust, without
approval of the majority of the shares of such AIM Trust. The trustees shall
have the power to alter, amend or repeal the bylaws of each AIM Trust or adopt
new bylaws at any time.
21
CAPITALIZATION
The following table sets forth, as of March 31, 2003, (i) the
capitalization of each class of shares of each Fund, (ii) the capitalization of
each class of shares of Buying Fund, and (iii) the pro forma capitalization of
each class of shares of Buying Fund as adjusted to give effect to the
transactions contemplated by the Agreements.
<Table>
<Caption>
PRO FORMA
AIM GLOBAL INVESCO INVESCO INVESCO
SCIENCE AND AIM TELECOMMUNICATIONS TECHNOLOGY FUND TECHNOLOGY FUND
TECHNOLOGY FUND TECHNOLOGY FUND FUND (BUYING FUND) (BUYING FUND)
CLASS A SHARES CLASS A SHARES CLASS A SHARES CLASS A SHARES CLASS A SHARES
------------------ --------------- ------------------ --------------- ---------------
Net Assets..................... $259,794,537 $17,832,997 $325,550 $4,459,686 $282,412,770
Shares Outstanding............. 56,238,269 8,614,884 41,098 262,641 16,631,767
Net Asset Value Per Share...... $ 4.62 $ 2.07 $ 7.92 $ 16.98 $ 16.98
</Table>
<Table>
<Caption>
PRO FORMA
AIM GLOBAL INVESCO INVESCO INVESCO
SCIENCE AND AIM TELECOMMUNICATIONS TECHNOLOGY FUND TECHNOLOGY FUND
TECHNOLOGY FUND TECHNOLOGY FUND FUND (BUYING FUND) (BUYING FUND)
CLASS B SHARES CLASS B SHARES CLASS B SHARES CLASS B SHARES CLASS B SHARES
------------------ --------------- ------------------ --------------- ---------------
Net Assets..................... $86,450,772 $10,902,887 $15,865 $531,767 $97,901,291
Shares Outstanding............. 20,078,388 5,356,039 2,011 31,586 5,815,206
Net Asset Value Per Share...... $ 4.31 $ 2.04 $ 7.89 $ 16.84 $ 16.84
</Table>
<Table>
<Caption>
PRO FORMA
AIM GLOBAL INVESCO INVESCO INVESCO
SCIENCE AND AIM TELECOMMUNICATIONS TECHNOLOGY FUND TECHNOLOGY FUND
TECHNOLOGY FUND TECHNOLOGY FUND FUND (BUYING FUND) (BUYING FUND)
CLASS C SHARES CLASS C SHARES CLASS C SHARES CLASS C SHARES CLASS C SHARES
------------------ --------------- ------------------ --------------- ---------------
Net Assets..................... $15,139,655 $5,574,716 $2,188,211 $5,758,958 $28,661,540
Shares Outstanding............. 3,516,236 2,736,421 283,394 351,409 1,748,898
Net Asset Value Per Share...... $ 4.31 $ 2.04 $ 7.72 $ 16.39 $ 16.39
</Table>
<Table>
<Caption>
PRO FORMA
INVESCO INVESCO INVESCO
TELECOMMUNICATIONS TECHNOLOGY FUND TECHNOLOGY FUND
FUND (BUYING FUND) (BUYING FUND)
INVESTOR INVESTOR INVESTOR
CLASS SHARES CLASS SHARES CLASS SHARES
------------------ --------------- ---------------
Net Assets.......................................................... $274,946,793 $853,529,554 $1,128,476,347
Shares Outstanding.................................................. 34,558,571 50,510,923 66,782,057
Net Asset Value Per Share........................................... $ 7.96 $ 16.90 $ 16.90
</Table>
<Table>
<Caption>
PRO FORMA
INVESCO INVESCO INVESCO
TELECOMMUNICATIONS TECHNOLOGY FUND TECHNOLOGY FUND
FUND (BUYING FUND) (BUYING FUND)
CLASS K SHARES CLASS K SHARES CLASS K SHARES
------------------ --------------- ---------------
Net Assets........................................................... $666,209 $22,155,733 $22,821,942
Shares Outstanding................................................... 84,345 1,320,710 1,360,423
Net Asset Value Per Share............................................ $ 7.90 $ 16.78 $ 16.78
</Table>
<Table>
<Caption>
PRO FORMA
INVESCO INVESCO
TECHNOLOGY FUND TECHNOLOGY FUND
(BUYING FUND) (BUYING FUND)
INSTITUTIONAL INSTITUTIONAL
CLASS SHARES CLASS SHARES
--------------- ---------------
Net Assets................................................................................ $707,040,240 $707,040,240
Shares Outstanding........................................................................ 40,770,656 40,770,656
Net Asset Value Per Share................................................................. $ 17.34 $ 17.34
</Table>
22
INTERESTS OF CERTAIN PERSONS
If the Reorganizations of both AIM Funds are consummated, INVESCO, as the
investment advisor of Buying Fund, will gain approximately $395.7 million in
additional assets under management (based on AIM Funds' net assets as of March
31, 2003), upon which INVESCO will receive advisory fees. Exhibit C sets forth
INVESCO's advisory fees applicable to Buying Fund.
LEGAL MATTERS
Certain legal matters concerning the tax consequences of the
Reorganizations will be passed upon by Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, NW, Washington, DC 20036-1221.
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND
For more information with respect to each AIM fund concerning the following
topics, please refer to the following sections of the applicable Selling Fund
Prospectus, which has been made a part of this Proxy Statement/Prospectus by
reference: (i) see "Performance Information" for more information about the
performance of each AIM Fund; (ii) see "Fund Management" for more information
about the management of each AIM Fund; (iii) see "Other Information" for more
information about each AIM Fund's policy with respect to dividends and
distributions; and (iv) see "Other Information" and "Shareholder Information"
for more information about sales charges, including contingent deferred sales
charges, applicable to shares of each AIM Fund, the pricing, purchase,
redemption and repurchase of shares of each AIM Fund, tax consequences to
shareholders of various transactions in shares of each AIM Fund, distribution
arrangements and the multiple class structure of each AIM Fund.
For more information with respect to INVESCO Fund and Buying Fund
concerning the following topics, please refer to the following sections of the
INVESCO Fund Prospectus, which has been made a part of this Proxy
Statement/Prospectus by reference, or the Buying Fund Prospectus, which has been
made a part of this Proxy Statement/Prospectus by reference and which is
attached to this Proxy Statement/Prospectus as Appendix II, as applicable: (i)
see "Fund Performance" for more information about the performance of INVESCO
Fund or Buying Fund; (ii) see "Fund Management" and "Portfolio Managers" for
more information about the management of INVESCO Fund or Buying Fund; (iii) see
"Share Price" for more information about the pricing of shares of INVESCO Fund
or Buying Fund; (iv) see "Taxes" for more information about tax consequences to
shareholders of various transactions in shares of INVESCO Fund or Buying Fund;
(v) see "Dividends And Capital Gain Distributions" for more information about
INVESCO Fund's or Buying Fund's policy with respect to dividends and
distributions; and (vi) see "How To Buy Shares", "How To Sell Shares" and "Your
Account Services" for more information about sales charges, including contingent
deferred sales charges, applicable to shares of INVESCO Fund or Buying Fund, the
purchase, redemption and repurchase of shares of INVESCO Fund or Buying Fund,
distribution arrangements and the multiple class structure of INVESCO Fund or
Buying Fund.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which AIM Trusts
and Company have filed with the SEC pursuant to the requirements of the 1933 Act
and the 1940 Act, to which reference is hereby made. The SEC file number of AIM
Funds Group's registration statement containing the Prospectus for AIM New
Technology Fund and related Statement of Additional Information is Registration
No. 811-01540. The SEC file number of AIM Investment Funds' registration
statement containing the Prospectus for AIM Global Science and Technology Fund
and the related Statement of Additional Information is Registration Statement
No. 811-05426. Such Selling Fund Prospectus is incorporated herein by reference.
The SEC file number
23
for Company's registration statement containing the Buying Fund Prospectus is
Registration No. 811-03826. Such Buying Fund Prospectus is incorporated herein
by reference.
AIM Trusts and Company are subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith
file reports and other information with the SEC. Reports, proxy material,
registration statements and other information filed by AIM Trusts and Company
(including the Registration Statement of Company relating to Buying Fund on Form
N-14 of which this Proxy Statement/Prospectus is a part) may be inspected
without charge and copied at the public reference facilities maintained by the
SEC at Room 1014, Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549,
and at the following regional office of the SEC: 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may also be obtained from
the Public Reference Section of the SEC at 450 Fifth Street, NW, Washington, DC
20549, at the prescribed rates. The SEC maintains a website at www.sec.gov that
contains information regarding AIM Trusts and Company and other registrants that
file electronically with the SEC.
PROPOSAL 2 --
ELECTION OF TRUSTEES
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON PROPOSAL 2?
Proposal 2 applies to the shareholders of each AIM Fund.
BACKGROUND
In considering the integration initiative proposed by AMVESCAP, the
independent directors of the INVESCO Family of Funds and the independent
directors/trustees of the AIM Family of Funds determined that the shareholders
of all the AIM Family of Funds and the INVESCO Family of Funds would benefit if
a unified board of directors/trustees was responsible for overseeing the
operation of both the AIM Family of Funds and the INVESCO Family of Funds and
the services provided by AIM, INVESCO and their affiliates. Accordingly, the
Boards of Directors/Trustees of the AIM Family of Funds and the Boards of
Directors of the INVESCO Family of Funds agreed to combine the separate boards
and create a unified board of directors/trustees.
You are being asked to approve Proposal 2 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to benefit from having
a combined board of trustees.
STRUCTURE OF THE BOARDS OF TRUSTEES
Each Board of Trustees currently consists of 12 persons. Ten of the current
trustees are "independent," meaning they are not "interested persons" of Trust
within the meaning of the 1940 Act. Two of the current trustees are "interested
persons" because of their business and financial relationships with Trust and
AIM, its investment advisor, and/or AIM's parent, AMVESCAP.
NOMINEES FOR TRUSTEES
Each of the AIM Trusts' Committee on Directors/Trustees (which consists
solely of independent trustees) has approved the nomination of each of the 12
current trustees, as set forth below, to serve as trustee until his or her
successor is elected and qualified. In addition, each Committee on Directors/
Trustees has approved the nomination of four new nominees, as set forth below,
to serve as trustee until his or her successor is elected and qualified. These
four new nominees were nominated as a result of the proposed combination of the
Boards of Directors/Trustees of the AIM Family of Funds and the Boards of
Directors of the INVESCO Family of Funds.
Each nominee who is a current trustee serves as a director or trustee of
the 17 registered investment companies comprising the AIM Family of Funds. Each
nominee who is a current trustee oversees
24
86 portfolios which comprise the AIM Family of Funds. The business address of
each nominee who is a current trustee is 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.
Each new nominee serves as a director of the ten registered investment
companies comprising the INVESCO Family of Funds. Each new nominee currently
oversees 46 portfolios which comprise the INVESCO Family of Funds. The business
address of each new nominee is 4350 South Monaco Street, Denver, Colorado 80237.
If elected, each nominee would oversee a total of 27 registered investment
companies currently comprising 132 portfolios.
NOMINEES WHO CURRENTLY ARE INDEPENDENT TRUSTEES
<Table>
<Caption>
TRUSTEE PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ------- ----------------------- --------------------------
Frank S. Bayley -- 1939........ 2001(1) Of Counsel, law firm of Baker Badgley Funds, Inc.
1987(2) & McKenzie (registered investment
company)
Bruce L. Crockett -- 1944...... 1987(1) Chairman, Crockett Technology ACE Limited (insurance
2001(2) Associates (technology company); Captaris, Inc.
consulting company) and (unified messaging provider)
Captaris, Inc. (unified
messaging provider)
Albert R. Dowden -- 1941....... 2000(1) Director of a number of public Cortland Trust, Inc.
2001(2) and private business (Chairman) (registered
corporations, including the investment company); Annuity
Boss Group, Ltd. (private and Life Re (Holdings), Ltd.
investment and management) and (insurance company)
Magellan Insurance Company;
formerly President, Chief
Executive Officer and
Director, Volvo Group North
America, Inc.; Senior Vice
President, AB Volvo and
director of various affiliated
Volvo Group companies
Edward K. Dunn, Jr. -- 1935.... 1998(1) Formerly, Chairman, Mercantile None
2001(2) Mortgage Corp.; President and
Chief Operating Officer,
Mercantile-Safe Deposit &
Trust Co.; and President,
Mercantile Bankshares Corp.
Jack M. Fields -- 1952......... 1997(1) Chief Executive Officer, Administaff
2001(2) Twenty First Century Group,
Inc. (government affairs
company) and Texana Timber LP
Carl Frischling -- 1937........ 1993(1) Partner, law firm of Kramer Cortland Trust, Inc.
2001(2) Levin Naftalis & Frankel LLP (registered investment
company)
Prema Mathai-Davis -- 1950..... 1998(1) Formerly, Chief Executive None
2001(2) Officer, YWCA of the USA
Lewis F. Pennock -- 1942....... 1992(1) Partner, law firm of Pennock & None
2001(2) Cooper
Ruth H. Quigley -- 1935........ 2001(1) Retired None
1987(2)
Louis S. Sklar -- 1939......... 1993(1) Executive Vice President, None
2001(2) Development and Operations,
Hines Interests Limited
Partnership (real estate
development company)
</Table>
25
NOMINEES WHO CURRENTLY ARE INTERESTED PERSONS
<Table>
<Caption>
NAME, YEAR OF BIRTH AND
POSITION(S) HELD WITH TRUSTEE PRINCIPAL OCCUPATION(S)
EACH AIM TRUST SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ----------------------- ------- ----------------------- --------------------------
Robert H. Graham(3) -- 1946.... 1992(1) Director and Chairman, A I M None
Chairman and President 1998(2) Management Group Inc.
(financial services holding
company); and Director and
Vice Chairman, AMVESCAP PLC
(parent of AIM and a global
investment management firm)
and Chairman, AMVESCAP
PLC -- AIM Division; 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), A I M Fund
Services, Inc. (registered
transfer agent), and Fund
Management Company (registered
broker dealer); and Chief
Executive Officer, AMVESCAP
PLC-Managed Products
Mark H. Williamson(4) -- 1951.. 2003(1) Director, President and Chief Director of each of the ten
Executive Vice President 2003(2) Executive Officer, A I M INVESCO Funds
Management Group Inc.;
Director, Chairman and
President, A I M Advisors,
Inc. (registered investment
advisor); Director, A I M
Distributors, Inc. (registered
broker dealer); and Chief
Executive Officer of the AIM
Division of AMVESCAP PLC
(2003-present); formerly,
Chief Executive Officer,
Managed Products Division,
AMVESCAP PLC (2001-2002);
Chairman of the Board
(1998-2002), President
(1998-2002) and Chief
Executive Officer (1998-2002)
of INVESCO Funds Group, Inc.
(registered investment
advisor) and INVESCO
Distributors, Inc. (registered
broker dealer); Chief
Operating Officer and Chairman
of the Board of INVESCO Global
Health Sciences Fund; Chairman
and Chief Executive Officer of
NationsBanc Advisors, Inc.;
and Chairman of NationsBanc
Investments, Inc.
</Table>
- ---------------
(1) Denotes service as a trustee of AIM Funds Group.
(2) Denotes service as a trustee of AIM Investment Funds.
26
(3) Mr. Graham is considered an interested person of each AIM Trust because he
is a director of AMVESCAP PLC, parent of the advisor to, and principal
underwriter of, each AIM Trust.
(4) Mr. Williamson is considered an interested person of each AIM Trust because
he is an officer and a director of the advisor to, and a director of the
principal underwriter of, each AIM Trust.
NEW NOMINEES WHO WILL BE INDEPENDENT TRUSTEES
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ----------------------- --------------------------
Bob R. Baker -- 1936............. Consultant (2000-present); None
formerly, President and Chief
Executive Officer (1988-2000) of
AMC Cancer Research Center,
Denver, Colorado; until
mid-December 1988, Vice Chairman
of the Board of First Columbia
Financial Corporation, Englewood,
Colorado; formerly, Chairman of
the Board and Chief Executive
Officer of First Columbia
Financial Corporation.
James T. Bunch -- 1942........... Co-President and Founder of None
Green, Manning & Bunch Ltd.,
Denver, Colorado (1988-present)
(investment banking firm);
Director and Vice President of
Western Golf Association and
Evans Scholars Foundation;
Executive Committee, United
States Golf Association;
formerly, General Counsel and
Director of Boettcher & Co.,
Denver, Colorado; and formerly,
Chairman and Managing Partner,
law firm of Davis, Graham &
Stubbs, Denver, Colorado.
Gerald J. Lewis -- 1933.......... Chairman of Lawsuit Resolution General Chemical Group, Inc.,
Services, San Diego, California Hampdon, New Hampshire (1996-
(1987-present); formerly, present), Wheelabrator
Associate Justice of the Technologies, Inc. (waste
California Court of Appeals; and management company), Fisher
Of Counsel, law firm of Latham & Scientific, Inc. (laboratory
Watkins, San Diego, California supplies), Henley Manufacturing,
(1987-1997). Inc., and California Coastal
Properties, Inc.
Larry Soll, Ph.D. -- 1942........ Retired; formerly, Chairman of Synergen Inc. (since
the Board (1987-1994), Chief incorporation in 1982) and Isis
Executive Officer (1982-1989 and Pharmaceuticals, Inc.
1993-1994) and President
(1982-1989) of Synergen Inc.
(biotechnology company); and
formerly, trustee of INVESCO
Global Health Sciences Fund.
</Table>
THE BOARDS' RECOMMENDATION ON PROPOSAL 2
Your Board, including the independent trustees, unanimously recommends that
you vote "FOR" these 16 nominees.
27
CURRENT COMMITTEES OF THE BOARDS
The Board of Trustees of each AIM Trust currently has four standing
committees: an Audit Committee, an Investments Committee, a Valuation Committee
and a Committee on Directors/Trustees. These committees will remain as part of
the proposed combined board.
AUDIT COMMITTEE
Each Audit Committee is comprised entirely of independent trustees. The
current members of each Audit Committee are Messrs. Frank S. Bayley, Bruce L.
Crockett, Albert R. Dowden (Vice Chair), Edward K. Dunn, Jr. (Chair), Jack M.
Fields, Lewis F. Pennock, Louis S. Sklar, Dr. Prema Mathai-Davis and Miss Ruth
H. Quigley. The Audit Committee is responsible for: (i) the appointment,
compensation and oversight of any independent auditors employed by your Fund
(including resolution of disagreements between your Fund's management and the
auditor regarding financial reporting) for the purpose of preparing or issuing
an audit report or related work; (ii) overseeing the financial reporting process
of your Fund; (iii) monitoring the process and the resulting financial
statements prepared by management to promote accuracy of financial reporting and
asset valuation; and (iv) pre-approving permissible non-audit services that are
provided to your Fund by its independent auditors.
COMMITTEE ON DIRECTORS/TRUSTEES
Each Committee on Directors/Trustees is comprised entirely of independent
trustees. The current members of each Committee on Directors/Trustees are
Messrs. Bayley, Crockett (Chair), Dowden, Dunn, Fields (Vice Chair), Pennock and
Sklar, Dr. Mathai-Davis and Miss Quigley. The Committee on Directors/Trustees is
responsible for: (i) nominating persons who are not interested persons of each
AIM Trust for election or appointment: (a) as additions to the Board, (b) to
fill vacancies which, from time to time, may occur in the Board and (c) for
election by shareholders of each AIM Trust at meetings called for the election
of trustees; (ii) nominating persons who are not interested persons of each AIM
Trust for selection as members of each committee of the Board, including,
without limitation, the Audit Committee, the Committee on Directors/Trustees,
the Investments Committee and the Valuation Committee, and to nominate persons
for selection as chair and vice chair of each such committee; (iii) reviewing
from time to time the compensation payable to the independent trustees and
making recommendations to the Board regarding compensation; (iv) reviewing and
evaluating from time to time the functioning of the Board and the various
committees of the Board; (v) selecting independent legal counsel to the
independent trustees and approving the compensation paid to independent legal
counsel; and (vi) approving the compensation paid to independent counsel and
other advisers, if any, to the Audit Committee of Trust.
Each Committee on Directors/Trustees will consider nominees recommended by
a shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Committee on Directors/Trustees or the Board, as applicable, shall
make the final determination of persons to be nominated.
Notice procedures set forth in each AIM Trust's bylaws require that any
shareholder of your Fund desiring to nominate a trustee for election at a
shareholder meeting must submit to the Secretary of such AIM Trust 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 meeting and not earlier than the close
of business on the 120th day prior to the meeting. The notice must set forth:
(i) as to each person whom the shareholder proposes to nominate for election or
reelection as a trustee all information relating to such person that is required
to be disclosed in solicitations of proxies for election of trustees in an
election contest, or is otherwise required, in each case pursuant to Regulation
14A of the Securities Exchange Act of 1934 (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
trustee if elected); and (ii) as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination is made: (a) the name
and address of such shareholder, as they appear on such AIM Trust's books, and
of such
28
beneficial owner; and (b) the number of shares of each series portfolio of such
AIM Trust which are owned of record or beneficially by such shareholder and such
beneficial owner.
INVESTMENTS COMMITTEE
The current members of each Investments Committee are Messrs. Bayley,
Crockett, Dowden, Dunn, Fields, Carl Frischling, Pennock and Sklar (Chair), Dr.
Mathai-Davis (Vice Chair) and Miss Quigley. The Investments Committee is
responsible for: (i) overseeing AIM's investment-related compliance systems and
procedures to ensure their continued adequacy; and (ii) considering and acting,
on an interim basis between meetings of the full Board, on investment-related
matters requiring Board consideration, including dividends and distributions,
brokerage policies and pricing matters.
VALUATION COMMITTEE
The current members of each Valuation Committee are Messrs. Dunn and
Pennock (Chair), and Miss Quigley (Vice Chair). The Valuation Committee is
responsible for: (i) periodically reviewing AIM's Procedures for Valuing
Securities ("Procedures"), and making any recommendations to AIM with respect
thereto; (ii) reviewing proposed changes to the Procedures recommended by AIM
from time to time; (iii) periodically reviewing information provided by AIM
regarding industry developments in connection with valuation; (iv) periodically
reviewing information from AIM regarding fair value and liquidity determinations
made pursuant to the Procedures, and making recommendations to the full Board in
connection therewith (whether such information is provided only to the Committee
or to the Committee and the full Board simultaneously); and (v) if requested by
AIM, assisting AIM's internal valuation committee and/or the full Board in
resolving particular valuation anomalies.
BOARD AND COMMITTEE MEETING ATTENDANCE
During the fiscal year ended October 31, 2002, the Board of Trustees of AIM
Investment Funds met ten times, the Audit Committee met six times, the Committee
on Directors/Trustees met five times, the Investments Committee met four times
and the Valuation Committee met one time. All of the current trustees then
serving attended at least 75% of the meetings of the Board or applicable
committee during the most recent fiscal year.
During the fiscal year ended December 31, 2002, the Board of Trustees of
AIM Funds Group met ten times, the Audit Committee met six times, the Committee
on Directors/Trustees met five times, the Investments Committee met four times
and the Valuation Committee met one time. All of the current trustees then
serving attended at least 75% of the meetings of the Board or applicable
committee during the most recent fiscal year.
TRUSTEE'S 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 funds within the AIM Family of
Funds. Each such trustee receives a fee, allocated among the funds within the
AIM Family of Funds for which he or she serves as a director or trustee, which
consists of an annual retainer component and a meeting fee component.
Information regarding compensation paid or accrued for each trustee of each
AIM Trust who was not affiliated with AIM during the year ended December 31,
2002 is found in Exhibit D.
RETIREMENT PLAN FOR TRUSTEES
The trustees have adopted a retirement plan for the trustees of each AIM
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.
29
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 each AIM Trust and/or the other funds within the AIM Family of Funds (each, a
"Covered Fund") who has at least five years of credited service as a trustee
(including service to a predecessor fund) for a Covered Fund. The retirement
benefits will equal 75% of the trustee's annual retainer paid or accrued by any
Covered Fund to such trustee during the twelve-month period prior to retirement,
including the amount of any retainer deferred under a separate deferred
compensation agreement between the Covered Fund and the trustee. The annual
retirement benefits are payable in quarterly installments for a number of years
equal to the lesser of (i) ten or (ii) the number of such trustee's credited
years of service. A death benefit is also available under the plan that provides
a surviving spouse with a quarterly installment of 50% of a deceased trustee's
retirement benefits for the same length of time that the trustee would have
received the benefits 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. Payment of benefits under the plan is not secured or funded by AIM
Trusts.
DEFERRED COMPENSATION AGREEMENTS
Messrs. Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (for
purposes of this paragraph only, the "Deferring Trustees") have each executed a
Deferred Compensation Agreement (collectively, the "Compensation Agreements").
Pursuant to the Compensation Agreements, the Deferring Trustees have the option
to elect to defer receipt of up to 100% of their compensation payable by each
AIM Trust, and such amounts are placed into a deferral account. Currently, the
Deferring Trustees have the option to select various funds within the AIM Family
of 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 Trustees' 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 Trustees' termination of service as a
trustee of an AIM 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 AIM Trusts and of each other fund within the AIM Family of Funds
from which they are deferring compensation.
OFFICERS OF TRUST
Information regarding the current officers of AIM Trusts can be found in
Exhibit E.
SECURITY OWNERSHIP OF MANAGEMENT
Information regarding the ownership of each class of your Fund's shares by
trustees, nominees, and current executive officers of the applicable AIM Trust
can be found in Exhibit F.
TRUSTEE OWNERSHIP OF YOUR FUND'S SHARES
The dollar range of equity securities beneficially owned by each trustee
and nominee as of December 31, 2002 (i) in each AIM Fund and (ii) on an
aggregate basis, in all registered investment companies overseen by the trustee
within the AIM Funds complex can be found in Exhibit G.
30
PROPOSAL 3 --
ELECTION OF DIRECTORS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON PROPOSAL 3?
Proposal 3 applies to the shareholders of INVESCO Fund only.
BACKGROUND
The independent directors of your Board believe that your interests would
best be served if the INVESCO Family of Funds and the AIM Family of Funds had a
unified board of directors/trustees responsible for overseeing the operation of
both the AIM Family of Funds and the INVESCO Family of Funds and the services
provided by AIM, INVESCO and their affiliates. Accordingly, the Boards of
Directors of the INVESCO Family of Funds and the Boards of Directors/Trustees of
the AIM Family of Funds agreed to combine the separate boards and create a
unified board of directors/trustees.
If you are a shareholder of INVESCO Fund, you are being asked to approve
Proposal 3 so that, in the event that Proposal 1 is not approved, your Fund will
still be able to benefit from having a combined board of directors.
STRUCTURE OF THE BOARD OF DIRECTORS
The Board currently consists of the following 11 persons: Bob R. Baker,
Sueann Ambron, Victor L. Andrews, Lawrence H. Budner, James T. Bunch, Raymond R.
Cunningham, Richard W. Healey, Gerald L. Lewis, John W. McIntyre, Larry Soll,
Ph.D. and Mark H. Williamson. Eight of the current directors are "independent,"
meaning they are not "interested persons" of Company within the meaning of the
1940 Act. Three of the current directors are "interested persons" because of
their business and financial relationships with Company and INVESCO, its
investment advisor, and/or INVESCO's parent, AMVESCAP. Six of the current
directors have declined to stand for re-election as directors of Company.
Therefore, their terms as directors of Company will end upon the election and
qualification of their successor directors at the Special Meeting.
NOMINEES FOR DIRECTORS
Company's nominating committee (which consists solely of independent
directors) has approved the nomination of five of the 11 current directors, as
set forth below, each to serve as director until his successor is elected and
qualified. In addition, the nominating committee has approved the nomination of
11 new nominees, as set forth below, each to serve as director until his or her
successor is elected and qualified. These 11 new nominees were nominated to
effect the combination of the Boards of Directors/ Trustees of the AIM Family of
Funds and the Boards of Directors of the INVESCO Family of Funds.
Each nominee who is a current director serves as a director of the ten
registered investment companies comprising the INVESCO Family of Funds. Each
nominee who is a current director oversees 46 portfolios which comprise the
INVESCO Family of Funds. The business address of each nominee who is a current
director is 4350 South Monaco Street, Denver, Colorado 80237.
Each new nominee serves as a director or trustee of the 17 registered
investment companies comprising the AIM Family of Funds. Each new nominee
currently oversees 86 portfolios which comprise the AIM Family of Funds. The
business address of each new nominee is 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.
If elected, each nominee would oversee a total of 27 registered investment
companies currently comprising 132 portfolios.
31
NOMINEES WHO CURRENTLY ARE INDEPENDENT DIRECTORS
<Table>
<Caption>
DIRECTOR PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- -------- ----------------------- --------------------------
Bob R. Baker -- 1936........... 1983 Consultant (2000-present); None
formerly, President and Chief
Executive Officer (1988-2000)
of AMC Cancer Research Center,
Denver, Colorado; until mid-
December 1988, Vice Chairman
of the Board of First Columbia
Financial Corporation,
Englewood, Colorado; formerly,
Chairman of the Board and
Chief Executive Officer of
First Columbia Financial
Corporation.
James T. Bunch -- 1942......... 2000 Co-President and Founder of None
Green, Manning & Bunch Ltd.,
Denver, Colorado
(1988-present) (investment
banking firm); Director and
Vice President of Western Golf
Association and Evans Scholars
Foundation; Executive
Committee, United States Golf
Association; formerly, General
Counsel and Director of
Boettcher & Co., Denver,
Colorado; and formerly,
Chairman and Managing Partner,
law firm of Davis, Graham &
Stubbs, Denver, Colorado.
Gerald J. Lewis -- 1933........ 2000 Chairman of Lawsuit Resolution General Chemical Group, Inc.,
Services, San Diego, Hampdon, New Hampshire
California (1987-present); (1996-present), Wheelabrator
formerly, Associate Justice of Technologies, Inc. (waste
the California Court of management company), Fisher
Appeals; and Of Counsel, law Scientific, Inc. (laboratory
firm of Latham & Watkins, San supplies), Henley
Diego, California (1987-1997). Manufacturing, Inc., and
California Coastal Properties,
Inc.
Larry Soll, Ph.D. -- 1942...... 1997 Retired; formerly, Chairman of Synergen Inc. (since
the Board (1987-1994), Chief incorporation in 1982) and
Executive Officer (1982-1989 Isis Pharmaceuticals, Inc.
and 1993-1994) and President
(1982-1989) of Synergen Inc.
(biotechnology company); and
formerly, trustee of INVESCO
Global Health Sciences Fund.
</Table>
32
NOMINEE WHO CURRENTLY IS AN INTERESTED PERSON
<Table>
<Caption>
DIRECTOR PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- -------- ----------------------- --------------------------
Mark H. Williamson(1) -- 1951 1998 Director, President and Chief Director/trustee of each of
Executive Officer, A I M the 17 AIM Funds
Management Group Inc.;
Director, Chairman and
President, A I M Advisors,
Inc. (registered investment
advisor); Director, A I M
Distributors, Inc. (registered
broker dealer); and Chief
Executive Officer of the AIM
Division of AMVESCAP PLC
(2003-present); formerly,
Chief Executive Officer,
Managed Products Division,
AMVESCAP PLC (2001-2002);
Chairman of the Board
(1998-2002), President
(1998-2002) and Chief
Executive Officer (1998-2002)
of INVESCO Funds Group, Inc.
(registered investment
advisor) and INVESCO
Distributors, Inc. (registered
broker dealer); Chief
Operating Officer and Chairman
of the Board of INVESCO Global
Health Sciences Fund; Chairman
and Chief Executive Officer of
NationsBanc Advisors, Inc.;
and Chairman of NationsBanc
Investments, Inc.
</Table>
- ---------------
(1) Mr. Williamson is considered an interested person of Company because he is
an officer and a director of the advisor to, and a director of the principal
underwriter of, Company.
NEW NOMINEES WHO WILL BE INDEPENDENT DIRECTORS
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ----------------------- --------------------------
Frank S. Bayley -- 1939........ Of Counsel, law firm of Baker & Badgley Funds, Inc. (registered
McKenzie investment company)
Bruce L. Crockett -- 1944...... Chairman, Crockett Technology ACE Limited (insurance company);
Associates (technology consulting Captaris, Inc. (unified messaging
company) and Captaris, Inc. provider)
(unified messaging provider)
Albert R. Dowden -- 1941....... Director of a number of public and Cortland Trust, Inc. (Chairman)
private business corporations, (registered investment company);
including the Boss Group, Ltd. Annuity and Life Re (Holdings),
(private investment and management) Ltd. (insurance company)
and Magellan Insurance Company;
formerly President, Chief Executive
Officer and Director, Volvo Group
North America, Inc.; Senior Vice
President, AB Volvo and director of
various affiliated Volvo Group
companies
Edward K. Dunn, Jr. -- 1935.... Formerly, Chairman, Mercantile None
Mortgage Corp.; President and Chief
Operating Officer, Mercantile-Safe
Deposit & Trust Co.; and President,
Mercantile Bankshares Corp.
</Table>
33
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ----------------------- --------------------------
Jack M. Fields -- 1952......... Chief Executive Officer, Twenty Administaff
First Century Group, Inc.
(government affairs company) and
Texana Timber LP
Carl Frischling -- 1937........ Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Naftalis & Frankel LLP investment company)
Prema Mathai-Davis -- 1950..... Formerly, Chief Executive Officer, None
YWCA of the USA
Lewis F. Pennock -- 1942....... Partner, law firm of Pennock & None
Cooper
Ruth H. Quigley -- 1935........ Retired None
Louis S. Sklar -- 1939......... Executive Vice President, None
Development and Operations, Hines
Interests Limited Partnership (real
estate development company)
</Table>
NEW NOMINEE WHO WILL BE AN INTERESTED PERSON
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ----------------------- --------------------------
Robert H. Graham(1) -- 1946 Director and Chairman, A I M None
Management Group Inc. (financial
services holding company); and
Director and Vice Chairman,
AMVESCAP PLC (parent of AIM and a
global investment management firm)
and Chairman, AMVESCAP PLC -- AIM
Division; 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), A I M
Fund Services, Inc. (registered
transfer agent), and Fund
Management Company (registered
broker dealer); and Chief Executive
Officer, AMVESCAP PLC-Managed
Products
</Table>
- ---------------
(1) Mr. Graham will be considered an interested person of Company because he is
a director of AMVESCAP PLC, parent of the advisor to, and principal
underwriter of, Company.
THE BOARD'S RECOMMENDATION ON PROPOSAL 3
Your Board, including the independent directors, unanimously recommends
that you vote "FOR" these 16 nominees.
COMMITTEES OF THE BOARD
The Board of Directors has nine standing committees: an audit committee, an
investments and management liaison committee, a brokerage committee, a
derivatives committee, a valuation committee, a legal committee, a compensation
committee, a retirement plan committee and a nominating committee.
34
AUDIT COMMITTEE
Company has an audit committee established for the purpose of overseeing
the accounting and financial reporting process of Company and audits of the
financial statements of Company. The audit committee is comprised entirely of
independent directors. The committee meets quarterly with Company's independent
accountants and officers to review accounting principles used by Company, the
adequacy of internal controls, the responsibilities and fees of the independent
accountants, and other matters. The current members of the audit committee are
Messrs. Andrews, Baker, Budner, Lewis and McIntyre.
EXECUTIVE COMMITTEE
Company has an executive committee. On occasion, the committee acts upon
the current and ordinary business of Company between the meetings of the Board.
Except for certain powers which, under applicable law, may only be exercised by
the full Board, the committee may exercise all powers and authority of the Board
in the management of the business of Company. All decisions are subsequently
submitted for ratification by the Board. The current members of the executive
committee are Messrs. Baker, Bunch, McIntyre and Williamson.
INVESTMENTS AND MANAGEMENT LIAISON COMMITTEE
Company has an investments and management liaison committee which meets
quarterly with various management personnel of INVESCO in order to facilitate
better understanding of management and operations of Company, and to review
investment, legal and operational matters which have been assigned to the
committee by the Board of Directors, in furtherance of the Board's overall duty
of supervision. The current members of the investments and management liaison
committee are Messrs. Andrews, Baker, Bunch, Soll and Dr. Ambron.
BROKERAGE COMMITTEE
Company has a brokerage committee. The committee meets periodically to
review soft dollar and other brokerage transactions by your Fund and to review
policies and procedures of INVESCO with respect to brokerage transactions. It
reports on these matters to the Board of Directors. The current members of the
brokerage committee are Messrs. Budner, Bunch and McIntyre.
DERIVATIVES COMMITTEE
Company has a derivatives committee. The committee meets periodically to
review derivatives investments made by your Fund. It monitors the use of
derivatives by your Fund and the procedures utilized by INVESCO to ensure that
the use of such instruments follows the policies adopted by the Board of
Directors. The committee reports on these matters to the Board of Directors. The
current members of the derivatives committee are Messrs. Andrews, Lewis and
Soll.
NOMINATING COMMITTEE
Company has a nominating committee. The committee meets periodically to
review and nominate candidates for positions as independent directors to fill
vacancies on the Board of Directors. The nominating committee will consider
nominees recommended by shareholders. If a shareholder desires to nominate a
candidate, the shareholder must submit a request in writing to the Chairman of
the nominating committee. The current members of the nominating committee are
Messrs. Baker, Bunch, Lewis and Soll.
LEGAL COMMITTEE
Company has a legal committee. The committee meets periodically to review
compensation arrangements with counsel to Company and to its independent
directors. The committee reports on these matters to the Board of Directors. The
current members of the legal committee are Messrs. Bunch, Lewis and McIntyre.
35
COMPENSATION COMMITTEE
Company has a compensation committee. The committee meets periodically to
review compensation arrangements of Company's independent directors. The
committee reports on these matters to the Board of Directors. The current
members of the compensation committee are Messrs. Andrews, Baker, Budner and
Soll.
VALUATION COMMITTEE
Company has a valuation committee. The committee meets periodically to
review valuation issues regarding investments made by your Fund. The committee
reports on these matters to the Board of Directors. The current members of the
valuation committee are Messrs. Baker, Bunch, Cunningham and McIntyre.
RETIREMENT PLAN COMMITTEE
Company has a retirement plan committee. The committee meets periodically
to review Company's retirement arrangements for its independent directors. The
committee reports on these matters to the Board of Directors. The current
members of the retirement plan committee are Messrs. Andrews, Baker, Budner,
Cunningham and Soll.
BOARD AND COMMITTEE MEETING ATTENDANCE
During the fiscal year ended March 31, 2003, the Board of Directors met six
times, the audit committee met four times, the executive committee did not meet,
the investments and management liaison committee met four times, the brokerage
committee met four times, the derivatives committee met four times, the
nominating committee met four times, the legal committee met three times, the
compensation committee met two times, and the valuation, insurance and
retirement plan committees did not meet. All of the current directors then
serving attended at least 75% of the meetings of the Board or applicable
committee during the most recent fiscal year.
FUTURE COMMITTEE STRUCTURE
As a result of the combination of the Boards of Directors of the INVESCO
Family of Funds and the Boards of Directors/Trustees of the AIM Family of Funds,
it is expected that the Board will adopt a committee structure that is the same
as that which is in effect for the AIM Family of Funds, so that the Board of
Directors will have four committees: an Audit Committee, a Committee on
Directors/Trustees, an Investments Committee and a Valuation Committee. These
committees are described below.
AUDIT COMMITTEE
The Audit Committee will be comprised entirely of independent directors.
The Audit Committee will be responsible for: (i) the appointment, compensation
and oversight of any independent auditors employed by your Fund (including
resolution of disagreements between your Fund's management and the auditor
regarding financial reporting) for the purpose of preparing or issuing an audit
report or related work; (ii) overseeing the financial reporting process of your
Fund; (iii) monitoring the process and the resulting financial statements
prepared by management to promote accuracy of financial reporting and asset
valuation; and (iv) pre-approving permissible non-audit services that are
provided to your Fund by its independent auditors.
COMMITTEE ON DIRECTORS/TRUSTEES
The Committee on Directors/Trustees will be comprised entirely of
independent directors. It will be responsible for: (i) nominating persons who
are not interested persons of Company for election or appointment: (a) as
additions to the Board, (b) to fill vacancies which, from time to time, may
occur in the Board and (c) for election by shareholders of Company at meetings
called for the election of directors;
36
(ii) nominating persons who are not interested persons of Company for selection
as members of each committee of the Board, including, without limitation, the
audit committee, the committee on directors, the investments committee and the
valuation committee, and to nominate persons for selection as chair and vice
chair of each such committee; (iii) reviewing from time to time the compensation
payable to the independent directors and making recommendations to the Board
regarding compensation; (iv) reviewing and evaluating from time to time the
functioning of the Board and the various committees of the Board; (v) selecting
independent legal counsel to the independent trustees and approving the
compensation paid to independent legal counsel; and (vi) approving the
compensation paid to independent counsel and other advisers, if any, to the
Audit Committee of Company.
INVESTMENTS COMMITTEE
The Investments Committee will be responsible for: (i) overseeing the
advisor's investment-related compliance systems and procedures to ensure their
continued adequacy; and (ii) considering and acting, on an interim basis between
meetings of the full Board, on investment-related matters requiring Board
consideration, including dividends and distributions, brokerage policies and
pricing matters.
VALUATION COMMITTEE
The Valuation Committee will be responsible for: (i) periodically reviewing
the advisor's procedures for valuing securities ("Procedures"), and making any
recommendations to the advisor with respect thereto; (ii) reviewing proposed
changes to the Procedures recommended by the advisor from time to time; (iii)
periodically reviewing information provided by the advisor regarding industry
developments in connection with valuation; (iv) periodically reviewing
information from the advisor regarding fair value and liquidity determinations
made pursuant to the Procedures, and making recommendations to the full Board in
connection therewith (whether such information is provided only to the committee
or to the committee and the full Board simultaneously); and (v) if requested by
the advisor, assisting the advisor's internal valuation committee and/or the
full Board in resolving particular valuation anomalies.
DIRECTOR'S COMPENSATION
Each director who is independent is compensated for his or her services
according to a fee schedule which recognizes the fact that such director also
serves as a director of other funds within the INVESCO Family of Funds. Each
such director receives a fee, allocated among the funds within the INVESCO
Family of Funds for which he or she serves as a director, which consists of an
annual retainer component and a meeting fee component.
Information regarding compensation paid or accrued for each continuing
director of Company who was not affiliated with INVESCO during the year ended
December 31, 2002 is found in Exhibit H.
CURRENT RETIREMENT PLAN FOR DIRECTORS
The Boards of Directors of the INVESCO Family of Funds have adopted a
Retirement Plan (the "Retirement Plan") and a Deferred Retirement Plan Account
Agreement (the "Account Agreement"). Certain of the independent directors of
Company participate either in the Retirement Plan or in the Account Agreement.
Under the Retirement Plan and the Account Agreement, each participating director
who is not an interested person of the INVESCO Funds and who has served for at
least five years (a "Participating Qualified Director") is entitled to receive a
benefit upon retirement.
Commencing with attainment of age 72 by a Participating Qualified Director
who has elected to participate in the Retirement Plan and who voluntarily
retires prior to reaching age 72, and commencing with the date of retirement of
a Participating Qualified Director who retires upon reaching age 72 or at any
time subsequent to age 72 up to the mandatory retirement age of 75, a
Participating Qualified Director shall receive quarterly payments at an annual
rate of $34,000 (the "Annual Benefit"). Directors who became Participating
Qualified Directors on or before January 1, 2001 who retire upon reaching age 72
(or at age 73 or 74, if the director extends his retirement date for one to two
years, but less than
37
three years) are entitled to payment for one year of twice the Annual Benefit.
Payment of the Annual Benefit will continue for the remainder of the
Participating Qualified Director's life or ten years, whichever is longer. If a
Participating Qualified Director becomes disabled before the date upon which his
or her Annual Benefit payments would normally commence, such benefit payments
will begin. If a Participating Qualified Director dies prior to the receipt of
the Annual Benefit for ten years, the Annual Benefit will be paid to his/her
beneficiary or estate until an aggregate of ten years of payments has been
received. A Participating Qualified Director who has elected to participate in
the Retirement Plan receives no benefits from the Account Agreement. The cost of
the Retirement Plan will be allocated among the funds within the INVESCO Family
of Funds in a manner determined to be fair and equitable by the committee
administering the Retirement Plan.
A Participating Qualified Director who has elected to participate in the
Account Agreement receives no benefits from the Retirement Plan. Pursuant to the
terms of the Account Agreement, a deferred retirement account is established for
a Qualified Participating Director (the "Account"). The dollar amount credited
to the Account is in an amount which, based upon an assumed account appreciation
rate per annum (currently 5.75%), will provide the Participating Qualified
Director with an account value of $340,000 upon reaching age 72. Once the
initial dollar amount of the Account is established, Account proceeds are
invested in shares of one or more of the funds within the INVESCO Family of
Funds. The value of the Account fluctuates with the appreciation or depreciation
in the shares of the funds within the INVESCO Family of Funds owned by the
Account and Account shares are increased by the amount of any dividends and
capital gains distributions paid with respect to the shares. Upon retirement, a
Participating Qualified Director is entitled to receive the value in the Account
either in a lump sum payment or in payments over a stipulated number of months.
The Account value continues to fluctuate as long as monthly payments are made.
If a Participating Qualified Director becomes disabled or dies prior to his or
her retirement and if, at the time of disability or death, the value of a
Participating Qualified Director's Account is less than $340,000, the Director
or the Director's beneficiary or estate will not be paid the value in the
Account but will receive $34,000 per annum for ten years. If, at the time of the
Participating Qualified Director's death or disability prior to retirement, the
value in the director's Account is $340,000 or more, the Participating Qualified
Director or his or her estate or beneficiary will receive the value in the
Account either in a lump sum or in quarterly installments. The cost of providing
the initial dollar amount to be allocated to a Participating Qualified
Director's Account and the cost of payment of any death or disability benefit
that aggregates more than the Account value will be allocated among the funds
within the INVESCO Family of Funds in a manner determined to be fair and
equitable by a committee appointed to administer the Account Agreement.
Company has no stock options, pension, or retirement plans for affiliated
directors of the INVESCO Family of Funds or for management or other personnel,
and pays no salary or compensation to any of its officers.
CURRENT DEFERRED COMPENSATION PLAN
The independent directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of the INVESCO Family of
Funds. Certain of the deferred amounts have been invested in the shares of all
funds within the INVESCO Family of Funds except funds offered by INVESCO
Variable Investment Funds, Inc., in which the directors are legally precluded
from investing. Each independent director may, therefore, be deemed to have an
indirect interest in shares of each such INVESCO fund, in addition to any
INVESCO fund shares the independent director may own either directly or
beneficially. Each of the independent directors has agreed to invest a minimum
of $100,000 of his or her own resources in shares of the funds within the
INVESCO Family of Funds. Compensation contributed to a deferred compensation
plan may constitute all or a portion of this $100,000 commitment.
38
NEW RETIREMENT PLAN FOR DIRECTORS
The Boards of Directors of the INVESCO Family of Funds intend to adopt a
new retirement plan (the "New Retirement Plan") for the directors of Company who
are not affiliated with INVESCO, which will be effective as of the date of the
Special Meeting. The New Retirement Plan also will be adopted by the Boards of
Directors/Trustees of the AIM Family of Funds. The reason for adoption of the
New Retirement Plan is to provide for consistency in the retirement plans for
the Boards of Directors of the INVESCO Family of Funds and the Boards of
Directors/Trustees of the AIM Family of Funds. The retirement plan will include
a retirement policy as well as retirement benefits for independent directors.
The retirement policy will permit each independent director to serve until
December 31 of the year in which the director turns 72. A majority of the
directors will be able to extend from time to time the retirement date of a
director.
Annual retirement benefits will be available to each independent director
of Company and/or the other funds within the INVESCO Family of Funds and funds
within the AIM Family of Funds (each, a "Covered Fund") who has at least five
years of credited service as a director (including service to a predecessor
fund) for a Covered Fund. The retirement benefits will equal 75% of the
director's annual retainer paid or accrued by any Covered Fund to such director
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 director. The annual retirement benefits will be payable in
quarterly installments for a number of years equal to the lesser of (i) ten or
(ii) the number of such director's credited years of service. A death benefit
will also be available under the New Retirement Plan that will provide a
surviving spouse with a quarterly installment of 50% of a deceased director's
retirement benefits for the same length of time that the director would have
received the benefits based on his or her service. A director must have attained
the age of 65 (55 in the event of death or disability) to receive any retirement
benefit. Payment of benefits under the New Retirement Plan will not be secured
or funded by Company.
Upon the effectiveness of the New Retirement Plan, the independent
directors will cease to accrue benefits under the Retirement Plan and the
Account Agreement. Messrs. Baker and Soll will not receive any additional
benefits under the Retirement Plan or the Account Agreement, but will be
entitled to amounts which have been previously funded under the Retirement Plan
or the Account Agreement for their benefit. An affiliate of INVESCO will
reimburse Company for any amounts funded by Company for Messrs. Baker and Soll
under the Retirement Plan and the Account Agreement.
NEW DEFERRED COMPENSATION AGREEMENTS
The Boards of Directors of the INVESCO Family of Funds intend to adopt new
deferred compensation agreements which are consistent with the deferred
compensation agreements adopted by the Boards of Directors/Trustees of the AIM
Family of Funds. Pursuant to the new deferred compensation agreements ("New
Compensation Agreements"), a director will have the option to elect to defer
receipt of up to 100% of his or her compensation payable by Company, and such
amounts are placed into a deferral account. The deferring directors will have
the option to select various INVESCO Funds in which all or part of their
deferral account will be deemed to be invested. The list of funds may change
from time to time and may include AIM Funds in addition to INVESCO Funds.
Distributions from the deferring directors' deferral accounts will be paid in
cash, generally in equal quarterly installments over a period of up to ten years
(depending on the New Compensation Agreement) beginning on the date selected
under the New Compensation Agreement.
The Board, in its sole discretion, will be able to accelerate or extend the
distribution of such deferral accounts after the deferring directors' retirement
benefits commence under the New Retirement Plan. The Board, in its sole
discretion, also will be able to accelerate or extend the distribution of such
deferral accounts after the deferring directors' termination of service as a
director of Company. If a deferring director dies prior to the distribution of
amounts in his or her deferral account, the balance of the deferral account will
be distributed to his or her designated beneficiary. The New Compensation
Agreements will
39
not be funded and, with respect to the payments of amounts held in the deferral
accounts, the deferring directors will have the status of unsecured creditors of
Company and of each other INVESCO fund or AIM fund from which they will be
deferring compensation.
OFFICERS OF COMPANY
Information regarding the current officers of Company can be found in
Exhibit I.
SECURITY OWNERSHIP OF MANAGEMENT
Information regarding the ownership of each class of your Fund's shares by
the directors, nominees and current executive officers of Company can be found
in Exhibit J.
DIRECTOR OWNERSHIP OF YOUR FUND'S SHARES
The dollar range of equity securities beneficially owned by each continuing
director and nominee as of December 31, 2002 (i) in your Fund and (ii) on an
aggregate basis, in all registered investment companies overseen by the director
within the INVESCO Funds complex can be found in Exhibit K.
PROPOSAL 4 --
APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON PROPOSAL 4?
Proposal 4 applies to the shareholders of INVESCO Fund only.
BACKGROUND
INVESCO currently serves as the investment advisor to your Fund. AMVESCAP
has recommended restructuring the advisory and administrative servicing
arrangements so that AIM is the advisor and administrator for all funds within
the INVESCO Family of Funds and the AIM Family of Funds. Your Board has approved
a new advisory agreement under which AIM will serve as the investment advisor
for your Fund, and a new sub-advisory agreement under which INVESCO
Institutional, an affiliate of INVESCO, which is currently serving as your
Fund's investment advisor, will serve as sub-advisor. The portfolio management
team for your Fund will not change as a result of this restructuring.
You are being asked to approve Proposal 4 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to benefit from a new
investment advisory agreement between AIM and Company.
Your Board recommends that you approve the new advisory agreement between
AIM and Company for your Fund. Your Board is asking you to vote on this new
agreement because Company may enter into a new advisory agreement for your Fund
only with shareholder approval. If approved, this new agreement would replace
the current advisory agreement between INVESCO and Company for your Fund. The
form of Company's proposed Master Investment Advisory Agreement with AIM is at
Appendix IV.
Under the new arrangements, the advisory fees paid by your Fund will not
change. If shareholders of your Fund approve Proposal 4, Company will also enter
into a new Master Administrative Services Agreement with AIM that will replace
the current Administrative Services Agreement between Company and INVESCO, and
move the provision of certain administrative services currently provided by
INVESCO pursuant to the current advisory agreement between Company and INVESCO
to the Master Administrative Services Agreement with AIM. If the proposed
advisory agreement is approved and these new arrangements are implemented, the
aggregate fees paid by your Fund for advisory and administrative services will
not increase.
Any voluntary or contractual expense limitations and fee waivers that have
been agreed to by INVESCO and Company with respect to your Fund will not be
terminated if the proposed new advisory
40
agreement with AIM is approved. Instead, AIM will assume INVESCO's obligations
with respect to these voluntary and contractual expense limitations and fee
waivers, on the same terms and conditions.
If INVESCO and Company have entered into voluntary or contractual expense
limitations or fee waivers with respect to your Fund, INVESCO currently is
entitled to reimbursement from a share class of your Fund that has fees and
expenses absorbed pursuant to this arrangement if such reimbursement does not
cause such share class to exceed the expense limitation and the reimbursement is
made within three years after INVESCO incurred the expense. If the proposed new
advisory agreement with AIM is approved, INVESCO will assign to AIM its right to
be reimbursed with respect to fees and expenses absorbed by it. Other than
substituting AIM for INVESCO as the party having the right to be reimbursed,
this assignment will not alter in any way the rights or obligations of your Fund
or its shareholders.
A description of how the proposed advisory agreement differs from the
current advisory agreement is set forth below under "Terms of the Proposed
Advisory Agreement." At an in-person meeting of the Board of Directors held on
August 12-13, 2003, the Board of Directors, including a majority of the
independent directors, voted to recommend that shareholders approve a proposal
to adopt the proposed advisory agreement for your Fund.
YOUR FUND'S CURRENT INVESTMENT ADVISOR
INVESCO, the current investment advisor for your Fund, became the
investment advisor for your Fund under the current advisory agreement on
February 14, 2000. Your Fund's initial shareholder initially approved the
agreement and your Fund's public shareholders have not subsequently voted on the
agreement. The Board of Directors, including a majority of the independent
directors, last approved the current advisory agreement on May 15, 2003.
THE PROPOSED NEW INVESTMENT ADVISOR FOR YOUR FUND
AIM is a wholly owned subsidiary of A I M Management Group Inc. ("AIM
Management"), a holding company with its principal offices at 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173. AIM Management is an indirect wholly owned
subsidiary of AMVESCAP, 30 Finsbury Square, London EC2A 1AG, United Kingdom.
AMVESCAP and its subsidiaries are an independent investment management group. A
list of the names, addresses and principal occupations of the principal
executive officer and directors of AIM can be found in Exhibit L.
POSITIONS WITH AIM HELD BY COMPANY'S DIRECTORS OR EXECUTIVE OFFICERS
Mark H. Williamson, who is a director and/or executive officer of Company,
is a director and/or officer of AIM. He also beneficially owns shares of
AMVESCAP and/or options to purchase shares of AMVESCAP.
TERMS OF THE CURRENT ADVISORY AGREEMENT
Under the terms of the current advisory agreement with INVESCO for your
Fund, INVESCO acts as investment manager and administrator for your Fund. As
investment manager, INVESCO provides a continuous investment program for your
Fund, including investment research and management, with respect to all
securities, investments and cash equivalents of your Fund. INVESCO also makes
recommendations as to the manner in which voting rights, rights to consent to
actions of your Fund and any other rights pertaining to your Fund's securities
shall be exercised. INVESCO provides sub-accounting, recordkeeping and
administrative services to your Fund under an administrative services agreement.
Under the advisory agreement, as administrator, INVESCO also provides, at its
expense and at the request of your Fund, executive, statistical, administrative,
internal accounting and clerical services and office space, equipment and
facilities.
41
The current advisory agreement for your Fund continues in effect from year
to year only if such continuance is specifically approved at least annually by
(i) the Board of Directors or the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of your Fund and each other series
portfolio of Company, and (ii) the vote of a majority of the directors of
Company who are not interested persons of INVESCO or Company by votes cast in
person at a meeting called for such purpose. The current advisory agreement
provides that the Board of Directors, a majority of the outstanding voting
securities of your Fund and each other series portfolio of Company or INVESCO
may terminate the agreement with respect to your Fund on 60 days' written notice
without penalty. The agreement terminates automatically in the event of its
assignment, unless an order is issued by the SEC conditionally or
unconditionally exempting such assignment from the applicable provisions of the
1940 Act.
The current advisory agreement for your Fund provides that your Fund will
pay or cause to be paid all of its expenses not assumed by INVESCO, including
without limitation:
- brokerage commissions, issue and transfer taxes and other costs related
to securities transactions;
- fees, charges and expenses related to accounting, custodian, depository,
dividend disbursing agent, dividend reinvestment agent, transfer agent,
registrar, independent pricing services and legal services performed for
your Fund;
- interest on indebtedness incurred by Company or your Fund;
- taxes;
- fees for maintaining the registration and qualification of your Fund or
its shares under federal and state law;
- compensation and expenses of the independent directors;
- costs of printing and distributing reports, notices of shareholders'
meetings, proxy statements, dividend notices, prospectuses, statements of
additional information and other communications to your Fund's
shareholders, including expenses relating to Board and shareholder
meetings;
- costs, fees and other expenses arising in connection with the
organization and filing of Company's Articles of Incorporation,
determinations of tax status of your Fund, initial registration and
qualification of your Fund's securities under federal and state
securities laws and approval of Company's operations by any other federal
or state authority;
- expenses of repurchasing and redeeming shares of your Fund;
- insurance premiums;
- costs of designing, printing and issuing certificates representing shares
of your Fund;
- extraordinary expenses, including fees and disbursements of Company's
counsel, in connection with litigation by or against Company or your
Fund;
- premiums for the fidelity bond maintained by your Fund pursuant to the
1940 Act (except those premiums that may be allocated to INVESCO as an
insured);
- association and institute dues;
- expenses, if any, of distributing shares of your Fund pursuant to a 12b-1
plan of distribution;
- fees under the administrative services agreement; and
- all other costs and expenses of your Fund's operations and organization
unless otherwise explicitly provided.
The current advisory agreement requires INVESCO to reimburse your Fund
monthly for any salaries paid by your Fund to officers, directors and full-time
employees of your Fund who are also officers, general partners or employees of
INVESCO or its affiliates. Although INVESCO has this obligation under the
42
current advisory agreement, your Fund does not pay salaries to its officers,
non-independent directors or employees for services rendered to your Fund.
If, in any given year, the sum of your Fund's expenses exceed the most
restrictive state-imposed annual expense limitation, INVESCO is required to
promptly reimburse such excess expenses to your Fund pursuant to the current
advisory agreement. Interest, taxes, extraordinary expenses and expenses which
are capitalized are not deemed expenses for purposes of this reimbursement
obligation.
The annual rates at which INVESCO receives fees from your Fund under the
current advisory agreement, the total net assets of your Fund, the dollar
amounts of advisory fees paid to INVESCO by your Fund net of any expense
limitations and the reimbursement, if any, made by INVESCO to your Fund for the
most recent fiscal year are in Exhibit M.
ADDITIONAL SERVICES PROVIDED BY INVESCO AND ITS AFFILIATES
INVESCO and its affiliates also provide additional services to Company and
your Fund. INVESCO currently provides or arranges for others to provide
accounting and administrative services to your Fund. INVESCO currently serves as
your Fund's transfer agent. Prior to July 1, 2003, INVESCO Distributors, Inc.
served as the principal underwriter for your Fund. This company is an indirect
wholly owned subsidiary of AMVESCAP, the parent company of INVESCO. Information
concerning fees paid to INVESCO and its affiliates for these services is in
Exhibit N.
ADVISORY FEES CHARGED BY AIM FOR SIMILAR FUNDS IT MANAGES
The advisory fee schedules for other funds advised by AIM with similar
investment objectives as your Fund are in Exhibit O.
TERMS OF THE PROPOSED ADVISORY AGREEMENT
Under the terms of the proposed advisory agreement, AIM would act as
investment manager and administrator for your Fund. As investment manager, AIM
would provide a continuous investment program for your Fund, including
supervision of all aspects of your Funds' operations, including the investment
and reinvestment of cash, securities or other properties comprising your Funds'
assets and investment research and management, subject at all times to the
policies and control of the Board of Directors. AIM would also provide
administrative services pursuant to a Master Administrative Services Agreement.
The proposed advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties under the agreement on the part of AIM or any of its officers,
directors, or employees, AIM would not be subject to liability to Company or
your Fund or to any shareholders of your Fund for any act or omission in the
course of, or connected with, rendering services under the agreement or for any
losses that may be sustained in the purchase, holding or sale of any security.
The proposed advisory agreement for your Fund would continue in effect from
year to year only if such continuance is specifically approved at least annually
by (i) the Board of Directors or the vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of your Fund, and (ii) the
affirmative vote of a majority of the directors of Company who are not
interested persons of AIM or Company by votes cast in person at a meeting called
for such purpose. The proposed advisory agreement provides that the Board of
Directors, a majority of the outstanding voting securities of your Fund or AIM
may terminate the agreement with respect to your Fund on 60 days' written notice
without penalty. The proposed agreement terminates automatically in the event of
its "assignment" (as defined in the 1940 Act).
The proposed advisory agreement for your Fund provides that your Fund will
pay or cause to be paid all of the ordinary business expenses incurred in the
operations of your Fund and the offering of its shares. These expenses borne by
your Fund would include, without limitation, brokerage commissions, taxes,
legal,
43
accounting, auditing, or governmental fees, the cost of preparing share
certificates, custodian, transfer and shareholder service agent costs, expenses
of issue, sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to trustees and shareholder
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by Company on behalf of your
Fund in connection with membership in investment company organizations and the
cost of printing copies of prospectuses and statements of additional information
distributed to your Fund's shareholders.
The compensation to be paid to AIM under the proposed advisory agreement
would be calculated by applying annual rates to the average daily net assets of
your Fund for each calendar year. The annual rates at which AIM will receive
advisory fees from your Fund under the proposed advisory agreement are in
Exhibit P.
If Proposal 4 is approved, Company will be able to take advantage of an
exemptive order obtained from the SEC by AIM and certain of the AIM Funds. This
exemptive order will allow your Fund and each other series portfolio of Company
(each, an "Investing Fund") to invest their uninvested cash 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. AIM
will receive advisory fees from the Affiliated Money Market Funds to the extent
an Investing Fund invests uninvested cash in such Affiliated Money Market Fund.
If the Board approves AIM's use of the exemptive order for Company, AIM intends
to waive a portion of the advisory fees payable by each Investing Fund in an
amount equal to 25% of the advisory fee AIM receives from the Affiliated Money
Market Funds as a result of such Investing Fund's investment of uninvested cash
in such Affiliated Money Market Fund.
The primary differences between the current advisory agreement with INVESCO
and the proposed advisory agreement with AIM that the Board of Directors
approved are to:
- replace INVESCO with AIM as the investment advisor for your Fund;
- move certain administrative services to an administrative services
agreement with AIM;
- add provisions relating to certain functions to be performed by AIM in
connection with your Fund's securities lending program;
- change certain obligations regarding payment of expenses of your Fund;
- revise non-exclusivity provisions that are set forth in the current
advisory agreement;
- amend delegation provisions that are set forth in the current advisory
agreement;
- add to the limitation of liability provisions that are set forth in the
current advisory agreement to, among other things, specifically state the
limitation of liability of Company's shareholders; and
- change the governing state law set forth in the current advisory
agreement.
Although certain terms and provisions in the current advisory agreement
with INVESCO and the proposed advisory agreement with AIM are described slightly
differently, there are few substantive differences between these agreements. The
substantive differences are discussed below.
ADMINISTRATIVE SERVICES
For your Fund, the Board of Directors, in approving the proposed advisory
agreement with AIM, has approved removing the provision of certain
administrative services that are covered under the current advisory agreement
with INVESCO, and consolidating those administrative services with your Fund's
accounting and recordkeeping services in a new Master Administrative Services
Agreement with AIM. The primary reason for this change is to make your Fund's
agreements consistent with similar agreements for the AIM Funds. If shareholders
approve the proposed advisory agreement, your Fund will continue to receive
substantially the same accounting and administrative services it currently
receives and at the same
44
or lower costs pursuant to the new Master Administrative Services Agreement. As
a result, there would be no loss of services nor would there be any increase in
costs borne by your Fund as a result of the transfer of administrative duties
from the advisory agreement to the Master Administrative Services Agreement.
SECURITIES LENDING
If your Fund engages in securities lending, AIM will provide it with
investment advisory services and related administrative services. The proposed
advisory agreement includes a new provision that specifies the administrative
services to be rendered by AIM if your Fund engages in securities lending
activities, as well as the compensation AIM may receive for such administrative
services. Administrative 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 loans; (c) monitoring the agent to ensure that
securities loans are effected in accordance with AIM's instructions and with
procedures adopted by the Board of Directors; (d) preparing appropriate periodic
reports for, and seeking appropriate approvals from, the Board of Directors with
respect to securities lending activities; (e) responding to agent inquiries; and
(f) performing such other duties as may be necessary.
In accordance with an exemptive order issued by the SEC, before your Fund
may participate in a securities lending program, the Board of Directors must
approve such participation. In addition, the Board of Directors must evaluate
the securities lending arrangements annually, and must determine that it is in
the best interests of the shareholders of your Fund to invest in AIM-advised
money market funds any cash collateral your Fund receives as security for the
borrower's obligation to return the loaned securities. If your Fund invests the
cash collateral in AIM-advised money market funds, AIM will receive additional
advisory fees from these money market funds, because the invested cash
collateral will increase the assets of these funds and AIM receives advisory
fees based upon the assets of these funds.
AIM does not receive any additional compensation for advisory services
rendered in connection with securities lending activities. As compensation for
the related administrative services AIM will provide, your Fund will pay AIM a
fee equal to 25% of the net monthly interest or fee income retained or paid to
your Fund from such activities. AIM intends to waive this fee, and has agreed to
seek Board approval prior to its receipt of all or a portion of such fee.
PAYMENT OF EXPENSES AND RESTRICTIONS ON FEES RECEIVED
Under the current advisory agreement with INVESCO, INVESCO has the
obligation to reimburse your Fund for any salaries paid by your Fund to
officers, non-independent directors and employees of your Fund. Your Fund does
not currently pay any such salaries. Such provision is not included in the
proposed advisory agreement with AIM.
The current advisory agreement provides that if annual fees exceed the most
restrictive state-imposed annual expense limitation, INVESCO is required to
reimburse any such excess to your Fund. Such state-imposed limitations are no
longer applicable because the National Securities Market Improvements Act of
1996 (NSMIA) preempted state laws under which mutual funds such as your Fund
previously were regulated. Accordingly, under the proposed advisory agreement,
such annual expense limitation has been removed. Removing this state-imposed
annual expense limitation will not result in an increase in fees paid by your
Fund.
NON-EXCLUSIVITY PROVISIONS
The current advisory agreement with INVESCO provides that the services
furnished by INVESCO are not deemed to be exclusive and that INVESCO shall be
entitled to furnish similar services to others, including other investment
companies with similar objectives, and that INVESCO may aggregate orders for its
other customers together with any securities of the same type to be sold or
purchased for your Fund in order to obtain best execution and lower brokerage
commissions. In such event, INVESCO must
45
allocate the securities purchased or sold and the expenses incurred in the
transaction in a manner it considers most equitable.
AIM has proposed and the Board of Directors has agreed that the
non-exclusivity provisions in the proposed advisory agreement with AIM should be
divided into two separate provisions: one dealing with services provided by AIM
to other investment accounts and the other dealing with employees of AIM. Under
the new provisions, AIM will act as investment manager or advisor to fiduciary
and other managed accounts and to other investment companies and accounts,
including off-shore entities or accounts. The proposed advisory agreement states
that whenever your Fund and one or more other investment companies or accounts
advised by AIM have moneys available for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to your Fund and such other companies and accounts. Such allocation
procedure may adversely affect the size of the positions obtainable and the
prices realized by your Fund. The non-exclusivity provisions of the proposed
advisory agreement also explicitly recognize that officers and directors of AIM
may serve as officers or directors of Company, and that officers and directors
of Company may serve as officers or directors of AIM to the extent permitted by
law; and that officers and directors of AIM do not owe an exclusive duty to
Company. As described above, unlike the current advisory agreement, the proposed
advisory agreement does not require AIM to reimburse Company for any salaries
paid by Company to officers, directors and full-time employees of Company who
are also officers, directors or employees of AIM or its affiliates. Your Fund
does not currently pay any such salaries.
DELEGATION
The current advisory agreement provides that INVESCO may, in compliance
with applicable law and with the prior written approval of your Fund, make use
of affiliated companies and their employees in connection with rendering of the
services required of INVESCO. INVESCO must supervise all such services and
remain fully responsible for the services provided.
The proposed advisory agreement expands the extent to which AIM can
delegate its rights, duties and obligations by expressly providing that AIM may
delegate any or all of its rights, duties or obligations under the agreement to
one or more sub-advisors rather than solely to certain specified advisory
services. The proposed advisory agreement also provides that AIM may replace
sub-advisors from time to time, in accordance with applicable federal securities
laws, rules and regulations in effect or interpreted from time to time by the
SEC or with exemptive orders or other similar relief. Any such delegation shall
require approval by the applicable Board and the shareholders unless, in
accordance with applicable federal securities laws, rules, interpretations and
exemptions, AIM is not required to seek shareholder approval of the appointment
of a sub-advisor. AIM currently intends to appoint INVESCO Institutional as the
sub-advisor to your Fund if the shareholders approve the proposed sub-advisory
agreement described under Proposal 5.
LIMITATION OF LIABILITY OF AIM, COMPANY AND SHAREHOLDERS
The current advisory agreement does not explicitly state the limitation of
liability for INVESCO for acts or omissions in the course of, or connected with,
rendering advisory services under the current advisory agreement. The limitation
of liability provisions of the 1940 Act apply to both INVESCO and AIM in their
capacity as advisor. In addition, the proposed advisory agreement states that no
series of Company shall be liable for the obligations of other series of Company
and the liability of AIM to one series of Company shall not automatically render
AIM liable to any other series of Company. Consistent with applicable law, the
proposed advisory agreement would also include a provision stating that AIM's
obligations under the agreement are not binding on any shareholders of Company
individually and that shareholders are entitled to the same limitation on
personal liability as shareholders of private corporations for profit. The
primary reason for this change is to make your Fund's agreement consistent with
similar agreements for the AIM Funds.
46
STATE LAW GOVERNING THE AGREEMENT
Questions of state law under the current advisory agreement with INVESCO
are governed by the laws of Colorado. Under the proposed advisory agreement with
AIM, Texas law would apply. The Board of Directors determined that, because the
services under the proposed advisory agreement with AIM will primarily be
provided in Texas, it was more appropriate to apply Texas law to the proposed
advisory agreement.
FACTORS THE DIRECTORS CONSIDERED IN APPROVING THE ADVISORY AGREEMENT
At the request of AIM, the Board of Directors discussed the approval of the
proposed advisory agreement at an in-person meeting held on August 12-13, 2003.
The independent directors also discussed the approval of the proposed advisory
agreement with independent counsel prior to that meeting. In evaluating the
proposed advisory agreement, the Board of Directors requested and received
information from AIM to assist in its deliberations.
The Board of Directors considered the following factors in determining
reasonableness and fairness of the proposed changes between the current advisory
agreement with INVESCO and the proposed advisory agreement with AIM:
- The qualifications of AIM to provide investment advisory services. The
Board of Directors reviewed the credentials and experience of the
officers and employees of AIM who will provide investment advisory
services to your Fund and the proposal, if approved by shareholders, to
appoint INVESCO Institutional as sub-advisor to your Fund, and noted that
the persons providing portfolio management services to your Fund would
not change if Proposals 4 and 5 are approved by shareholders.
- The range of advisory services provided by AIM. The Board of Directors
reviewed the services to be provided by AIM under the proposed advisory
agreement, and noted that no material changes in the level or type of
services provided under the current advisory agreement with INVESCO would
occur if the proposed advisory agreement is approved by the shareholders,
other than the provision by AIM of certain administrative services if
your Fund engages in securities lending.
- Qualifications of AIM to provide a range of management and administrative
services. The Board of Directors reviewed the general nature of the
non-investment advisory services 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 Board of Directors also
considered the organizational structure employed by AIM and its
affiliates to provide those services. The Board of Directors reviewed the
proposed elimination from the proposed advisory agreement of the
provision of administrative services to your Fund. The Board of Directors
also reviewed the proposed form of Master Administrative Services
Agreement, noted that the overall services to be provided under the
existing arrangements and under the proposed Master Administrative
Services Agreement are the same, and concluded that the overall
accounting and administrative services to be provided by AIM would not
change under the combination of the proposed advisory agreement and the
Master Administrative Services Agreement.
- The performance record of your Fund. The Board of Directors reviewed
your Fund's performance record and determined that AIM has developed the
expertise and resources for managing funds with an investment objective
and strategies similar to those of your Fund and is able, therefore, to
provide advisory and administrative services to your Fund.
- Advisory fees and expenses. The Board of Directors examined the expense
ratio and the level of advisory fees for your Fund under the current
advisory agreement and compared them with the advisory fees expected to
be incurred under the proposed advisory agreement. The Board of Directors
concluded that your Fund's projected expense ratio and advisory fees
under the proposed advisory agreement were fair and reasonable in
comparison with those of other similar funds
47
(including similar funds advised by AIM) and in light of the investment
management services to be provided by AIM under the proposed advisory
agreement. The advisory fees that are being proposed under the proposed
advisory agreement are the same as the advisory fees paid to INVESCO
under the current advisory agreement, other than the removal of the
reimbursement obligation related to services provided to both your Fund
and AIM by officers and directors which is not currently applicable, and
the provisions that permit AIM's receipt of fees for providing
administrative services in connection with securities lending activities.
Such fees would be paid only to the extent that your Fund engages in
securities lending. The Board of Directors noted that AIM intends to
waive its right to receive any fees under the proposed investment
advisory agreement for the administrative services it provides in
connection with securities lending activities. The Board of Directors
also noted that AIM has agreed to seek the Board's approval prior to its
receipt of all or a portion of such fees.
- The profitability of AIM. The Board of Directors reviewed information
concerning the profitability of AIM's (and its affiliates') investment
advisory and other activities and its financial condition. The Board of
Directors noted that, except as described above, no changes to the
advisory fees were being proposed, other than to permit AIM's receipt of
fees for providing services in connection with securities lending, and
further noted that AIM intends to waive its right to receive any such
fees and has agreed to seek the Board's approval prior to its receipt of
all or a portion of such fees. The Board of Directors also noted that, in
accordance with an exemptive order issued by the SEC, before your Fund
may participate in a securities lending program, the Board of Directors
must approve such participation. In addition, the Board of Directors must
evaluate the securities lending arrangements annually and determine that
it is in the best interests of the shareholders of your Fund to invest in
AIM-advised money market funds any cash collateral your Fund receives as
security for the borrower's obligation to return the loaned securities.
If your Fund invests the cash collateral in AIM-advised money market
funds, AIM will receive additional advisory fees from these money market
funds, because the invested cash collateral will increase the assets of
these funds and AIM receives advisory fees based upon the assets of these
funds. The Board of Directors noted that the cash collateral relates to
assets of your Fund that have already been invested, and the investment
of the cash collateral is intended to benefit your Fund by providing it
with additional income. The Board of Directors also noted that an
investment of the cash collateral in an AIM-advised money market fund
would have a positive effect on the profitability of AIM.
- The terms of the proposed advisory agreement. The Board of Directors
reviewed the terms of the proposed advisory agreement, including changes
being made to clarify or expand non-exclusivity, delegation and liability
provisions, to separate administrative services from advisory services
and to have AIM assist your Fund if it engages in securities lending. The
Board of Directors determined that these changes reflect the current
environment in which your Fund operates, and that AIM should have the
flexibility to operate in that environment.
After considering the above factors, the Board of Directors concluded that
it is in the best interests of your Fund and its shareholders to approve the
proposed advisory agreement between Company and AIM for your Fund.
The Board of Directors reached this conclusion after careful discussion and
analysis. The Board of Directors believes that it has carefully and thoroughly
examined the pertinent issues and alternatives. In recommending that you approve
the proposed advisory agreement, the independent directors have taken the action
which they believe to be in your best interests. In so doing, they were advised
by independent counsel, retained by the independent directors and paid for by
Company, as to the nature of the matters to be considered and the standards to
be used in reaching their decision.
If approved, the proposed advisory agreement will become effective on
November 5, 2003, and will expire, unless renewed, on or before June 30, 2005.
If shareholders of your Fund do not approve both Proposals 4 and 5, the current
advisory agreement with INVESCO will continue in effect for your Fund.
48
THE BOARD'S RECOMMENDATION ON PROPOSAL 4
Your Board, including the independent directors, unanimously recommends
that you vote "FOR" this Proposal.
PROPOSAL 5 --
APPROVAL OF NEW SUB-ADVISORY AGREEMENT
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON PROPOSAL 5?
Proposal 5 applies to the shareholders of INVESCO Fund only.
BACKGROUND
INVESCO currently serves as the investment advisor to your Fund. AMVESCAP
has recommended restructuring the advisory and administrative servicing
arrangements so that AIM is the advisor and administrator for all funds within
the INVESCO Family of Funds and AIM Funds. Your Board has approved a proposed
advisory agreement under which AIM will serve as the investment advisor for your
Fund, and a proposed sub-advisory agreement under which INVESCO Institutional,
an affiliate of INVESCO, will serve as sub-advisor. The portfolio management
team for your Fund will not change as a result of this restructuring.
You are being asked to approve Proposal 5 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to benefit from the
proposed sub-advisory agreement between AIM and INVESCO Institutional.
The Board of Directors recommends that you approve the proposed
sub-advisory agreement between AIM and INVESCO Institutional for your Fund. The
Board of Directors is asking you to vote on this proposed sub-advisory agreement
because the proposed sub-advisory agreement for your Fund may only be entered
into with shareholder approval. The form of the proposed Master Intergroup
Sub-Advisory Contract for Mutual Funds between AIM and INVESCO Institutional for
your Fund is at Appendix V.
At an in-person meeting of the Board of Directors held on August 12-13,
2003, the Board of Directors, including a majority of the independent directors,
voted to recommend that shareholders approve a proposal to adopt the proposed
sub-advisory agreement for your Fund.
THE PROPOSED SUB-ADVISOR FOR YOUR FUND
INVESCO Institutional is an indirect wholly owned subsidiary of AMVESCAP. A
list of the names, addresses and principal occupations of the principal
executive officer and directors of INVESCO Institutional is in Exhibit Q.
POSITIONS WITH INVESCO INSTITUTIONAL HELD BY COMPANY'S DIRECTORS OR EXECUTIVE
OFFICERS
None of the directors or executive officers of Company also are directors
and/or officers of INVESCO Institutional.
TERMS OF THE PROPOSED SUB-ADVISORY AGREEMENT
Under the proposed sub-advisory agreement between AIM and INVESCO
Institutional, INVESCO Institutional will provide general investment advice and
portfolio management to your Fund and, subject to the supervision of the
directors of Company and AIM and in conformance with the stated policies of your
Fund, INVESCO Institutional will manage the investment operations of your Fund.
INVESCO Institutional will not only make investment decisions for your Fund, but
will also place the purchase and sale orders for the portfolio transactions of
your Fund. INVESCO Institutional may purchase and sell portfolio securities from
and to brokers and dealers who sell shares of your Fund or provide your Fund,
AIM's other clients or INVESCO Institutional's other clients with research,
analysis, advice and similar
49
services. INVESCO Institutional may pay to brokers and dealers, in return for
such research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to INVESCO Institutional determining in good
faith that such commission or spread is reasonable in terms either of the
particular transaction or of the overall responsibility of AIM and INVESCO
Institutional to your Fund and their other clients and that that the total
commissions or spreads paid by each fund will be reasonable in relation to the
benefits to the fund over the long term.
Specifically, INVESCO Institutional will be required to perform the
following services under the proposed sub-advisory agreement:
- To provide a continuous investment program for your Fund, including
investment research and management, with respect to all of your Fund's
assets in conformity with (i) Company's Articles of Incorporation, bylaws
and registration statement, and (ii) the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations;
- To determine what securities and other investments are to be purchased or
sold for your Fund and the brokers and dealers through whom trades will
be executed;
- Whenever INVESCO Institutional simultaneously places orders to purchase
or sell the same security on behalf of your Fund and one or more accounts
advised by INVESCO Institutional, to allocate as to price and amount
among all such accounts in a manner believed to be equitable to each
account; and
- To maintain all books and records with respect to the securities
transactions of your Fund in compliance with the requirements of the 1940
Act and to furnish the Board of Directors and AIM with periodic and
special reports as the Board of Directors or AIM reasonably may request.
The proposed sub-advisory agreement will continue from year to year for
your Fund only if such continuance is specifically approved at least annually by
(i) the Board of Directors or the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of your Fund, and (ii) the vote of a
majority of independent directors cast at a meeting called for such purpose. The
proposed sub-advisory agreement is terminable on 60 days' written notice by
either party thereto, by the Board of Directors, or by a vote of a majority of
the outstanding voting securities of your Fund, and will terminate automatically
if assigned.
For the services to be rendered and the expenses to be assumed by INVESCO
Institutional under the proposed sub-advisory agreement, AIM will pay to INVESCO
Institutional a fee that is computed daily and paid on or before the last day of
the next succeeding calendar month on the basis of AIM's compensation on the
sub-advised assets per year. The annual rate at which INVESCO Institutional will
receive fees from AIM under the proposed sub-advisory agreement is in Exhibit R.
ADVISORY FEES CHARGED BY INVESCO INSTITUTIONAL FOR SIMILAR TYPES OF ACCOUNTS FOR
WHICH IT SERVES AS ADVISOR
The annual advisory fee rates paid to INVESCO Institutional by certain
types of accounts with similar investment objectives as your Fund are in Exhibit
S.
FACTORS THE DIRECTORS CONSIDERED IN APPROVING THE PROPOSED SUB-ADVISORY
AGREEMENT
At the request of AIM and INVESCO Institutional, the Board of Directors
discussed the approval of the proposed sub-advisory agreement at an in-person
meeting held on August 12-13, 2003. The independent directors also discussed the
approval of the proposed sub-advisory agreement with independent counsel prior
to that meeting. In evaluating the proposed sub-advisory agreement, the Board of
Directors requested and received information from AIM to assist in its
deliberations.
50
The Board of Directors considered the following factors in determining the
reasonableness and fairness of the proposed sub-advisory agreement between AIM
and INVESCO Institutional for your Fund:
- The range of sub-advisory services provided by INVESCO
Institutional. The Board of Directors reviewed the services to be
provided by INVESCO Institutional under the proposed sub-advisory
agreement, and noted that, if the proposed sub-advisory agreement is
approved by shareholders, the level and type of investment advisory
services under the proposed sub-advisory agreement will be comparable to
those currently provided by INVESCO under Company's current advisory
agreement with INVESCO.
- The fees payable to INVESCO Institutional for its services. The Board of
Directors noted that if the proposed sub-advisory agreement is approved,
INVESCO Institutional will receive compensation based on that portion of
the assets of your Fund that it manages (the sub-advised assets). In
addition, the fees paid would be a percentage of the advisory fees that
AIM receives on the sub-advised assets. The Board of Directors noted that
these fees had been agreed to by AIM and INVESCO Institutional, as well
as by AMVESCAP, the indirect parent of AIM and INVESCO Institutional. The
Board of Directors also noted that the proposed changes to the
compensation to INVESCO Institutional would have no effect on your Fund,
since the fees are payable by AIM.
- The performance record of your Fund. The Board of Directors reviewed the
performance record of your Fund and noted that the same portfolio
management team will be providing investment advisory services to your
Fund under the proposed sub-advisory agreement. The Board of Directors
determined that such portfolio management team had provided satisfactory
services with respect to your Fund, after considering performance
information that it received during the past year from INVESCO.
- The profitability of INVESCO Institutional. The Board of Directors
considered information concerning the profitability of INVESCO
Institutional's (and its affiliates') investment advisory and other
activities and its financial condition. The Board of Directors noted that
INVESCO Institutional would receive an annual fee equal to a percentage
of AIM's compensation on the sub-advised assets. The Board of Directors
noted that the proposed sub-advisory fees are less than the advisory fees
currently received by INVESCO under the current advisory agreement, but
that INVESCO Institutional assured the Board of Directors that such
reduction would not affect the nature or quality of the services provided
by it to your Fund.
- The terms of the proposed agreement. The Board of Directors reviewed the
terms of the proposed agreement. The Board of Directors determined that
this new agreement reflects the current environment in which your Fund
operates, and that INVESCO Institutional should have the flexibility to
operate in that environment.
After considering the above factors, the Board of Directors concluded that
it is in the best interests of your Fund and its shareholders to approve the
proposed sub-advisory agreement between AIM and INVESCO Institutional for your
Fund.
The Board of Directors reached this conclusion after careful discussion and
analysis. The Board of Directors believes that it has carefully and thoroughly
examined the pertinent issues and alternatives. In recommending that you approve
the proposed sub-advisory agreement, the independent directors have taken the
action which they believe to be in your best interests. In so doing, they were
advised by independent counsel, retained by the independent directors and paid
for by Company, as to the nature of the matters to be considered and the
standards to be used in reaching their decision.
If approved, the proposed sub-advisory agreement will become effective on
November 5, 2003, and will expire, unless renewed, on or before June 30, 2005.
If shareholders of your Fund do not approve both Proposals 4 and 5, the current
advisory agreement with INVESCO will continue in effect for your Fund and AIM
and INVESCO Institutional will not enter into the proposed sub-advisory
agreement for your Fund.
51
THE BOARD'S RECOMMENDATION ON PROPOSAL 5
Your Board, including the independent directors, unanimously recommends
that you vote "FOR" this Proposal.
PROPOSAL 6 --
APPROVAL OF THE PLAN TO REDOMESTICATE COMPANY
AS A DELAWARE STATUTORY TRUST
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON PROPOSAL 6?
Proposal 6 applies to the shareholders of INVESCO Fund only.
BACKGROUND
Company currently is organized as a Maryland corporation. AMVESCAP has
identified each series portfolio of Company as appropriate to be redomesticated
as a new series portfolio of a newly created open-end management investment
company organized as a statutory trust under the Delaware Statutory Trust Act
(the "New Trust").
If Proposal 1 is approved with respect to INVESCO Fund and Proposal 6 is
approved, your Fund will first be redomesticated as a new series portfolio of
the New Trust and, after such redomestication has occurred, your Fund will be
combined with Buying Fund.
The Board of Directors has approved the Plan, which provides for a series
of transactions to convert your Fund and each other series portfolio of Company
(each, a "Current Fund") to a corresponding series (a "New Fund") of the New
Trust. Under the Plan, each Current Fund will transfer all its assets to a
corresponding New Fund in exchange solely for voting shares of beneficial
interest in the New Fund and the New Fund's assumption of all the Current Fund's
liabilities (collectively, the "Redomestication"). A form of the Plan relating
to the proposed Redomestication is set forth in Appendix VI.
Approval of the Plan requires the affirmative vote of a majority of the
issued and outstanding shares of Company. The Board of Directors is soliciting
the proxies of the shareholders of your Fund to vote on the Plan with this Proxy
Statement/Prospectus. The Board of Directors is soliciting the proxies of the
shareholders of Company's other series portfolios to vote on the Plan with a
separate proxy statement.
The Redomestication is being proposed primarily to provide Company with
greater flexibility in conducting its business operations. The operations of
each New Fund following the Redomestication will be substantially similar to
those of its predecessor Current Fund. As described below, the New Trust's
Declaration of Trust differs from Company's Articles of Incorporation in certain
respects that are expected to improve Company's and each Current Fund's
operations. The New Trust, like Company, will operate as an open-end management
investment company registered with the SEC under the 1940 Act.
REASONS FOR THE PROPOSED REDOMESTICATION
The Redomestication is being proposed because, as noted above, INVESCO and
the Board of Directors believe that the Delaware statutory trust organizational
form offers a number of advantages over the Maryland corporate organizational
form. As a result of these advantages, the Delaware statutory trust
organizational form has been increasingly used by mutual funds, including the
majority of the funds within the AIM Family of Funds.
The Delaware statutory trust organizational form offers greater flexibility
than the Maryland corporate form. A Maryland corporation is governed by the
detailed requirements imposed by Maryland corporate law and by the terms of its
Articles of Incorporation. A Delaware statutory trust is subject to fewer
statutory requirements. The New Trust will be governed primarily by the terms of
its Declaration of Trust. In particular, the New Trust will have greater
flexibility to conduct business without the necessity of engaging in expensive
proxy solicitations to shareholders. For example, under Maryland corporate law,
52
amendments to Company's Articles of Incorporation would typically require
shareholder approval. Under Delaware law, unless the Declaration of Trust of a
Delaware statutory trust provides otherwise, amendments to it may be made
without first obtaining shareholder approval. In addition, unlike Maryland
corporate law, which restricts the delegation of a board of directors'
functions, Delaware law permits the board of trustees of a Delaware statutory
trust to delegate certain of its responsibilities. For example, the board of
trustees of a Delaware statutory trust may delegate the responsibility of
declaring dividends to duly empowered committees of the board or to appropriate
officers. Finally, Delaware law permits the trustees to adapt a Delaware
statutory trust to future contingencies. For example, the trustees may, without
a shareholder vote, change a Delaware statutory trust's domicile or
organizational form. In contrast, under Maryland corporate law, a company's
board of directors would be required to obtain shareholder approval prior to
changing domicile or organizational form.
The Redomestication will also have certain other effects on Company, its
shareholders and management, which are described below under the heading "The
New Trust Compared to Company."
WHAT THE PROPOSED REDOMESTICATION WILL INVOLVE
To accomplish the Redomestication, the New Trust has been formed as a
Delaware statutory trust pursuant to its Declaration of Trust, and each New Fund
has been established as a series portfolio of the New Trust. On the closing
date, each Current Fund will transfer all of its assets to the corresponding
classes of the corresponding New Fund in exchange solely for a number of full
and fractional classes of shares of the New Fund equal to the number of full and
fractional shares of common stock of the corresponding classes of the Current
Fund then outstanding and the New Fund's assumption of the Current Fund's
liabilities. Immediately thereafter, each Current Fund will distribute those New
Fund shares to its shareholders in complete liquidation of such Current Fund.
Upon completion of the Redomestication, each shareholder of each Current Fund
will be the owner of full and fractional shares of the corresponding New Fund
equal in number and aggregate net asset value to the shares he or she held in
the Current Fund. As soon as practicable after the consummation of the
Redomestication, each Current Fund will be terminated and Company will be
dissolved as a Maryland corporation.
The obligations of Company and the New Trust under the Plan are subject to
various conditions stated therein. To provide against unforeseen events, the
Plan may be terminated or amended at any time prior to the closing of the
Redomestication by action of the Board of Directors, notwithstanding the
approval of the Plan by the shareholders of any Current Fund. However, no
amendments may be made that would materially adversely affect the interests of
shareholders of any Current Fund. Company and the New Trust may at any time
waive compliance with any condition contained in the Plan, provided that the
waiver does not materially adversely affect the interests of shareholders of any
Current Fund.
The Plan authorizes Company to acquire one share of each class of each New
Fund and, as the sole shareholder of the New Trust prior to the Redomestication,
to do each of the following:
- Approve with respect to each New Fund a new investment advisory agreement
with AIM with an effective date of November 5, 2003 that will be
substantially identical to that described in Proposal 4 and a new
investment advisory agreement with INVESCO that is substantially
identical to the corresponding Current Fund's existing investment
advisory agreement with INVESCO for the interim period between the
consummation of the Redomestication and November 5, 2003. Information on
the new advisory agreement, including a description of the differences
between it and Company's current advisory agreement, is set forth above
under Proposal 4. If Proposal 4 is not approved by shareholders of a
Current Fund, Company will approve for the corresponding New Fund an
investment advisory agreement with INVESCO that is substantially
identical to such Current Fund's existing investment advisory agreement
with INVESCO.
- Approve with respect to each New Fund a new sub-advisory agreement
between AIM and INVESCO Institutional that will be substantially
identical to that described in Proposal 5. Information on the new
sub-advisory agreement is set forth above under Proposal 5. If Proposal 5
is
53
not approved by shareholders of a Current Fund, Company will not approve
a sub-advisory agreement between AIM and INVESCO Institutional for the
corresponding New Fund.
- Assuming that Proposal 4 is approved by shareholders, approve with
respect to each New Fund a new administrative services agreement with AIM
with an effective date of November 5, 2003 that will be substantially
identical to the new administrative services agreement with AIM that will
be entered into by Company if shareholders approve Proposal 4 and a new
administrative services agreement with INVESCO that is substantially
identical to the corresponding Current Fund's existing administrative
services agreement with INVESCO for the interim period between the
consummation of the Redomestication and November 5, 2003. If Proposal 4
is not approved by shareholders of a Current Fund, Company will approve
for the corresponding New Fund an administrative services agreement with
AIM that is substantially identical to such Current Fund's existing
administrative services agreement with INVESCO.
- Approve with respect to each New Fund a distribution agreement with AIM
Distributors. The proposed distribution agreement will provide for
substantially identical distribution services as currently provided to
each corresponding Current Fund by AIM Distributors.
- Approve a distribution plan pursuant to Rule 12b-1 under the 1940 Act
with respect to each class of each New Fund that will be substantially
identical to the corresponding Current Fund's existing distribution plan
for that class.
- Approve with respect to each New Fund a custodian agreement with State
Street Bank and Trust Company and a transfer agency and servicing
agreement with A I M Fund Services, Inc., each of which currently
provides such services to the corresponding Current Fund, and a multiple
class plan pursuant to Rule 18f-3 of the 1940 Act which will be
substantially identical to the multiple class plan that has been approved
by the Board of Directors for the corresponding Current Fund and which is
expected to become effective prior to the consummation of the
Redomestication.
- Elect the directors of Company as the trustees of the New Trust to serve
without limit in time, except as they may resign or be removed by action
of the New Trust's trustees or shareholders, and except as they retire in
accordance with the New Trust's retirement policy for trustees. The New
Trust's retirement policy for trustees will replace Company's retirement
policy for directors.
- Ratify the selection of PricewaterhouseCoopers LLP, the accountants for
each Current Fund, as the independent public accountants for each New
Fund.
- Approve such other agreements and plans as are necessary for each New
Fund's operation as a series of an open-end management investment
company.
The New Trust's transfer agent will establish for each shareholder an
account containing the appropriate number of shares of each class of each New
Fund. Such accounts will be identical in all respects to the accounts currently
maintained by Company's transfer agent for each shareholder of the Current
Funds. Shares held in the Current Fund accounts will automatically be designated
as shares of the New Funds. Certificates for Current Fund shares issued before
the Redomestication will represent shares of the corresponding New Fund after
the Redomestication. Shareholders of the New Funds will not have the right to
demand or require the New Trust to issue share certificates. Any account options
or privileges on accounts of shareholders under the Current Funds will be
replicated on the New Fund account. No sales charges will be imposed in
connection with the Redomestication.
Assuming your approval of Proposal 6, Company currently contemplates that
the Redomestication will close on October 23, 2003.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE REDOMESTICATION
Company and the New Trust will receive an opinion of Ballard Spahr Andrews
& Ingersoll, LLP to the effect that the Redomestication will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. Accordingly,
the Current Funds, the New Funds and the shareholders of the
54
New Funds will recognize no gain or loss for Federal income tax purposes as a
result of the Redomestication. Shareholders of the Current Funds should consult
their tax advisers regarding the effect, if any, of the Redomestication in light
of their individual circumstances and as to state and local consequences, if
any, of the Redomestication.
APPRAISAL RIGHTS
Appraisal rights are not available to shareholders. However, shareholders
retain the right to redeem their shares of the Current Funds or the New Funds,
as the case may be, at any time before or after the Redomestication.
THE NEW TRUST COMPARED TO COMPANY
STRUCTURE OF THE NEW TRUST
The New Trust has been established under the laws of the State of Delaware
by the filing of a certificate of trust in the office of the Secretary of State
of Delaware. The New Trust has established series corresponding to and having
identical designations as the series portfolios of Company. The New Trust has
also established classes with respect to each New Fund corresponding to and
having identical designations as the classes of each Current Fund. Each New Fund
will have the same investment objectives, policies, and restrictions as its
predecessor Current Fund. The New Trust's fiscal year is the same as that of
Company. The New Trust will not have any operations prior to the
Redomestication. Initially, Company will be the sole shareholder of the New
Trust.
As a Delaware statutory trust, the New Trust's operations are governed by
its Declaration of Trust and Amended and Restated Bylaws and applicable Delaware
law rather than by Company's Articles of Incorporation and Amended and Restated
Bylaws and applicable Maryland law. Certain differences between the two
domiciles and organizational forms are summarized below. The operations of the
New Trust will continue to be subject to the provisions of the 1940 Act and the
rules and regulations thereunder.
TRUSTEES OF THE NEW TRUST
Subject to the provisions of the Declaration of Trust, the business of the
New Trust will be managed by its trustees, who have all powers necessary or
convenient to carry out their responsibilities. The responsibilities, powers,
and fiduciary duties of the trustees of the New Trust are substantially the same
as those of the directors of Company.
The trustees of the New Trust would be those persons elected at this
Special Meeting to serve as directors of Company. Information concerning the
nominees for election as directors of Company is set forth above under Proposal
3.
SHARES OF THE NEW TRUST
The beneficial interests in the New Funds will be represented by
transferable shares, par value $0.01 per share. Shareholders do not have the
right to demand or require the New Trust to issue share certificates. The
trustees have the power under the Declaration of Trust to establish new series
and classes of shares; Company's directors currently have a similar right. The
Declaration of Trust permits the trustees to issue an unlimited number of shares
of each class and series. Company is authorized to issue only the number of
shares specified in the Articles of Incorporation and may issue additional
shares only with Board approval and after payment of a fee to the State of
Maryland on any additional shares authorized.
Your Fund currently has the classes of shares set forth in Exhibit A. The
New Trust has established for each New Fund the classes that currently exist for
its predecessor Current Fund. Except as discussed in this Proxy
Statement/Prospectus, shares of each class of each New Fund will have rights,
privileges, and terms substantially similar to those of the corresponding class
of the Current Fund.
55
For a discussion of certain differences between and among Company's
Articles of Incorporation and Amended and Restated Bylaws and Maryland law and
the New Trust's Declaration of Trust and Amended and Restated Bylaws and
Delaware law, see "Rights of Shareholders" in Proposal 1 above. The foregoing
discussion and the discussion under the caption "Rights of Shareholders" in
Proposal 1 above is only a summary of certain differences and is not a complete
description of all the differences. Shareholders should refer to the provisions
of the governing documents of Company and the New Trust and state law directly
for a more thorough comparison. Copies of the Articles of Incorporation and
Amended and Restated Bylaws of Company and of the Declaration of Trust and the
New Trust's Amended and Restated Bylaws are available to shareholders without
charge upon written request to Company.
THE BOARD'S RECOMMENDATION ON PROPOSAL 6
Your Board, including the independent directors, unanimously recommends
that you vote "FOR" this Proposal.
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
PROXY STATEMENT/PROSPECTUS
We are sending you this Proxy Statement/Prospectus and the enclosed proxy
card because the Boards of Trustees and the Board of Directors are soliciting
your proxy to vote at the Special Meetings and at any adjournments of the
Special Meetings. This Proxy Statement/Prospectus gives you information about
the business to be conducted at the Special Meetings. However, you do not need
to attend a Special Meeting to vote your shares. Instead, you may simply
complete, sign and return the enclosed proxy card or vote by telephone or
through a website established for that purpose.
AIM Trusts and Company each intend to mail this Proxy Statement/Prospectus,
the enclosed Notice of Special Meeting of Shareholders and the enclosed proxy
card on or about August 25, 2003 to all shareholders entitled to vote.
Shareholders of record as of the close of business on July 25, 2003 (the "Record
Date") are entitled to vote at a Special Meeting. The number of shares
outstanding of each class of shares of each Fund on the Record Date can be found
at Exhibit T. Each share is entitled to one vote for each full share held, and a
fractional vote for a fractional share held.
TIME AND PLACE OF SPECIAL MEETINGS
The Special Meetings will be held at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046 on October 21, 2003, at 3:00 p.m., Central Time.
VOTING IN PERSON
If you do attend a Special Meeting and wish to vote in person, we will
provide you with a ballot prior to the vote. However, if your shares are held in
the name of your broker, bank or other nominee, you must bring a letter from the
nominee indicating that you are the beneficial owner of the shares on the Record
Date and authorizing you to vote. Please call the applicable AIM Trust or
Company at (800) 952-3502 if you plan to attend a Special Meeting.
VOTING BY PROXY
Whether you plan to attend a Special Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
a Special Meeting and vote.
If you properly fill in and sign your proxy card and send it to us in time
to vote at a Special Meeting, your "proxy" (the individual named on your proxy
card) will vote your shares as you have directed. If you sign your proxy card
but do not make specific choices, your proxy will vote your shares as
recommended by the Boards of Trustees or the Board of Directors, as applicable,
as follows.
56
For shareholders of AIM Funds:
- FOR the proposal to approve the Agreement for your Fund.
- FOR the election of all 16 nominees for trustee.
For shareholders of INVESCO Fund:
- FOR the proposal to approve the Agreement for your Fund.
- FOR the election of all 16 nominees for director.
- FOR the proposal to approve a new investment advisory agreement with AIM
for your Fund.
- FOR the proposal to approve a new investment sub-advisory agreement
between AIM and INVESCO Institutional for your Fund.
- FOR the proposal to approve the Plan.
Your proxy will have the authority to vote and act on your behalf at any
adjournment of the Special Meetings.
If you authorize a proxy, you may revoke it at any time before it is
exercised by sending in another proxy card with a later date or by notifying the
Secretary of the applicable AIM Trust or of Company in writing to the address of
such Trust or Company, as applicable, set forth on the cover page of this Proxy
Statement/Prospectus before the Special Meeting that you have revoked your
proxy. In addition, although merely attending a Special Meeting will not revoke
your proxy, if you are present at a Special Meeting you may withdraw your proxy
and vote in person. Shareholders may also transact any other business not
currently contemplated that may properly come before a Special Meeting in the
discretion of the proxies or their substitutes.
VOTING BY TELEPHONE OR THE INTERNET
You may vote your shares by telephone or through a website established for
that purpose by following the instructions that appear on the proxy card
accompanying this Proxy Statement/Prospectus.
QUORUM REQUIREMENT AND ADJOURNMENT
A quorum of shareholders is necessary to hold a valid meeting. A quorum
will exist for Proposals 1, 4 and 5 if shareholders entitled to vote one-third
of the issued and outstanding shares of your Fund on the Record Date are present
at the Special Meeting for your Fund in person or by proxy. A quorum will exist
for Proposal 2 if shareholders entitled to vote one-third of the issued and
outstanding shares of Trust on the Record Date are present at the Special
Meeting in person or by proxy. A quorum will exist for Proposals 3 and 6 if
shareholders entitled to vote one-third of the issued and outstanding shares of
Company on the Record Date are present at the Special Meeting in person or by
proxy.
Under the rules applicable to broker-dealers, if your broker holds your
shares in its name, the broker will not be entitled to vote your shares if it
has not received instructions from you. A "broker non-vote" occurs when a broker
has not received voting instructions from a shareholder and is barred from
voting the shares without shareholder instructions because the proposal is
non-routine.
Abstentions and broker non-votes will count as shares present at the
Special Meetings for purposes of establishing a quorum.
If a quorum is not present at a Special Meeting or a quorum is present but
sufficient votes to approve a Proposal are not received, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Special
Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR a Proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST such
Proposal against such
57
adjournment. A shareholder vote may be taken on a Proposal in this Proxy
Statement/Prospectus prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
VOTE NECESSARY TO APPROVE EACH PROPOSAL
PROPOSALS 1, 4 AND 5. Approval of Proposals 1, 4 and 5 requires the lesser
of (a) the affirmative vote of 67% or more of the voting securities of your Fund
present or represented by proxy at the Special Meeting, if the holders of more
than 50% of the outstanding voting securities of your Fund are present or
represented by proxy, or (b) the affirmative vote of more than 50% of the
outstanding voting securities of your Fund. Abstentions and broker non-votes are
counted as present but are not considered votes cast at the Special Meeting. As
a result, they have the same effect as a vote against Proposals 1, 4 and 5
because approval of Proposals 1, 4 and 5 requires the affirmative vote of a
percentage of the voting securities present or represented by proxy or a
percentage of the outstanding voting securities.
PROPOSALS 2 AND 3. The affirmative vote of a plurality of votes cast at
the Special Meeting is necessary to elect trustees or directors, as applicable,
meaning that the nominee with the most affirmative votes for a particular slot
is elected for that slot. In an uncontested election for trustees or directors,
the plurality requirement is not a factor. Abstentions and broker non-votes will
not count as votes cast and will have no effect on the outcome of this proposal.
PROPOSAL 6. Approval of Proposal 6 requires the affirmative vote of a
majority of the issued and outstanding shares of Company. Abstentions and broker
non-votes are counted as present but are not considered votes cast at the
Special Meeting. As a result, they have the same effect as a vote against the
Plan because approval of the Plan requires the affirmative vote of a percentage
of the outstanding voting securities.
PROXY SOLICITATION
Each AIM Trust and Company have engaged the services of Georgeson
Shareholder Communications Inc. ("Solicitor") to assist in the solicitation of
proxies for the Special Meetings. For AIM New Technology Fund, Solicitor's costs
are estimated to be $23,600. For AIM Global Science and Technology Fund,
Solicitor's costs are estimated to be approximately $343,800. For INVESCO
Telecommunications Fund, Solicitor's costs are estimated to be approximately
$134,300.
AIM Trusts and Company expect to solicit proxies principally by mail, but
each AIM Trust, Company and Solicitor may also solicit proxies by telephone,
facsimile or personal interview. AIM Trusts' and Company's officers will not
receive any additional or special compensation for any such solicitation.
AMVESCAP, on behalf of either AIM or INVESCO, will bear the costs and expenses
incurred in connection with the Reorganizations, including Solicitor's costs.
OTHER MATTERS
Management does not know of any matters to be presented at the Special
Meetings other than those discussed in this Proxy Statement/Prospectus. If any
other matters properly come before the Special Meetings, the shares represented
by proxies will be voted with respect thereto in accordance with management's
recommendation.
SHAREHOLDER PROPOSALS
As a general matter, your Fund does not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of your Fund, you should send such proposal to the applicable AIM
Trust or Company at the address set forth on the first page of this Proxy
Statement/ Prospectus. To be considered for presentation at a meeting of
shareholders, an AIM Trust or Company, as applicable, must receive proposals a
reasonable time before proxy materials are prepared for the meeting. Your
proposal also must comply with applicable law.
58
For a discussion of procedures that you must follow if you want to propose
an individual for nomination as a trustee of an AIM Trust, please refer to the
section of this Proxy Statement/Prospectus entitled "Proposal 2 -- Committees of
the Board -- Committee on Directors/Trustees."
For a discussion of how to propose an individual for nomination as a
director, please refer to the section of this Proxy Statement/Prospectus
entitled "Proposal 2 -- Current Committees of the Boards -- Nominating
Committee."
OWNERSHIP OF SHARES
A list of the name, address and percent ownership of each person who, as of
July 25, 2003, to the knowledge of AIM Funds Group owned 5% or more of any class
of the outstanding shares of AIM New Technology Fund can be found at Exhibit U.
A list of the name, address and percent ownership of each person who, as of
July 25, 2003, to the knowledge of AIM Investment Funds owned 5% or more of any
class of the outstanding shares of AIM Global Science and Technology Fund can be
found at Exhibit V.
A list of the name, address and percent ownership of each person who, as of
July 25, 2003, to the knowledge of Company owned 5% or more of any class of the
outstanding shares of INVESCO Fund can be found at Exhibit W.
A list of the name, address and percent ownership of each person who, as of
July 25, 2003, to the knowledge of Company owned 5% or more of any class of the
outstanding shares of Buying Fund can be found at Exhibit X.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Trustees of AIM Investment Funds has
appointed PricewaterhouseCoopers LLP ("PwC") as AIM Investment Fund's
independent public accountants for the fiscal year ending October 31, 2003. The
Audit Committee of the Board of Trustees of AIM Funds Group has appointed PwC as
AIM Funds Group's independent public accountants for the fiscal year ending
December 31, 2003. A representative of PwC is expected to be available at the
Special Meetings and to have the opportunity to make a statement and respond to
appropriate questions from the shareholders. The Audit Committees of the Boards
of Trustees of each AIM Investment Funds and AIM Funds Group have considered
whether the provision of the services below is compatible with maintaining PwC's
independence.
FEES PAID TO PWC RELATED TO AIM INVESTMENT FUNDS
PwC billed AIM Investment Funds (consisting of six separate series
portfolios) aggregate fees for professional services rendered for the 2002
fiscal year as follows:
<Table>
Audit Fees.................................................. $166,720
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees*............................................. $ 78,103
--------
Total Fees.................................................. $244,823
</Table>
- ---------------
* All Other Fees includes fees billed for all other non-audit services,
including fees for tax-related services rendered to AIM Investment Funds.
59
FEES PAID TO PWC NOT RELATED TO AIM INVESTMENT FUNDS
PwC billed AIM aggregate fees for professional services rendered for the
2002 fiscal year to AIM, or any affiliate that provided services to AIM
Investment Funds, as follows:
<Table>
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees**............................................ $346,364
--------
Total Fees.................................................. $346,364
</Table>
- ---------------
** As required by SEC rules, All Other Fees includes amounts paid to PwC by your
Fund's advisor and other related entities that provides support for the
operations of Trust. All Other Fees include business advisory services
performed for the selection of a transfer agent and its conversion. The
services provided benefited many legal entities of AIM, including many other
funds within the AIM Fund complex.
FEES PAID TO PWC RELATED TO AIM FUNDS GROUP
PwC billed AIM Funds Group (consisting of twelve separate series
portfolios) aggregate fees for professional services rendered for the 2002
fiscal year as follows:
<Table>
Audit Fees.................................................. $292,970
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees*............................................. $ 52,214
--------
Total Fees.................................................. $345,184
</Table>
- ---------------
* All Other Fees includes fees billed for all other non-audit services,
including fees for tax-related services rendered to AIM Funds Group.
FEES PAID TO PWC NOT RELATED TO AIM FUNDS GROUP
PwC billed AIM aggregate fees for professional services rendered for the
2002 fiscal year to AIM, or any affiliate that provided services to AIM Funds
Group, as follows:
<Table>
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees**............................................ $346,364
--------
Total Fees.................................................. $346,364
</Table>
- ---------------
** As required by SEC rules, All Other Fees includes amounts paid to PwC by your
Fund's advisor and other related entities that provides support for the
operations of Trust. All Other Fees include business advisory services
performed for the selection of a transfer agent and its conversion. The
services provided benefited many legal entities of AIM, including many other
funds within the AIM Fund complex.
The audit committee of Company's Board of Directors has appointed PwC as
Company's independent public accountants for the 2004 fiscal year ending March
31, 2004. A representative of PwC is expected to be available at the Special
Meetings and to have the opportunity to make a statement and respond to
appropriate questions from the shareholders. The audit committee of Company's
Board of Directors has considered whether the provision of the services below is
compatible with maintaining PwC's independence.
60
FEES PAID TO PWC RELATED TO COMPANY
PwC billed Company (consisting of nine separate series portfolios)
aggregate fees for professional services rendered for the 2003 fiscal year as
follows:
<Table>
<Caption>
Audit Fees.................................................. $218,050
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees*............................................. $ 35,543
--------
Total Fees.................................................. $253,593
</Table>
- ---------------
* All Other Fees includes fees billed for all other non-audit services,
including fees for tax-related services rendered to Company.
FEES PAID TO PWC NOT RELATED TO COMPANY
PwC billed INVESCO aggregate fees for professional services rendered for
the 2003 fiscal year to INVESCO, or any affiliate that provided services to
Company, as follows:
<Table>
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees**............................................ $52,500
-------
Total Fees.................................................. $52,500
</Table>
- ---------------
** As required by SEC rules, All Other Fees includes amounts paid to PwC by your
Fund's advisor and other related entities that provide support for the
operations of Company. All Other Fees include services relating to tax
services, controls review on the transfer agency, research in accounting
consultations, a CRM project and other agreed upon procedures. The services
performed for your Fund's advisor and related entities benefit many legal
entities of INVESCO, including many sister funds within the investment
company complex.
61
EXHIBIT A
CLASSES OF SHARES OF EACH FUND AND CORRESPONDING CLASSES OF SHARES OF BUYING
FUND
<Table>
<Caption>
AIM NEW AIM GLOBAL SCIENCE INVESCO INVESCO
TECHNOLOGY FUND AND TECHNOLOGY FUND TELECOMMUNICATIONS FUND TECHNOLOGY FUND
- --------------- ------------------- ----------------------- ---------------
Class A Shares Class A Shares Class A Shares Class A Shares
Class B Shares Class B Shares Class B Shares Class B Shares
Class C Shares Class C Shares Class C Shares Class C Shares
Class K Shares Class K Shares
Investor Class Shares Investor Class Shares
</Table>
A-1
EXHIBIT B
COMPARISON OF PERFORMANCE OF EACH FUND AND BUYING FUND
AIM NEW TECHNOLOGY FUND
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.
ANNUAL TOTAL RETURNS
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.
<Table>
<Caption>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURN
- ----------- -------
2001................................................................... -43.03%
2002................................................................... -45.31%
</Table>
The Class A shares' year-to-date total return as of March 31, 2003 was
- -1.43%.
During the period shown in the bar chart, the highest quarterly return was
31.79% (quarter ended June 30, 2001) and the lowest quarterly return was -48.66%
(quarter ended March 31, 2001).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of
a broad-based securities market index, a style specific index and a peer group
index. The fund's performance reflects payment of sales loads. The indices do
not reflect payment of fees, expenses or taxes.
Average Annual Total Returns (for the periods ended December 31, 2002)
<Table>
<Caption>
SINCE INCEPTION
1 YEAR INCEPTION DATE
-------- --------- ----------
Class A 8/31/00
Return Before Taxes................... (48.28)% (49.98)%
Return After Taxes on Distributions... (48.28) (49.98)
Return After Taxes on Distributions
and Sale of Fund Shares............ (29.64) (35.54)
S&P 500 Index(1)........................ (22.09) (19.69)(4) 8/31/00(4)
PSE Technology Index(2)................. (33.33) (33.09)(4) 8/31/00(4)
Lipper Science & Technology Fund
Index(3).............................. (41.38) (47.28)(4) 8/31/00(4)
</Table>
- ---------------
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates
B-1
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 only and after-tax returns for
Class B and C will vary.
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance. The
fund has also included the PSE Technology Index, which the fund believes
more closely reflects the performance of the types of securities in which
the fund invests. In addition, the Lipper Science & Technology Fund Index
(which may or may not include the fund) is included for comparison to a peer
group.
(2) The PSE Technology Index is a price-weighted index of the top 100 technology
stocks listed on the Pacific Stock Exchange.
(3) The Lipper Science & Technology Fund Index is an equally weighted
representation of the 30 largest funds that make up the Lipper Science &
Technology category. These funds invest more than 65% of their portfolios in
science and technology stocks.
(4) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND
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.
ANNUAL TOTAL RETURNS
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.
<Table>
<Caption>
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
1993................................................................... 47.66%
1994................................................................... -4.40%
1995................................................................... 8.59%
1996................................................................... 5.24%
1997................................................................... 13.18%
1998................................................................... 18.14%
1999................................................................... 108.08%
2000................................................................... -38.86%
2001................................................................... -54.15%
2002................................................................... -44.00%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
62.18% (quarter ended December 31, 1999) and the lowest quarterly return was
- -50.36% (quarter ended March 31, 2001).
B-2
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of
a broad-based securities market index. The fund's performance reflects payment
of sales loads.
Average Annual Total Returns (for the periods ended December 31, 2002)
<Table>
<Caption>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
-------- -------- -------- ------------ ----------
Class A 01/27/92
Return Before Taxes................... (46.69)% (18.14)% (3.91)% --
Return After Taxes on Distributions... (46.69) (19.18) (5.23) --
Return After Taxes on Distributions
and Sale of Fund Shares............ (28.67) (11.34) (1.64) --
S&P 500(2)
(reflects no deduction for fees,
expenses, or taxes)................ (22.09) (0.58) 9.34 --
</Table>
- ---------------
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 only and after-tax returns for Class B and C will vary.
(1) Since Inception performance is only provided for a class with less than ten
calendar years of performance.
(2) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
INVESCO TELECOMMUNICATIONS FUND
INVESCO TECHNOLOGY FUND (BUYING FUND)
Performance information in the bar charts below is that of the Funds'
Investor Class shares, which has the longest operating history of the Funds'
classes.
The bar charts below show the Funds' Investor Class actual yearly
performance (commonly known as their "total return") for the years ended
December 31 over the past decade or since inception. The table below shows the
pre-tax and after-tax average annual total returns of Investor Class for various
periods ended December 31, 2002 compared to the S&P 500 Index.
After-tax returns are provided on a pre-redemption and post-redemption
basis. Pre-redemption returns assume you continue to hold your shares and pay
taxes on Fund distributions (i.e., dividends and capital gains) but do not
reflect taxes that may be incurred upon selling or exchanging shares.
Post-redemption returns assume payment of taxes on fund distributions and also
that you close your account and pay remaining federal taxes. After-tax returns
are calculated using the highest individual federal income tax rates in effect
at the time the distribution is paid. State and local taxes are not considered.
Actual after-tax returns depend on an investor's tax situation and may differ
from those shown. For investors holding their shares in tax-deferred
arrangements such as 401(k) plans or individual retirement accounts, the
after-tax returns shown are not relevant.
The information in the bar charts and table illustrates the variability of
each Fund's total return and how its performance compared to a broad measure of
market performance. Remember, past performance (before and after taxes) does not
indicate how each Fund will perform in the future.
B-3
TELECOMMUNICATIONS FUND -- INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1)(2)
<Table>
<Caption>
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURN
- ----------- ------
1995........................................................ 27.37%
1996........................................................ 16.81%
1997........................................................ 30.29%
1998........................................................ 40.98%
1999........................................................ 144.28%
2000........................................................ -26.91%
2001........................................................ -54.19%
2002........................................................ -50.96%
</Table>
Best Calendar Qtr. 12/99 62.22%
Worst Calendar Qtr. 9/01 (41.40)%
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/02
----------------------------------
10 YEARS OR
SINCE
1 YEAR 5 YEARS INCEPTION
------ ------- -----------
Telecommunications Fund(1)(2)
Return Before Taxes....................................... (50.96)% (10.78)% 1.69%(3)
Return After Taxes on Distributions....................... (50.96)% (11.09)% 0.21%(3)
Return After Taxes on Distributions and Sale of Fund
Shares................................................. (31.29)% (7.89)% 1.12%(3)
S&P 500 Index(4)
(reflects no deduction for fees, expenses or taxes)....... (22.09)% (0.58)% 9.96%(3)
</Table>
B-4
TECHNOLOGY FUND -- INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1)(2)(3)
<Table>
<Caption>
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURN
- ----------- ------
1993........................................................ 15.03%
1994........................................................ 5.27%
1995........................................................ 45.80%
1996........................................................ 21.75%
1997........................................................ 8.85%
1998........................................................ 30.12%
1999........................................................ 144.94%
2000........................................................ -22.77%
2001........................................................ -45.51%
2002........................................................ -47.22%
</Table>
Best Calendar Qtr. 12/99 66.77%
Worst Calendar Qtr. 9/01 (41.44)%
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/02
--------------------------------
10 YEARS
OR SINCE
1 YEAR 5 YEARS INCEPTION
------ ------- ---------
Technology Fund(1)(2)
Return Before Taxes....................................... (47.22)% (6.67)% 5.18%
Return After Taxes on Distributions....................... (47.22)% (7.16)% 2.46%
Return After Taxes on Distributions and Sale of Fund
Shares................................................. (28.99)% (4.64)% 3.64%
</Table>
- ---------------
(1) Total return figures include reinvested dividends and capital gain
distributions and the effect of each class' expenses.
(2) Returns before taxes for Investor Class shares of Technology and
Telecommunications Funds year-to-date as of the calendar quarter ended June
30, 2003 were 17.80% and 15.21%, respectively.
(3) The Fund (Investor Class shares) commenced investment operations on August
1, 1994. Index comparison begins on August 1, 1994.
(4) The S&P 500 Index is an unmanaged index considered representative of the
performance of the broad U.S. stock market. Please keep in mind that the
Index does not pay brokerage, management, administrative, or distribution
expenses, all of which are paid by the classes and are reflected in their
annual returns. Index returns also do not include sales charges or CDSCs
that may be paid by the shareholder.
B-5
EXHIBIT C
COMPARISON FEE TABLES AND EXPENSE EXAMPLES
FEE TABLE
This table compares the shareholder fees and annual operating expenses as a
percentage of net assets ("Expense Ratios"), of Class A, Class B and Class C
shares of AIM Global Science and Technology Fund and AIM New Technology Fund,
Class A, Class B, Class C, Class K and Investor Class shares of INVESCO
Telecommunications Fund and Class A, Class B, Class C, Class K, Investor Class
and Institutional Class shares of INVESCO Technology Fund ("Buying Fund"; AIM
Global Science and Technology Fund, AIM New Technology Fund and INVESCO
Telecommunications Fund are each a "Fund"). This table assumes shareholders of
all three Funds have approved the reorganization. Pro Forma Combined Expense
Ratios of Buying Fund giving effect to the reorganization of each Fund into
Buying Fund are also provided.
<Table>
<Caption>
AIM GLOBAL SCIENCE AND
TECHNOLOGY FUND AIM NEW TECHNOLOGY FUND
SELLING FUND SELLING FUND
(AS OF 10/31/02) (AS OF 12/31/02)
-------------------------------- --------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
SHAREHOLDER FEES
(fees paid directly from
your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering
price)...................... 4.75% None None 5.50% None None
Maximum Deferred Sales Charge
(Load)(1)................... None(2)(3) 5.00% 1.00% None(2)(3) 5.00% 1.00%
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are deducted from
fund assets)
Management Fees.............. 0.97% 0.97% 0.97% 1.00% 1.00% 1.00%
Distribution and/or Service
(12b-1) Fees(7)............. 0.50% 1.00% 1.00% 0.35% 1.00% 1.00%
Other Expenses............... 1.09% 1.09% 1.09% 1.31% 1.31% 1.31%
Total Annual Fund Operating
Expenses(8)(9)(10).......... 2.56% 3.06% 3.06% 2.66% 3.31% 3.31%
Fee Waiver................... 0.55% 0.55% 0.55% 0.66% 0.66% 0.66%
Net Expenses................. 2.01% 2.51% 2.51% 2.00% 2.65% 2.65%
<Caption>
INVESCO TELECOMMUNICATIONS FUND
SELLING FUND
(AS OF 3/31/03)
-----------------------------------------------------------
CLASS A CLASS B CLASS C CLASS K INVESTOR CLASS
------- ------- ------- ------- --------------
SHAREHOLDER FEES
(fees paid directly from
your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering
price)...................... 5.50% None None None None
Maximum Deferred Sales Charge
(Load)(1)................... None(2)(4) 5.00% 1.00% None(5) None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are deducted from
fund assets)
Management Fees.............. 0.65% 0.65% 0.65% 0.65% 0.65%
Distribution and/or Service
(12b-1) Fees(7)............. 0.35% 1.00% 1.00% 0.45% 0.25%
Other Expenses............... 0.66% 10.50% 4.11% 2.20% 1.86%
Total Annual Fund Operating
Expenses(8)(9)(10).......... 1.66% 12.15% 5.76% 3.30% 2.76%
Fee Waiver................... None 9.40% 3.01% 1.10% None
Net Expenses................. 1.66% 2.75% 2.75% 2.20% 2.76%
</Table>
C-1
<Table>
<Caption>
INVESCO TECHNOLOGY FUND
BUYING FUND
(AS OF 3/31/03)
---------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly
from your
investment)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price)..... 5.50% None None None None None
Maximum Deferred
Sales Charge
(Load)(1)........... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are
deducted from fund
assets)
Management Fees...... 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and/or
Service (12b-1)
Fees(7)............. 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses....... 0.56% 1.14% 2.35% 1.44% 0.30% 0.92%
Total Annual Fund
Operating
Expenses(10)........ 1.51% 2.74% 3.95% 2.49% 0.90% 1.77%
Fee Waivers.......... None None 1.20% 0.29% None None
Net Expenses......... 1.51% 2.74% 2.75% 2.20% 0.90% 1.77%
<Caption>
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED
BUYING FUND
(AS OF 3/31/03)
---------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly
from your
investment)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price)..... 5.50% None None None None None
Maximum Deferred
Sales Charge
(Load)(1)........... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are
deducted from fund
assets)
Management Fees...... 0.56% 0.56% 0.56% 0.56% 0.56% 0.56%
Distribution and/or
Service (12b-1)
Fees(7)............. 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses....... 1.11% 1.40% 1.87% 1.46% 0.31% 1.14%
Total Annual Fund
Operating
Expenses(10)........ 2.02% 2.96% 3.43% 2.47% 0.87% 1.95%
Fee Waivers.......... None 0.21% 0.68% 0.52% None 0.18%
Net Expenses......... 2.02% 2.75% 2.75% 1.95% 0.87% 1.77%
</Table>
- ---------------
(1) For AIM Global Science and Technology Fund and AIM New Technology Fund,
calculated as a percentage of original purchase price or redemption
proceeds, whichever is less. For INVESCO Telecommunications Fund, Buying
Fund and Buying Fund Pro Forma Combined, calculated as a percentage of
original purchase price.
(2) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(3) Effective November 1, 2002, if you are a retirement plan participant and
you bought $1,000,000 or more of Class A shares, you may pay a 1% CDSC if a
total redemption of the retirement plan assets occurs within 12 months from
the date of the retirement plan's initial purchase.
(4) For qualified plans investing in Class A shares, you may pay a CDSC of 1%
on your Class A shares if the plan is redeemed within 12 months from the
initial deposit in the plan's INVESCO account.
(5) For qualified plans investing in Class K shares, you may pay a CDSC of
0.70% on your Class K shares if the plan is redeemed within 12 months from
the initial deposit in the plan's INVESCO account.
(6) There is no guarantee that actual expenses will be the same as those shown
in the table.
(7) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares of a Fund for a long period of
time, you may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
(8) AIM has contractually agreed to limit Total Annual Fund Operating Expenses
on AIM Global Science and Technology Fund (excluding interest, taxes,
dividend expense on short sales, extraordinary items and increases in
expenses due to expense offset arrangements, if any) on Class A, Class B
and Class C shares to 2.00%, 2.50% and 2.50%, respectively. The expense
limitation agreement is in effect through October 31, 2004.
C-2
(9) AIM has contractually agreed to waive fees and/or reimburse expenses on AIM
New Technology Fund (excluding interest, taxes, dividend expense on short
sales, extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit the Total Annual Fund Operating Expenses of Class A
shares to 2.00% (e.g., if AIM waives 0.66% of Class A share expense, AIM
will also waive 0.66% of Class B and Class C share expenses). The expense
limitation agreement is in effect through December 31, 2004.
(10) INVESCO has contractually agreed to waive fees and bear any expenses on the
INVESCO Telecommunications Fund and Buying Fund through April 30, 2004 to
limit Total Annual Operating Expenses (excluding interest, taxes, brokerage
commissions, extraordinary expenses and increases in expenses due to
expense offset arrangements, if any) to 2.10%, 2.75%, 2.75% and 2.20% on
Class A, Class B, Class C and Class K shares, respectively. Further,
INVESCO will limit Investor Class shares to 1.77% for one year from the
closing of the reorganization. INVESCO has also voluntarily agreed to limit
Total Annual Operating Expenses on the INVESCO Telecommunications Fund
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases in expenses due to expense offset arrangements, if any) to
1.85%, 2.50%, 2.50%, 1.95% and 1.75% on Class A, Class B, Class C, Class K
and Investor Class shares, respectively. INVESCO has also voluntarily
agreed to limit Total Annual Operating Expenses on Buying Fund (excluding
interest, taxes, brokerage commissions, extraordinary expenses and
increases in expenses due to expense offset arrangements, if any) to 1.50%,
2.15%, 2.15% and 1.15% on Class A, Class B, Class C and the Institutional
Class shares, respectively. Further, INVESCO will change the voluntary
limit on Class K shares from 2.20% to 1.95% upon closing of the
reorganization. The voluntary expense limitations cannot be revoked by
INVESCO prior to May 2004. Effective June 1, 2002, INVESCO is entitled to
reimbursement of any fees waived pursuant to this arrangement if such
reimbursement does not cause the funds to exceed the current expense
limitations and the reimbursement is made within three years after INVESCO
incurred the expense.
C-3
EXPENSE EXAMPLE
The Example is intended to help you compare the costs of investing in
different classes of each Fund and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes
of Buying Fund giving effect to the reorganization of each Fund into Buying Fund
are also provided. All costs are based upon the information set forth in the Fee
Table above.
The Example assumes that you invested $10,000 for the time periods
indicated and shows the expenses that you would pay both if you redeem all of
your shares at the end of those periods and if you do not redeem your shares.
The Example also assumes that your investment has a 5% return each year and that
the operating expenses remain the same. The Example reflects fee waivers and/or
expense reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND (SELLING
FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $669 $1,184 $1,724 $3,194
Assuming no redemption............................ $669 $1,184 $1,724 $3,194
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $754 $1,194 $1,758 $3,219
Assuming no redemption(3)......................... $254 $ 894 $1,558 $3,219
Class C shares
Assuming complete redemption at end of
period(2)...................................... $354 $ 894 $1,558 $3,336
Assuming no redemption............................ $254 $ 894 $1,558 $3,336
AIM NEW TECHNOLOGY FUND (SELLING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $742 $1,272 $1,827 $3,332
Assuming no redemption............................ $742 $1,272 $1,827 $3,332
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $768 $1,257 $1,870 $3,411
Assuming no redemption(3)......................... $268 $ 957 $1,670 $3,411
Class C shares
Assuming complete redemption at end of
period(2)...................................... $368 $ 957 $1,670 $3,559
Assuming no redemption............................ $268 $ 957 $1,670 $3,559
INVESCO TELECOMMUNICATIONS FUND (SELLING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $709 $1,045 $1,403 $2,407
Assuming no redemption............................ $709 $1,045 $1,403 $2,407
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $778 $2,888 $4,780 $7,273
Assuming no redemption(3)......................... $278 $2,588 $4,580 $7,273
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,447 $2,598 $5,401
Assuming no redemption............................ $278 $1,447 $2,598 $5,401
</Table>
C-4
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
Class K shares
Assuming complete redemption at end of period..... $223 $ 913 $1,627 $3,520
Assuming no redemption............................ $223 $ 913 $1,627 $3,520
Investor Class shares
Assuming complete redemption at end of period..... $279 $ 856 $1,459 $3,090
Assuming no redemption............................ $279 $ 856 $1,459 $3,090
INVESCO TECHNOLOGY FUND (BUYING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $695 $1,001 $1,328 $2,252
Assuming no redemption............................ $695 $1,001 $1,328 $2,252
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $777 $1,150 $1,650 $2,773
Assuming no redemption(3)......................... $277 $ 850 $1,450 $2,773
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,094 $1,928 $4,089
Assuming no redemption............................ $278 $1,094 $1,928 $4,089
Class K shares
Assuming complete redemption at end of period..... $223 $ 748 $1,300 $2,804
Assuming no redemption............................ $223 $ 748 $1,300 $2,804
Institutional Class shares
Assuming complete redemption at end of period..... $ 92 $ 287 $ 498 $1,108
Assuming no redemption............................ $ 92 $ 287 $ 498 $1,108
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 557 $ 959 $2,084
Assuming no redemption............................ $180 $ 557 $ 959 $2,084
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED (BUYING
FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $744 $1,149 $1,578 $2,769
Assuming no redemption............................ $744 $1,149 $1,578 $2,769
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $778 $1,196 $1,739 $3,044
Assuming no redemption(3)......................... $278 $ 896 $1,539 $3,044
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $ 991 $1,726 $3,667
Assuming no redemption............................ $378 $ 991 $1,726 $3,667
Class K shares
Assuming complete redemption at end of period..... $198 $ 720 $1,269 $2,767
Assuming no redemption............................ $198 $ 720 $1,269 $2,767
Institutional Class shares
Assuming complete redemption at end of period..... $ 89 $ 278 $ 482 $1,073
Assuming no redemption............................ $ 89 $ 278 $ 482 $1,073
</Table>
C-5
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 595 $1,035 $2,260
Assuming no redemption............................ $180 $ 595 $1,035 $2,260
</Table>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class shares at the end of the
eighth year.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OF FUTURE EXPENSES. EACH
SELLING FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OF LESS THAN THOSE SHOWN. THE TABLE AND THE
ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF
THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION
OF AND DOES NOT REPRESENT EACH SELLING FUND'S OR BUYING FUND'S PROJECTED OR
ACTUAL PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-6
FEE TABLE
This table compares the shareholder fees and annual operating expenses as a
percentage of net assets ("Expense Ratios"), of Class A, Class B and Class C
shares of AIM Global Science and Technology Fund and AIM New Technology Fund and
Class A, Class B, Class C, Class K, Investor Class and Institutional Class
shares of INVESCO Technology Fund ("Buying Fund"; AIM Global Science and
Technology Fund and AIM New Technology Fund are each a "Fund"). This table
assumes that only shareholders of these Funds have approved the reorganization.
Pro Forma Combined Expense Ratios of Buying Fund giving effect to the
reorganization of these Selling Funds into Buying Fund are also provided.
<Table>
<Caption>
AIM GLOBAL SCIENCE AND
TECHNOLOGY FUND AIM NEW TECHNOLOGY FUND
SELLING FUND (AS OF 10/31/02) SELLING FUND (AS OF 12/31/02)
------------------------------ ------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 4.75% None None 5.50% None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(2)(3) 5.00% 1.00% None(2)(3) 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES(6)
(expenses are deducted from fund
assets)
Management Fees..................... 0.97% 0.97% 0.97% 1.00% 1.00% 1.00%
Distribution and Service (12b-1)
Fees(7)........................... 0.50% 1.00% 1.00% 0.35% 1.00% 1.00%
Other Expenses...................... 1.09% 1.09% 1.09% 1.31% 1.31% 1.31%
Total Annual Fund Operating
Expenses(8)(9).................... 2.56% 3.06% 3.06% 2.66% 3.31% 3.31%
Fee Waivers......................... 0.55% 0.55% 0.55% 0.66% 0.66% 0.66%
Net Expenses........................ 2.01% 2.51% 2.51% 2.00% 2.65% 2.65%
</Table>
C-7
<Table>
<Caption>
INVESCO TECHNOLOGY FUND
BUYING FUND (AS OF 3/31/03)
------------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 5.50% None None None None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING EXPENSES(6)
(expenses are deducted from fund
assets)
Management Fees..................... 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and Service (12b-1)
Fees(7)........................... 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses...................... 0.56% 1.14% 2.35% 1.44% 0.30% 0.92%
Total Annual Fund Operating
Expenses(10)...................... 1.51% 2.74% 3.95% 2.49% 0.90% 1.77%
Fee Waivers/Reimbursements.......... None None 1.20% 0.29% None None
Net Expenses........................ 1.51% 2.74% 2.75% 2.20% 0.90% 1.77%
<Caption>
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED
BUYING FUND (AS OF 3/31/03)
---------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
-------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 5.50% None None None None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING EXPENSES(6)
(expenses are deducted from fund
assets)
Management Fees..................... 0.57% 0.57% 0.57% 0.57% 0.57% 0.57%
Distribution and Service (12b-1)
Fees(7)........................... 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses...................... 1.12% 1.41% 1.67% 1.45% 0.32% 0.93%
Total Annual Fund Operating
Expenses(10)...................... 2.04% 2.98% 3.24% 2.47% 0.89% 1.75%
Fee Waivers/Reimbursements.......... None 0.23% 0.49% 0.52% None None
Net Expenses........................ 2.04% 2.75% 2.75% 1.95% 0.89% 1.75%
</Table>
- ---------------
(1) For AIM Global Science and Technology Fund and AIM New Technology Fund,
calculated as a percentage of original purchase price or redemption
proceeds, whichever is less. For Buying Fund and Buying Fund Pro Forma
Combined, calculated as a percentage of original purchase price.
(2) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(3) Effective November 1, 2002, if you are a retirement plan participant and
you bought $1,000,000 or more of Class A shares, you may pay a 1% CDSC if a
total redemption of the retirement plan assets occurs within 12 months from
the date of the retirement plan's initial purchase.
(4) For qualified plans investing in Class A shares, you may pay a CDSC of 1%
on your Class A shares if the plan is redeemed within 12 months from the
initial deposit in the plan's INVESCO account.
(5) For qualified plans investing in Class K shares, you may pay a CDSC of
0.70% on your Class K shares if the plan is redeemed within 12 months from
the initial deposit in the plan's INVESCO account.
(6) There is no guarantee that actual expenses will be the same as those shown
in the table.
(7) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares of a Fund for a long period of
time, you may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
C-8
(8) AIM has contractually agreed to limit Total Annual Fund Operating Expenses
on AIM Global Science and Technology Fund (excluding interest, taxes,
dividend expense on short sales, extraordinary items and increases in
expenses due to expense offset arrangements, if any) on Class A, Class B
and Class C shares to 2.00%, 2.50% and 2.50%, respectively. The expense
limitation agreement is in effect through October 31, 2004.
(9) AIM has contractually agreed to waive fees and/or reimburse expenses on AIM
New Technology Fund (excluding interest, taxes, dividend expense on short
sales, extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit the Total Annual Fund Operating Expenses of Class A
shares to 2.00% (e.g., if AIM waives 0.66% of Class A share expense, AIM
will also waive 0.66% of Class B and Class C share expenses). The expense
limitation agreement is in effect through December 31, 2004.
(10) INVESCO has contractually agreed to waive fees and bear any expenses on
Buying Fund through April 30, 2004 to limit Total Annual Operating Expenses
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases in expenses due to expense offset arrangements, if any) to
2.10%, 2.75%, 2.75% and 2.20% on Class A, Class B, Class C and Class K
shares, respectively. Further, INVESCO will limit Investor Class shares to
1.77% for one year from the closing of the reorganization. INVESCO has also
voluntarily agreed to limit Total Annual Operating Expenses on Buying Fund
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases in expenses due to expense offset arrangements, if any) to
1.50%, 2.15%, 2.15% and 1.15% on Class A, Class B, Class C and the
Institutional Class shares, respectively. Further, INVESCO will change the
voluntary limit on Class K shares from 2.20% to 1.95% upon closing of the
reorganization. The voluntary expense limitations cannot be revoked by
INVESCO prior to May 2004. Effective June 1, 2002, INVESCO is entitled to
reimbursement of any fees waived pursuant to this arrangement if such
reimbursement does not cause the funds to exceed the current expense
limitations and the reimbursement is made within three years after INVESCO
incurred the expense.
C-9
EXPENSE EXAMPLE
The Example is intended to help you compare the costs of investing in
different classes of each Fund and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes
of Buying Fund giving effect to the reorganization of each Fund into Buying Fund
are also provided. All costs are based upon the information set forth in the Fee
Table above.
The Example assumes that you invested $10,000 for the time periods
indicated and shows the expenses that you would pay both if you redeem all of
your shares at the end of those periods and if you do not redeem your shares.
The Example also assumes that your investment has a 5% return each year and that
the operating expenses remain the same. The Example reflects fee waivers and/or
expense reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND (SELLING FUND)
Class A shares(1)
Assuming complete redemption at end of period........ $669 $1,184 $1,724 $3,194
Assuming no redemption............................... $669 $1,184 $1,724 $3,194
Class B shares
Assuming complete redemption at end of
period(2)(3)...................................... $754 $1,194 $1,758 $3,219
Assuming no redemption(3)............................ $254 $ 894 $1,558 $3,219
Class C shares
Assuming complete redemption at end of period(2)..... $354 $ 894 $1,558 $3,336
Assuming no redemption............................... $254 $ 894 $1,558 $3,336
AIM NEW TECHNOLOGY FUND (SELLING FUND)
Class A shares(1)
Assuming complete redemption at end of period........ $742 $1,272 $1,827 $3,332
Assuming no redemption............................... $742 $1,272 $1,827 $3,332
Class B shares
Assuming complete redemption at end of
period(2)(3)...................................... $768 $1,257 $1,870 $3,411
Assuming no redemption(3)............................ $268 $ 957 $1,670 $3,411
Class C shares
Assuming complete redemption at end of period(2)..... $368 $ 957 $1,670 $3,559
Assuming no redemption............................... $268 $ 957 $1,670 $3,559
INVESCO TECHNOLOGY FUND (BUYING FUND)
Class A shares(1)
Assuming complete redemption at end of period........ $695 $1,001 $1,328 $2,252
Assuming no redemption............................... $695 $1,001 $1,328 $2,252
Class B shares
Assuming complete redemption at end of
period(2)(3)...................................... $777 $1,150 $1,650 $2,773
Assuming no redemption(3)............................ $277 $ 850 $1,450 $2,773
Class C shares
Assuming complete redemption at end of period(2)..... $378 $1,094 $1,928 $4,089
Assuming no redemption............................... $278 $1,094 $1,928 $4,089
</Table>
C-10
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
Class K shares
Assuming complete redemption at end of period........ $223 $ 748 $1,300 $2,804
Assuming no redemption............................... $223 $ 748 $1,300 $2,804
Institutional Class shares
Assuming complete redemption at end of period........ $ 92 $ 287 $ 498 $1,108
Assuming no redemption............................... $ 92 $ 287 $ 498 $1,108
Investor Class shares
Assuming complete redemption at end of period........ $180 $ 557 $ 959 $2,084
Assuming no redemption............................... $180 $ 557 $ 959 $2,084
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED (BUYING
FUND)
Class A shares(1)
Assuming complete redemption at end of period........ $746 $1,154 $1,588 $2,789
Assuming no redemption............................... $746 $1,154 $1,588 $2,789
Class B shares
Assuming complete redemption at end of
period(2)(3)...................................... $778 $1,200 $1,747 $3,062
Assuming no redemption(3)............................ $278 $ 900 $1,547 $3,062
Class C shares
Assuming complete redemption at end of period(2)..... $378 $ 952 $1,651 $3,507
Assuming no redemption............................... $278 $ 952 $1,651 $3,507
Class K shares
Assuming complete redemption at end of period........ $198 $ 720 $1,269 $2,767
Assuming no redemption............................... $198 $ 720 $1,269 $2,767
Institutional Class shares
Assuming complete redemption at end of period........ $ 91 $ 284 $ 493 $1,096
Assuming no redemption............................... $ 91 $ 284 $ 493 $1,096
Investor Class shares
Assuming complete redemption at end of period........ $178 $ 551 $ 949 $2,062
Assuming no redemption............................... $178 $ 551 $ 949 $2,062
</Table>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class shares at the end of the
eighth year.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OF FUTURE EXPENSES. EACH
SELLING FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OF LESS THAN THOSE SHOWN. THE TABLE AND THE
ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF
THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION
OF AND DOES NOT REPRESENT A SELLING FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-11
FEE TABLE
This table compares the shareholder fees and annual operating expenses as a
percentage of net assets ("Expense Ratios"), of Class A, Class B and Class C
shares of AIM New Technology Fund, Class A, Class B, Class C, Class K and
Investor Class shares of INVESCO Telecommunications Fund and Class A, Class B,
Class C, Class K, Investor Class and Institutional Class shares of INVESCO
Technology Fund ("Buying Fund"; AIM New Technology Fund and INVESCO
Telecommunications Fund are each a "Fund"). This table assumes that only
shareholders of these two Funds have approved the reorganization. Pro Forma
Combined Expense Ratios of Buying Fund giving effect to the reorganization of
these Funds into Buying Fund are also provided.
<Table>
<Caption>
INVESCO
TELECOMMUNICATIONS FUND
AIM NEW TECHNOLOGY FUND SELLING FUND
SELLING FUND (AS OF 12/31/02)
(AS OF 12/31/02) ----------------------------------------------------
----------------------------------- INVESTOR
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS K CLASS
------- ------- ------- ------- ------- ------- ------- --------
SHAREHOLDER FEES
(fees paid directly from
your investment)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of offering
price).................. 5.50% None None 5.50% None None None None
Maximum Deferred Sales
Charge (Load)(1)........ None(2)(3) 5.00% 1.00% None(2)(4) 5.00% 1.00% None(5) None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are deducted
from fund assets)
Management Fees........... 1.00% 1.00% 1.00% 0.65% 0.65% 0.65% 0.65% 0.65%
Distribution and Service
(12b-1) Fees(7)......... 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.45% 0.25%
Other Expenses............ 1.31% 1.31% 1.31% 0.66% 10.50% 4.11% 2.20% 1.86%
Total Annual Fund
Operating
Expenses(8)(9).......... 2.66% 3.31% 3.31% 1.66% 12.15% 5.76% 3.30% 2.76%
Fee Waivers............... 0.66% 0.66% 0.66% None 9.40% 3.01% 1.10% None
Net Expenses.............. 2.00% 2.65% 2.65% 1.66% 2.75% 2.75% 2.20% 2.76%
</Table>
C-12
<Table>
<Caption>
INVESCO TECHNOLOGY FUND
BUYING FUND
(AS OF 3/31/03)
-------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 5.50% None None None None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING EXPENSES(6)
(expenses are deducted from fund
assets)
Management Fees..................... 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and Service (12b-1)
Fees(7)........................... 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses...................... 0.56% 1.14% 2.35% 1.44% 0.30% 0.92%
Total Annual Fund Operating
Expenses(9)....................... 1.51% 2.74% 3.95% 2.49% 0.90% 1.77%
Fee Waivers/Reimbursements.......... None None 1.20% 0.29% None None
Net Expenses........................ 1.51% 2.74% 2.75% 2.20% 0.90% 1.77%
<Caption>
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED
BUYING FUND
(AS OF 3/31/03)
--------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
-------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 5.50% None None None None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING EXPENSES(6)
(expenses are deducted from fund
assets)
Management Fees..................... 0.58% 0.58% 0.58% 0.58% 0.58% 0.58%
Distribution and Service (12b-1)
Fees(7)........................... 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses...................... 1.01% 1.32% 2.17% 1.47% 0.31% 1.14%
Total Annual Fund Operating
Expenses(9)....................... 1.94% 2.90% 3.75% 2.50% 0.89% 1.97%
Fee Waivers/Reimbursements.......... None 0.15% 1.00% 0.55% None 0.20%
Net Expenses........................ 1.94% 2.75% 2.75% 1.95% 0.89% 1.77%
</Table>
- ---------------
(1) For AIM New Technology Fund, calculated as a percentage of original purchase
price or redemption proceeds, whichever is less. For INVESCO
Telecommunications Fund, Buying Fund and Buying Fund Pro Forma Combined,
calculated as a percentage of original purchase price.
(2) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(3) Effective November 1, 2002, if you are a retirement plan participant and you
bought $1,000,000 or more of Class A shares, you may pay a 1% CDSC if a
total redemption of the retirement plan assets occurs within 12 months from
the date of the retirement plan's initial purchase.
(4) For qualified plans investing in Class A shares, you may pay a CDSC of 1% on
your Class A shares if the plan is redeemed within 12 months from the
initial deposit in the plan's INVESCO account.
(5) For qualified plans investing in Class K shares, you may pay a CDSC of 0.70%
on your Class K shares if the plan is redeemed within 12 months from the
initial deposit in the plan's INVESCO account.
(6) There is no guarantee that actual expenses will be the same as those shown
in the table.
(7) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares of a Fund for a long period of
time, you may pay more than the economic equivalent of the maximum front-end
sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
C-13
(8) AIM has contractually agreed to waive fees and/or reimburse expenses on AIM
New Technology Fund (excluding interest, taxes, dividend expense on short
sales, extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit the Total Annual Fund Operating Expenses of Class A
shares to 2.00% (e.g., if AIM waives 0.66% of Class A share expense, AIM
will also waive 0.66% of Class B and Class C share expenses). The expense
limitation agreement is in effect through December 31, 2004.
(9) INVESCO has contractually agreed to waive fees and bear any expenses on the
INVESCO Telecommunications Fund and Buying Fund through April 30, 2004 to
limit Total Annual Operating Expenses (excluding interest, taxes, brokerage
commissions, extraordinary expenses and increases in expenses due to expense
offset arrangements, if any) to 2.10%, 2.75%, 2.75% and 2.20% on Class A,
Class B, Class C and Class K shares, respectively. Further, INVESCO will
limit Investor Class shares to 1.77% for one year from the closing of the
reorganization. INVESCO has also voluntarily agreed to limit Total Annual
Operating Expenses on the INVESCO Telecommunications Fund (excluding
interest, taxes, brokerage commissions, extraordinary expenses and increases
in expenses due to expense offset arrangements, if any) to 1.85%, 2.50%,
2.50%, 1.95% and 1.75% on Class A, Class B, Class C, Class K and Investor
Class shares, respectively. INVESCO has also voluntarily agreed to limit
Total Annual Operating Expenses on Buying Fund (excluding interest, taxes,
brokerage commissions, extraordinary expenses and increases in expenses due
to expense offset arrangements, if any) to 1.50%, 2.15%, 2.15% and 1.15% on
Class A, Class B, Class C and the Institutional Class shares, respectively.
Further, INVESCO will change the voluntary limit on Class K shares from
2.20% to 1.95% upon closing of the reorganization. The voluntary expense
limitations cannot be revoked by INVESCO prior to May 2004. Effective June
1, 2002, INVESCO is entitled to reimbursement of any fees waived pursuant to
this arrangement if such reimbursement does not cause the funds to exceed
the current expense limitations and the reimbursement is made within three
years after INVESCO incurred the expense.
C-14
EXPENSE EXAMPLE
The Example is intended to help you compare the costs of investing in
different classes of each Fund and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes
of Buying Fund giving effect to the reorganization of each Fund into Buying Fund
are also provided. All costs are based upon the information set forth in the Fee
Table above.
The Example assumes that you invested $10,000 for the time periods
indicated and shows the expenses that you would pay both if you redeem all of
your shares at the end of those periods and if you do not redeem your shares.
The Example also assumes that your investment has a 5% return each year and that
the operating expenses remain the same. The Example reflects fee waivers and/or
expense reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
AIM NEW TECHNOLOGY FUND (SELLING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $742 $1,272 $1,827 $3,332
Assuming no redemption............................ $742 $1,272 $1,827 $3,332
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $768 $1,257 $1,870 $3,411
Assuming no redemption(3)......................... $268 $ 957 $1,670 $3,411
Class C shares
Assuming complete redemption at end of
period(2)...................................... $368 $ 957 $1,670 $3,559
Assuming no redemption............................ $268 $ 957 $1,670 $3,559
INVESCO TELECOMMUNICATIONS FUND (SELLING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $709 $1,045 $1,403 $2,407
Assuming no redemption............................ $709 $1,045 $1,403 $2,407
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $778 $2,888 $4,780 $7,273
Assuming no redemption(3)......................... $278 $2,588 $4,580 $7,273
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,447 $2,598 $5,401
Assuming no redemption............................ $278 $1,447 $2,598 $5,401
Class K shares
Assuming complete redemption at end of period..... $223 $ 913 $1,627 $3,520
Assuming no redemption............................ $223 $ 913 $1,627 $3,520
Investor Class shares
Assuming complete redemption at end of period..... $279 $ 856 $1,459 $3,090
Assuming no redemption............................ $279 $ 856 $1,459 $3,090
</Table>
C-15
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
INVESCO TECHNOLOGY FUND (BUYING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $695 $1,001 $1,328 $2,252
Assuming no redemption............................ $695 $1,001 $1,328 $2,252
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $777 $1,150 $1,650 $2,773
Assuming no redemption(3)......................... $277 $ 850 $1,450 $2,773
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,094 $1,928 $4,089
Assuming no redemption............................ $278 $1,094 $1,928 $4,089
Class K shares
Assuming complete redemption at end of period..... $223 $ 748 $1,300 $2,804
Assuming no redemption............................ $223 $ 748 $1,300 $2,804
Institutional Class shares
Assuming complete redemption at end of period..... $ 92 $ 287 $ 498 $1,108
Assuming no redemption............................ $ 92 $ 287 $ 498 $1,108
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 557 $ 959 $2,084
Assuming no redemption............................ $180 $ 557 $ 959 $2,084
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED (BUYING
FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $736 $1,126 $1,539 $2,690
Assuming no redemption............................ $736 $1,126 $1,539 $2,690
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $778 $1,184 $1,715 $2,985
Assuming no redemption(3)......................... $278 $ 884 $1,515 $2,985
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,055 $1,851 $3,929
Assuming no redemption............................ $278 $1,055 $1,851 $3,929
Class K shares
Assuming complete redemption at end of period..... $198 $ 726 $1,281 $2,795
Assuming no redemption............................ $198 $ 726 $1,281 $2,795
Institutional Class shares
Assuming complete redemption at end of period..... $ 91 $ 284 $ 493 $1,096
Assuming no redemption............................ $ 91 $ 284 $ 493 $1,096
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 599 $1,044 $2,280
Assuming no redemption............................ $180 $ 599 $1,044 $2,280
</Table>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class shares at the end of the
eighth year.
C-16
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OF FUTURE EXPENSES. EACH
SELLING FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OF LESS THAN THOSE SHOWN. THE TABLE AND THE
ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF
THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION
OF AND DOES NOT REPRESENT EACH SELLING FUND'S OR BUYING FUND'S PROJECTED OR
ACTUAL PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-17
FEE TABLE
This table compares the shareholder fees and annual operating expenses as a
percentage of net assets ("Expense Ratios"), of Class A, Class B and Class C of
AIM Global Science and Technology Fund, Class A, Class B, Class C, Class K and
Investor Class of INVESCO Telecommunications Fund and Class A, Class B, Class C,
Class K, Investor Class and Institutional Class of INVESCO Technology Fund
("Buying Fund"; AIM Global Science and Technology Fund and INVESCO
Telecommunications Fund are each a "Fund"). This table assumes that only
shareholders of these Funds have approved the reorganization. Pro Forma Combined
Expense Ratios of Buying Fund giving effect to the reorganization of these Funds
into Buying Fund are also provided.
<Table>
<Caption>
AIM GLOBAL SCIENCE AND
TECHNOLOGY FUND INVESCO TELECOMMUNICATIONS FUND
SELLING FUND SELLING FUND
(AS OF 10/31/03) (AS OF 3/31/03)
--------------------------------- -------------------------------------------------------
INVESTOR
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS K CLASS
------- ------- ------- ------- ------- ------- ------- --------
SHAREHOLDER FEES
(fees paid directly from
your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering
price)..................... 4.75% None None 5.50% None None None None
Maximum Deferred Sales Charge
(Load)(1).................. None(2)(3) 5.00% 1.00% None(2)(4) 5.00% 1.00% None(5) None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are deducted from
fund assets)
Management Fees.............. 0.97% 0.97% 0.97% 0.65% 0.65% 0.65% 0.65% 0.65%
Distribution and Service
(12b-1) Fees(7)............ 0.50% 1.00% 1.00% 0.35% 1.00% 1.00% 0.45% 0.25%
Other Expenses............... 1.09% 1.09% 1.09% 0.66% 10.50% 4.11% 2.20% 1.86%
Total Annual Fund Operating
Expenses(8)(9)............. 2.56% 3.06% 3.06% 1.66% 12.15% 5.76% 3.30% 2.76%
Fee Waivers.................. 0.55% 0.55% 0.55% None 9.40% 3.01% 1.10% None
Net Expenses................. 2.01% 2.51% 2.51% 1.66% 2.75% 2.75% 2.20% 2.76%
</Table>
C-18
<Table>
<Caption>
INVESCO TECHNOLOGY FUND
BUYING FUND
(AS OF 3/31/03)
-------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly
from your
investment)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price).... 5.50% None None None None None
Maximum Deferred
Sales Charge
(Load)(1).......... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are
deducted from fund
assets)
Management Fees...... 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and
Service (12b-1)
Fees(7)............ 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses....... 0.56% 1.14% 2.35% 1.44% 0.30% 0.92%
Total Annual Fund
Operating
Expenses(9)........ 1.51% 2.74% 3.95% 2.49% 0.90% 1.77%
Fee Waivers/
Reimbursements..... None None 1.20% 0.29% None None
Net Expenses......... 1.51% 2.74% 2.75% 2.20% 0.90% 1.77%
<Caption>
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED
BUYING FUND
(AS OF 3/31/03)
-------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly
from your
investment)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price).... 5.50% None None None None None
Maximum Deferred
Sales Charge
(Load)(1).......... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are
deducted from fund
assets)
Management Fees...... 0.56% 0.56% 0.56% 0.56% 0.56% 0.56%
Distribution and
Service (12b-1)
Fees(7)............ 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses....... 1.11% 1.41% 2.03% 1.47% 0.31% 1.14%
Total Annual Fund
Operating
Expenses(9)........ 2.02% 2.97% 3.59% 2.48% 0.87% 1.95%
Fee Waivers/
Reimbursements..... None 0.22% 0.84% 0.53% None 0.18%
Net Expenses......... 2.02% 2.75% 2.75% 1.95% 0.87% 1.77%
</Table>
- ---------------
(1) For AIM Global Science and Technology Fund, calculated as a percentage of
original purchase price or redemption proceeds, whichever is less. For
INVESCO Telecommunications Fund, Buying Fund and Buying Fund Pro Forma
Combined, calculated as a percentage of original purchase price.
(2) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(3) Effective November 1, 2002, if you are a retirement plan participant and you
bought $1,000,000 or more of Class A shares, you may pay a 1% CDSC if a
total redemption of the retirement plan assets occurs within 12 months from
the date of the retirement plan's initial purchase.
(4) For qualified plans investing in Class A shares, you may pay a CDSC of 1% on
your Class A shares if the plan is redeemed with 12 months from the initial
deposit in the plan's INVESCO account.
(5) For qualified plans investing in Class K shares, you may pay a CDSC of 0.70%
on you Class K shares if the plan is redeemed with 12 months from the
initial deposit in the plan's INVESCO account.
(6) There is no guarantee that actual expenses will be the same as those shown
in the table.
(7) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares of a Fund for a long period of
time, you may pay more than the economic equivalent of the maximum front-end
sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
(8) AIM has contractually agreed to limit Total Annual Fund Operating Expenses
on AIM Global Science and Technology Fund (excluding interest, taxes,
dividend expense on short sales, extraordinary items and increases in
expenses due to expense offset arrangements, if any) on Class A, Class B and
Class C shares to 2.00%, 2.50% and 2.50%, respectively. The expense
limitation agreement is in effect through October 31, 2004.
C-19
(9) INVESCO has contractually agreed to waive fees and bear any expenses on the
INVESCO Telecommunications Fund and Buying Fund through April 30, 2004 to
limit Total Annual Operating Expenses (excluding interest, taxes, brokerage
commissions, extraordinary expenses and increases in expenses due to expense
offset arrangements, if any) to 2.10%, 2.75%, 2.75% and 2.20% on Class A,
Class B, Class C and Class K shares, respectively. Further, INVESCO will
limit Investor Class shares to 1.77% for one year from the closing of the
reorganization. INVESCO has also voluntarily agreed to limit Total Annual
Operating Expenses on the INVESCO Telecommunications Fund (excluding
interest, taxes, brokerage commissions, extraordinary expenses and increases
in expenses due to expense offset arrangements, if any) to 1.85%, 2.50%,
2.50%, 1.95% and 1.75% on Class A, Class B, Class C, Class K and Investor
Class shares, respectively. INVESCO has also voluntarily agreed to limit
Total Annual Operating Expenses on Buying Fund (excluding interest, taxes,
brokerage commissions, extraordinary expenses and increases in expenses due
to expense offset arrangements, if any) to 1.50, 2.15%, 2.15% and 1.15% on
Class A, Class B, Class C and the Institutional Class shares, respectively.
Further, INVESCO will change the voluntary limit on Class K shares from
2.20% to 1.95% upon closing of the reorganization. The voluntary expense
limitations cannot be revoked by INVESCO prior to May 2004. Effective June
1, 2002, INVESCO is entitled to reimbursement of any fees waived pursuant to
this arrangement if such reimbursement does not cause the funds to exceed
the current expense limitations and the reimbursement is made with three
years after INVESCO incurred the expense.
C-20
EXPENSE EXAMPLE
The Example is intended to help you compare the costs of investing in
different classes of each Fund and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes
of Buying Fund giving effect to the reorganization of each Fund into Buying Fund
are also provided. All costs are based upon the information set forth in the Fee
Table above
The Example assumes that you invested $10,000 for the time periods
indicated and shows the expenses that you would pay both if you redeem all of
your shares at the end of those periods and if you do not redeem your shares.
The Example also assumes that your investment has a 5% return each year and that
the operating expenses remain the same. The Example reflects fee waivers and/or
expenses reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND (SELLING
FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $669 $1,184 $1,724 $3,194
Assuming no redemption............................ $669 $1,184 $1,724 $3,194
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $754 $1,194 $1,758 $3,219
Assuming no redemption(3)......................... $254 $ 894 $1,558 $3,219
Class C shares
Assuming complete redemption at end of
period(2)...................................... $354 $ 894 $1,558 $3,336
Assuming no redemption............................ $254 $ 894 $1,558 $3,336
INVESCO TELECOMMUNICATIONS FUND
(SELLING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $709 $1,045 $1,403 $2,407
Assuming no redemption............................ $709 $1,045 $1,403 $2,407
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $778 $2,888 $4,780 $7,273
Assuming no redemption(3)......................... $278 $2,588 $4,580 $7,273
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,447 $2,598 $5,401
Assuming no redemption............................ $278 $1,447 $2,598 $5,401
Class K shares
Assuming complete redemption at end of period..... $223 $ 913 $1,627 $3,520
Assuming no redemption............................ $223 $ 913 $1,627 $3,520
Investor Class shares
Assuming complete redemption at end of period..... $279 $ 856 $1,459 $3,090
Assuming no redemption............................ $279 $ 856 $1,459 $3,090
</Table>
C-21
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
INVESCO TECHNOLOGY FUND
(BUYING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $695 $1,001 $1,328 $2,252
Assuming no redemption............................ $695 $1,001 $1,328 $2,252
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $777 $1,150 $1,650 $2,773
Assuming no redemption(3)......................... $277 $ 850 $1,450 $2,773
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,094 $1,928 $4,089
Assuming no redemption............................ $278 $1,094 $1,928 $4,089
Class K shares
Assuming complete redemption at end of period..... $223 $ 748 $1,300 $2,804
Assuming no redemption............................ $223 $ 748 $1,300 $2,804
Institutional Class shares
Assuming complete redemption at end of period..... $ 92 $ 287 $ 498 $1,108
Assuming no redemption............................ $ 92 $ 287 $ 498 $1,108
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 557 $ 959 $2,084
Assuming no redemption............................ $180 $ 557 $ 959 $2,084
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED (BUYING
FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $744 $1,149 $1,578 $2,769
Assuming no redemption............................ $744 $1,149 $1,578 $2,769
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $778 $1,198 $1,743 $3,053
Assuming no redemption(3)......................... $278 $ 898 $1,543 $3,053
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,023 $1,788 $3,799
Assuming no redemption............................ $278 $1,023 $1,788 $3,799
Class K shares
Assuming complete redemption at end of period..... $198 $ 722 $1,273 $2,776
Assuming no redemption............................ $198 $ 722 $1,273 $2,776
Institutional Class shares
Assuming complete redemption at end of period..... $ 89 $ 278 $ 482 $1,073
Assuming no redemption............................ $ 89 $ 278 $ 482 $1,073
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 595 $1,035 $2,260
Assuming no redemption............................ $180 $ 595 $1,035 $2,260
</Table>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class shares at the end of the
eighth year.
C-22
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OF FUTURE EXPENSES. EACH
SELLING FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OF LESS THAN THOSE SHOWN. THE TABLE AND THE
ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF
THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION
OF AND DOES NOT REPRESENT EACH SELLING FUND'S OR BUYING FUND'S PROJECTED OR
ACTUAL PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-23
FEE TABLE
This table compares the shareholder fees and annual operating expenses as a
percentage of net assets ("Expense Ratios"), of Class A, Class B, Class C, Class
K and Investor Class of INVESCO Telecommunications Fund ("Fund") and Class A,
Class B, Class C, Class K, Investor Class and Institutional Class of INVESCO
Technology Fund ("Buying Fund"). This table assumes that only shareholders of
this Fund has approved the reorganization. Pro Forma Combined Expense Ratios of
Buying Fund giving effect to the reorganization of this Fund into Buying Fund
are also provided.
<Table>
<Caption>
INVESCO TELECOMMUNICATIONS FUND INVESCO TECHNOLOGY FUND
SELLING FUND BUYING FUND
(AS OF 3/31/03) (AS OF 3/31/03)
----------------------------------------------------- --------------------------------
INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS A CLASS B CLASS C
------- ------- ------- ------- -------- ------- ------- -------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 5.50% None None None None 5.50% None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(2)(3) 5.00% 1.00% None(4) None None(2)(3) 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES(5)
(expenses are deducted from fund
assets)
Management Fees.................... 0.65% 0.65% 0.65% 0.65% 0.65% 0.60% 0.60% 0.60%
Distribution and Service (12b-1)
Fees(6)........................... 0.35% 1.00% 1.00% 0.45% 0.25% 0.35% 1.00% 1.00%
Other Expenses..................... 0.66% 10.50% 4.11% 2.20% 1.86% 0.56% 1.14% 2.35%
Total Annual Fund Operating
Expenses(7)....................... 1.66% 12.15% 5.76% 3.30% 2.76% 1.51% 2.74% 3.95%
Fee Waiver......................... None 9.40% 3.01% 1.10% None None None 1.20%
Net Expenses....................... 1.66% 2.75% 2.75% 2.20% 2.76% 1.51% 2.74% 2.75%
<Caption>
INVESCO TECHNOLOGY FUND
BUYING FUND
(AS OF 3/31/03)
----------------------------------
INSTITUTIONAL INVESTOR
CLASS K CLASS CLASS
------- ------------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... None None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(4) None None
ANNUAL FUND OPERATING EXPENSES(5)
(expenses are deducted from fund
assets)
Management Fees.................... 0.60% 0.60% 0.60%
Distribution and Service (12b-1)
Fees(6)........................... 0.45% None 0.25%
Other Expenses..................... 1.44% 0.30% 0.92%
Total Annual Fund Operating
Expenses(7)....................... 2.49% 0.90% 1.77%
Fee Waiver......................... 0.29% None None
Net Expenses....................... 2.20% 0.90% 1.77%
</Table>
<Table>
<Caption>
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED
BUYING FUND
(AS OF 3/31/03)
---------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS K INSTITUTIONAL CLASS INVESTOR CLASS
------- ------- ------- ------- ------------------- --------------
SHAREHOLDER FEES
(fees paid directly from
your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering
price)...................... 5.50% None None None None None
Maximum Deferred Sales Charge
(Load)(1)................... None(2)(3) 5.00% 1.00% None(4) None None
ANNUAL FUND OPERATING
EXPENSES(5)
(expenses are deducted from
fund assets)
Management Fees............... 0.58% 0.58% 0.58% 0.58% 0.58% 0.58%
Distribution and Service
(12b-1) Fees(6)............. 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses................ 0.53% 0.94% 2.76% 1.47% 0.32% 1.14%
Total Annual Fund Operating
Expenses(7)................. 1.46% 2.52% 4.34% 2.50% 0.90% 1.97%
Fee Waivers................... None None 1.59% 0.55% None 0.20%
Net Expenses.................. 1.46% 2.52% 2.75% 1.95% 0.90% 1.77%
</Table>
- ---------------
(1) For INVESCO Telecommunications Fund, Buying Fund and Buying Fund Pro Forma
Combined, calculated as a percentage of original purchase price.
C-24
(2) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(3) For qualified plans investing in Class A shares, you may pay a CDSC of 1% on
your Class A shares if the plan is redeemed with 12 months from the initial
deposit in the plan's INVESCO account.
(4) For qualified plans investing in Class K shares, you may pay a CDSC of 0.70%
on you Class K shares if the plan is redeemed with 12 months from the
initial deposit in the plan's INVESCO account.
(5) There is no guarantee that actual expenses will be the same as those shown
in the table.
(6) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares of a Fund for a long period of
time, you may pay more than the economic equivalent of the maximum front-end
sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
(7) INVESCO has contractually agreed to waive fees and bear any expenses on the
INVESCO Telecommunications Fund and Buying Fund through April 30, 2004 to
limit Total Annual Operating Expenses (excluding interest, taxes, brokerage
commissions, extraordinary expenses and increases in expenses due to expense
offset arrangements, if any) to 2.10%, 2.75%, 2.75% and 2.20% on Class A,
Class B, Class C and Class K shares, respectively. Further, INVESCO will
limit Investor Class shares to 1.77% for one year from the closing of the
reorganization. INVESCO has also voluntarily agreed to limit Total Annual
Operating Expenses on the INVESCO Telecommunications Fund (excluding
interest, taxes, brokerage commissions, extraordinary expenses and increases
in expenses due to expense offset arrangements, if any) to 1.85%, 2.50%,
2.50%, 1.95% and 1.75% on Class A, Class B, Class C, Class K and Investor
Class shares, respectively. INVESCO has also voluntarily agreed to limit
Total Annual Operating Expenses on Buying Fund (excluding interest, taxes,
brokerage commissions, extraordinary expenses and increases in expenses due
to expense offset arrangements, if any) to 1.50, 2.15%, 2.15% and 1.15% on
Class A, Class B, Class C and the Institutional Class shares, respectively.
Further, INVESCO will change the voluntary limit on Class K shares from
2.20% to 1.95% upon closing of the reorganization. The voluntary expense
limitations cannot be revoked by INVESCO prior to May 2004. Effective June
1, 2002, INVESCO is entitled to reimbursement of any fees waived pursuant to
this arrangement if such reimbursement does not cause the funds to exceed
the current expense limitations and the reimbursement is made within three
years after INVESCO incurred the expense.
C-25
EXPENSE EXAMPLE
The Example is intended to help you compare the costs of investing in
different classes of Fund and Buying Fund with the cost of investing in other
mutual funds. Pro Forma Combined costs of investing in different classes of
Buying Fund giving effect to the reorganization of Fund into Buying Fund are
also provided. All costs are based upon the information set forth in the Fee
Table above.
The Example assumes that you invested $10,000 for the time periods
indicated and shows the expenses that you would pay both if you redeem all of
your shares at the end of those periods and if you do not redeem your shares.
The Example also assumes that your investment has a 5% return each year and that
the operating expenses remain the same. The Example reflects fee waivers and/or
expenses reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
INVESCO TELECOMMUNICATIONS FUND (SELLING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $709 $1,045 $1,403 $2,407
Assuming no redemption............................ $709 $1,045 $1,403 $2,407
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $778 $2,888 $4,780 $7,273
Assuming no redemption(3)......................... $278 $2,588 $4,580 $7,273
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,447 $2,598 $5,401
Assuming no redemption............................ $278 $1,447 $2,598 $5,401
Class K shares
Assuming complete redemption at end of period..... $223 $ 913 $1,627 $3,520
Assuming no redemption............................ $223 $ 913 $1,627 $3,520
Investor Class shares
Assuming complete redemption at end of period..... $279 $ 856 $1,459 $3,090
Assuming no redemption............................ $279 $ 856 $1,459 $3,090
INVESCO TECHNOLOGY FUND (BUYING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $695 $1,001 $1,328 $2,252
Assuming no redemption............................ $695 $1,001 $1,328 $2,252
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $777 $1,150 $1,650 $2,773
Assuming no redemption(3)......................... $277 $ 850 $1,450 $2,773
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,094 $1,928 $4,089
Assuming no redemption............................ $278 $1,094 $1,928 $4,089
Class K shares
Assuming complete redemption at end of period..... $223 $ 748 $1,300 $2,804
Assuming no redemption............................ $223 $ 748 $1,300 $2,804
</Table>
C-26
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
Institutional Class shares
Assuming complete redemption at end of period..... $ 92 $ 287 $ 498 $1,108
Assuming no redemption............................ $ 92 $ 287 $ 498 $1,108
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 557 $ 959 $2,084
Assuming no redemption............................ $180 $ 557 $ 959 $2,084
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED (BUYING
FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $690 $ 986 $1,304 $2,200
Assuming no redemption............................ $690 $ 986 $1,304 $2,200
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $755 $1,085 $1,540 $2,595
Assuming no redemption(3)......................... $255 $ 785 $1,340 $2,595
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,171 $2,077 $4,393
Assuming no redemption............................ $278 $1,171 $2,077 $4,393
Class K shares
Assuming complete redemption at end of period..... $198 $ 726 $1,281 $2,795
Assuming no redemption............................ $198 $ 726 $1,281 $2,795
Institutional Class shares
Assuming complete redemption at end of period..... $ 92 $ 287 $ 498 $1,108
Assuming no redemption............................ $ 92 $ 287 $ 498 $1,108
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 599 $1,044 $2,280
Assuming no redemption............................ $180 $ 599 $1,044 $2,280
</Table>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class shares at the end of the
eighth year.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OF FUTURE EXPENSES. EACH
SELLING FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OF LESS THAN THOSE SHOWN. THE TABLE AND THE
ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF
THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION
OF AND DOES NOT REPRESENT A SELLING FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-27
FEE TABLE
This table compares the shareholder fees and annual operating expenses as a
percentage of net assets ("Expense Ratios"), of Class A, Class B and Class C of
AIM New Technology Fund ("Fund") and Class A, Class B, Class C, Class K,
Investor Class and Institutional Class of INVESCO Technology Fund ("Buying
Fund"). This table assumes that only shareholders of this Fund has approved the
reorganization. Pro Forma Combined Expense Ratios of Buying Fund giving effect
to the reorganization of Fund into Buying Fund are also provided.
<Table>
<Caption>
AIM NEW TECHNOLOGY FUND
SELLING FUND
(AS OF 12/31/02)
------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)............................. 5.50% None None
Maximum Deferred Sales Charge (Load)(1)..................... None(2)(3) 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES(6)
(expenses are deducted from fund assets)
Management Fees............................................. 1.00% 1.00% 1.00%
Distribution and Service (12b-1) Fees(7).................... 0.35% 1.00% 1.00%
Other Expenses.............................................. 1.31% 1.31% 1.31%
Total Annual Fund Operating Expenses(8)..................... 2.66% 3.31% 3.31%
Fee Waivers................................................. 0.66% 0.66% 0.66%
Net Expenses................................................ 2.00% 2.65% 2.65%
</Table>
C-28
<Table>
<Caption>
INVESCO TECHNOLOGY FUND
BUYING FUND
(AS OF 3/31/03)
---------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly
from your
investment)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price).... 5.50% None None None None None
Maximum Deferred
Sales Charge
(Load)(1).......... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are
deducted from fund
assets)
Management Fees...... 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and
Service (12b-1)
Fees(7)............ 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses....... 0.56% 1.14% 2.35% 1.44% 0.30% 0.92%
Total Annual Fund
Operating
Expenses(9)........ 1.51% 2.74% 3.95% 2.49% 0.90% 1.77%
Fee Waivers.......... None None 1.20% 0.29% None None
Net Expenses......... 1.51% 2.74% 2.75% 2.20% 0.90% 1.77%
<Caption>
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED
BUYING FUND
(AS OF 3/31/03)
-------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly
from your
investment)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price).... 5.50% None None None None None
Maximum Deferred
Sales Charge
(Load)(1).......... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are
deducted from fund
assets)
Management Fees...... 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and
Service (12b-1)
Fees(7)............ 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses....... 1.03% 1.33% 1.77% 1.45% 0.32% 0.93%
Total Annual Fund
Operating
Expenses(9)........ 1.98% 2.93% 3.37% 2.50% 0.92% 1.78%
Fee Waivers.......... None 0.18% 0.62% 0.55% None 0.01%
Net Expenses......... 1.98% 2.75% 2.75% 1.95% 0.92% 1.77%
</Table>
- ---------------
(1) For AIM New Technology Fund, calculated as a percentage of original purchase
price or redemption proceeds, whichever is less. For Buying Fund and Buying
Fund Pro Forma Combined, calculated as a percentage of original purchase
price.
(2) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(3) Effective November 1, 2002, if you are a retirement plan participant and you
bought $1,000,000 or more of Class A shares, you may pay a 1% CDSC if a
total redemption of the retirement plan assets occurs within 12 months from
the date of the retirement plan's initial purchase.
(4) For qualified plans investing in Class A shares, you may pay a CDSC of 1% on
your Class A shares if the plan is redeemed with 12 months from the initial
deposit in the plan's INVESCO account.
(5) For qualified plans investing in Class K shares, you may pay a CDSC of 0.70%
on you Class K shares if the plan is redeemed with 12 months from the
initial deposit in the plan's INVESCO account.
(6) There is no guarantee that actual expenses will be the same as those shown
in the table.
(7) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares of a Fund for a long period of
time, you may pay more than the economic equivalent of the maximum front-end
sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
(8) AIM has contractually agreed to waive fees and/or reimburse expenses on AIM
New Technology Fund (excluding interest, taxes, dividend expense on short
sales, extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit the Total Annual Fund Operating Expenses of Class A
shares to 2.00% (e.g., if AIM waives 0.66% of Class A share expense, AIM
will also waive 0.66% of Class B and Class C share expenses). The expense
limitation agreement is in effect through December 31, 2004.
C-29
(9) INVESCO has contractually agreed to waive fees and bear any expenses on
Buying Fund through April 30, 2004 to limit Total Annual Operating Expenses
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases in expenses due to expense offset arrangements, if any) to
2.10%, 2.75%, 2.75% and 2.20% on Class A, Class B, Class C and Class K
shares, respectively. Further, INVESCO will limit Investor Class shares to
1.77% for one year from the closing of the reorganization. INVESCO has also
voluntarily agreed to limit Total Annual Operating Expenses on Buying Fund
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases in expenses due to expense offset arrangements, if any) to
1.50%, 2.15%, 2.15% and 1.15% on Class A, Class B, Class C and the
Institutional Class shares, respectively. Further, INVESCO will change the
voluntary limit on Class K shares from 2.20% to 1.95% upon closing of the
reorganization. The voluntary expense limitations cannot be revoked by
INVESCO prior to May 2004. Effective June 1, 2002, INVESCO is entitled to
reimbursement of any fees waived pursuant to this arrangement if such
reimbursement does not cause the funds to exceed the current expense
limitations and the reimbursement is made within three years after INVESCO
incurred the expense.
C-30
EXPENSE EXAMPLE
The Example is intended to help you compare the costs of investing in
different classes of Fund and Buying Fund with the cost of investing in other
mutual funds. Pro Forma Combined costs of investing in different classes of
Buying Fund giving effect to the reorganization of Fund into Buying Fund are
also provided. All costs are based upon the information set forth in the Fee
Table above.
The Example assumes that you invested $10,000 for the time periods
indicated and shows the expenses that you would pay both if you redeem all of
your shares at the end of those periods and if you do not redeem your shares.
The Example also assumes that your investment has a 5% return each year and that
the operating expenses remain the same. The Example reflects fee waivers and/or
expenses reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
AIM NEW TECHNOLOGY FUND (SELLING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $742 $1,272 $1,827 $3,332
Assuming no redemption............................ $742 $1,272 $1,827 $3,332
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $768 $1,257 $1,870 $3,411
Assuming no redemption(3)......................... $268 $ 957 $1,670 $3,411
Class C shares
Assuming complete redemption at end of
period(2)...................................... $368 $ 957 $1,670 $3,559
Assuming no redemption............................ $268 $ 957 $1,670 $3,559
INVESCO TECHNOLOGY FUND (BUYING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $695 $1,001 $1,328 $2,252
Assuming no redemption............................ $695 $1,001 $1,328 $2,252
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $777 $1,150 $1,650 $2,773
Assuming no redemption(3)......................... $277 $ 850 $1,450 $2,773
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,094 $1,928 $4,089
Assuming no redemption............................ $278 $1,094 $1,928 $4,089
Class K shares
Assuming complete redemption at end of period..... $223 $ 748 $1,300 $2,804
Assuming no redemption............................ $223 $ 748 $1,300 $2,804
Institutional Class shares
Assuming complete redemption at end of period..... $ 92 $ 287 $ 498 $1,108
Assuming no redemption............................ $ 92 $ 287 $ 498 $1,108
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 557 $ 959 $2,084
Assuming no redemption............................ $180 $ 557 $ 959 $2,084
</Table>
C-31
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED (BUYING
FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $740 $1,137 $1,559 $2,729
Assuming no redemption............................ $740 $1,137 $1,559 $2,729
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $778 $1,190 $1,727 $3,015
Assuming no redemption(3)......................... $278 $ 890 $1,527 $3,015
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $ 979 $1,702 $3,616
Assuming no redemption............................ $278 $ 979 $1,702 $3,616
Class K shares
Assuming complete redemption at end of period..... $198 $ 726 $1,281 $2,795
Assuming no redemption............................ $198 $ 726 $1,281 $2,795
Institutional Class shares
Assuming complete redemption at end of period..... $ 94 $ 293 $ 509 $1,131
Assuming no redemption............................ $ 94 $ 293 $ 509 $1,131
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 559 $ 964 $2,094
Assuming no redemption............................ $180 $ 559 $ 964 $2,094
</Table>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class shares at the end of the
eighth year.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OF FUTURE EXPENSES. EACH
SELLING FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OF LESS THAN THOSE SHOWN. THE TABLE AND THE
ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF
THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION
OF AND DOES NOT REPRESENT A SELLING FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-32
FEE TABLE
This table compares the shareholder fees and annual operating expenses as a
percentage of net assets ("Expense Ratios"), of Class A, Class B and Class C of
AIM Global Science and Technology Fund ("Fund") and Class A, Class B, Class C,
Class K, Investor Class and Institutional Class of INVESCO Technology Fund
("Buying Fund"). This table assumes that only shareholders of this Fund has
approved the reorganization. Pro Forma Combined Expense Ratios of Buying Fund
giving effect to the reorganization of Fund into Buying Fund are also provided.
<Table>
<Caption>
AIM GLOBAL SCIENCE
AND TECHNOLOGY FUND
SELLING FUND
(AS OF 10/31/02)
------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)............................. 4.75% None None
Maximum Deferred Sales Charge (Load)(1)..................... None(2)(3) 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES(6)
(expenses are deducted from fund assets)
Management Fees............................................. 0.97% 0.97% 0.97%
Distribution and Service (12b-1) Fees(7).................... 0.50% 1.00% 1.00%
Other Expenses.............................................. 1.09% 1.09% 1.09%
Total Annual Fund Operating Expenses(8)..................... 2.56% 3.06% 3.06%
Fee Waivers................................................. 0.55% 0.55% 0.55%
Net Expenses................................................ 2.01% 2.51% 2.51%
</Table>
C-33
<Table>
<Caption>
INVESCO TECHNOLOGY FUND
BUYING FUND
(AS OF 3/31/03)
-------------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly
from your
investment)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price).... 5.50% None None None None None
Maximum Deferred
Sales Charge
(Load)(1).......... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are
deducted from fund
assets)
Management Fees...... 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and
Service (12b-1)
Fees(7)............ 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses....... 0.56% 1.14% 2.35% 1.44% 0.30% 0.92%
Total Annual Fund
Operating
Expenses(9)........ 1.51% 2.74% 3.95% 2.49% 0.90% 1.77%
Fee Waivers.......... None None 1.20% 0.29% None None
Net Expenses......... 1.51% 2.74% 2.75% 2.20% 0.90% 1.77%
<Caption>
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED
BUYING FUND
(AS OF 3/31/03)
----------------------------------------------------------------------------
INSTITUTIONAL INVESTOR
CLASS A CLASS B CLASS C CLASS K CLASS CLASS
------- ------- ------- ------- ------------- --------
SHAREHOLDER FEES
(fees paid directly
from your
investment)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price).... 5.50% None None None None None
Maximum Deferred
Sales Charge
(Load)(1).......... None(2)(4) 5.00% 1.00% None(5) None None
ANNUAL FUND OPERATING
EXPENSES(6)
(expenses are
deducted from fund
assets)
Management Fees...... 0.58% 0.58% 0.58% 0.58% 0.58% 0.58%
Distribution and
Service (12b-1)
Fees(7)............ 0.35% 1.00% 1.00% 0.45% None 0.25%
Other Expenses....... 1.11% 1.41% 1.79% 1.44% 0.31% 0.92%
Total Annual Fund
Operating
Expenses(9)........ 2.04% 2.99% 3.37% 2.47% 0.89% 1.75%
Fee Waivers.......... None 0.24% 0.62% 0.52% None None
Net Expenses......... 2.04% 2.75% 2.75% 1.95% 0.89% 1.75%
</Table>
- ---------------
(1) For AIM Global Science and Technology Fund, calculated as a percentage of
original purchase price or redemption proceeds, whichever is less. For
Buying Fund and Buying Fund Pro Forma Combined, calculated as a percentage
of original purchase price.
(2) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(3) Effective November 1, 2002, if you are a retirement plan participant and you
bought $1,000,000 or more of Class A shares, you may pay a 1% CDSC if a
total redemption of the retirement plan assets occurs within 12 months from
the date of the retirement plan's initial purchase.
(4) For qualified plans investing in Class A shares, you may pay a CDSC of 1% on
your Class A shares if the plan is redeemed with 12 months from the initial
deposit in the plan's INVESCO account.
(5) For qualified plans investing in Class K shares, you may pay a CDSC of 0.70%
on you Class K shares if the plan is redeemed with 12 months from the
initial deposit in the plan's INVESCO account.
(6) There is no guarantee that actual expenses will be the same as those shown
in the table.
(7) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares of a Fund for a long period of
time, you may pay more than the economic equivalent of the maximum front-end
sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
(8) AIM has contractually agreed to limit Total Annual Fund Operating Expenses
on AIM Global Science and Technology Fund (excluding interest, taxes,
dividend expense on short sales, extraordinary items and increases in
expenses due to expense offset arrangements, if any) on Class A, Class B and
Class C shares to 2.00%, 2.50% and 2.50%, respectively. The expense
limitation agreement is in effect through October 31, 2004.
C-34
(9) INVESCO has contractually agreed to waive fees and bear any expenses on
Buying Fund through April 30, 2004 to limit Total Annual Operating Expenses
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases in expenses due to expense offset arrangements, if any) to
2.10%, 2.75%, 2.75% and 2.20% on Class A, Class B, Class C and Class K
shares, respectively. Further, INVESCO will limit Investor Class shares to
1.77% for one year from the closing of the reorganization. INVESCO has
voluntarily agreed to limit Total Annual Operating Expenses on Buying Fund
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases in expenses due to expense offset arrangements, if any) to
1.50%, 2.15%, 2.15% and 1.15% on Class A, Class B, Class C and the
Institutional Class shares, respectively. Further, INVESCO will change the
voluntary limit on Class K shares from 2.20% to 1.95% upon closing of the
reorganization. The voluntary expense limitations cannot be revoked by
INVESCO prior to May 2004. Effective June 1, 2002, INVESCO is entitled to
reimbursement of any fees waived pursuant to this arrangement if such
reimbursement does not cause the funds to exceed the current expense
limitations and the reimbursement is made within three years after INVESCO
incurred the expense.
C-35
EXPENSE EXAMPLE
The Example is intended to help you compare the costs of investing in
different classes of Fund and Buying Fund with the cost of investing in other
mutual funds. Pro Forma Combined costs of investing in different classes of
Buying Fund giving effect to the reorganization of Fund into Buying Fund are
also provided. All costs are based upon the information set forth in the Fee
Table above.
The Example assumes that you invested $10,000 for the time periods
indicated and shows the expenses that you would pay both if you redeem all of
your shares at the end of those periods and if you do not redeem your shares.
The Example also assumes that your investment has a 5% return each year and that
the operating expenses remain the same. The Example reflects fee waivers and/or
expenses reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND (SELLING
FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $669 $1,184 $1,724 $3,194
Assuming no redemption............................ $669 $1,184 $1,724 $3,194
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $754 $1,194 $1,758 $3,219
Assuming no redemption(3)......................... $254 $ 894 $1,558 $3,219
Class C shares
Assuming complete redemption at end of
period(2)...................................... $354 $ 894 $1,558 $3,336
Assuming no redemption............................ $254 $ 894 $1,558 $3,336
INVESCO TECHNOLOGY FUND (BUYING FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $695 $1,001 $1,328 $2,252
Assuming no redemption............................ $695 $1,001 $1,328 $2,252
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $777 $1,150 $1,650 $2,773
Assuming no redemption(3)......................... $277 $ 850 $1,450 $2,773
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,094 $1,928 $4,089
Assuming no redemption............................ $278 $1,094 $1,928 $4,089
Class K shares
Assuming complete redemption at end of period..... $223 $ 748 $1,300 $2,804
Assuming no redemption............................ $223 $ 748 $1,300 $2,804
Institutional Class shares
Assuming complete redemption at end of period..... $ 92 $ 287 $ 498 $1,108
Assuming no redemption............................ $ 92 $ 287 $ 498 $1,108
Investor Class shares
Assuming complete redemption at end of period..... $180 $ 557 $ 959 $2,084
Assuming no redemption............................ $180 $ 557 $ 959 $2,084
</Table>
C-36
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
INVESCO TECHNOLOGY FUND PRO FORMA COMBINED (BUYING
FUND)
Class A shares(1)
Assuming complete redemption at end of period..... $746 $1,154 $1,588 $2,789
Assuming no redemption............................ $746 $1,154 $1,588 $2,789
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $778 $1,202 $1,751 $3,068
Assuming no redemption(3)......................... $278 $ 902 $1,551 $3,068
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $ 979 $1,702 $3,616
Assuming no redemption............................ $278 $ 979 $1,702 $3,616
Class K shares
Assuming complete redemption at end of period..... $198 $ 720 $1,269 $2,767
Assuming no redemption............................ $198 $ 720 $1,269 $2,767
Institutional Class shares
Assuming complete redemption at end of period..... $ 91 $ 284 $ 493 $1,096
Assuming no redemption............................ $ 91 $ 284 $ 493 $1,096
Investor Class shares
Assuming complete redemption at end of period..... $178 $ 551 $ 949 $2,062
Assuming no redemption............................ $178 $ 551 $ 949 $2,062
</Table>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class shares at the end of the
eighth year.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OF FUTURE EXPENSES. EACH
SELLING FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OF LESS THAN THOSE SHOWN. THE TABLE AND THE
ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF
THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION
OF AND DOES NOT REPRESENT A SELLING FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-37
EXHIBIT D
TRUSTEE COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for
each AIM trustee of each AIM Trust who was not affiliated with AIM during the
year ended December 31, 2002.
<Table>
<Caption>
AGGREGATE COMPENSATION
FROM AIM TRUST(1) TOTAL
---------------------- ESTIMATED COMPENSATION
AIM RETIREMENT BENEFITS ANNUAL FROM ALL
AIM FUNDS INVESTMENT ACCRUED BY ALL BENEFITS UPON AIM
NAME OF TRUSTEE GROUP FUNDS AIM FUNDS(2) RETIREMENT(3) FUNDS(4)
- --------------- --------- ---------- ------------------- ------------- ------------
Frank S. Bayley.............. $20,222 $7,460 $142,800 $90,000 $150,000
Bruce L. Crockett............ 20,094 7,413 50,132 90,000 149,000
Owen Daly II(5).............. 0 1,047 40,045 75,000 -0-
Albert R. Dowden............. 20,222 7,460 57,955 90,000 150,000
Edward K. Dunn, Jr. ......... 20,094 7,413 94,149 90,000 149,000
Jack M. Fields............... 20,222 7,460 29,153 90,000 153,000
Carl Frischling(6)........... 20,222 7,460 74,511 90,000 150,000
Prema Mathai-Davis........... 20,222 7,460 33,931 90,000 150,000
Lewis F. Pennock............. 20,811 7,676 54,802 90,000 154,000
Ruth H. Quigley.............. 20,222 7,460 142,502 90,000 153,000
Louis S. Sklar............... 20,683 7,629 78,500 90,000 153,000
</Table>
- ---------------
(1) Amounts shown are based on the fiscal years ended October 31, 2002 and
December 31, 2002 for AIM Investment Funds and AIM Funds Group,
respectively. The total amount of compensation deferred by all trustees of
AIM Investment Funds during the fiscal year ended October 31, 2002,
including earnings, was $34,109. The total amount of compensation deferred
by all trustees of AIM Funds Group during the fiscal year ended December 31,
2002, including earnings, was $89,867.
(2) During the fiscal year ended October 31, 2002, the total amount of expenses
allocated to AIM Investment Funds in respect of such retirement benefits was
$3,876. During the fiscal year ended December 31, 2002, the total amount of
expenses allocated to AIM Funds Group in respect of such retirement benefits
was $102,009.
(3) Amounts shown assume each trustee serves until his or her normal retirement
date.
(4) All trustees currently serve as directors or trustees of 17 registered
investment companies advised by AIM.
(5) Mr. Daly was a trustee until December 31, 2001, when he retired.
(6) During the fiscal year ended October 31, 2002, AIM Investment Funds paid
$25,413 in legal fees to Kramer Levin Naftalis & Frankel LLP ("Kramer
Levin") for services rendered by such firm as counsel to the independent
trustees of AIM Investment Funds. During the fiscal year ended December 31,
2002, AIM Funds Group paid $64,893 in legal fees to Kramer Levin for
services rendered by such firm as counsel to the independent trustees of AIM
Funds Group. Mr. Frischling is a partner of Kramer Levin.
D-1
EXHIBIT E
OFFICERS OF AIM TRUSTS
The following table provides information with respect to the current
officers of each AIM Trust. Each officer is elected by the applicable Board of
Trustees and serves until his or her successor is chosen and qualified or until
his or her resignation or removal by such Board of Trustees. The business
address of each of the following persons is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND
POSITION(S) HELD WITH AIM OFFICER
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------- ------- -------------------------------------------
Robert H. Graham -- 1946.......... 1992* Director and Chairman, A I M Management Group Inc.
Chairman and President 1998** (financial services holding company); and Director
and Vice Chairman, AMVESCAP PLC (parent of AIM and a
global investment management firm) and Chairman,
AMVESCAP PLC -- AIM Division; 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), A I M Fund Services, Inc.
(registered transfer agent), and Fund Management
Company (registered broker dealer); and Chief
Executive Officer, AMVESCAP PLC-Managed Products
Mark H. Williamson -- 1951........ 2003 Director, President and Chief Executive Officer,
Executive Vice President A I M Management Group Inc.; Director, Chairman and
President, A I M Advisors, Inc. (registered
investment advisor); Director, A I M Distributors,
Inc. (registered broker dealer); and Chief Executive
Officer of the AIM Division of AMVESCAP PLC
(2003-present); formerly, Chief Executive Officer,
Managed Products Division, AMVESCAP PLC (2001-2002);
Chairman of the Board (1998-2002), President
(1998-2002) and Chief Executive Officer (1998-2002)
of INVESCO Funds Group, Inc. (registered investment
advisor) and INVESCO Distributors, Inc. (registered
broker dealer); Chief Operating Officer and Chairman
of the Board of INVESCO Global Health Sciences Fund;
Chairman and Chief Executive Officer of NationsBanc
Advisors, Inc.; and Chairman of NationsBanc
Investments, Inc.
Kevin M. Carome -- 1956........... 2003 Director, Senior Vice President and General Counsel,
Senior Vice President A I M Management Group Inc. (financial services
holding company) and A I M Advisors, Inc.; and Vice
President, A I M Capital Management, Inc., A I M
Distributors, Inc. and A I M Fund Services; Director,
Vice President and General Counsel, Fund Management
Company
Gary T. Crum -- 1947.............. 1992* Director, Chairman and Director of Investments, A I M
Senior Vice President 1998** Capital Management, Inc.; Director and Executive Vice
President, A I M Management Group, Inc.; Director and
Senior Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP PLC;
formerly Chief Executive Officer and President, A I M
Capital Management, Inc.
Robert G. Alley -- 1948........... 1992* Managing Director and Chief Fixed Income Officer,
Vice President A I M Capital Management, Inc. and Vice President,
A I M Advisors, Inc.
</Table>
E-1
<Table>
<Caption>
NAME, YEAR OF BIRTH AND
POSITION(S) HELD WITH AIM OFFICER
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------- ------- -------------------------------------------
Stuart W. Coco -- 1955............ 1992* Managing Director and Chief Research Officer -- Fixed
Vice President 2002** Income, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
Melville B. Cox -- 1943........... 1992* Vice President and Chief Compliance Officer, A I M
Vice President 1998** Advisors, Inc. and A I M Capital Management, Inc.;
and Vice President, A I M Fund Services, Inc.
Edgar M. Larsen -- 1940........... 1999* Vice President, A I M Advisors, Inc.; and President,
Vice President 2002** Chief Executive Officer and Chief Investment Officer,
A I M Capital Management, Inc.
Dana R. Sutton -- 1959............ 1992* Vice President and Fund Treasurer, A I M Advisors,
Vice President and Treasurer 1998** Inc.
Nancy L. Martin -- 1957........... 2003 Vice President, A I M Advisors, Inc.; and Vice
Secretary President and General Counsel, A I M Capital
Management, Inc.
</Table>
- ---------------
* Denotes service as officer of AIM Funds Group.
** Denotes service as officer of AIM Investment Funds.
E-2
EXHIBIT F
SECURITY OWNERSHIP OF MANAGEMENT OF AIM TRUSTS
To the best knowledge of the AIM Funds Group, the following table sets
forth certain information regarding the ownership as of July 25, 2003 of shares
of beneficial interest of each class of AIM New Technology Fund by the trustees,
nominees, and current executive officers of AIM Funds Group. No information is
given as to a class if a trustee, nominee or current executive officer held no
shares of any or all classes of AIM New Technology Fund as of July 25, 2003.
<Table>
<Caption>
NUMBER OF SHARES OF
AIM NEW TECHNOLOGY FUND PERCENT OF
NAME OF TRUSTEE/NOMINEE/OFFICER CLASS OWNED BENEFICIALLY CLASS*
- ------------------------------- -------- ----------------------- ----------
Frank S. Bayley..................................
Bruce L. Crockett................................
Albert R. Dowden.................................
Edward K. Dunn, Jr. .............................
Jack M. Fields...................................
Carl Frischling..................................
Robert H. Graham.................................
Prema Mathai-Davis...............................
Lewis F. Pennock.................................
Ruth H. Quigley..................................
Louis S. Sklar...................................
Mark H. Williamson...............................
Bob R. Baker.....................................
James T. Bunch...................................
Gerald J. Lewis..................................
Larry Soll, Ph.D. ...............................
Kevin M. Carome..................................
Gary T. Crum.....................................
Robert G. Alley..................................
Stuart W. Coco...................................
Melville B. Cox..................................
Edgar M. Larsen..................................
Dana R. Sutton...................................
Nancy L. Martin..................................
All trustees, nominees, and current executive
officers as a group............................
</Table>
- ---------------
* To the best knowledge of AIM Funds Group, the ownership of shares of AIM New
Technology Fund by trustees, nominees and current executive officers of AIM
Funds Group as a group constituted less than 1% of each class of AIM New
Technology Fund as of July 25, 2003.
F-1
To the best knowledge of the AIM Investment Funds, the following table sets
forth certain information regarding the ownership as of July 25, 2003 of shares
of beneficial interest of each class of AIM Global Science and Technology Fund
by the trustees, nominees, and current executive officers of AIM Investment
Funds. No information is given as to a class if a trustee, nominee or current
executive officer held no shares of any or all classes of AIM Global Science and
Technology Fund as of July 25, 2003.
<Table>
<Caption>
NUMBER OF SHARES OF
AIM GLOBAL SCIENCE AND
TECHNOLOGY FUND PERCENT OF
NAME OF TRUSTEE/NOMINEE/OFFICER CLASS OWNED BENEFICIALLY CLASS*
- ------------------------------- -------- ---------------------- ----------
Frank S. Bayley.....................................
Bruce L. Crockett...................................
Albert R. Dowden....................................
Edward K. Dunn, Jr. ................................
Jack M. Fields......................................
Carl Frischling.....................................
Robert H. Graham....................................
Prema Mathai-Davis..................................
Lewis F. Pennock....................................
Ruth H. Quigley.....................................
Louis S. Sklar......................................
Mark H. Williamson..................................
Bob R. Baker........................................
James T. Bunch......................................
Gerald J. Lewis.....................................
Larry Soll, Ph.D. ..................................
Kevin M. Carome.....................................
Gary T. Crum........................................
Robert G. Alley.....................................
Stuart W. Coco......................................
Melville B. Cox.....................................
Edgar M. Larsen.....................................
Dana R. Sutton......................................
Nancy L. Martin.....................................
All trustees, nominees, and current executive
officers as a group...............................
</Table>
- ---------------
* To the best knowledge of AIM Investment Funds, the ownership of shares of AIM
Global Science and Technology Fund by trustees, nominees and current executive
officers of AIM Investment Funds as a group constituted less than 1% of each
class of AIM Global Science and Technology Fund as of July 25, 2003.
F-2
EXHIBIT G
TRUSTEE OWNERSHIP OF FUND SHARES
Set forth below is the dollar range of equity securities beneficially owned
by each trustee and nominee as of December 31, 2002 (i) in each AIM Fund and
(ii) on an aggregate basis, in all registered investment companies overseen by
the trustee within the AIM Funds complex:
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
DOLLAR RANGE OF EQUITY REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY SECURITIES IN AIM COMPANIES OVERSEEN
SECURITIES IN AIM NEW GLOBAL SCIENCE AND BY TRUSTEE IN THE
NAME OF TRUSTEE TECHNOLOGY FUND TECHNOLOGY FUND AIM FUNDS COMPLEX
- --------------- ---------------------- ---------------------- -------------------------
INTERESTED TRUSTEES
Robert H. Graham................. None None Over $100,000
Mark H. Williamson............... None None $10,001-$50,000
INDEPENDENT TRUSTEES
Frank S. Bayley.................. None None $10,001-$50,000
Bruce L. Crockett................ None None $1-$10,000
Albert R. Dowden................. None None $50,001-$100,000
Edward K. Dunn, Jr.(1)........... None $1-$10,000 Over $100,000
Jack M. Fields(1)................ None None Over $100,000
Carl Frischling(1)............... None None Over $100,000
Prema Mathai-Davis(1)............ None None Over $100,000
Lewis F. Pennock................. None None $50,001-$100,000
Ruth H. Quigley.................. None None $1-$10,000
Louis S. Sklar(1)................ None None Over $100,000
INDEPENDENT NOMINEES
Bob R. Baker..................... None None None
James T. Bunch................... None None None
Gerald J. Lewis.................. None None None
Larry Soll, Ph.D................. None None None
</Table>
- ---------------
(1) Includes the total amount of compensation deferred by the trustee at his or
her election pursuant to a deferred compensation plan. Such deferred
compensation is placed in a deferral account and deemed to be invested in
one or more of the funds within the AIM Family of Funds.
G-1
EXHIBIT H
DIRECTOR COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for
each continuing director of Company who was not affiliated with INVESCO during
the year ended December 31, 2002.
<Table>
<Caption>
TOTAL
COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM ALL
COMPENSATION ACCRUED BY BENEFITS UPON INVESCO
NAME OF DIRECTOR FROM COMPANY(1) COMPANY(2) RETIREMENT(3) FUNDS(4)
- ---------------- --------------- ------------------- ---------------- ------------
Bob R. Baker.................... $34,423 0 $9,323 $138,000
James T. Bunch.................. $31,203 0 0 124,625
Gerald J. Lewis................. $28,870 0 0 116,500
Larry Soll, Ph.D. .............. $31,522 0 0 126,000
</Table>
- ---------------
(1) The vice chairman of the Board, the chairs of certain of your Fund's
committees who are independent directors, and the members of your Fund's
committees who are independent directors each receive compensation for
serving in such capacities in addition to the compensation paid to all
independent directors. Amounts shown are based on the fiscal year ended
March 2003.
(2) Represents estimated benefits accrued with respect to the current Retirement
Plan and Deferred Retirement Plan Account Agreement, and not compensation
deferred at the election of the directors. Amounts shown are based on the
fiscal year ended March 31, 2003.
(3) These amounts represent the estimated annual benefits payable by the ten
INVESCO Funds upon the directors' retirement under the current Retirement
Plan and Deferred Retirement Plan Account Agreement, calculated using the
current method of allocating director compensation among the INVESCO Funds.
These estimated benefits assume retirement at age 72. With the exception of
Messrs. Bunch and Lewis, each of these directors has served as a director of
one or more of the INVESCO Funds for the minimum five-year period required
to be eligible to participate in the current Retirement Plan.
(4) All continuing directors currently serve as directors of ten registered
investment companies advised by INVESCO.
H-1
EXHIBIT I
OFFICERS OF COMPANY
The following table provides information with respect to the current
officers of Company. Each officer is elected by the Board of Directors and
serves until his or her successor is chosen and qualified or until his or her
resignation or removal by the Board of Directors. The business address of all
officers of Company is 4350 South Monaco Street, Denver, Colorado 80237.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND OFFICER
POSITION(S) HELD WITH COMPANY SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ----------------------------- ------- -------------------------------------------
Mark H. Williamson -- 1951........ 1998 Director, President and Chief Executive Officer, A I M
Chairman of the Board Management Group Inc.; Director, Chairman and
President, A I M Advisors, Inc. (registered investment
advisor); Director, A I M Distributors, Inc.
(registered broker dealer); and Chief Executive Officer
of the AIM Division of AMVESCAP PLC (2003-present);
formerly, Chief Executive Officer, Managed Products
Division, AMVESCAP PLC (2001-2002); Chairman of the
Board (1998-2002), President (1998-2002) and Chief
Executive Officer (1998-2002) of INVESCO Funds Group,
Inc. (registered investment advisor) and INVESCO
Distributors, Inc. (registered broker dealer); Chief
Operating Officer and Chairman of the Board of INVESCO
Global Health Sciences Fund; Chairman and Chief
Executive Officer of NationsBanc Advisors, Inc.; and
Chairman of NationsBanc Investments, Inc.
Raymond R. Cunningham -- 1951..... 2001 President (2001-present) and Chief Executive Officer
President and Chief Executive (2003-present) of INVESCO Funds Group, Inc.; Chairman
Officer of the Board (2003-present) and President
(2003-present) of INVESCO Distributors, Inc.; formerly,
Chief Operating Officer (2001-2003) and Senior Vice
President (1999-2002) of INVESCO Funds Group, Inc. and
INVESCO Distributors, Inc.; and Senior Vice President
of GT Global -- North America (1992-1998).
Glen A. Payne -- 1947............. 1989 Senior Vice President, General Counsel and Secretary of
Secretary INVESCO Funds Group, Inc.; Senior Vice President,
Secretary and General Counsel of INVESCO Distributors,
Inc.; formerly, Secretary of INVESCO Global Health
Sciences Fund; General Counsel of INVESCO Trust Company
(1989-1998); and employee of the Securities and
Exchange Commission, Washington, DC (1973-1989).
Ronald L. Grooms -- 1946.......... 1988 Senior Vice President and Treasurer of INVESCO Funds
Chief Accounting Officer, Chief Group, Inc.; and Senior Vice President and Treasurer of
Financial Officer and Treasurer INVESCO Distributors, Inc.; formerly, Treasurer and
Principal Financial and Accounting Officer of INVESCO
Global Health Sciences Fund; and Senior Vice President
and Treasurer of INVESCO Trust Company (1988-1998).
</Table>
I-1
<Table>
<Caption>
NAME, YEAR OF BIRTH AND OFFICER
POSITION(S) HELD WITH COMPANY SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ----------------------------- ------- -------------------------------------------
William J. Galvin, Jr. -- 1956.... 1992 Senior Vice President and Assistant Secretary INVESCO
Assistant Secretary Funds Group, Inc.; and Senior Vice President and
Assistant Secretary of INVESCO Distributors, Inc.;
formerly, Trust Officer of INVESCO Trust Company
(1995-1998).
Pamela J. Piro -- 1960............ 1999 Vice President and Assistant Treasurer of INVESCO Funds
Assistant Treasurer Group, Inc.; and Assistant Treasurer of INVESCO
Distributors, Inc.; formerly, Assistant Vice President
(1996-1997).
Tane T. Tyler -- 1965............. 2002 Vice President and Assistant General Counsel of INVESCO
Assistant Secretary Funds Group, Inc.
</Table>
I-2
EXHIBIT J
SECURITY OWNERSHIP OF MANAGEMENT OF COMPANY
To the best knowledge of Company, the following table sets forth certain
information regarding the ownership as of July 25, 2003 of the shares of common
stock of each class of each series portfolio of Company by the directors,
nominees, and current executive officers of Company:
<Table>
<Caption>
NUMBER OF SHARES
OWNED BENEFICIALLY AND
SERIES AND CLASS PERCENTAGE OF CLASS*
---------------- ----------------------
Bob R. Baker...............................................
Sueann Ambron..............................................
Victor L. Andrews..........................................
Lawrence H. Budner.........................................
James T. Bunch.............................................
Raymond R. Cunningham......................................
Richard W. Healey..........................................
Gerald J. Lewis............................................
John W. McIntyre...........................................
Larry Soll, Ph.D. .........................................
Mark H. Williamson.........................................
Frank S. Bayley............................................
Bruce L. Crockett..........................................
Albert R. Dowden...........................................
Edward K. Dunn, Jr. .......................................
Jack M. Fields.............................................
Carl Frischling............................................
Robert H. Graham...........................................
Prema Mathai-Davis.........................................
Lewis F. Pennock...........................................
Ruth H. Quigley............................................
Louis S. Sklar.............................................
Glen A. Payne..............................................
Ronald L. Grooms...........................................
William J. Galvin, Jr. ....................................
Pamela J. Piro.............................................
Tane T. Tyler..............................................
</Table>
- ---------------
* To the best knowledge of Company, the ownership of shares of each series
portfolio of Company by current directors, nominees, and current executive
officers of Company as a group constituted less than 1% of each class of each
series portfolio of Company as of July 25, 2003.
J-1
EXHIBIT K
DIRECTOR OWNERSHIP OF FUND SHARES
Set forth below is the dollar range of equity securities beneficially owned
by each continuing director and nominee as of December 31, 2002 (i) in INVESCO
Telecommunications Fund and (ii) on an aggregate basis, in all registered
investment companies overseen by the director within the INVESCO Funds complex:
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY COMPANIES OVERSEEN
SECURITIES IN INVESCO BY DIRECTOR IN THE
NAME OF DIRECTOR TELECOMMUNICATIONS FUND INVESCO FUNDS COMPLEX
- ---------------- ----------------------- -------------------------
INDEPENDENT DIRECTORS
Bob R. Baker...................................... $1-$10,000 $10,001-$50,000
James T. Bunch.................................... $1-$10,000 $50,001-$100,000
Gerald J. Lewis................................... $1-$10,000 $50,001-$100,000
Larry Soll, Ph.D. ................................ $10,001-$50,000 Over $100,000
INTERESTED DIRECTOR
Mark H. Williamson................................ $10,001-$50,000 Over $100,000
INDEPENDENT NOMINEES
Frank S. Bayley................................... None None
Bruce L. Crockett................................. None None
Albert R. Dowden.................................. None None
Edward K. Dunn.................................... None None
Jack M. Fields.................................... None None
Carl Frischling................................... None None
Prema Mathai-Davis................................ None None
Lewis F. Pennock.................................. None None
Ruth H. Quigley................................... None None
Louis S. Sklar.................................... None None
NOMINEE WHO WILL BE INTERESTED
Robert H. Graham.................................. None None
</Table>
K-1
EXHIBIT L
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF
A I M ADVISORS, INC.
The following table provides information with respect to the principal
executive officer and the directors of A I M Advisors, Inc. ("AIM"). The
business address of the principal executive officer and the directors of AIM is
11 Greenway Plaza, Suite 100, Houston, TX 77046.
<Table>
<Caption>
NAME AND ADDRESS POSITION WITH AIM PRINCIPAL OCCUPATION
- ---------------- ----------------- --------------------
Mark H. Williamson................... Director, Chairman See director table under Proposal 2
and President
Kevin M. Carome...................... Director, Senior Vice Director, Senior Vice President,
President, General Secretary and General Counsel, A I M
Counsel and Secretary Management Group Inc.; Vice President,
A I M Capital Management, Inc., A I M
Distributors, Inc. and A I M Fund
Services, Inc., and Director, Vice
President and General Counsel, Fund
Management Company
Gary T. Crum......................... Director, Senior Vice Chairman, Director and Director of
President and Chief Investments, A I M Capital Management,
Financial Officer Inc.; Director and Executive Vice
President, A I M Management Group Inc.;
Director, A I M Distributors, Inc. and
AMVESCAP PLC
Dawn M. Hawley....................... Director, Senior Vice Director, Senior Vice President and
President and Chief Chief Financial Officer, A I M
Financial Officer Management Group Inc.; Vice President
and Treasurer, A I M Capital
Management, Inc. and A I M
Distributors, Inc.; Director, Vice
President and Chief Financial Officer,
A I M Fund Services, Inc.; and Vice
President and Chief Financial Officer,
Fund Management Company
</Table>
L-1
EXHIBIT M
COMPENSATION TO INVESCO FUNDS GROUP, INC.
Company pays INVESCO Funds Group, Inc., out of the assets of INVESCO
Telecommunications Fund, as full compensation for all services rendered, an
advisory fee for INVESCO Telecommunications Fund set forth below. Such fee shall
be calculated by applying the following annual rate to the average daily net
assets of INVESCO Telecommunications Fund for the calendar year, computed in the
manner used for the determination of the net asset value of shares of INVESCO
Telecommunications Fund.
<Table>
<Caption>
NET FEES PAID
TO INVESCO FEE WAIVERS OR
FUNDS GROUP, EXPENSE
TOTAL NET ASSETS INC. FOR THE REIMBURSEMENTS
FOR THE MOST MOST FOR THE MOST
RECENTLY RECENTLY RECENTLY
ANNUAL RATE COMPLETED COMPLETED COMPLETED
(BASED ON AVERAGE FISCAL PERIOD FISCAL PERIOD FISCAL PERIOD
NET ASSETS DAILY NET ASSETS) OR YEAR OR YEAR OR YEAR
- ---------- ----------------- ---------------- ------------- --------------
First $500 million................... 0.65% $278,142,628 $0 $3,453,759
Next $500 million.................... 0.55%
From $1 billion...................... 0.45%
From $4 billion...................... 0.40%
From $6 billion...................... 0.375%
From $8 billion...................... 0.35%
</Table>
M-1
EXHIBIT N
FEES PAID TO INVESCO FUNDS GROUP, INC. AND AFFILIATES IN MOST RECENT FISCAL YEAR
The following chart sets forth the non-advisory fees paid by INVESCO
Telecommunications Fund during its most recently completed fiscal year to
INVESCO Funds Group, Inc. and to affiliates of INVESCO Funds Group, Inc.
<Table>
<Caption>
INVESCO INVESCO INVESCO
NAME OF FUND (ADMINISTRATIVE SERVICES)* DISTRIBUTORS, INC.** (TRANSFER AGENCY)
- ------------ -------------------------- -------------------- -----------------
INVESCO Telecommunications Fund........ $170,044 $545,212 $5,386,698
</Table>
- ---------------
* Fees paid to INVESCO for administrative services for the prior fiscal year
were paid pursuant to an agreement other than the advisory agreement.
** Net amount received from Rule 12b-1 fees. Excluded are amounts reallowed to
broker-dealers, agents and other service providers.
N-1
EXHIBIT O
ADVISORY FEE SCHEDULES FOR OTHER AIM FUNDS
The following table provides information with respect to the annual
advisory fee rates paid to A I M Advisors, Inc. by certain funds that have a
similar investment objective as INVESCO Telecommunications Fund.
<Table>
<Caption>
TOTAL NET ASSETS
FOR THE MOST FEE WAIVER, EXPENSE LIMITATIONS
RECENTLY AND/OR EXPENSE REIMBURSEMENTS
ANNUAL RATE (BASED ON AVERAGE COMPLETED FISCAL FOR THE MOST RECENTLY COMPLETED
NAME OF FUND DAILY NET ASSETS) PERIOD OR YEAR FISCAL PERIOD OR YEAR
- ------------ ----------------------------- ---------------- -------------------------------
AIM Basic Balanced
Fund.................. 0.65% of the first $1 $ 95,737,649 Waive advisory fee and/or
billion; 0.60% over $1 reimburse expenses on Class A,
billion up to and including Class B and Class C to extent
$5 billion; 0.55% of the necessary to limit Total
excess over $5 billion Operating Expenses (excluding
interest, taxes, dividends on
short sales, extraordinary
items and increases in expenses
due to expense offset
arrangements, if any) of Class
A shares to 1.50%
AIM Blue Chip Fund...... 0.75% of the first $350 $2,903,854,053 Waive 0.025% of advisory fee on
million; 0.625% of the excess each $5 billion increment on
over $350 million net assets in excess of $5
billion up to a maximum waiver
of 0.175% on net assets in
excess of $35 billion
AIM Developing Markets
Fund.................. 0.975% of the first $500 $ 157,833,643 Waive advisory fee and
million; 0.95% over $500 reimburse expenses on Class A,
million up to and including Class B and Class C to extent
$1 billion; 0.925% over $1 necessary to limit Total
billion up to and including Operating Expenses (excluding
$1.5 billion; 0.90% of the interest, taxes, dividends on
excess over $1.5 billion short sales, extraordinary
items and increases in expenses
due to expense offset
arrangements, if any) of Class
A shares to 2.00%
</Table>
O-1
<Table>
<Caption>
TOTAL NET ASSETS
FOR THE MOST FEE WAIVER, EXPENSE LIMITATIONS
RECENTLY AND/OR EXPENSE REIMBURSEMENTS
ANNUAL RATE (BASED ON AVERAGE COMPLETED FISCAL FOR THE MOST RECENTLY COMPLETED
NAME OF FUND DAILY NET ASSETS) PERIOD OR YEAR FISCAL PERIOD OR YEAR
- ------------ ----------------------------- ---------------- -------------------------------
AIM Diversified Dividend
Fund.................. 0.75% of the first $1 $ 16,049,354 Waive advisory fee and/or
billion; 0.70% over $1 reimburse expenses on Class A,
billion up to and including Class B and Class C to the
$2 billion; 0.625% of the extent necessary to limit Total
excess over $2 billion Operating Expenses (excluding
interest, taxes, dividends on
short sales, extraordinary
items and increases in expenses
due to expense offset
arrangements, if any) of Class
A shares to 1.75%
AIM Large Cap Basic
Value Fund............ 0.60% of the first $1 $ 180,146,221 N/A
billion; 0.575% over $1
billion up to and including
$2 billion; 0.55% of the
excess over $2 billion
AIM Premier Equity
Fund.................. 0.80% of the first $150 $9,364,213,634 Waive 0.025% of advisory fee on
million; 0.625% of the excess each $5 billion increment on
over $150 million net assets in excess of $5
billion up to a maximum waiver
of 0.175% on net assets in
excess of $35 billion
AIM V.I. Blue Chip
Fund.................. 0.75% of the first $340 $ 65,762,832 Waive advisory fees of Series I
million; 0.625% of the excess and II shares to the extent
over $350 million necessary to limit the expenses
(excluding 12b-1 plan fees, if
any, interest, taxes, dividend
expense on short sales,
extraordinary items and offset
arrangements, if any) of each
Series to 1.30%
AIM V.I. Premier Equity
Fund.................. 0.65% of the first $250 $1,530,358,905 N/A
million; 0.60% of the excess
over $250 million
</Table>
O-2
EXHIBIT P
PROPOSED COMPENSATION TO A I M ADVISORS, INC.
The following table provides information with respect to the annual
advisory fee rates proposed to be paid to A I M Advisors, Inc. by INVESCO
Telecommunications Fund under the proposed advisory agreement.
<Table>
<Caption>
ANNUAL RATE
NET ASSETS (BASED ON AVERAGE DAILY NET ASSETS)
- ---------- -----------------------------------
First $500 million.......................................... 0.65%
Next $500 million........................................... 0.55%
From $1 billion............................................. 0.45%
From $4 billion............................................. 0.40%
From $6 billion............................................. 0.375%
From $8 billion............................................. 0.35%
</Table>
P-1
EXHIBIT Q
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF
INVESCO INSTITUTIONAL (N.A.), INC.
The following table provides information with respect to the principal
executive officer and the directors of INVESCO Institutional (N.A.), Inc., all
of whose business address is 1360 Peachtree Street, Atlanta, Georgia 30309.
<Table>
<Caption>
POSITION WITH
NAME AND ADDRESS INVESCO INSTITUTIONAL PRINCIPAL OCCUPATION
- ---------------- --------------------- --------------------
John D. Rogers............... Director, Chairman, President Chief Executive Officer,
and Chief Executive Officer AMVESCAP PLC -- INVESCO
Division
David A. Hartley............. Director and Chief Financial Chief Financial Officer,
Officer INVESCO Division
</Table>
Q-1
EXHIBIT R
PROPOSED COMPENSATION TO INVESCO INSTITUTIONAL (N.A.), INC.
AIM proposes to pay INVESCO Institutional (N.A.), Inc., as full
compensation for all investment advisory services rendered to INVESCO
Telecommunications Fund, a sub-advisory fee. Such fee shall be computed daily
and paid monthly, at the rate of 40% of AIM's compensation on the sub-advised
assets per year, on or before the last day of the next succeeding calendar
month.
R-1
EXHIBIT S
ADVISORY FEE SCHEDULES FOR OTHER INVESCO INSTITUTIONAL (N.A.), INC. ADVISED
FUNDS
The following table provides information with respect to the annual
advisory fee rates paid to INVESCO Institutional (N.A.), Inc. by certain funds
that have a similar investment objective as INVESCO Telecommunications Fund.
S-1
EXHIBIT T
SHARES OUTSTANDING OF EACH CLASS OF AIM NEW TECHNOLOGY FUND ON RECORD DATE
As of July 25, 2003, there were the following number of shares outstanding
of each class of AIM New Technology Fund:
CLASS A SHARES
[ADD]
CLASS B SHARES
[ADD]
CLASS C SHARES
[ADD]
As of July 25, 2003, there were the following number of shares outstanding
of each class of AIM Global Science and Technology Fund:
CLASS A SHARES
[ADD]
CLASS B SHARES
[ADD]
CLASS C SHARES
[ADD]
As of July 25, 2003, there were the following number of shares outstanding
of each class of INVESCO Telecommunications Fund:
CLASS A SHARES
39,026.27
CLASS B SHARES
6,313.18
CLASS C SHARES
307,886.38
CLASS K SHARES
92,271.10
INVESTOR CLASS SHARES
33,020,514.96
T-1
EXHIBIT U
OWNERSHIP OF SHARES OF AIM NEW TECHNOLOGY FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of AIM Funds Group owned 5% or more
of any class of the outstanding shares of AIM New Technology Fund. A shareholder
who owns beneficially 25% or more of the outstanding securities of AIM New
Technology Fund is presumed to "control" AIM New Technology Fund as defined in
the 1940 Act. Such control may affect the voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- --------- ------------ -------------
</Table>
- ---------------
* AIM Funds Group has no knowledge of whether all or any portion of the shares
owned of record are also owned beneficially.
U-1
EXHIBIT V
OWNERSHIP OF SHARES OF AIM GLOBAL SCIENCE AND TECHNOLOGY FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of AIM Investment Funds owned 5% or
more of any class of the outstanding shares of AIM Global Science and Technology
Fund. A shareholder who owns beneficially 25% or more of the outstanding
securities of AIM Global Science and Technology Fund is presumed to "control"
AIM Global Science and Technology Fund as defined in the 1940 Act. Such control
may affect the voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- -------- ------------ -------------
</Table>
- ---------------
* AIM Investment Funds has no knowledge of whether all or any portion of the
shares owned of record are also owned beneficially.
V-1
EXHIBIT W
OWNERSHIP OF SHARES OF INVESCO TELECOMMUNICATIONS FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of Company owned 5% or more of any
class of the outstanding shares of INVESCO Telecommunications Fund. A
shareholder who owns beneficially 25% or more of the outstanding securities of
INVESCO Telecommunications Fund is presumed to "control" INVESCO
Telecommunications Fund as defined in the 1940 Act. Such control may affect the
voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- ------------------- ------------- -------------
State Street Global Adv. Tr.................... Institutional Class 50,051,195.00 99.98%
105 Rosemont Ave.
Westwood, MA 02090-2318
Charles Schwab & Co Inc........................ Investor Class 7,895,073.06 23.91%
Special Custody Acct for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-41222
Nat'l. Financial Services Corp................. Investor Class 2,693,013.30 8.16%
The Exclusive Benefit Cust
One World Financial Center
200 Liberty Street 5th Fl
Attn: Kate Recon
New York, NY 10281-5500
Charles Schwab & Co. Inc. ..................... Class A 16,170.52 41.43%
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
Dean Witter Reynolds Cust for Randy Koontz..... Class A 2,634.73 6.75%
P.O. Box 250
New York, NY 10008-0250
Prudential Securities Inc. .................... Class A 2,455.87 6.29%
Attn: Mutual Funds
1 New York Plaza
New York, NY 10004-1901
Michael B. Baranowski.......................... Class A 2,386.64 6.12%
Lorie A. Baronowski
13308 Balmoral Heights Pl
Clifton, VA 20124-1544
Michael B. Baranowski.......................... Class A 2,238.71 5.74%
Lorie A. Baronowski
FMT G. Cust IRA Rollover
FBO Jerry L. Stelma
707 Bremerton Pl NE
Renton, WA 98059-4763
American Enterprise Investment Svcs. .......... Class A 2,100.29 5.38%
P.O. Box 9446
Minneapolis, MN 55440-9446
</Table>
W-1
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- ------------------- ------------- -------------
NFS/FMTC Rollover IRA.......................... Class B 3,094.06 49.01%
FBO Michael W. Mulcahy
19322 Araglin Ct.
Strongsville, OH 44149-0958
NFS/FMTC Sep IRA............................... Class B 1,118.01 17.71%
FBO Norm Detrick
3820 Roberts Rdg.
Akron, OH 44333-1177
American Enterprise Investment Svcs............ Class B 1,095.30 17.35%
P.O. Box 9446
Minneapolis, MN 55440-9446
National Investor Services FBO................. Class B 387.04 6.13%
55 Water Street, 32nd Floor
New York, NY 10041-0028
Saxon & Co. ................................... Class K 63,329.68 68.63%
P.O. Box 7780-1888
Philadelphia, PA 19182-0001
Circle Trust Co. .............................. Class K 9,425.96 10.22%
Pacific Coast Cabling Inc.
Metro Center
One Station Pl.
Stamford, CT 06902-6800
JPMorgan Chase Bank............................ Class K 8,979.95 9.73%
Deloitte & Touche Profit Sharing
Att: Angela Ma
3 Metrotech Ctr Fl6
Brooklyn, NY 11245-0001
</Table>
- ---------------
* Company has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
W-2
EXHIBIT X
OWNERSHIP OF SHARES OF BUYING FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of Company owned 5% or more of any
class of the outstanding shares of Buying Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of Buying Fund is
presumed to "control" Buying Fund as defined in the 1940 Act. Such control may
affect the voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- -------------- ------------- -------------
Charles Schwab & Co. Inc. ........................ Investor Class 7,895,073.06 23.91%
Special Custody for the Exclusive Benefit of the
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
Charles Schwab & Co. Inc. ........................ Investor Class 2,693,013.30 8.16%
Special Custody Account for the Exclusive Benefit
of the Customers
One World Financial Center
200 Liberty Street 5th Flr.
Attn: Kate Recon
New York, NY 10281-5500
Charles Schwab & Co. Inc. ........................ Investor Class 12,883,740.71 25.33%
Special Custody Acct. for the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery Funds
San Francisco, CA 94104-4122
Charles Schwab & Co. Inc. ........................ Class A 48,219.68 26.58%
Special Custody Acct. for the Exclusive Benefit of
Customers
Attn: Mutual Funds
101 Montgomery Funds
San Francisco, CA 94104-4122
FTC & Co. ........................................ Class A 22,131.67 12.20%
Datalynx
P.O. Box 173736
Denver, CO 80217-3736
American Enterprise Investment Svcs. ............. Class B 2,728.51 6.98%
P.O. Box 9446
Minneapolis, MN 55440-9446
Fiserv Securities Inc. ........................... Class B 2,653.97 6.79%
One Commerce Square
2005 Market Street Suite 1200
Philadelphia, PA 19103-7008
</Table>
X-1
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- -------------- ------------- -------------
Fiserv Securities Inc. ........................... Class B 2,143.68 5.48%
One Commerce Square
2005 Market Street Suite 1200
Philadelphia, PA 19103-7008
Transamerica Life Ins. & Annuity Co. ............. Class K 949,707.82 58.85%
Attn: Daisy Lo
Retirement Services-Separate Acct
P.O. Box 30368
Los Angeles, CA 90030-0368
Saxon & Co. ...................................... Class K 467,580.00 28.98%
P.O. Box 7780-1888
Philadelphia, PA 19182-0001
</Table>
- ---------------
* Company has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
X-2
APPENDIX I
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
AIM NEW TECHNOLOGY FUND,
A SEPARATE PORTFOLIO OF
AIM FUNDS GROUP;
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND,
A SEPARATE PORTFOLIO OF
AIM INVESTMENT FUNDS; AND
INVESCO TELECOMMUNICATIONS FUND
A SEPARATE PORTFOLIO OF
INVESCO SECTOR FUNDS, INC.
AUGUST 13, 2003
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE 1 DEFINITIONS........................................................ I-2
SECTION 1.1. Definitions................................................. I-2
ARTICLE 2 TRANSFER OF ASSETS................................................. I-4
SECTION 2.1. Reorganization of Selling Fund.............................. I-4
SECTION 2.2. Computation of Net Asset Value.............................. I-5
SECTION 2.3. Valuation Date.............................................. I-5
SECTION 2.4. Delivery.................................................... I-5
SECTION 2.5. Termination of Series....................................... I-5
SECTION 2.6. Issuance of Buying Fund Shares.............................. I-6
SECTION 2.7. Investment Securities....................................... I-6
SECTION 2.8. Liabilities................................................. I-6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER........................... I-6
SECTION 3.1. Organization; Authority..................................... I-6
SECTION 3.2. Registration and Regulation of Seller....................... I-6
SECTION 3.3. Financial Statements........................................ I-7
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities......... I-7
SECTION 3.5. Selling Fund Shares; Business Operations.................... I-7
SECTION 3.6. Accountants................................................. I-8
SECTION 3.7. Binding Obligation.......................................... I-8
SECTION 3.8. No Breaches or Defaults..................................... I-8
SECTION 3.9. Authorizations or Consents.................................. I-8
SECTION 3.10. Permits..................................................... I-8
SECTION 3.11. No Actions, Suits or Proceedings............................ I-8
SECTION 3.12. Contracts................................................... I-9
SECTION 3.13. Properties and Assets....................................... I-9
SECTION 3.14. Taxes....................................................... I-9
SECTION 3.15. Benefit and Employment Obligations.......................... I-10
SECTION 3.16. Brokers..................................................... I-10
SECTION 3.17. Voting Requirements......................................... I-10
SECTION 3.18. State Takeover Statutes..................................... I-10
SECTION 3.19. Books and Records........................................... I-10
SECTION 3.20. Prospectus and Statement of Additional Information.......... I-10
SECTION 3.21. No Distribution............................................. I-10
SECTION 3.22. Liabilities of Selling Fund................................. I-10
SECTION 3.23. Value of Shares............................................. I-10
SECTION 3.24. Shareholder Expenses........................................ I-10
SECTION 3.25. Intercompany Indebtedness; Consideration.................... I-10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............................ I-11
SECTION 4.1. Organization; Authority..................................... I-11
SECTION 4.2. Registration and Regulation of Buyer........................ I-11
SECTION 4.3. Financial Statements........................................ I-11
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities......... I-11
SECTION 4.5. Registration of Buying Fund Shares.......................... I-11
</Table>
I-i
<Table>
<Caption>
PAGE
----
SECTION 4.6. Accountants................................................. I-12
SECTION 4.7. Binding Obligation.......................................... I-12
SECTION 4.8. No Breaches or Defaults..................................... I-12
SECTION 4.9. Authorizations or Consents.................................. I-12
SECTION 4.10. Permits..................................................... I-13
SECTION 4.11. No Actions, Suits or Proceedings............................ I-13
SECTION 4.12. Taxes....................................................... I-13
SECTION 4.13. Brokers..................................................... I-13
SECTION 4.14. Representations Concerning the Reorganization............... I-14
SECTION 4.15. Prospectus and Statement of Additional Information.......... I-14
SECTION 4.16. Value of Shares............................................. I-14
SECTION 4.17. Intercompany Indebtedness; Consideration.................... I-14
ARTICLE 5 COVENANTS.......................................................... I-14
SECTION 5.1. Conduct of Business......................................... I-14
SECTION 5.2. Announcements............................................... I-15
SECTION 5.3. Expenses.................................................... I-15
SECTION 5.4. Further Assurances.......................................... I-15
SECTION 5.5. Notice of Events............................................ I-15
SECTION 5.6. Access to Information....................................... I-15
SECTION 5.7. Consents, Approvals and Filings............................. I-16
SECTION 5.8. Submission of Agreement to Shareholders..................... I-16
SECTION 5.9. Delay of Consummation of Reorganization..................... I-16
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION......................... I-16
SECTION 6.1. Conditions Precedent of Buyer............................... I-16
SECTION 6.2. Mutual Conditions........................................... I-17
SECTION 6.3. Conditions Precedent of Seller.............................. I-18
ARTICLE 7 TERMINATION OF AGREEMENT........................................... I-18
SECTION 7.1. Termination................................................. I-18
SECTION 7.2. Survival After Termination.................................. I-18
ARTICLE 8 MISCELLANEOUS...................................................... I-18
SECTION 8.1. Survival of Representations, Warranties and Covenants....... I-18
SECTION 8.2. Governing Law............................................... I-19
SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment........... I-19
SECTION 8.4. Obligations of Buyer and Seller............................. I-19
SECTION 8.5. Amendments.................................................. I-19
SECTION 8.6. Enforcement................................................. I-19
SECTION 8.7. Interpretation.............................................. I-19
SECTION 8.8. Counterparts................................................ I-19
SECTION 8.9. Entire Agreement; Exhibits and Schedules.................... I-19
SECTION 8.10. Notices..................................................... I-20
SECTION 8.11. Representations by Seller Investment Adviser................ I-20
SECTION 8.12. Representations by Buyer Investment Adviser................. I-20
SECTION 8.13. Successors and Assigns; Assignment.......................... I-21
</Table>
I-ii
<Table>
<Caption>
PAGE
----
Exhibit A Excluded Liabilities of Selling Fund
Schedule 2.1 Classes of Shares of Selling Fund and Corresponding Classes
of Shares of Buying Fund
Schedule 3.4 Certain Contingent Liabilities of Selling Fund
Schedule 3.5(d) Permitted Restructurings and Redomestications of Funds
Schedule 4.4 Certain Contingent Liabilities of Buying Fund
Schedule 4.5(a) Portfolios of Buyer
Schedule 4.5(b) Classes of Shares of Buying Fund and Number of Shares of
Each Class Buyer is Authorized to Issue
Schedule 5.1 Permitted Combinations of Funds
Schedule 6.2(f) Tax Opinions
</Table>
I-iii
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 13, 2003 (this
"Agreement"), by and among AIM Funds Group, a Delaware statutory trust ("AFG"),
acting on behalf of AIM New Technology Fund, a separate series of AFG ("AIM
Technology Fund"); AIM Investment Funds, a Delaware statutory trust ("AIF"),
acting on behalf of AIM Global Science and Technology Fund, a separate series of
AIF ("Science & Technology Fund"); INVESCO Sector Funds, Inc., a Maryland
corporation ("ISF"), acting on behalf of INVESCO Telecommunications Fund, a
separate series of ISF ("Telecommunications Fund") (each of AFG, AIF and ISF, in
such capacity, a "Seller," and each of AIM Technology Fund, Science & Technology
Fund and Telecommunications Fund a "Selling Fund"); ISF, acting on behalf of
INVESCO Technology Fund, a separate series of ISF ("Buying Fund") (ISF, in such
capacity, "Buyer"); A I M Advisors, Inc., a Delaware corporation ("A I M
Advisors"); and INVESCO Funds Group, Inc., a Delaware corporation ("IFG").
WITNESSETH
WHEREAS, each Seller is a management investment company registered with the
SEC (as defined below) under the Investment Company Act (as defined below) that
offers separate series of its shares representing interests in its investment
portfolios, including its Selling Fund series, for sale to the public; and
WHEREAS, Buyer is a management investment company registered with the SEC
under the Investment Company Act that offers separate series of its shares
representing interests in investment portfolios, including Buying Fund, for sale
to the public; and
WHEREAS, IFG provides investment advisory services to Buyer with respect to
Buying Fund; and
WHEREAS, A I M Advisors provides investment advisory services to AFG with
respect to AIM Technology Fund and AIF with respect to Science & Technology
Fund, and IFG provides investment advisory services to ISF with respect to
Telecommunications Fund; and
WHEREAS, each Selling Fund desires to provide for its Reorganization (as
defined below) through the transfer of all of its assets to Buying Fund in
exchange for the assumption by Buying Fund of all of the Liabilities (as defined
below) of that Selling Fund and the issuance by Buyer of shares of Buying Fund
in the manner set forth in this Agreement; and
WHEREAS, the Reorganizations are independent of each other, and the
consummation of one Reorganization is not contingent on the consummation of any
other Reorganization; and
WHEREAS, this Agreement is intended to be and is adopted by the parties
hereto as a Plan of Reorganization within the meaning of the regulations under
Section 368(a) of the Code (as defined below); and
WHEREAS, for convenience, the balance of this Agreement (except the
definitions of "Seller Investment Adviser," "Seller Registration Statement,"
"Selling Fund Financial Statements" and "Shareholders Meeting," Sections 2.5,
3.14(a), 3.17, 5.8, 8.4(b) and 8.10, and Schedule 2.1) will refer only to a
single Reorganization, one Seller and one Selling Fund, but the terms and
conditions hereof shall apply separately to each Reorganization and to the
Seller and Selling Fund participating therein and to Buyer and Buying Fund (as
participants therein).
I-1
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and undertakings contained in this Agreement, each Seller, Buyer,
A I M Advisors and IFG agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. For all purposes in this Agreement, the
following terms shall have the respective meanings set forth in this Section 1.1
(such definitions to be equally applicable to both the singular and plural forms
of the terms herein defined):
"Advisers Act" means the Investment Advisers Act of 1940, as amended, and
all rules and regulations of the SEC adopted pursuant thereto.
"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.
"Agreement" means this Agreement and Plan of Reorganization, together with
all exhibits and schedules attached hereto and all amendments hereto and
thereof.
"Applicable Law" means the applicable laws of the state in which each of
Buyer and Seller has been organized and shall include, as applicable, the
Delaware Statutory Trust Act and the Maryland General Corporation Law.
"Benefit Plan" means any material "employee benefit plan" (as defined in
Section 3(3) of ERISA) and any material bonus, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, retirement, profit sharing, welfare plans or other plan, arrangement
or understanding maintained or contributed to by Seller on behalf of Selling
Fund, or otherwise providing benefits to any current or former employee, officer
or director/trustee of Seller.
"Buyer" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"Buyer Counsel" means Kirkpatrick & Lockhart LLP.
"Buyer Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of Buying Fund.
"Buyer Investment Adviser" means INVESCO Funds Group, Inc.
"Buyer Registration Statement" means the registration statement on Form
N-1A of Buyer, as amended, 1940 Act Registration No. 811-03826.
"Buying Fund" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Buying Fund Auditors" means PricewaterhouseCoopers LLP.
"Buying Fund Financial Statements" means the audited financial statements
of Buying Fund for the fiscal year ended March 31, 2003.
"Buying Fund Shares" means shares of each class of Buying Fund issued
pursuant to Section 2.6 of this Agreement.
"Closing" means the transfer of the assets of Selling Fund to Buying Fund,
the assumption of all of Selling Fund's Liabilities by Buying Fund and the
issuance of Buying Fund Shares directly to Selling Fund Shareholders as
described in Section 2.1 of this Agreement.
"Closing Date" means October 27, 2003, or such other date as the parties
may mutually agree upon.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations adopted pursuant thereto.
I-2
"corresponding" means, when used with respect to a class of shares of
Selling Fund or Buying Fund, the classes of their shares set forth opposite each
other on Schedule 2.1.
"Effective Time" means 8:00 a.m. Eastern Time on the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations adopted pursuant thereto.
"Exchangeability Date" means the first date on which Buyer Investment
Adviser determines that shares of retail mutual funds advised by Buyer
Investment Adviser and shares of retail mutual funds advised by Seller
Investment Adviser generally may be exchanged for shares of the same or a
similar class of each other.
"Governing Documents" means the organic documents which govern the business
and operations of each of Buyer and Seller and shall include, as applicable, the
Charter, Amended and Restated Agreement and Declaration of Trust, Amended and
Restated Bylaws and Bylaws.
"Governmental Authority" means any foreign, United States or state
government, government agency, department, board, commission (including the SEC)
or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the NASD Regulation, Inc., the
Commodity Futures Trading Commission, the National Futures Association, the
Investment Management Regulatory Organization Limited and the Office of Fair
Trading).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Liabilities" means all of the liabilities of any kind of Selling Fund,
including without limitation all liabilities included in the calculation of the
net asset value per share of each class of Selling Fund Shares on the Closing
Date, but not including the excluded liabilities set forth on Exhibit A.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a change in the
condition (financial or otherwise), properties, assets or prospects of an entity
having an adverse monetary effect in an amount equal to or greater than $50,000.
"NYSE" means the New York Stock Exchange.
"Permits" shall have the meaning set forth in Section 3.10 of this
Agreement.
"Person" means an individual or a corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of the assets of Selling Fund by
Buying Fund in consideration of the assumption by Buying Fund of all of the
Liabilities of Selling Fund and the issuance by Buyer of Buying Fund Shares
directly to Selling Fund Shareholders as described in this Agreement, and the
termination of Selling Fund's status as a designated series of shares of Seller.
"Required Shareholder Vote" means the lesser of (a) the affirmative vote of
67% or more of the voting securities of Selling Fund present or represented by
proxy at the Shareholders Meeting, if the holders of more than 50% of the
outstanding voting securities of Selling Fund are present or represented by
proxy, or (b) the affirmative vote of more than 50% of the outstanding voting
securities of Selling Fund.
"Return" means any return, report or form or any attachment thereto
required to be filed with any taxing authority.
I-3
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
"Seller" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"Seller Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of Selling Fund.
"Seller Investment Adviser" means A I M Advisors, Inc. (in the case of AFG
and AIF) or INVESCO Funds Group, Inc. (in the case of ISF with respect to
Telecommunications Fund).
"Seller Registration Statement" means the registration statement on Form
N-1A of Seller, as amended, 1940 Act Registration No. 811-01540 (in the case of
AFG), No. 811-05426 (in the case of AIF) and No. 811-03826 (in the case of IFG).
"Selling Fund" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Selling Fund Auditors" means PricewaterhouseCoopers LLP.
"Selling Fund Financial Statements" means the audited financial statements
of Selling Fund for the fiscal year ended December 31, 2002 (in the case of AIM
Technology Fund), October 31, 2002 (and the unaudited financial statements of
Selling Fund for the period ended April 30, 2003) (in the case of Science &
Technology Fund) or March 31, 2003 (in the case of Telecommunications Fund).
"Selling Fund Shareholders" means the holders of record of the outstanding
shares of each class of Selling Fund as of the close of regular trading on the
NYSE on the Valuation Date.
"Selling Fund Shares" means the outstanding shares of each class of Selling
Fund.
"Shareholders Meeting" means a meeting of the shareholders of Selling Fund
convened in accordance with Applicable Law and the Governing Documents of Seller
to consider and vote upon the approval of this Agreement and, in connection
therewith, with respect to AIM Technology Fund and Science & Technology Fund
only, the sale of all of each such Selling Fund's assets and the termination of
each such Selling Fund as a designated series of Seller.
"Tax" means any tax or similar governmental charge, impost or levy
(including income taxes (including alternative minimum tax and estimated tax),
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes, or windfall
profit taxes), together with any related penalties, fines, additions to tax or
interest, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof.
"Termination Date" means December 31, 2003, or such later date as the
parties may mutually agree upon.
"Treasury Regulations" means the Federal income tax regulations adopted
pursuant to the Code.
"Valuation Date" shall have the meaning set forth in Section 2.2 of this
Agreement.
ARTICLE 2
TRANSFER OF ASSETS
SECTION 2.1. Reorganization of Selling Fund. At the Effective Time, all
of the assets of Selling Fund shall be delivered to Buyer Custodian for the
account of Buying Fund in exchange for the assumption by Buying Fund of all of
the Liabilities of Selling Fund and delivery by Buyer directly to the holders of
record as of the Effective Time of the issued and outstanding shares of each
class of Selling Fund of a number of shares of each corresponding class of
Buying Fund, as set forth on Schedule 2.1 (including, if applicable, fractional
shares rounded to the nearest thousandth), having an aggregate net
I-4
asset value equal to the value of the net assets of Selling Fund so transferred,
assigned and delivered, all determined and adjusted as provided in Section 2.2
below. Upon delivery of such assets, Buying Fund will receive good and
marketable title to such assets free and clear of all Liens.
SECTION 2.2. Computation of Net Asset Value.
(a) The net asset value per share of each class of Buying Fund Shares, and
the value of the assets and the amount of the Liabilities of Selling Fund,
shall, in each case, be determined as of the close of regular trading on the
NYSE on the business day next preceding the Closing Date (the "Valuation Date").
(b) The net asset value per share of each class of Buying Fund Shares shall
be computed in accordance with the policies and procedures of Buying Fund as
described in the Buyer Registration Statement.
(c) The value of the assets and the amount of the Liabilities of Selling
Fund to be transferred to Buying Fund pursuant to this Agreement shall be
computed in accordance with the policies and procedures of Selling Fund as
described in the Seller Registration Statement.
(d) Subject to Sections 2.2(b) and (c) above, all computations of value
regarding the assets and Liabilities of Selling Fund and the net asset value per
share of each class of Buying Fund Shares to be issued pursuant to this
Agreement shall be made by agreement of Seller and Buyer. The parties agree to
use commercially reasonable efforts to resolve any material pricing differences
between the prices of portfolio securities determined in accordance with their
respective pricing policies and procedures.
SECTION 2.3. Valuation Date. The share transfer books of Selling Fund
will be permanently closed as of the close of business on the Valuation Date and
only requests for the redemption of shares of Selling Fund received in proper
form prior to the close of regular trading on the NYSE on the Valuation Date
shall be accepted by Selling Fund. Redemption requests thereafter received by
Selling Fund shall be deemed to be redemption requests for Buying Fund Shares of
the corresponding class (assuming that the transactions contemplated by this
Agreement have been consummated), to be distributed to Selling Fund Shareholders
under this Agreement.
SECTION 2.4. Delivery.
(a) No later than three (3) business days preceding the Closing Date,
Seller shall instruct Seller Custodian to transfer all assets held by Selling
Fund to the account of Buying Fund maintained at Buyer Custodian. Such assets
shall be delivered by Seller to Buyer Custodian on the Closing Date. The assets
so delivered shall be duly endorsed in proper form for transfer in such
condition as to constitute a good delivery thereof, in accordance with the
custom of brokers, and shall be accompanied by all necessary state stock
transfer stamps, if any, or a check for the appropriate purchase price thereof.
Cash held by Selling Fund shall be delivered on the Closing Date and shall be in
the form of currency or wire transfer in Federal funds, payable to the order of
the account of Buying Fund at Buyer Custodian.
(b) If, on the Closing Date, Selling Fund is unable to make delivery in the
manner contemplated by Section 2.4(a) of securities held by Selling Fund for the
reason that any of such securities purchased prior to the Closing Date have not
yet been delivered to Selling Fund or its broker, then Buyer shall waive the
delivery requirements of Section 2.4(a) with respect to said undelivered
securities if Selling Fund has delivered to Buyer Custodian by or on the Closing
Date, and with respect to said undelivered securities, executed copies of an
agreement of assignment and escrow and due bills executed on behalf of said
broker or brokers, together with such other documents as may be required by
Buyer or Buyer Custodian, including brokers' confirmation slips.
SECTION 2.5. (a) Termination of Series. Following receipt of the Required
Shareholder Vote and as soon as reasonably practicable after the Closing Date,
the status of each of AIM Technology Fund and Science & Technology Fund as a
designated series of Seller shall be terminated; provided, however, that the
termination of each such Selling Fund as a designated series of Seller shall not
be required if the Reorganization shall not have been consummated.
I-5
(b) Termination of Series and Redemption of Selling Fund Shares. Following
receipt of the Required Shareholder Vote and as soon as reasonably practicable
after the Closing Date, the status of Telecommunications Fund as a designated
series of Seller shall be terminated and Seller shall redeem the outstanding
shares of such Selling Fund from its shareholders in accordance with its
Governing Documents and Applicable Law; provided, however, that the termination
of such Selling Fund as a designated series of Seller and the redemption of such
shares shall not be required if the Reorganization shall not have been
consummated.
SECTION 2.6. Issuance of Buying Fund Shares. At the Effective Time,
Selling Fund Shareholders holding shares of a class of Selling Fund shall be
issued that number of full and fractional shares of the corresponding class of
Buying Fund having a net asset value equal to the net asset value of such shares
of such class of Selling Fund held by Selling Fund Shareholders on the Valuation
Date. All issued and outstanding shares of Selling Fund shall thereupon be
canceled on the books of Seller. Seller shall provide instructions to the
transfer agent of Buyer with respect to the shares of each class of Buying Fund
to be issued to Selling Fund Shareholders. Buyer shall have no obligation to
inquire as to the validity, propriety or correctness of any such instruction,
but shall, in each case, assume that such instruction is valid, proper and
correct. Buyer shall record on its books the ownership of the shares of each
class of Buying Fund by Selling Fund Shareholders and shall forward a
confirmation of such ownership to Selling Fund Shareholders. No redemption or
repurchase of such shares credited to former Selling Fund Shareholders in
respect of Selling Fund Shares represented by unsurrendered share certificates
shall be permitted until such certificates have been surrendered to Buyer for
cancellation, or if such certificates are lost or misplaced, until lost
certificate affidavits have been executed and delivered to Buyer.
SECTION 2.7. Investment Securities. On or prior to the Valuation Date,
Seller shall deliver a list setting forth the securities Selling Fund then owned
together with the respective Federal income tax bases thereof and holding
periods therefor. Seller shall provide to Buyer on or before the Valuation Date
detailed tax basis accounting records for each security to be transferred to it
pursuant to this Agreement. Such records shall be prepared in accordance with
the requirements for specific identification tax lot accounting and clearly
reflect the bases used for determination of gain and loss realized on the sale
of any security transferred to Buying Fund hereunder. Such records shall be made
available by Seller prior to the Valuation Date for inspection by the Treasurer
(or his or her designee) or the auditors of Buyer upon reasonable request.
SECTION 2.8. Liabilities. Selling Fund shall use reasonable best efforts
to discharge all of its known liabilities, so far as may be possible, prior to
the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, on behalf of Selling Fund, represents and warrants to Buyer as
follows:
SECTION 3.1. Organization; Authority. Seller is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 3.2. Registration and Regulation of Seller. Seller is duly
registered with the SEC as an investment company under the Investment Company
Act and all Selling Fund Shares which have been or are being offered for sale
have been duly registered under the Securities Act and have been duly
registered, qualified or are exempt from registration or qualification under the
securities laws of each state or other jurisdiction in which such shares have
been or are being offered for sale, and no action has been taken by Seller to
revoke or rescind any such registration or qualification. Selling Fund is in
compliance in all material respects with all applicable laws, rules and
regulations, including, without limitation, the Investment Company Act, the
Securities Act, the Exchange Act and all applicable state securities laws.
Selling Fund is in compliance in all material respects with the investment
policies and restrictions applicable to it set forth in the Seller Registration
Statement. The value of the net assets of Selling Fund
I-6
is determined using portfolio valuation methods that comply in all material
respects with the requirements of the Investment Company Act and the policies of
Selling Fund and all purchases and redemptions of Selling Fund Shares have been
effected at the net asset value per share calculated in such manner.
SECTION 3.3. Financial Statements. The books of account and related
records of Selling Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited Selling Fund Financial
Statements previously delivered to Buyer present fairly in all material respects
the financial position of Selling Fund as of the date(s) indicated and the
results of operations and changes in net assets for the period(s) then ended in
accordance with generally accepted accounting principles applied on a consistent
basis for the period(s) then ended.
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Selling Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Selling
Fund or the status of Selling Fund as a regulated investment company under the
Code, other than changes resulting from any change in general conditions in the
financial or securities markets or the performance of any investments made by
Selling Fund or occurring in the ordinary course of business of Selling Fund or
Seller. Except as set forth on Schedule 4.4, (a) there are no contingent
liabilities of Buying Fund not disclosed in the Buying Fund Financial Statements
which are required to be disclosed in accordance with generally accepted
accounting principles and (b) no contingent liabilities of Buying Fund have
arisen since the date of the most recent financial statements included in the
Buying Fund Financial Statements which are required to be disclosed in
accordance with generally accepted accounting principles.
SECTION 3.5. Selling Fund Shares; Business Operations.
(a) Selling Fund Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(b) During the five-year period ending on the date of the Reorganization,
neither Selling Fund nor any person related to Selling Fund (as defined in
Section 1.368-1(e)(3) of the Treasury Regulations without regard to Section
1.368-1(e)(3)(i)(A)) will have directly or through any transaction, agreement,
or arrangement with any other person, (i) acquired shares of Selling Fund for
consideration other than shares of Selling Fund, except for shares redeemed in
the ordinary course of Selling Fund's business as an open-end investment company
as required by the Investment Company Act, or (ii) made distributions with
respect to Selling Fund's shares, except for (a) distributions necessary to
satisfy the requirements of Sections 852 and 4982 of the Code for qualification
as a regulated investment company and avoidance of excise tax liability and (b)
additional distributions, to the extent such additional distributions do not
exceed 50% of the value (without giving effect to such distributions) of the
proprietary interest in Selling Fund on the Effective Date.
(c) At the time of its Reorganization, Selling Fund shall not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any Person could acquire Selling Fund Shares, except for
the right of investors to acquire Selling Fund Shares at net asset value in the
normal course of its business as a series of an open-end management investment
company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the Closing Date,
Selling Fund will have conducted its historic business within the meaning of
Section 1.368-1(d)(2) of the Treasury Regulations in a substantially unchanged
manner. In anticipation of its Reorganization, Selling Fund will not dispose of
assets that, in the aggregate, will result in less than 50% of its historic
business assets (within the meaning of Section 1.368-1(d)(3) of the Treasury
Regulations) being transferred to Buying Fund; provided, however, that this
Section 3.5(d) shall not preclude any of the restructurings or redomestications
of funds set forth on Schedule 3.5(d).
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(e) Seller does not have, and has not had during the six (6) months prior
to the date of this Agreement, any employees, and shall not hire any employees
from and after the date of this Agreement through the Closing Date.
SECTION 3.6. Accountants. Selling Fund Auditors, which have reported upon
the Selling Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Selling Fund Financial Statements, are independent public accountants as
required by the Securities Act and the Exchange Act.
SECTION 3.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Seller on behalf of Selling Fund and, assuming this
Agreement has been duly executed and delivered by Buyer and approved by the
shareholders of Selling Fund, constitutes the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms
from and with respect to the revenues and assets of Selling Fund, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization
or similar laws relating to or affecting creditors rights generally, or by
general equity principles (whether applied in a court of law or a court of
equity and including limitations on the availability of specific performance or
other equitable remedies).
SECTION 3.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Seller on behalf of Selling Fund and performance by Seller of its
obligations hereunder has been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Seller, other than approval by the
shareholders of Selling Fund, and (i) do not, and on the Closing Date will not,
result in any violation of the Governing Documents of Seller and (ii) do not,
and on the Closing Date will not, result in a breach of any of the terms or
provisions of, or constitute (with or without the giving of notice or the lapse
of time or both) a default under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation or imposition of any Lien upon any
property or assets of Selling Fund (except for such breaches or defaults or
Liens that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect) under (A) any indenture, mortgage or loan
agreement or any other material agreement or instrument to which Seller is a
party or by which it may be bound and which relates to the assets of Selling
Fund or to which any property of Selling Fund may be subject; (B) any Permit (as
defined below); or (C) any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over Seller or
any property of Selling Fund. Seller is not under the jurisdiction of a court in
a proceeding under Title 11 of the United States Code or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.9. Authorizations or Consents. Other than those which shall
have been obtained or made on or prior to the Closing Date and those that must
be made after the Closing Date to comply with Section 2.5 of this Agreement, no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority will be required to be obtained or made by Seller in
connection with the due execution and delivery by Seller of this Agreement and
the consummation by Seller of the transactions contemplated hereby.
SECTION 3.10. Permits. Seller has in full force and effect all approvals,
consents, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights of Governmental Authorities (collectively, "Permits")
necessary for it to conduct its business as presently conducted as it relates to
Selling Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of Seller there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 3.11. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of Seller, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Seller before any Governmental Authority which
questions the validity or legality of this Agreement or of the actions
I-8
contemplated hereby or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of Seller, threatened in
writing or, if probable of assertion, orally, against Seller affecting any
property, asset, interest or right of Selling Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Selling Fund. There are not in existence on the date hereof any
plea agreements, judgments, injunctions, consents, decrees, exceptions or orders
that were entered by, filed with or issued by any Governmental Authority
relating to Seller's conduct of the business of Selling Fund affecting in any
significant respect the conduct of such business. Seller is not, and has not
been, to the knowledge of Seller, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Selling Fund.
SECTION 3.12. Contracts. Seller is not in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party and which involves or affects the assets of Selling Fund,
by which the assets, business, or operations of Selling Fund may be bound or
affected, or under which it or the assets, business or operations of Selling
Fund receives benefits, and which default could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and, to the
knowledge of Seller there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
SECTION 3.13. Properties and Assets. Selling Fund has good and marketable
title to all properties and assets reflected in the Selling Fund Financial
Statements as owned by it, free and clear of all Liens, except as described in
the Selling Fund Financial Statements.
SECTION 3.14. Taxes.
(a) Selling Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Selling Fund has qualified for treatment as a
regulated investment company for each taxable year since inception that has
ended prior to the Closing Date and will have satisfied the requirements of Part
I of Subchapter M of the Code to maintain such qualification for the period
beginning on the first day of its current taxable year and ending on the Closing
Date. Selling Fund has no earnings and profits accumulated in any taxable year
in which the provisions of Subchapter M of the Code did not apply to it. In
order to (i) ensure continued qualification of Selling Fund for treatment as a
"regulated investment company" for tax purposes and (ii) eliminate any tax
liability of Selling Fund arising by reason of undistributed investment company
taxable income or net capital gain, Seller will declare on or prior to the
Valuation Date to the shareholders of Selling Fund a dividend or dividends that,
together with all previous such dividends, shall have the effect of distributing
(A) all of Selling Fund's investment company taxable income (determined without
regard to any deductions for dividends paid) for the taxable year ended December
31, 2002 (in the case of AIM Technology Fund), October 31, 2002 (in the case of
Science & Technology Fund) and March 31, 2003 (in the case of Telecommunications
Fund) (in each case, its "Last Completed Taxable Year") and for the short
taxable year beginning on the day after the end of its Last Completed Taxable
Year and ending on the Closing Date and (B) all of Selling Fund's net capital
gain recognized in its Last Completed Taxable Year and such short taxable year
(after reduction for any capital loss carryover).
(b) Selling Fund has timely filed all Returns required to be filed by it
and all Taxes with respect thereto have been paid, except where the failure so
to file or so to pay, would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Adequate provision has been made
in the Selling Fund Financial Statements for all Taxes in respect of all periods
ended on or before the date of such financial statements, except where the
failure to make such provisions would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. No deficiencies for any
Taxes have been proposed, assessed or asserted in writing by any taxing
authority against Selling Fund, and no deficiency has been proposed, assessed or
asserted, in writing, where such deficiency would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No waivers
of the time to assess any such Taxes are outstanding nor are any written
requests for such waivers pending
I-9
and no Return of Selling Fund is currently being or has been audited with
respect to income taxes or other Taxes by any Federal, state, local or foreign
Tax authority.
SECTION 3.15. Benefit and Employment Obligations. As of the Closing Date,
Selling Fund will have no obligation to provide any post-retirement or
post-employment benefit to any Person, including but not limited to under any
Benefit Plan, and will have no obligation to provide unfunded deferred
compensation or other unfunded or self-funded benefits to any Person.
SECTION 3.16. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Seller in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Seller or any action taken by it.
SECTION 3.17. Voting Requirements. The Required Shareholder Vote is the
only vote of the holders of any class of shares of Selling Fund necessary to
approve this Agreement and, in connection therewith with respect to AIM
Technology Fund and Science & Technology only, the sale of all of each such
Selling Fund's assets and the termination of each such Selling Fund as a
designated series of Seller.
SECTION 3.18. State Takeover Statutes. No state takeover statute or
similar statute or regulation applies or purports to apply to this Agreement or
any of the transactions contemplated by this Agreement.
SECTION 3.19. Books and Records. The books and records of Seller relating
to Selling Fund, reflecting, among other things, the purchase and sale of
Selling Fund Shares, the number of issued and outstanding shares owned by each
Selling Fund Shareholder and the state or other jurisdiction in which such
shares were offered and sold, are complete and accurate in all material
respects.
SECTION 3.20. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Selling Fund as
of the date on which they were issued did not contain, and as supplemented by
any supplement thereto dated prior to or on the Closing Date do not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 3.21. No Distribution. Buying Fund Shares are not being acquired
for the purpose of any distribution thereof, other than in accordance with the
terms of this Agreement.
SECTION 3.22. Liabilities of Selling Fund. The Liabilities of Selling
Fund that are to be assumed by Buying Fund in connection with the
Reorganization, or to which the assets of Selling Fund to be transferred in the
Reorganization are subject, were incurred by Selling Fund in the ordinary course
of its business. The fair market value of the assets of Selling Fund to be
transferred to Buying Fund in the Reorganization will equal or exceed the sum of
the Liabilities to be assumed by Buying Fund, plus the amount of liabilities, if
any, to which such transferred assets will be subject. The total adjusted basis
of the assets of Selling Fund to be transferred to Buying Fund in the
Reorganization will equal or exceed the sum of the Liabilities to be assumed by
Buying Fund, plus the amount of liabilities, if any, to which such transferred
assets will be subject.
SECTION 3.23. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
SECTION 3.24. Shareholder Expenses. Selling Fund Shareholders will pay
their own expenses, if any, incurred in connection with the Reorganization.
SECTION 3.25. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration other than Buying Fund
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including
for
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this purpose any liabilities to which the assets of Selling Fund are subject)
will be given in exchange for the assets of Selling Fund acquired by Buying Fund
in connection with the Reorganization.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer, on behalf of Buying Fund, represents and warrants to Seller as
follows:
SECTION 4.1. Organization; Authority. Buyer is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 4.2. Registration and Regulation of Buyer. Buyer is duly
registered with the SEC as an investment company under the Investment Company
Act. Buying Fund is in compliance in all material respects with all applicable
laws, rules and regulations, including, without limitation, the Investment
Company Act, the Securities Act, the Exchange Act and all applicable state
securities laws. Buying Fund is in compliance in all material respects with the
applicable investment policies and restrictions set forth in the Buyer
Registration Statement. The value of the net assets of Buying Fund is determined
using portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the policies of Buying Fund and
all purchases and redemptions of Buying Fund Shares have been effected at the
net asset value per share calculated in such manner.
SECTION 4.3. Financial Statements. The books of account and related
records of Buying Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited Buying Fund Financial
Statements previously delivered to Seller present fairly in all material
respects the financial position of Buying Fund as of the date(s) indicated and
the results of operations and changes in net assets for the period(s) then ended
in accordance with generally accepted accounting principles applied on a
consistent basis for the period(s) then ended.
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Buying Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Buying Fund
or the status of Buying Fund as a regulated investment company under the Code,
other than changes resulting from any change in general conditions in the
financial or securities markets or the performance of any investments made by
Buying Fund or occurring in the ordinary course of business of Buying Fund or
Buyer. Except as set forth on Schedule 4.4, (a) there are no contingent
liabilities of Buying Fund not disclosed in the Buying Fund Financial Statements
which are required to be disclosed in accordance with generally accepted
accounting principles and (b) no contingent liabilities of Buying Fund have
arisen since the date of the most recent financial statements included in the
Buying Fund Financial Statements which are required to be disclosed in
accordance with generally accepted accounting principles.
SECTION 4.5. Registration of Buying Fund Shares.
(a) The shares of Buyer are divided into those portfolios, including Buying
Fund, that are set forth on Schedule 4.5(a).
(b) Buying Fund currently has those classes of shares that are set forth on
Schedule 4.5(b). Under its Governing Documents, Buyer is authorized to issue the
number of shares of each such class that is set forth on Schedule 4.5(b).
(c) Buying Fund Shares to be issued pursuant to Section 2.6 shall on the
Closing Date be duly registered under the Securities Act by a Registration
Statement on Form N-14 of Buyer then in effect.
(d) Buying Fund Shares to be issued pursuant to Section 2.6 are duly
authorized and on the Closing Date will be validly issued and fully paid and
non-assessable and will conform to the description thereof contained in the
Registration Statement on Form N-14 then in effect. At the time of its
Reorganization,
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Buying Fund shall not have outstanding any warrants, options, convertible
securities or any other type of right pursuant to which any Person could acquire
shares of Buying Fund, except for the right of investors to acquire shares of
Buying Fund at net asset value in the normal course of its business as a series
of an open-end management investment company operating under the Investment
Company Act.
(e) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus"), which forms a part of Buyer's Registration Statement on
Form N-14, shall be furnished to the shareholders of Selling Fund entitled to
vote at the Shareholders Meeting. The Combined Proxy Statement/Prospectus and
related Statement of Additional Information of Buying Fund, when they become
effective, shall conform to the applicable requirements of the Securities Act
and the Investment Company Act and shall not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading, provided, however, that no
representation or warranty is made with respect to written information provided
by Seller for inclusion in the Combined Proxy Statement/Prospectus.
(f) The shares of Buying Fund which have been or are being offered for sale
(other than the Buying Fund Shares to be issued in connection with the
Reorganization) have been duly registered under the Securities Act by the Buyer
Registration Statement and have been duly registered, qualified or are exempt
from registration or qualification under the securities laws of each state or
other jurisdiction in which such shares have been or are being offered for sale,
and no action has been taken by Buyer to revoke or rescind any such registration
or qualification.
SECTION 4.6. Accountants. Buying Fund Auditors, which have reported upon
the Buying Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Buying Fund Financial Statements, are independent public accountants as
required by the Securities Act and the Exchange Act.
SECTION 4.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Buyer on behalf of Buying Fund and, assuming this
Agreement has been duly executed and delivered by Seller, constitutes the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms from and with respect to the revenues and assets of Buying Fund,
except as the enforceability hereof may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting creditors' rights
generally, or by general equity principles (whether applied in a court or law or
a court of equity and including limitations on the availability of specific
performance or other equitable remedies).
SECTION 4.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Buyer on behalf of Buying Fund and performance by Buyer of its
obligations hereunder have been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Buyer and (i) do not, and on the
Closing Date will not, result in any violation of the Governing Documents of
Buyer and (ii) do not, and on the Closing Date will not, result in a breach of
any of the terms or provisions of, or constitute (with or without the giving of
notice or the lapse of time or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation or imposition of any Lien upon
any property or assets of Buying Fund (except for such breaches or defaults or
Liens that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect) under (A) any indenture, mortgage or loan
agreement or any other material agreement or instrument to which Buyer is a
party or by which it may be bound and which relates to the assets of Buying Fund
or to which any properties of Buying Fund may be subject; (B) any Permit; or (C)
any existing applicable law, rule, regulation, judgment, order or decree of any
Governmental Authority having jurisdiction over Buyer or any property of Buying
Fund. Buyer is not under the jurisdiction of a court in a proceeding under Title
11 of the United States Code or similar case within the meaning of Section
368(a)(3)(A) of the Code.
SECTION 4.9. Authorizations or Consents. Other than those which shall
have been obtained or made on or prior to the Closing Date, no authorization or
approval or other action by, and no notice to or
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filing with, any Governmental Authority will be required to be obtained or made
by Buyer in connection with the due execution and delivery by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated hereby.
SECTION 4.10. Permits. Buyer has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
Buying Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of Buyer there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 4.11. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of Buyer, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Buyer before any Governmental Authority which
questions the validity or legality of this Agreement or of the transactions
contemplated hereby, or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of Buyer, threatened in
writing or, if probable of assertion, orally, against Buyer, affecting any
property, asset, interest or right of Buying Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Buying Fund. There are not in existence on the date hereof any
plea agreements, judgments, injunctions, consents, decrees, exceptions or orders
that were entered by, filed with or issued by any Governmental Authority
relating to Buyer's conduct of the business of Buying Fund affecting in any
significant respect the conduct of such business. Buyer is not, and has not
been, to the knowledge of Buyer, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Buying Fund.
SECTION 4.12. Taxes.
(a) Buying Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Buying Fund has qualified for treatment as a
regulated investment company for each taxable year since inception that has
ended prior to the Closing Date and will satisfy the requirements of Part I of
Subchapter M of the Code to maintain such qualification for its current taxable
year. Buying Fund has no earnings or profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it.
(b) Buying Fund has timely filed all Returns required to be filed by it and
all Taxes with respect thereto have been paid, except where the failure so to
file or so to pay, would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Adequate provision has been made
in the Buying Fund Financial Statements for all Taxes in respect of all periods
ending on or before the date of such financial statements, except where the
failure to make such provisions would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. No deficiencies for any
Taxes have been proposed, assessed or asserted in writing by any taxing
authority against Buying Fund, and no deficiency has been proposed, assessed or
asserted, in writing, where such deficiency would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No waivers
of the time to assess any such Taxes are outstanding nor are any written
requests for such waivers pending and no Return of Buying Fund is currently
being or has been audited with respect to income taxes or other Taxes by any
Federal, state, local or foreign Tax authority.
SECTION 4.13. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Buyer in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Buyer or any action taken by it.
I-13
SECTION 4.14. Representations Concerning the Reorganization.
(a) Buyer has no plan or intention to reacquire any Buying Fund Shares
issued in the Reorganization, except to the extent that Buying Fund is required
by the Investment Company Act to redeem any of its shares presented for
redemption at net asset value in the ordinary course of its business as an
open-end, management investment company.
(b) Buying Fund has no plan or intention to sell or otherwise dispose of
any of the assets of Selling Fund acquired in the Reorganization, other than in
the ordinary course of its business and to the extent necessary to maintain its
status as a "regulated investment company" under the Code; provided, however,
that this Section 4.14(b) shall not preclude any of the restructurings or
redomestications of funds set forth on Schedule 3.5(d).
(c) Following the Reorganization, Buying Fund will continue an "historic
business" of Selling Fund or use a significant portion of Selling Fund's
"historic business assets" in a business. For purposes of this representation,
the terms "historic business" and "historic business assets" shall have the
meanings ascribed to them in Section 1.368-1(d) of the Treasury Regulations;
provided, however, that this Section 4.14(c) shall not preclude any of the
restructurings or redomestications of funds set forth on Schedule 3.5(d).
(d) Prior to or in the Reorganization, neither Buying Fund nor any person
related to Buying Fund (for purposes of this paragraph as defined in Section
1.368-1(e)(3) of the Treasury Regulations) will have acquired directly or
through any transaction, agreement or arrangement with any other person, shares
of Selling Fund with consideration other than shares of Buying Fund. There is no
plan or intention by Buying Fund or any person related to Buying Fund to acquire
or redeem any of the Buying Fund Shares issued in the Reorganization either
directly or through any transaction, agreement, or arrangement with any other
person, other than redemptions in the ordinary course of Buying Fund's business
as an open-end investment company as required by the Investment Company Act.
SECTION 4.15. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Buying Fund as of
the date on which they were issued did not contain, and as supplemented by any
supplement thereto dated prior to or on the Closing Date do not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 4.16. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
SECTION 4.17. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration other than Buying Fund
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including
for this purpose any liabilities to which the assets of Selling Fund are
subject) will be given in exchange for the assets of Selling Fund acquired by
Buying Fund in connection with the Reorganization. The fair market value of the
assets of Selling Fund transferred to Buying Fund in the Reorganization will
equal or exceed the sum of the Liabilities assumed by Buying Fund, plus the
amount of liabilities, if any, to which such transferred assets are subject.
ARTICLE 5
COVENANTS
SECTION 5.1. Conduct of Business.
(a) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), Seller shall conduct the business of
I-14
Selling Fund only in the ordinary course and substantially in accordance with
past practices, and shall use its reasonable best efforts to preserve intact its
business organization and material assets and maintain the rights, franchises
and business and customer relations necessary to conduct the business operations
of Selling Fund in the ordinary course in all material respects; provided,
however, that this Section 5.1(a) shall not preclude any of the restructurings
or redomestications of funds set forth on Schedule 3.5(d) or any of the
combinations of funds set forth on Schedule 5.1.
(b) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), Buyer shall conduct the business of Buying Fund only in the ordinary
course and substantially in accordance with past practices, and shall use its
reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business operations of Buying Fund in the
ordinary course in all material respects; provided, however, that this Section
5.1(b) shall not preclude any of the restructurings or redomestications of funds
set forth on Schedule 3.5(d) or any of the combinations of funds set forth on
Schedule 5.1.
SECTION 5.2. Announcements. Seller and Buyer shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement and the transactions contemplated by this
Agreement, and neither Seller nor Buyer shall issue any such press release or
make any public statement without the prior written approval of the other party
to this Agreement, such approval not to be unreasonably withheld, except as may
be required by law.
SECTION 5.3. Expenses. AMVESCAP PLC, on behalf of either Buyer Investment
Adviser or Seller Investment Adviser, shall bear the costs and expenses incurred
in connection with this Agreement and the Reorganization and other transactions
contemplated hereby; provided that any such expenses incurred by or on behalf of
Buying Fund or Selling Fund shall not be reimbursed or paid for by another
Person unless those expenses are solely and directly related to the
Reorganization.
SECTION 5.4. Further Assurances. Each of the parties hereto shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall, on or prior to the Closing Date, use
its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to the consummation of the Reorganization, including the
execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the Reorganization.
SECTION 5.5. Notice of Events. Buyer shall give prompt notice to Seller,
and Seller shall give prompt notice to Buyer, of (a) the occurrence or
non-occurrence of any event which to the knowledge of Buyer or to the knowledge
of Seller, the occurrence or non-occurrence of which would be likely to result
in any of the conditions specified in (i) in the case of Seller, Sections 6.1
and 6.2 or (ii) in the case of Buyer, Sections 6.2 and 6.3, not being satisfied
so as to permit the consummation of the Reorganization and (b) any material
failure on its part, or on the part of the other party hereto of which it has
knowledge, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.5 shall not limit or otherwise affect
the remedies available hereunder to any party.
SECTION 5.6. Access to Information.
(a) Seller will, during regular business hours and on reasonable prior
notice, allow Buyer and its authorized representatives reasonable access to the
books and records of Seller pertaining to the assets of Selling Fund and to
officers of Seller knowledgeable thereof; provided, however, that any such
access shall not significantly interfere with the business or operations of
Seller.
(b) Buyer will, during regular business hours and on reasonable prior
notice, allow Seller and its authorized representatives reasonable access to the
books and records of Buyer pertaining to the assets of Buying Fund and to
officers of Buyer knowledgeable thereof; provided, however, that any such access
shall not significantly interfere with the business or operations of Buyer.
I-15
SECTION 5.7. Consents, Approvals and Filings. Each of Seller and Buyer
shall make all necessary filings, as soon as reasonably practicable, including,
without limitation, those required under Applicable Law, the Securities Act, the
Exchange Act, the Investment Company Act and the Advisers Act, in order to
facilitate prompt consummation of the Reorganization and the other transactions
contemplated by this Agreement. In addition, each of Seller and Buyer shall use
its reasonable best efforts, and shall cooperate fully with each other (i) to
comply as promptly as reasonably practicable with all requirements of
Governmental Authorities applicable to the Reorganization and the other
transactions contemplated herein and (ii) to obtain as promptly as reasonably
practicable all necessary permits, orders or other consents of Governmental
Authorities and consents of all third parties necessary for the consummation of
the Reorganization and the other transactions contemplated herein. Each of
Seller and Buyer shall use reasonable efforts to provide such information and
communications to Governmental Authorities as such Governmental Authorities may
request.
SECTION 5.8. Submission of Agreement to Shareholders. Seller shall take
all action necessary in accordance with Applicable Law and its Governing
Documents to convene the Shareholders Meeting. Seller shall, through its Board
of Directors/Trustees, recommend to the shareholders of Selling Fund approval of
this Agreement and, in connection therewith with respect to AIM Technology Fund
and Science & Technology Fund only, the sale of all of each such Selling Fund's
assets and the termination of each such Selling Fund as a designated series of
Seller. Seller shall use its reasonable best efforts to hold a Shareholders
Meeting as soon as practicable after the date hereof.
SECTION 5.9. Delay of Consummation of Reorganization. The parties
acknowledge and agree that if the Exchangeability Date has not occurred prior to
the Closing Date, consummation of the Reorganization shall not occur on the
Closing Date but instead shall be postponed until a mutually acceptable date
occurring subsequent to the Exchangeability Date; provided, however, that in no
event shall the consummation of the Reorganization occur on a date subsequent to
the Termination Date. In the case of such postponement of the consummation of
the Reorganization, the parties agree that the term "Closing Date" in this
Agreement shall mean in each instance such mutually acceptable date subsequent
to the Exchangeability Date as the parties may choose to consummate the
Reorganization.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
SECTION 6.1. Conditions Precedent of Buyer. The obligation of Buyer to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by Buyer.
(a) The representations and warranties of Seller on behalf of Selling Fund
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date with the same effect
as though all such representations and warranties had been made as of the
Closing Date.
(b) Seller shall have complied with and satisfied in all material respects
all agreements and conditions relating to Selling Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Buyer shall have received at the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Seller, in such individual's capacity
as an officer of Seller and not as an individual, to the effect that the
conditions specified in Sections 6.1(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Seller certifying as to the accuracy and completeness of the
attached Governing Documents of Seller, and resolutions, consents and
authorizations of or regarding Seller with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
I-16
(d) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
(e) Buyer shall have received from Seller confirmations or other adequate
evidence as to the tax costs and holding periods of the assets and property of
Selling Fund transferred to Buying Fund in accordance with the terms of this
Agreement.
(f) To the extent applicable, Seller Investment Adviser shall have
terminated or waived, in either case in writing, any rights to reimbursement
from Selling Fund to which it is entitled for fees and expenses absorbed by
Seller Investment Adviser pursuant to voluntary and contractual fee waiver or
expense limitation commitments between Seller Investment Adviser and Selling
Fund.
SECTION 6.2. Mutual Conditions. The obligations of Seller and Buyer to
consummate the Reorganization are subject to the satisfaction, at or prior to
the Closing Date, of all of the following further conditions, any one or more of
which may be waived in writing by Seller and Buyer, but only if and to the
extent that such waiver is mutual.
(a) All filings required to be made prior to the Closing Date with, and all
consents, approvals, permits and authorizations required to be obtained on or
prior to the Closing Date from Governmental Authorities in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by Seller and Buyer shall have been made or
obtained, as the case may be; provided, however, that such consents, approvals,
permits and authorizations may be subject to conditions that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) This Agreement, the Reorganization of Selling Fund and related matters
shall have been approved and adopted at the Shareholders Meeting by the
shareholders of Selling Fund on the record date by the Required Shareholder
Vote.
(c) The assets of Selling Fund to be acquired by Buying Fund shall
constitute at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets held by Selling Fund
immediately prior to the Reorganization. For purposes of this Section 6.2(c),
assets used by Selling Fund to pay the expenses it incurs in connection with
this Agreement and the Reorganization and to effect all shareholder redemptions
and distributions (other than regular, normal dividends and regular, normal
redemptions pursuant to the Investment Company Act, and not in excess of the
requirements of Section 852 of the Code, occurring in the ordinary course of
Selling Fund's business as a series of an open-end management investment
company) after the date of this Agreement shall be included as assets of Selling
Fund held immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent injunction or
other order issued by any Governmental Authority preventing the consummation of
the Reorganization on the Closing Date shall be in effect; provided, however,
that the party or parties invoking this condition shall use reasonable efforts
to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by Buyer with respect to
Buying Fund Shares to be issued to Selling Fund Shareholders in connection with
the Reorganization shall have become effective under the Securities Act and no
stop order suspending the effectiveness thereof shall have been issued and, to
the best knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or
contemplated under the Securities Act.
(f) Seller and Buyer shall have received on or before the Closing Date an
opinion of Buyer Counsel in form and substance reasonably acceptable to Seller
and Buyer, as to the matters set forth on Schedule 6.2(f). In rendering such
opinion, Buyer Counsel may request and rely upon representations contained in
certificates of officers of Seller, Buyer and others, and the officers of Seller
and Buyer shall use their best efforts to make available such truthful
certificates.
I-17
SECTION 6.3. Conditions Precedent of Seller. The obligation of Seller to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by Seller.
(a) The representations and warranties of Buyer on behalf of Buying Fund
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date with the same effect
as though all such representations and warranties had been made as of the
Closing Date.
(b) Buyer shall have complied with and satisfied in all material respects
all agreements and conditions relating to Buying Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Seller shall have received on the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Buyer, in such individual's capacity
as an officer of Buyer and not as an individual, to the effect that the
conditions specified in Sections 6.3(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Buyer certifying as to the accuracy and completeness of the
attached Governing Documents of Buyer and resolutions, consents and
authorizations of or regarding Buyer with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
ARTICLE 7
TERMINATION OF AGREEMENT
SECTION 7.1. Termination. This Agreement may be terminated on or prior to
the Closing Date as follows:
(a) by mutual written consent of Seller and Buyer; or
(b) at the election of Seller or Buyer, to be effectuated by the delivery
by the terminating party to the other party of a written notice of such
termination:
(i) if the Closing Date shall not be on or before the Termination
Date, unless the failure to consummate the Reorganization is the result of
a willful and material breach of this Agreement by the party seeking to
terminate this Agreement;
(ii) if, upon a vote at the Shareholders Meeting or any final
adjournment thereof, the Required Shareholder Vote shall not have been
obtained as contemplated by Section 5.8; or
(iii) if any Governmental Authority shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Reorganization and such order, decree, ruling or
other action shall have become final and nonappealable.
SECTION 7.2. Survival After Termination. If this Agreement is terminated
in accordance with Section 7.1 hereof and the Reorganization of Selling Fund is
not consummated, this Agreement shall become void and of no further force and
effect with respect to the Reorganization and Selling Fund, except for the
provisions of Section 5.3.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Survival of Representations, Warranties and Covenants. The
representations and warranties in this Agreement, and the covenants in this
Agreement that are required to be performed at or prior to the Closing Date,
shall terminate upon the consummation of the transactions contemplated
hereunder. The covenants in this Agreement that are required to be performed in
whole or in part
I-18
subsequent to the Closing Date shall survive the consummation of the
transactions contemplated hereunder for a period of one (1) year following the
Closing Date.
SECTION 8.2. Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state.
SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns of the parties and such Persons.
Nothing in this Agreement is intended or shall be construed to confer upon any
entity or Person other than the parties hereto and their respective successors
and permitted assigns any right, remedy or claim under or by reason of this
Agreement or any part hereof. Without the prior written consent of the parties
hereto, this Agreement may not be assigned by any of the parties hereto.
SECTION 8.4. Obligations of Buyer and Seller.
(a) Seller and Buyer hereby acknowledge and agree that Buying Fund is a
separate investment portfolio of Buyer, that Buyer is executing this Agreement
on behalf of Buying Fund, and that any amounts payable by Buyer under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Buying Fund.
(b) Seller and Buyer hereby acknowledge and agree that Selling Fund is a
separate investment portfolio of Seller, that Seller is executing this Agreement
on behalf of Selling Fund and that any amounts payable by Seller under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Selling Fund. Buyer further acknowledges and agrees that, with respect
to AIF and AFG only, this Agreement has been executed by a duly authorized
officer of such Seller in his or her capacity as an officer of such Seller
intending to bind such Seller as provided herein, and that no officer, trustee
or shareholder of such Seller shall be personally liable for the liabilities or
obligation of such Seller incurred hereunder. Finally, Buyer acknowledges and
agrees that the liabilities and obligations of AIM Technology Fund and Science &
Technology Fund, as applicable, pursuant to this Agreement shall be enforceable
against the assets of such Selling Fund only and not against the assets of AIF
or AFG, as applicable, generally or assets belonging to any other series of AIF
or AFG, as applicable.
SECTION 8.5. Amendments. This Agreement may not be amended, altered or
modified except by a written instrument executed by Seller and Buyer.
SECTION 8.6. Enforcement. The parties agree irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
any state having jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity.
SECTION 8.7. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or a Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." Each representation and warranty contained in Article 3 or 4 that
relates to a general category of a subject matter shall be deemed superseded by
a specific representation and warranty relating to a subcategory thereof to the
extent of such specific representation or warranty.
SECTION 8.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and each of which shall
constitute one and the same instrument.
SECTION 8.9. Entire Agreement; Exhibits and Schedules. This Agreement,
including the Exhibits, Schedules, certificates and lists referred to herein,
and any documents executed by the parties simultaneously herewith or pursuant
thereto, constitute the entire understanding and agreement of the
I-19
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, written or oral, between the parties
with respect to such subject matter.
SECTION 8.10. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand or by overnight courier, two days after being
sent by registered mail, return receipt requested, or when sent by telecopier
(with receipt confirmed), provided, in the case of a telecopied notice, a copy
is also sent by registered mail, return receipt requested, or by courier,
addressed as follows (or to such other address as a party may designate by
notice to the other):
(a) If to AFG or AIF:
AIM Funds Group or AIM Investment Funds (as applicable)
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Kevin M. Carome
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attn: Martha J. Hays
(b) If to IFG:
INVESCO Sector Funds, Inc.
4350 South Monaco Street
Denver, Colorado 80237
Attn: Glen A. Payne
with a copy to:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
Attn: Clifford J. Alexander
SECTION 8.11. Representations by Seller Investment Adviser. In its
capacity as investment adviser to Seller, Seller Investment Adviser represents
to Buyer that to the best of its knowledge the representations and warranties of
Seller and Selling Fund contained in this Agreement are true and correct as of
the date of this Agreement. For purposes of this Section 8.11, the best
knowledge standard shall be deemed to mean that the officers of Seller
Investment Adviser who have substantive responsibility for the provision of
investment advisory services to Seller do not have actual knowledge to the
contrary after due inquiry.
SECTION 8.12. Representations by Buyer Investment Adviser. In its
capacity as investment adviser to Buyer, Buyer Investment Adviser represents to
Seller that to the best of its knowledge the representations and warranties of
Buyer and Buying Fund contained in this Agreement are true and correct as of the
date of this Agreement. For purposes of this Section 8.12, the best knowledge
standard shall be deemed to mean that the officers of Buyer Investment Adviser
who have substantive responsibility for the provision of investment advisory
services to Buyer do not have actual knowledge to the contrary after due
inquiry.
I-20
SECTION 8.13. Successors and Assigns; Assignment. This Agreement shall be
binding upon and inure to the benefit of Seller, on behalf of Selling Fund, and
Buyer, on behalf of Buying Fund, and their respective successors and assigns.
The parties hereto expressly acknowledge and agree that this Agreement shall be
binding upon and inure to the benefit of those Delaware statutory trusts that
are the resulting entities in the permitted restructurings and redomestications
of funds set forth on Schedule 3.5(d).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM FUNDS GROUP, acting on behalf of
AIM NEW TECHNOLOGY FUND
By: /s/ ROBERT H. GRAHAM
------------------------------------
AIM INVESTMENT FUNDS, acting on behalf
of
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND
By: /s/ ROBERT H. GRAHAM
------------------------------------
INVESCO SECTOR FUNDS, INC., acting on
behalf of INVESCO TECHNOLOGY FUND
By: /s/ RAYMOND R. CUNNINGHAM
------------------------------------
A I M ADVISORS, INC.
By: /s/ MARK H. WILLIAMSON
------------------------------------
INVESCO FUNDS GROUP, INC.
By: /s/ RAYMOND R. CUNNINGHAM
------------------------------------
I-21
EXHIBIT A
EXCLUDED LIABILITIES OF SELLING FUND
None.
SCHEDULE 2.1
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF SHARES OF SELLING FUND SHARES OF BUYING FUND
- --------------------------------- ------------------------
Class A shares.............................................. Class A shares
Class B shares.............................................. Class B shares
Class C shares.............................................. Class C shares
Class K shares*............................................. Class K shares
Investor Class shares*...................................... Investor Class shares
</Table>
- ---------------
* INVESCO Telecommunications Fund only
SCHEDULE 3.4
CERTAIN CONTINGENT LIABILITIES OF SELLING FUND
None.
SCHEDULE 3.5(d)
PERMITTED RESTRUCTURINGS AND REDOMESTICATIONS OF FUNDS
<Table>
<Caption>
CURRENT FUNDS CORRESPONDING NEW FUNDS
- ------------- -----------------------
AIM ADVISOR FUNDS................................ AIM INVESTMENT SECURITIES FUNDS
(DELAWARE STATUTORY TRUST) (DELAWARE STATUTORY TRUST)
AIM International Core Equity Fund............... AIM International Core Equity Fund
AIM Real Estate Fund............................. AIM Real Estate Fund
AIM INTERNATIONAL FUNDS, INC. ................... AIM INTERNATIONAL MUTUAL FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
AIM European Growth Fund......................... AIM European Growth Fund
INVESCO BOND FUNDS, INC. ........................ AIM BOND FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO High Yield Fund.......................... INVESCO High Yield Fund
INVESCO Select Income Fund....................... INVESCO Select Income Fund
INVESCO Tax-Free Bond Fund....................... INVESCO Tax-Free Bond Fund
INVESCO U.S. Government Securities Fund.......... INVESCO U.S. Government Securities Fund
INVESCO COMBINATION STOCK & BOND FUNDS, INC. .... AIM COMBINATION STOCK & BOND FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Balanced Fund............................ INVESCO Balanced Fund
INVESCO Total Return Fund........................ INVESCO Total Return Fund
INVESCO COUNSELOR SERIES FUNDS, INC. ............ AIM COUNSELOR SERIES TRUST
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Advantage Fund........................... INVESCO Advantage Fund
INVESCO INTERNATIONAL FUNDS, INC. ............... AIM INTERNATIONAL MUTUAL FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO European Fund............................ INVESCO European Fund
INVESCO International Blue Chip Value Fund....... INVESCO International Blue Chip Value Fund
INVESCO MONEY MARKET FUNDS, INC. ................ AIM TREASURER'S SERIES TRUST
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Cash Reserves Fund....................... INVESCO Cash Reserves Fund
INVESCO Tax-Free Money Fund...................... INVESCO Tax-Free Money Fund
INVESCO SECTOR FUNDS, INC. ...................... AIM SECTOR FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Energy Fund.............................. INVESCO Energy Fund
INVESCO Financial Services Fund.................. INVESCO Financial Services Fund
INVESCO Real Estate Opportunity Fund............. INVESCO Real Estate Opportunity Fund
INVESCO Technology Fund.......................... INVESCO Technology Fund
INVESCO Telecommunications Fund.................. INVESCO Telecommunications Fund
INVESCO Utilities Fund........................... INVESCO Utilities Fund
INVESCO STOCK FUNDS, INC. ....................... AIM STOCK FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Growth Fund.............................. INVESCO Growth Fund
INVESCO Growth & Income Fund..................... INVESCO Growth & Income Fund
INVESCO Value Equity Fund........................ INVESCO Value Equity Fund
</Table>
SCHEDULE 4.4
CERTAIN CONTINGENT LIABILITIES OF BUYING FUND
None.
SCHEDULE 4.5(a)
PORTFOLIOS OF BUYER
INVESCO Energy Fund
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Real Estate Opportunity Fund
INVESCO Technology Fund
INVESCO Telecommunications Fund
INVESCO Utilities Fund
SCHEDULE 4.5(b)
<Table>
<Caption>
NUMBER OF SHARES OF EACH CLASS
CLASSES OF SHARES OF BUYING FUND BUYER IS AUTHORIZED TO ISSUE
- -------------------------------- ------------------------------
Class A shares.............................................. 100,000,000
Class B shares.............................................. 100,000,000
Class C shares.............................................. 100,000,000
Class K shares.............................................. 100,000,000
Investor Class shares....................................... 100,000,000
</Table>
SCHEDULE 5.1
PERMITTED COMBINATIONS OF FUNDS
<Table>
INVESCO Advantage Fund into AIM Opportunities III Fund
INVESCO Growth Fund into AIM Large Cap Growth Fund
INVESCO Growth & Income Fund into AIM Blue Chip Fund
INVESCO European Fund into AIM European Growth Fund
AIM International Core Equity Fund into INVESCO
International Blue Chip Value Fund
AIM New Technology Fund into INVESCO Technology Fund
AIM Global Science and Technology Fund into INVESCO
Technology Fund
INVESCO Telecommunications Fund into INVESCO Technology Fund
AIM Global Financial Services Fund into INVESCO Financial
Services Fund
AIM Global Energy Fund into INVESCO Energy Fund
AIM Global Utilities Fund into INVESCO Utilities Fund
INVESCO Real Estate Opportunity Fund into AIM Real Estate
Fund
INVESCO Tax-Free Bond Fund into AIM Municipal Bond Fund
INVESCO High Yield Fund into AIM High Yield Fund
INVESCO Select Income Fund into AIM Income Fund
INVESCO U.S. Government Securities Fund into AIM
Intermediate Government Fund
INVESCO Cash Reserves Fund into AIM Money Market Fund
INVESCO Tax-Free Money Fund into AIM Tax-Exempt Cash Fund
INVESCO Balanced Fund into INVESCO Total Return Fund
INVESCO Value Equity Fund into AIM Large Cap Basic Value
Fund
AIM Premier Equity Fund II into AIM Premier Equity Fund
</Table>
SCHEDULE 6.2(f)
TAX OPINIONS
(i) The transfer of the assets of Selling Fund to Buying Fund in exchange
solely for Buying Fund Shares distributed directly to Selling Fund Shareholders
and Buying Fund's assumption of the Liabilities, as provided in the Agreement,
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code and Selling Fund and Buying Fund will be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
(ii) In accordance with Section 361(a) and Section 361(c)(1) of the Code,
no gain or loss will be recognized by Selling Fund on the transfer of its assets
to Buying Fund solely in exchange for Buying Fund Shares and Buying Fund's
assumption of the Liabilities or on the distribution of Buying Fund Shares to
Selling Fund Shareholders; provided that, no opinion is expressed as to the
effect of the Reorganization on Selling Fund or any Selling Fund Shareholder
with respect to any asset as to which any unrealized gain or loss is required to
be recognized for Federal income tax purposes at the end of a taxable year (or
on the termination or transfer of a taxpayer's rights (or obligations) with
respect to such asset) under a mark-to-market system of accounting.
(iii) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange
for Buying Fund Shares issued directly to Selling Fund Shareholders.
(iv) In accordance with Section 354(a)(1) of the Code, no gain or loss will
be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares
in exchange for Selling Fund Shares.
(v) In accordance with Section 362(b) of the Code, the basis to Buying Fund
of the assets of Selling Fund will be the same as the basis of such assets in
the hands of Selling Fund immediately prior to the Reorganization.
(vi) In accordance with Section 358(a) of the Code, a Selling Fund
Shareholder's basis for Buying Fund Shares received by the Selling Fund
Shareholder will be the same as his or her basis for Selling Fund Shares
exchanged therefor.
(vii) In accordance with Section 1223(1) of the Code, a Selling Fund
Shareholder's holding period for Buying Fund Shares will be determined by
including such Selling Fund Shareholder's holding period for Selling Fund Shares
exchanged therefor, provided that such Selling Fund Shareholder held such
Selling Fund Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the Code, the holding period
with respect to the assets of Selling Fund transferred to Buying Fund in the
Reorganization will include the holding period for such assets in the hands of
Selling Fund.
(ix) In accordance with Section 381(a)(2) of the Code, Buying Fund will
succeed to and take into account the items of Selling Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381 through 384 of the Code and the Treasury Regulations thereunder.
APPENDIX II
INVESCO SECTOR FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & Precious Metals Fund--Investor Class, Class A, B, and C
INVESCO Real Estate Opportunity Fund--Investor Class, Class A, B, and C
INVESCO Utilities Fund--Investor Class, Class A, B, and C
Supplement dated August 1, 2003 to the Prospectus dated August 1, 2003
INVESCO REAL ESTATE OPPORTUNITY FUND
The Board of Directors of INVESCO Sector Funds, Inc. ("Seller") unanimously
approved, on June 9, 2003, an Agreement and Plan of Reorganization (the "Plan")
pursuant to which INVESCO Real Estate Opportunity Fund ("Selling Fund"), a
series of Seller, would transfer all of its assets and liabilities to AIM Real
Estate Fund ("Buying Fund"), a series of AIM Advisor Funds (the
"Reorganization"). As a result of the Reorganization, shareholders of Selling
Fund would receive shares of Buying Fund in exchange for their shares of Selling
Fund, and Selling Fund would cease operations.
INVESCO Funds Group, Inc. ("INVESCO") serves as the investment advisor to
Selling Fund and A I M Advisors, Inc. ("AIM") serves as the investment advisor
to Buying Fund. Both investment advisors are wholly owned subsidiaries of
AMVESCAP PLC ("AMVESCAP"), an independent global investment management company.
The Reorganization is part of an integration initiative announced on March 27,
2003, by AMVESCAP, with respect to its North American mutual fund operations.
One component of AMVESCAP's integration initiative is the rationalization and
streamlining of the various funds within The AIM Family of Funds(R) and the
INVESCO Family of Funds. In that regard, AMVESCAP has undertaken an extensive
review of these funds and concluded that it would be appropriate to reduce the
number of smaller and less efficient funds that compete in the same space for
shareholder assets and to consolidate certain funds having similar investment
objectives and strategies. Reducing the number of funds both within The AIM
Family of Funds(R) and the INVESCO Family of Funds will allow AIM and INVESCO to
concentrate on managing their core products.
In AMVESCAP's view, AIM has best developed the expertise and resources for
managing funds with an investment objective and strategies similar to those of
Selling Fund and should therefore manage the combined fund. AMVESCAP's belief is
that the Reorganization will allow Buying Fund the best available opportunities
for investment management, growth prospects and potential economies of scale.
The Board of Directors of Seller, including the independent directors, has
determined that the Reorganization is advisable and in the best interests of
Selling Fund and that the interests of the shareholders of Selling Fund will not
be diluted as a result of the Reorganization.
The investment objectives of Selling Fund and Buying Fund are similar. Selling
Fund's investment objective is capital growth and income. Buying Fund's
investment objective is high total return.
The Plan requires approval of Selling Fund shareholders and will be submitted to
the shareholders for their consideration at a meeting to be held on or around
October 21, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
It is anticipated that Selling Fund will be closed to new investors during the
fourth quarter of 2003.
INVESCO TELECOMMUNICATIONS FUND
The Board of Directors of INVESCO Sector Funds, Inc. ("Seller") unanimously
approved, on June 9, 2003, an Agreement and Plan of Reorganization (the "Plan")
pursuant to which INVESCO Telecommunications Fund ("Selling Fund"), would
transfer all of its assets and liabilities to INVESCO Technology Fund ("Buying
Fund"), both of which are series of Seller (the "Reorganization"). As a result
of the Reorganization, shareholders of Selling Fund would receive shares of
Buying Fund in exchange for their shares of Selling Fund, and Selling Fund would
cease operations.
INVESCO Funds Group, Inc. ("INVESCO") serves as the investment advisor to both
Selling Fund and Buying Fund. The investment advisor is a wholly owned
subsidiary of AMVESCAP PLC ("AMVESCAP"), an independent global investment
management company. The Reorganization is part of an integration initiative
announced on March 27, 2003, by AMVESCAP, with respect to its North American
mutual fund operations.
One component of AMVESCAP's integration initiative is the rationalization and
streamlining of various funds within the INVESCO Family of Funds. In that
regard, AMVESCAP has undertaken an extensive review of these funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete in the same space for shareholder assets and to consolidate
certain funds having similar investment objectives and strategies. Reducing the
number of funds within the INVESCO Family of Funds will allow INVESCO to
concentrate on managing its core products.
AMVESCAP's belief is that the Reorganization will allow Buying Fund the best
available opportunities for investment management, growth prospects and
potential economies of scale.
The Board of Directors of Seller, including the independent directors, has
determined that the Reorganization is advisable and in the best interests of
Selling Fund and that the interests of the shareholders of Selling Fund will not
be diluted as a result of the Reorganization.
The investment objectives of Selling Fund and Buying Fund are the same. Selling
Fund's investment objective is capital growth and income. Buying Fund's
investment objective is capital growth.
The Plan requires approval of Selling Fund shareholders and will be submitted to
the shareholders for their consideration at a meeting to be held on or around
October 21, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
It is anticipated that Selling Fund will be closed to new investors during the
fourth quarter of 2003.
Effective August 18, 2003, the section of the Prospectus entitled "Fees And
Expenses" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Investor Class Class A Class B Class C Class K
Maximum Front-End Sales Charge
on purchases as a percentage of
offering price None 5.50% None None None
Maximum Contingent Deferred Sales
Charge (CDSC) as a percentage of
the lower of the total original cost or
current market value of the shares None None(1) 5.00%(2) 1.00%(2) None(1)
Maximum Sales Charge on reinvested
dividends/distributions None None None None None
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares
within eighteen months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) A 5% and 1% CDSC may
be charged on Class B and Class C shares, respectively. Please see the section
entitled "How To Buy Shares."
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
With the exception of Class A shares, there is no charge to invest directly
through INVESCO. Class A shares are subject to a front-end sales charge. For
more information on this charge, please see the subsection entitled "Sales
Charges." If you buy $1,000,000 or more of Class A shares and redeem the shares
within eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the lower of the total original
cost or current market value of the shares may be assessed. With respect to
redemption of Class C shares held twelve months or less, a CDSC of 1% of the
lower of the total original cost or current market value of the shares may be
assessed. With respect to Class K shares, if you are a qualified plan and elect
to receive a dealer concession, you may pay a CDSC of 0.70% on your Class K
shares if the plan is redeemed within twelve months from initial deposit in the
plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. For a non-qualified plan, in
determining whether a CDSC applies to a redemption, it is assumed that the
shares being redeemed first are any shares in the shareholder's Fund account
that are not subject to a CDSC, followed by shares held the longest in the
shareholder's account. These charges are not assessed upon Class A, B, C, or K
shares acquired through reinvestment of dividends or other distributions, or
Class A, B, C, or K shares exchanged for the same class of another INVESCO Fund.
For more information on CDSC charges, please see the subsection of the
Prospectus entitled "Choosing A Share Class" and the section of the Statement of
Additional Information entitled "Distributor - Sales Charges and Dealer
Concessions."
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares - Choosing A Share Class" is amended to (i) delete the second paragraph
in its entirety and (ii) substitute the following in its place:
In addition, you should also consider the factors below:
Investor
Class Class A Class B Class C Class K
Initial Sales Charge None 5.50% None None None
CDSC(1) None 1% on certain 1%-5% for 1% for shares 0.70% on certain
purchases held shares held held less than purchases
less than 18 less than 12 months held less than
months 6 years 12 months
12b-1 Fee 0.25% 0.35% 1.00% 1.00% 0.45%
12b-1 Fee
(Utilities Fund Only) 0.25% 0.25% 1.00% 1.00% None
Conversion No No Yes(2) No No
Purchase Order
Maximum None None $250,000 $1,000,000 None
(1) Please see the subsection entitled "Sales Charges" below and the section of
the Funds' Statement of Additional Information entitled "Distributor - Sales
Charges and Dealer Concessions" for more information regarding CDSC charges and
dealer concessions.
(2) Class B shares, along with the pro rata portion of the shares' reinvested
dividends and distributions, automatically convert to Class A shares at the end
of the month which is eight years after the date on which such Class B shares
were purchased.
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares - Sales Charges (Class A, B, C And K Only)" is amended to (i) delete the
third, fourth, seventh, eighth, and tenth paragraphs in their entirety and (ii)
substitute the following, respectively, in their place:
CONTINGENT DEFERRED SALES CHARGE (CDSC) for Class A and Class K Shares. You
can purchase $1,000,000 or more of Class A shares at net asset value, and
the distributor may pay a dealer concession and/or a service fee for
purchases of $1,000,000 or more. However, if you purchase shares worth
$1,000,000 or more, they may be subject to a CDSC of 1% if you redeem them
prior to eighteen months after the date of purchase. We will use the
"first-in, first-out" method to determine your holding period. Under this
method, the date of redemption will be compared with the earliest purchase
date of shares held in your account. If your holding period is less than
eighteen months, the CDSC may be assessed on the amount of the lower of the
total original cost or current market value of the shares. For qualified
plans investing in Class A shares, you may pay a CDSC of 1% if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. For qualified plans investing in Class K shares, you may pay a
CDSC of 0.70% if the plan is redeemed within twelve months from initial
deposit in the plan's INVESCO account.
CDSC 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 CDSC in the following percentages. If your holding
period is less than six years for Class B shares and twelve months for
Class C shares, the CDSC may be assessed on the amount of the lower of the
total original cost or current market value of the shares.
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(1) None
(1) Class B shares, along with the pro rata portion of the shares'
reinvested dividends and distributions, automatically convert to Class A
shares at the end of the month which is eight years after the date on which
such Class B shares were purchased.
RIGHTS OF ACCUMULATION. You may combine your new purchases of Class A
shares with shares currently owned (Class A, B, C, or K) for the purpose of
qualifying for the lower initial sales charge rates that apply to larger
purchases. The applicable initial sales charge for the new purchase is
based on the total of your current purchase and the current value of all
other shares you own.
LETTER OF INTENT. Under a Letter of Intent (LOI), you commit to purchase a
specified dollar amount of Class A shares of a Fund during a thirteen-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 thirteen-month period, your account will be adjusted to the
higher initial sales charge level for the amount actually invested.
You will not pay a CDSC:
|X| if you purchase less than $1,000,000 of Class A shares;
|X| if you purchase $1,000,000 or more of Class A shares and hold
those shares for more than eighteen months;
|X| if you redeem Class B shares you held for more than six years;
|X| if you redeem Class C shares you held for more than twelve
months;
|X| if you participate in the periodic withdrawal program and
withdraw up to 12% of the value of your shares that are subject
to a CDSC in any twelve-month period. The value of your shares,
and applicable twelve-month period, will be calculated based upon
the value of your account on, and the date of, the first periodic
withdrawal;
|X| if you redeem shares acquired through reinvestment of dividends
and distributions;
|X| if you are a participant in a qualified retirement plan and
redeem Class C shares or Class K shares in order to fund a
distribution;
|X| if you are a qualified plan investing in Class A shares or Class
K shares and elect to forego any dealer concession;
|X| on increases in the net asset value of your shares;
|X| to pay account fees;
|X| for IRA distributions due to death or disability or periodic
distribution based on life expectancy;
|X| to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
|X| for redemptions following the death of a shareholder or
beneficial owner.
Effective August 18, 2003, the section of the Prospectus entitled "How To Sell
Shares" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
Various fees may apply to Fund redemptions. You may be charged a CDSC at
the time of redemption depending how long you have held your shares. If you
buy $1,000,000 or more of Class A shares and redeem the shares within
eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a
dealer concession, you may pay a CDSC of 1% on your Class A shares if the
plan is redeemed within twelve months from initial deposit in the plan's
INVESCO account. If you are a qualified plan and elect to forego the dealer
concession, you will not be charged a CDSC. With respect to redemption of
Class B shares held six years or less, a CDSC of 1% - 5% of the lower of
the total original cost or current market value of the shares may be
assessed. With respect to redemption of Class C shares held twelve months
or less, a CDSC of 1% of the lower of the total original cost or current
market value of the shares may be assessed. With respect to Class K shares,
if you are a qualified plan and elect to receive a dealer concession, you
may pay a CDSC of 0.70% on your Class K shares if the plan is redeemed
within twelve months from initial deposit in the plan's INVESCO account. If
you are a qualified plan and elect to forego the dealer concession, you
will not be charged a CDSC. For a non-qualified plan, in determining
whether a CDSC applies to a redemption, it is assumed that the shares being
redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the
shareholder's account. These charges are not assessed upon Class A, B, C,
or K shares acquired through reinvestment of dividends or other
distributions, or Class A, B, C, or K shares exchanged for the same class
of another INVESCO Fund. For more information on CDSC charges, please see
the subsection of the Prospectus entitled "Choosing A Share Class" and the
section of the Statement of Additional Information entitled "Distributor -
Sales Charges and Dealer Concessions."
INVESCO HEALTH SCIENCES FUND
Effective August 1, 2003, the section of the Prospectus entitled "Portfolio
Managers" is amended to add:
ANDY SUMMERS is a Portfolio Manager for all INVESCO Health Sciences portfolios.
Andy joined the INVESCO Health Sciences investment team in 1998. He is a CFA
charterholder. Prior to joining INVESCO, Andy worked as an analyst assistant for
Denver Investment Advisors. He received his master's degree in finance from the
University of Wisconsin at Madison in 1998. He received his bachelor's degree in
finance from the University of Wisconsin at Whitewater in 1996.
INVESCO TECHNOLOGY FUND
Effective August 1, 2003, the section of the Prospectus entitled "Portfolio
Managers" is amended to add:
CHRIS DRIES is a Portfolio Manager for the INVESCO Technology Fund. Chris
joined INVESCO in 1993, and was promoted to the investment division in 1995. He
previously held the position of manager of investment operations for the
investment division at INVESCO. Chris received his master's degree in finance
from the University of Colorado at Denver and his bachelor's degree in finance
from the University of Colorado at Boulder.
MICHELLE FENTON is a Portfolio Manager of INVESCO Dynamics Fund and INVESCO
Mid-Cap Growth Fund. Michelle is also a Portfolio Manager for the INVESCO
Technology Fund. She is a CFA charterholder. Michelle has more than eight years
of investment industry experience. Before joining the investment division of
INVESCO in 1998, Michelle worked at Berger Funds as an equity analyst. Prior to
that, she was a research analyst at Smith Barney. Michelle received her
bachelor's degree in finance from Montana State University.
PROSPECTUS | AUGUST 1, 2003
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YOU SHOULD KNOW WHAT INVESCO KNOWS(R)
- --------------------------------------------------------------------------------
INVESCO SECTOR
FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & PRECIOUS METALS FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO REAL ESTATE OPPORTUNITY FUND--INVESTOR CLASS, CLASS A, B AND C
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO UTILITIES FUND--INVESTOR CLASS, CLASS A, B, AND C
NINE MUTUAL FUNDS DESIGNED FOR INVESTORS SEEKING CAPITAL GROWTH THROUGH TARGETED
INVESTMENT OPPORTUNITIES.
INVESTOR CLASS SHARES OFFERED BY THIS PROSPECTUS ARE OFFERED ONLY TO
GRANDFATHERED INVESTORS. PLEASE SEE THE SECTION OF THE PROSPECTUS ENTITLED "HOW
TO BUY SHARES."
CLASS A, B, AND C SHARES ARE SOLD PRIMARILY THROUGH FINANCIAL INTERMEDIARIES.
CLASS K SHARES ARE SOLD TO QUALIFIED RETIREMENT PLANS, RETIREMENT SAVINGS
PROGRAMS, EDUCATIONAL SAVINGS PROGRAMS, AND WRAP PROGRAMS PRIMARILY THROUGH
FINANCIAL INTERMEDIARIES.
TABLE OF CONTENTS
Investment Goals, Strategies, And Risks....................2
Fund Performance...........................................5
Fees And Expenses.........................................10
Investment Risks..........................................14
Principal Risks Associated With The Funds.................14
Temporary Defensive Positions.............................16
Portfolio Turnover........................................16
Fund Management...........................................17
Portfolio Managers........................................17
Potential Rewards.........................................18
Share Price...............................................18
How To Buy Shares.........................................19
Your Account Services.....................................23
How To Sell Shares........................................24
Taxes.....................................................26
Dividends And Capital Gain Distributions..................26
Financial Highlights......................................27
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.
[INVESCO ICON] INVESCO(R)
The Securities and Exchange Commission has not approved or disapproved the
shares of these Funds. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is committing
a federal crime. INVESCO Funds Group, Inc. ("INVESCO") is the investment advisor
for the Funds. Together with our affiliated companies, we at INVESCO direct all
aspects of the management and sale of the Funds.
INVESCO Funds Group, Inc. ("INVESCO") is the investment advisor for the Funds.
Together with our affiliated companies, we at INVESCO direct all aspects of the
management and sale of the Funds.
This Prospectus contains important information about the Funds' Investor Class,
Class A, B, C, and, if applicable, K shares. Class A, B, and C shares are sold
primarily through financial intermediaries. Class K shares are sold to qualified
retirement plans, retirement savings programs, educational savings programs, and
wrap programs primarily through financial intermediaries. If you invest through
a financial intermediary, please contact your financial intermediary or, with
respect to Class K shares, your plan or program sponsor, for detailed
information on suitability and transactional issues (i.e., how to purchase or
sell shares, minimum investment amounts, and fees and expenses). INVESCO
Technology Fund also offers an additional class of shares through a separate
Prospectus. Each of the Fund's classes has varying expenses, with resulting
effects on their performance. You can choose the class of shares that is best
for you, based on how much you plan to invest and other relevant factors
discussed in "How To Buy Shares." To obtain additional information about the
other class of Technology Fund's shares, contact A I M Distributors, Inc.
("ADI") at 1-800-347-4246.
THIS PROSPECTUS WILL TELL YOU MORE ABOUT:
[KEY ICON] INVESTMENT GOALS & STRATEGIES
[ARROWS ICON] POTENTIAL INVESTMENT RISKS
[GRAPH ICON] PAST PERFORMANCE
[INVESCO ICON] WORKING WITH INVESCO
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[KEY ICON] [ARROWS ICON] INVESTMENT GOALS, STRATEGIES, AND RISKS
FACTORS COMMON TO ALL THE FUNDS
FOR MORE DETAILS ABOUT EACH FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK,
PLEASE SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.
The Funds seek capital growth; Real Estate Opportunity, Telecommunications, and
Utilities Funds also attempt to earn income for you. The Funds are actively
managed. They invest primarily in equity securities that INVESCO believes will
rise in price faster than other securities, as well as in options and other
investments whose values are based upon the values of equity securities.
Each Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies doing business in the
economic sector described by its name. At any given time, 20% of each Fund's
assets is not required to be invested in the sector. To determine whether a
potential investment is truly doing business in a particular sector, a company
must meet at least one of the following tests:
o At least 50% of its gross income or its net sales must come from activities
in the sector;
o At least 50% of its assets must be devoted to producing revenues from the
sector;
o or Based on other available information, we determine that its primary
business is within the sector.
INVESCO uses a research oriented "bottom-up" investment approach to create each
Fund's investment portfolio, focusing on company fundamentals and growth
prospects when selecting securities. In general, the Funds emphasize companies
that INVESCO believes are strongly managed and will generate above-average
long-term capital appreciation.
Growth investing may be more volatile than other investment styles because
growth stocks are more sensitive to investor perceptions of an issuing company's
growth potential. Growth-oriented funds typically will underperform
value-oriented funds when investor sentiment favors the value investing style.
Value investing seeks securities, particularly stocks, that are currently
undervalued by the market -- companies that are performing well, or have solid
management and products, but whose stock prices do not reflect that value.
Through our value process, we seek to provide reasonably consistent returns over
a variety of market cycles. Value-oriented funds typically will underperform
growth-oriented funds when investor sentiment favors the growth investing style.
As sector funds, each portfolio is concentrated in a comparatively narrow
segment of the economy. This means a Fund's investment concentration in a sector
is higher than most mutual funds and the broad securities markets. Consequently,
the Funds tend to be more volatile than other mutual funds, and the value of
their portfolio investments and consequently the value of an investment in a
Fund tend to go up and down more rapidly.
The Funds are subject to other principal risks, as applicable, such as market,
foreign securities, liquidity, derivatives, counterparty, lack of timely
information, and portfolio turnover risks. These risks are described and
discussed later in the Prospectus under the headings "Investment Risks" and
"Principal Risks Associated With The Funds." An investment in a Fund is not a
deposit of any bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") or any other government agency. As with any
mutual fund, there is always a risk that you may lose money on your investment
in a Fund.
The Funds are concentrated in these sectors:
[KEY ICON] INVESCO ENERGY FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies within the energy sector.
These companies include, but are not limited to, oil companies, oil and gas
exploration companies, natural gas pipeline companies, refinery companies,
energy conservation companies, coal, alternative energy companies, and
innovative energy technology companies.
Generally, we prefer to keep the Fund's investments divided among the four main
energy subsectors: major oil companies, energy services, oil and gas
exploration/production companies, and natural gas pipeline companies. We adjust
portfolio weightings depending on current economic conditions. Although
individual security selection drives the performance of the Fund, short-term
fluctuations in commodity prices may influence Fund returns and increase price
fluctuations in the Fund's shares. The businesses in which we invest may be
adversely affected by foreign government, federal, or state regulations on
energy production, distribution, and sale.
[KEY ICON] INVESCO FINANCIAL SERVICES FUND -- INVESTOR CLASS, CLASS A, B, C,
AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies involved in the financial
services sector. These companies include, but are not limited to, banks
(regional and money-centers), insurance companies (life, property and casualty,
and multiline), investment and miscellaneous industries (asset managers,
brokerage firms, and government-sponsored agencies), and suppliers to financial
services companies.
We place a greater emphasis on companies that are increasing their revenue
streams along with their earnings. We seek companies that we believe can grow
their revenues and earnings in a variety of interest rate environments --
although securities prices of financial services companies generally are
interest rate sensitive. We seek companies with successful sales and marketing
cultures and that leverage technologies in their operations and distribution. We
adjust portfolio weightings depending on current economic conditions and
relative valuations of securities.
This sector generally is subject to extensive governmental regulation, which may
change frequently. In addition, the profitability of businesses in these
industries depends heavily upon the availability and cost of money, and may
fluctuate significantly in response to changes in interest rates, as well as
changes in general economic conditions. From time to time, severe competition
may also affect the profitability of these industries.
[KEY ICON] INVESCO GOLD & PRECIOUS METALS FUND -- INVESTOR CLASS, CLASS A, B,
AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies involved in exploring
for, mining, processing, or dealing and investing in gold, gold bullion, and
other precious metals, such as silver, platinum, and palladium, as well as
diamonds. The securities of these companies are highly dependent on the price of
precious metals at any given time.
Fluctuations in the price of gold directly -- and often dramatically -- affect
the profitability and market value of companies in this sector. Changes in
political or economic climate for the two largest gold producers -- South Africa
and the former Soviet Union -- may have a direct impact on the price of gold
worldwide. Up to 10% at the time of purchase of the Fund's assets may be
invested in gold bullion. The Fund's investments directly in gold bullion will
earn no income return; appreciation in the market price of gold is the sole
manner in which the Fund can realize gains on bullion investments. The Fund may
have higher storage and custody costs in connection with its ownership of
bullion than those associated with the purchase, holding and sale of more
traditional types of investments.
The Fund primarily focuses on those gold companies that have the ability to
increase production capacity at low costs, while having the potential to make
major gold discoveries around the world. Additionally, we try to identify
companies that leverage increasing gold prices; that is, companies that do not
hedge gold prices on the market. While the Fund may take positions in mid- to
small-sized exploration companies that may be more volatile than investments in
large, more established companies, it will primarily focus on major gold stocks
that are leaders in their fields. Up to 100% of the Fund's assets may be
invested in foreign companies.
[KEY ICON] INVESCO HEALTH SCIENCES FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies that develop, produce, or
distribute products or services related to health care. These companies include,
but are not limited to, medical equipment or supplies, pharmaceuticals,
biotechnology, and health care providers and services companies.
We focus on the dominant players in fast-growing therapeutic areas or companies
on the verge of exciting medical breakthroughs. We seek companies with strong,
commercially successful products as well as promising product pipelines. This
strategy may lead us to invest in both well-established health care firms and
faster-growing, more dynamic entities. Well-established health care companies
typically provide liquidity and earnings visibility for the portfolio and
represent core holdings in the Fund. The Fund also may invest in high growth,
earlier stage companies whose future profitability could be dependent upon
increasing market shares from one or a few key products. Such companies often
have limited operating histories and their potential profitability may be
dependent on regulatory approval of their products, which increases the
volatility of these companies' securities prices and could have an adverse
impact upon the companies' future growth and profitability.
Changes in government regulation could also have an adverse impact. Continuing
technological advances may mean rapid obsolescence of products and services.
[KEY ICON] INVESCO LEISURE FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in the design,
production, and distribution of products related to the leisure activities.
These industries include, but are not limited to, hotels/gaming, publishing,
advertising, beverages, audio/video, broadcasting-radio/TV, cable & satellite
operators, cable & satellite programmers, motion pictures & TV, recreation
services/entertainment, retail, and toys.
We seek firms that can grow their businesses regardless of the economic
environment. INVESCO attempts to keep the portfolio well diversified across the
leisure sector, adjusting portfolio weightings depending on prevailing economic
conditions and relative valuations of securities. This sector depends on
consumer discretionary spending, which generally falls during economic
downturns. Securities of gambling casinos often are subject to high price
volatility and are considered speculative. Video and electronic games are
subject to risks of rapid obsolescence.
[KEY ICON] INVESCO REAL ESTATE OPPORTUNITY FUND -- INVESTOR CLASS, CLASS A,
B, AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies doing business in the
real estate industry, including real estate investment trusts ("REITS"), which
invest in real estate or interests in real estate. No one property type will
represent more than 50% of the Fund's total assets. The companies in which the
Fund invests may also include, but are not limited to, real estate brokers, home
builders or real estate developers, companies with substantial real estate
holdings, and companies with significant involvement in the real estate industry
or other real estate-related companies.
The real estate industry is highly cyclical, and the value of securities issued
by companies doing business in that sector may fluctuate widely. The real estate
industry -- and, therefore, the performance of the Fund -- is highly sensitive
to national, regional and local economic conditions, interest rates, property
taxes, overbuilding, decline in value of real estate, and changes in rental
income. REITS are companies or trusts that own and/or operate income-producing
real estate. Shares of REITS are publicly traded and are subject to the same
risks as any other security, as well as risks specific to the real estate
industry.
[KEY ICON] INVESCO TECHNOLOGY FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in
technology-related industries. These include, but are not limited to, various
applied technologies, hardware, software, semiconductors, telecommunications
equipment and services, and service-related companies in information technology.
Many of these products and services are subject to rapid obsolescence, which may
lower the market value of the securities of the companies in this sector.
A core portion of the Fund's portfolio is invested in market-leading technology
companies among various subsectors in the technology universe that we believe
will maintain or improve their market share regardless of overall economic
conditions. These companies are leaders in their field and are believed to have
a strategic advantage over many of their competitors. The remainder of the
Fund's portfolio consists of faster-growing, more volatile technology companies
that INVESCO believes to be emerging leaders in their fields. The market prices
of these companies tend to rise and fall more rapidly than those of larger, more
established companies.
[KEY ICON] INVESCO TELECOMMUNICATIONS FUND -- INVESTOR CLASS, CLASS A, B, C,
AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in the design,
development, manufacture, distribution, or sale of communications services and
equipment, and companies that are involved in supplying equipment or services to
such companies. The telecommunications sector includes, but is not limited to,
companies that offer telephone services, wireless communications, satellite
communications, television and movie programming, broadcasting, and Internet
access. Many of these products and services are subject to rapid obsolescence,
which may lower the market value of the securities of the companies in this
sector.
We select stocks based on projected total return for individual companies, while
also analyzing country specific factors that might affect stock performance or
influence company valuation. Normally, the Fund will invest primarily in
companies located in at least three different countries, although U.S. issuers
will often dominate the portfolio. The Fund's portfolio emphasizes strongly
managed market leaders, with a lesser weighting on smaller, faster growing
companies that offer new products or services and/or are increasing their market
share.
[KEY ICON] INVESCO UTILITIES FUND -- INVESTOR CLASS, CLASS A, B, AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in
utilities-related industries. These include, but are not limited to, companies
that produce, generate, transmit, or distribute natural gas or electricity, as
well as companies that provide telecommunications services, including local,
long distance and wireless.
Governmental regulation, difficulties in obtaining adequate financing and
investment return, environmental issues, prices of fuel for generation of
electricity, availability of natural gas, risks associated with power marketing
and trading, and risks associated with nuclear power facilities may adversely
affect the market value of the Fund's holdings. The recent trend towards
deregulation in the utility industries presents special risks. Some companies
may be faced with increased competition and may become less profitable.
Normally, INVESCO seeks to keep the portfolio divided among the electric
utilities, natural gas, and telecommunications industries. Weightings within the
various industry segments are continually monitored, and INVESCO adjusts the
portfolio weightings depending on the prevailing economic conditions.
[GRAPH ICON] FUND PERFORMANCE
Performance information in the bar charts below is that of the Funds' Investor
Class shares, which has the longest operating history of the Funds' classes.
Information included in the table is that of Investor Class, Class C, and, if
applicable, Class K shares. Performance information for Class A and B shares is
not shown in the table as those classes do not yet have a full calendar year of
performance. Investor Class and Class A, B, C, and K returns would be similar
because all classes of shares invest in the same portfolio of securities. The
returns of the classes would differ, however, to the extent of differing levels
of expenses. In this regard, the returns reflected in the bar charts and table
reflect only the applicable total expenses of the class shown. If the effect of
the other classes' total expenses were reflected, the returns would be lower
than those shown because the other classes have higher total expenses.
The bar charts below show the Funds' Investor Class actual yearly performance
(commonly known as their "total return") for the years ended December 31 over
the past decade or since inception. The returns in the bar charts do not reflect
a 12b-1 fee in excess of 0.25%, the sales charge for Class A shares, or the
applicable contingent deferred sales charge (CDSC) for Class B or Class C
shares; if they did, the total returns shown would be lower. The table below
shows the pre-tax and after-tax average annual total returns of Investor Class
and pre-tax average annual total returns for Class C shares, and, if applicable,
Class K shares for various periods ended December 31, 2002 compared to the S&P
500 Index, the S&P 500 Financials Index with respect to Financial Services Fund,
and the NAREIT -- Equity REIT Index with respect to Real Estate Opportunity
Fund. The after-tax returns are shown only for the Investor Class shares.
After-tax returns for other classes of shares offered in this Prospectus will
vary.
After-tax returns are provided on a pre-redemption and post-redemption basis.
Pre-redemption returns assume you continue to hold your shares and pay taxes on
Fund distributions (i.e., dividends and capital gains) but do not reflect taxes
that may be incurred upon selling or exchanging shares. Post-redemption returns
assume payment of taxes on fund distributions and also that you close your
account and pay remaining federal taxes. After-tax returns are calculated using
the highest individual federal income tax rates in effect at the time the
distribution is paid. State and local taxes are not considered. Actual after-tax
returns depend on an investor's tax situation and may differ from those shown.
For investors holding their shares in tax-deferred arrangements such as 401(k)
plans or individual retirement accounts, the after-tax returns shown are not
relevant.
The information in the bar charts and table illustrates the variability of each
Fund's total return and how its performance compared to a broad measure of
market performance. Remember, past performance (before and after taxes) does not
indicate how a Fund will perform in the future.
- --------------------------------------------------------------------------------
ENERGY FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
16.71% (7.25%) 19.80% 38.84% 19.09% (27.83%) 41.88% 58.17% (16.81%) (4.32)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/97 28.24%
Worst Calendar Qtr. 9/98 (18.34%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
18.52% (5.89%) 39.81% 30.29% 44.79% 13.45% 0.73% 26.69% (10.17%) (15.56%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/00 22.76%
Worst Calendar Qtr. 9/98 (18.20%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLD & PRECIOUS METALS FUND--
INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
72.47% (27.85%) 12.72% 40.64% (55.50%) (22.54%) (8.99%) (12.98%) 17.12% 59.65%
- --------------------------------------------------------------------------------
Best Calendar Qtr. 3/96 46.17%
Worst Calendar Qtr. 12/97 (37.51%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
(8.41%) 0.94% 58.89% 11.41% 18.46% 43.40% 0.59% 25.80% (14.68%) (25.24%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/95 19.53%
Worst Calendar Qtr. 3/01 (22.91%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEISURE FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
35.73% (4.98%) 15.79% 9.08% 26.46% 29.78% 65.59% (7.97%) 4.10% (15.41%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 25.59%
Worst Calendar Qtr. 9/01 (24.06%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND--
INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(3)
================================================================================
[GRAPHIC OMITTED]
1997 1998 1999 2000 2001 2002
21.50% (23.48%) (5.50%) 24.72% (1.91%) 5.81%
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/97 14.19%
Worst Calendar Qtr. 9/98 (20.46%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TECHNOLOGY FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
15.03% 5.27% 45.80% 21.75% 8.85% 30.12% 144.94% (22.77%) (45.51%) (47.22%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 66.77%
Worst Calendar Qtr. 9/01 (41.44%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(4)
================================================================================
[GRAPHIC OMITTED]
1995 1996 1997 1998 1999 2000 2001 2002
27.37% 16.81% 30.29% 40.98% 144.28% (26.91%) (54.19%) (50.96%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 62.22%
Worst Calendar Qtr. 9/01 (41.40%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UTILITIES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
21.20% (9.94%) 25.25% 12.75% 24.38% 24.30% 19.88% 4.14% (33.98%) (22.29%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/98 16.33%
Worst Calendar Qtr. 9/01 (23.67%)
- --------------------------------------------------------------------------------
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
INVESTOR CLASS
Energy Fund(1),(2)
Return Before Taxes (4.32%) 5.21% 10.70%
Return After Taxes on Distributions (4.32%) 4.86% 9.21%
Return After Taxes on Distributions
and Sale of Fund Shares (2.65%) 4.24% 8.34%
Gold & Precious Metals Fund(1),(2)
Return Before Taxes 59.65% 2.78% 0.07%
Return After Taxes on Distributions 59.65% 2.58% (1.25%)
Return After Taxes on Distributions
and Sale of Fund Shares 36.62% 2.12% (0.26%)
Health Sciences Fund(1),(2)
Return Before Taxes (25.24%) 2.97% 8.42%
Return After Taxes on Distributions (25.24%) 0.99% 6.14%
Return After Taxes on Distributions
and Sale of Fund Shares (15.50%) 2.36% 6.54%
Leisure Fund(1),(2)
Return Before Taxes (15.41%) 11.73% 13.63%
Return After Taxes on Distributions (15.41%) 10.02% 11.35%
Return After Taxes on Distributions
and Sale of Fund Shares (9.46%) 9.43% 10.73%
Technology Fund(1),(2)
Return Before Taxes (47.22%) (6.67%) 5.18%
Return After Taxes on Distributions (47.22%) (7.16%) 2.46%
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
Return After Taxes on Distributions
and Sale of Fund Shares (28.99%) (4.64%) 3.64%
Utilities Fund(1),(2)
Return Before Taxes (22.29%) (4.46%) 4.32%
Return After Taxes on Distributions (23.10%) (5.55%) 2.14%
Return After Taxes on Distributions
and Sale of Fund Shares (13.67%) (3.41%) 2.79%
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.35%
Financial Services Fund(1),(2)
Return Before Taxes (15.56%) 1.89% 12.44%
Return After Taxes on Distributions (15.60%) 0.59% 9.48%
Return After Taxes on Distributions
and Sale of Fund Shares (9.53%) 1.43% 9.20%
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.35%
S&P 500 Financials Index6
(reflects no deduction for fees, expenses
or taxes) (14.64%) 2.53% 14.08%
Real Estate Opportunity Fund(1),(2)
Return Before Taxes 5.81% (1.32%) 2.17%(3)
Return After Taxes on Distributions 4.56% (3.55%) (0.55%)(3)
Return After Taxes on Distributions
and Sale of Fund Shares 3.58% (2.21%) 0.35%(3)
NAREIT-- Equity REIT Index(6)
(reflects no deduction for fees, expenses
or taxes) 3.82% 3.30% 5.95%(3)
Telecommunications Fund(1),(2)
Return Before Taxes (50.96%) (10.78%) 1.69%(4)
Return After Taxes on Distributions (50.96%) (11.09%) 0.21%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (31.29%) (7.89%) 1.12%(4)
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.96%(4)
CLASS C - RETURN BEFORE TAXES (INCLUDING CDSC)
Energy Fund(1),(7) (6.01%) N/A 7.54%(8)
Gold & Precious Metals Fund(1),(7) 56.69% N/A 19.78%(8)
Health Sciences Fund(1),(7) (27.28%) N/A (12.12%)(8)
Leisure Fund(1),(7) (17.21%) N/A (6.36%)(8)
Technology Fund(1),(7) (48.74%) N/A (44.62%)(8)
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
Telecommunications Fund(1),(7) (52.53%) N/A (49.61%)(8)
Utilities Fund(1),(7) (24.11%) N/A (23.09%)(8)
S&P 500 Index(6) (22.09%) N/A (13.19%)(8)
Financial Services Fund(1),(7) (17.36%) N/A 2.05%(8)
S&P 500 Index(6) (22.09%) N/A (13.19%)(8)
S&P 500 Financials Index(6) (14.64%) N/A 4.45%(8)
Real Estate Opportunity Fund(1),(7) 3.94% N/A 7.99%(8)
NAREIT-- Equity REIT Index(6) 3.82% N/A 15.58%(8)
CLASS K - RETURN BEFORE TAXES
Energy Fund(1),(9) (7.29%) N/A (4.04%)(10)
Health Sciences Fund(1),(9) (25.71%) N/A (17.67%)(10)
Technology Fund(1),(9) (47.20%) N/A (45.27%)(10)
Telecommunications Fund(1),(9) (51.03%) N/A (51.38%)(10)
S&P 500 Index(6) (22.09%) N/A (16.32%)(10)
Financial Services Fund(1),(9) (15.88%) N/A (8.84%)(10)
S&P 500 Index(6) (22.09%) N/A (16.32%)(10)
S&P 500 Financials Index(6) (14.64%) N/A (7.64%)(10)
Leisure Fund(1),(9) (15.52%) N/A (11.49%)(11)
S&P 500 Index(6) (22.09%) N/A (22.09%)(11)
(1) Total return figures include reinvested dividends and capital gain distributions and the effect of each class's expenses.
(2) Returns before taxes for Investor Class shares of Energy, Financial Services, Gold & Precious Metals, Health Sciences, Leisure,
Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds year-to-date as of the calendar quarter ended June
30, 2003 were 10.05%, 11.02%, 0.37%, 16.16%, 12.19%, 15.14%, 17.80%, 15.21%, and 9.35%, respectively.
(3) The Fund (Investor Class shares) commenced investment operations on January 2, 1997. Index comparison begins on January 2,
1997.
(4) The Fund (Investor Class shares) commenced investment operations on August 1, 1994. Index comparison begins on August 1, 1994.
(5) The total returns are for those classes of shares with a full calendar year of performance. If the effect of the other classes'
total expenses, including 12b-1 fees, front-end sales charge for Class A, and CDSC for Class B were reflected, returns for
those classes would be lower than those shown.
(6) The S&P 500 Index is an unmanaged index considered representative of the performance of the broad U.S. stock market. The S&P
500 Financials Index is an unmanaged index that contains companies involved in activities such as banking, consumer finance,
investment banking and brokerage, asset management, insurance and investment, and real estate, including REITs. The NAREIT --
Equity REIT Index is an unmanaged index considered representative of the U.S. real estate investment trust equity market.
Please keep in mind that the Indexes do not pay brokerage, management, administrative, or distribution expenses, all of which
are paid by the classes and are reflected in their annual returns. Index returns also do not include sales charges or CDSCs
that may be paid by the shareholder.
(7) Returns before taxes, including CDSC, for Class C shares of Energy, Financial Services, Gold & Precious Metals, Health
Sciences, Leisure, Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds year-to-date as of the calendar
quarter ended June 30, 2003 were 8.76%, 9.38%, (1.00%), 14.43%, 10.69%, 13.73%, 16.57%, 13.90%, and 7.72%, respectively.
(8) Since inception of Class C shares on February 15, 2000. Index comparison begins on February 29, 2000.
(9) Returns before taxes for Class K shares of Energy, Financial Services, Health Sciences, Leisure, Technology, and
Telecommunications Funds year-to-date as of the calendar quarter ended June 30, 2003 were 10.01%, 11.00%, 15.74%, 11.82%,
17.56%, and 15.06%, respectively.
(10) Since inception of Class K shares on December 1, 2000. Index comparisons begin on December 1, 2000.
(11) Since inception of Class K shares on December 17, 2001. Index comparison begins on December 31, 2001.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class, Class A, Class B, Class C, or, if applicable, Class K shares of
the Funds. If you invest in the Funds through a financial intermediary, you may
be charged a commission or transaction fee by the financial intermediary for
purchases and sales of Fund shares.
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Investor Class Class A Class B Class C Class K
Maximum Front-End Sales Charge
on purchases as a percentage of
offering price None 5.50% None None None
Maximum Contingent Deferred
Sales Charge (CDSC) as a percentage
of the total original cost of the shares None None(1) 5.00%(2) 1.00%(2) None(1)
Maximum Sales Charge on reinvested
dividends/distributions None None None None None
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
ENERGY FUND Investor Class Class A Class B Class C Class K
Management Fees 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.69% 0.36% 0.66%(6) 0.78%(7) 4.16%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.69% 1.46% 2.41%(6) 2.53%(7) 5.36%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 3.16%
Net Expenses(5),(9) 1.69% 1.46% 2.41%(6) 2.53%(7) 2.20%(8)
==== ==== ==== ==== ====
FINANCIAL SERVICES FUND Investor Class Class A Class B Class C Class K
Management Fees 0.66% 0.66% 0.66% 0.66% 0.66%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.49% 0.50%(10) 0.74%(6) 0.79% 1.02%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.40% 1.51%(10) 2.40%(6) 2.45% 2.13%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 0.00%
Net Expenses(5),(9) 1.40% 1.51%(10) 2.40%(6) 2.45% 2.13%(8)
==== ==== ==== ==== ====
GOLD & PRECIOUS METALS FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00%
Other Expenses(4),(5) 0.88% 1.01%(10) 0.43% 0.90%
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.88% 2.11%(10) 2.18% 2.65%
==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.01% 0.00% 0.00%
Net Expenses(5),(9) 1.88% 2.10%(10) 2.18% 2.65%
==== ==== ==== ====
HEALTH SCIENCES FUND Investor Class Class A Class B Class C Class K
Management Fees 0.64% 0.64% 0.64% 0.64% 0.64%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.55% 0.89%(10) 0.87%(6) 1.63%(7) 0.98%
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.44% 1.88%(10) 2.51%(6) 3.27%(7) 2.07%
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.52% 0.00%
Net Expenses(5),(9) 1.44% 1.88%(10) 2.51%(6) 2.75%(7) 2.07%
==== ==== ==== ==== ====
LEISURE FUND Investor Class Class A Class B Class C Class K
Management Fees 0.69% 0.69% 0.69% 0.69% 0.69%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.56% 0.38% 0.54%(6) 0.75% 1.07%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.50% 1.42% 2.23%(6) 2.44% 2.21%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 0.01%
Net Expenses(5),(9) 1.50% 1.42% 2.23%(6) 2.44% 2.20%(8)
==== ==== ==== ==== ====
REAL ESTATE OPPORTUNITY FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00%
Other Expenses(4),(5) 1.43%(11) 0.56% 1.98%(6) 1.99%(7)
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 2.43%(11) 1.66% 3.73%(6) 3.74%(7)
==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.98% 0.99%
Net Expenses(5),(9) 2.43%(11) 1.66% 2.75%(6) 2.75%(7)
==== ==== ==== ====
TECHNOLOGY FUND Investor Class Class A Class B Class C Class K
Management Fees 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.92% 0.56%(10) 1.14%(6) 2.35%(7) 1.44%(8)
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.77% 1.51%(10) 2.74%(6) 3.95%(7) 2.49%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 1.20% 0.29%
Net Expenses(5),(9) 1.77% 1.51%(10) 2.74%(6) 2.75%(7) 2.20%(8)
==== ==== ==== ==== ====
TELECOMMUNICATIONS FUND Investor Class Class A Class B Class C Class K
Management Fees 0.65% 0.65% 0.65% 0.65% 0.65%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 1.86%(11) 0.66% 10.50%(6) 4.11%(7) 2.20%(8)
---- ---- ----- ---- ----
Total Annual Fund Operating Expenses(4),(5) 2.76%(11) 1.66% 12.15%(6) 5.76%(7) 3.30%(8)
==== ==== ===== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 9.40% 3.01% 1.10%
Net Expenses(5),(9) 2.76%(11) 1.66% 2.75%(6) 2.75%(7) 2.20%(8)
==== ==== ===== ==== ====
UTILITIES FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.25%(12) 1.00% 1.00%
Other Expenses(4),(5) 0.90%(11) 0.64%(10) 0.94%(6) 1.95%(7)
---- ---- ----- ----
Total Annual Fund Operating Expenses(4),(5) 1.90%(11) 1.64%(10),(12)2.69%(6) 3.70%(7)
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.95%
==== ==== ===== ====
Net Expenses(5),(9) 1.90%(11) 1.64%(10),(12)2.69%(6) 2.75%(7)
==== ==== ===== ====
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares within eighteen months from the date of purchase, you
may pay a 1% contingent deferred sales charge (CDSC) at the time of redemption. For qualified plans investing in Class A
shares, you may pay a CDSC of 1% on your Class A shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. For qualified plans investing in Class K shares, you may pay a CDSC of 0.70% on your Class K shares
if the plan is redeemed within twelve months from initial deposit in the plan's INVESCO account. Please see the sections
entitled "How to Buy Shares" and "How To Sell Shares."
(2) A 5% and 1% CDSC may be charged on Class B and Class C shares, respectively. Please see the section entitled "How To Buy
Shares."
(3) Because each class pays a 12b-1 distribution and service fee which is based upon each class's assets, if you own shares of a
Fund for a certain period of time, you may pay more than the economic equivalent of the maximum front-end sales charge
permitted for mutual funds by the National Association of Securities Dealers, Inc.
(4) Each Fund's actual Other Expenses and Total Annual Fund Operating Expenses were lower than the figures shown, because their
custodian fees were reduced under expense offset arrangements.
(5) INVESCO is entitled to reimbursement from the classes for fees and expenses absorbed pursuant to voluntary and contractual
expense limitation commitments between INVESCO and the Funds if such reimbursements do not cause a class to exceed expense
limitations and the reimbursement is made within three years after INVESCO incurred the expense. The voluntary expense
limitations may be changed at any time following consultation with the board of directors.
(6) Certain expenses of Class B shares of Energy, Financial Services, Health Sciences, Leisure, Real Estate Opportunity,
Technology, Telecommunications, and Utilities Funds were absorbed voluntarily by INVESCO pursuant to commitments between the
Funds and INVESCO. These commitments may be changed at any time following consultation with the board of directors. After
absorption, but excluding any expense offset arrangements, Energy Fund's Class B shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.58% and 2.33%, respectively, of the Fund's average net assets attributable to Class B shares;
Financial Services Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.43% and 2.09%,
respectively, of the Fund's average net assets attributable to Class B shares; Health Sciences Fund's Class B shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.42% and 2.06%, respectively, of the Fund's average net assets
attributable to Class B shares; Leisure Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were
0.45% and 2.14%, respectively, of the Fund's average net assets attributable to Class B shares; Real Estate Opportunity Fund's
Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.61% and 2.36%, respectively, of the Fund's
average net assets attributable to Class B shares; Technology Fund's Class B shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.55% and 2.15%, respectively, of the Fund's average net assets attributable to Class B shares;
Telecommunications Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.92% and 2.57%,
respectively, of the Fund's average net assets attributable to Class B shares; and Utilities Fund's Class B shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.39% and 2.14%, respectively, of the Fund's average net assets
attributable to Class B shares.
(7) Certain expenses of Class C shares of Energy, Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds were
absorbed voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any
time following consultation with the board of directors. Certain expenses of Class C shares of Health Sciences Fund were
absorbed by INVESCO pursuant to a contractual agreement between the Fund and INVESCO. After absorption, but excluding any
expense offset arrangements, Energy Fund's Class C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.58%
and 2.33%, respectively, of the Fund's average net assets attributable to Class C shares; Real Estate Opportunity Fund's Class
C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.60% and 2.35%, respectively, of the Fund's average net
assets attributable to Class C shares; Technology Fund's Class C shares' Other Expenses and Total Annual Fund Operating
Expenses were 1.09% and 2.69%, respectively, of the Fund's average net assets attributable to Class C shares;
Telecommunications Fund's Class C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.98% and 2.63%,
respectively, of the Fund's average net assets attributable to Class C shares; and Utilities Fund's Class C shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.30% and 2.05%, respectively, of the Fund's average net assets
attributable to Class C shares.
(8) Certain expenses of Class K shares of Energy, Financial Services, and Telecommunications Funds were absorbed voluntarily by
INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time following
consultation with the board of directors. Certain expenses of Class K shares of Leisure and Technology Funds were absorbed by
INVESCO pursuant to contractual agreements between the Funds and INVESCO. After absorption, but excluding any expense offset
arrangement, Energy Fund's Class K shares' Other Expenses and Total Annual Fund Operating Expenses were 0.87% and 2.07%,
respectively, of the Fund's average net assets attributable to Class K shares; Financial Services Fund's Class K shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.67% and 1.78%, respectively, of the Fund's average net assets
attributable to Class K shares; and Telecommunications Fund's Class K shares' Other Expenses and Total Annual Fund Operating
Expenses were 0.96% and 2.06%, respectively, of the Fund's average net assets attributable to Class K shares.
(9) To limit expenses, INVESCO has contractually obligated itself to waive fees and bear expenses through March 31, 2004 that would
cause the ratio of expenses to average net assets to exceed 2.10% for Class A shares, 2.75% for each of Class B and Class C
shares, and 2.20% for Class K shares.
(10) Certain expenses of Class A shares of Financial Services, Health Sciences, Technology, and Utilities Funds were absorbed
voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time
following consultation with the board of directors. Certain expenses of Class A shares of Gold & Precious Metals Fund were
absorbed by INVESCO pursuant to a contractual agreement between the Fund and INVESCO. After absorption, but excluding any
expense offset arrangements, Financial Services Fund's Class A shares' Other Expenses and Total Annual Fund Operating Expenses
were 0.37% and 1.38%, respectively, of the Fund's average net assets attributable to Class A shares; Health Sciences Fund's
Class A shares' Other Expenses and Total Annual Fund Operating Expenses were 0.42% and 1.41%, respectively, of the Fund's
average net assets attributable to Class A shares; Technology Fund's Class A shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.52% and 1.47%, respectively, of the Fund's average net assets attributable to Class A shares; and
Utilities Fund's Class A shares' Other Expenses and Total Annual Fund Operating Expenses were 0.41% and 1.41%, respectively, of
the Fund's average net assets attributable to Class A shares.
(11) Certain expenses of Investor Class shares of Real Estate Opportunity, Telecommunications, and Utilities Funds were absorbed
voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time
following consultation with the board of directors. After absorption, but excluding any expense offset arrangements, Real
Estate Opportunity Fund's Investor Class shares' Other Expenses and Total Annual Fund Operating Expenses were 0.60% and 1.60%,
respectively, of the Fund's average net assets attributable to Investor Class shares; Telecommunications Fund's Investor Class
shares' Other Expenses and Total Annual Fund Operating Expenses were 0.91% and 1.81%, respectively, of the Fund's average net
assets attributable to Investor Class shares; and Utilities Fund's Investor Class shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.30% and 1.30%, respectively, of the Fund's average net assets attributable to Investor Class shares.
(12 )Effective July 1, 2003, the Distribution and Service (12b-1) Fees have been reduced from 0.35% to 0.25%. Total Annual Fund
Operating Expenses have been restated for the current fiscal year end.
EXPENSE EXAMPLE
The Example is intended to help you compare the cost of investing in the
Investor Class, Class A, Class B, Class C, and, if applicable, Class K shares of
the Funds to the cost of investing in other mutual funds.
The Example assumes that you invested $10,000 in Investor Class, Class A, Class
B, Class C, or Class K shares of a Fund for the time periods indicated. Within
each Example, there is an assumption that you redeem all of your shares at the
end of those periods and that you keep your shares. The Example also assumes
that your investment had a hypothetical 5% return each year, and that a Fund's
Investor Class, Class A, Class B, Class C, and Class K shares' operating
expenses remain the same. Although the actual costs and performance of a Fund's
Investor Class, Class A, Class B, Class C, and Class K shares may be higher or
lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
ENERGY FUND
Investor Class $172 $ 533 $ 918 $1,998
Class A(1) $690 $ 986 $1,304 $2,200
Class B - With Redemption(1) $744 $1,051 $1,485 $2,511(2)
Class B - Without Redemption $244 $ 751 $1,285 $2,511(2)
Class C - With Redemption1 $356 $ 788 $1,345 $2,866
Class C - Without Redemption $256 $ 788 $1,345 $2,866
Class K(3) $223 $1,321 $2,411 $5,103
FINANCIAL SERVICES FUND
Investor Class $143 $ 443 $ 766 $1,680
Class A(1) $695 $1,001 $1,328 $2,252
Class B - With Redemption(1) $743 $1,048 $1,480 $2,515(2)
Class B - Without Redemption $243 $ 748 $1,280 $2,515(2)
Class C - With Redemption(1) $348 $ 764 $1,306 $2,786
Class C - Without Redemption $248 $ 764 $1,306 $2,786
Class K $216 $ 667 $1,144 $2,462
GOLD & PRECIOUS METALS FUND
Investor Class $191 $ 591 $1,016 $2,201
Class A(1),(3) $751 $1,174 $1,621 $2,856
Class B - With Redemption(1) $721 $ 982 $1,369 $2,496(2)
Class B - Without Redemption $221 $ 682 $1,169 $2,496(2)
Class C - With Redemption(1) $368 $ 823 $1,405 $2,983
Class C - Without Redemption $268 $ 823 $1,405 $2,983
HEALTH SCIENCES FUND
Investor Class $147 $ 456 $ 787 $1,724
Class A(1) $730 $1,108 $1,510 $2,630
Class B - With Redemption(1) $754 $1,082 $1,535 $2,691(2)
Class B - Without Redemption $254 $ 782 $1,335 $2,691(2)
Class C - With Redemption(1),(3) $378 $ 958 $1,663 $3,532
Class C - Without Redemption(3) $278 $ 958 $1,663 $3,532
Class K $210 $ 649 $1,114 $2,400
LEISURE FUND
Investor Class $153 $ 474 $ 818 $1,791
Class A(1) $687 $ 975 $1,284 $2,158
Class B - With Redemption(1) $726 $ 997 $1,395 $2,361(2)
Class B - Without Redemption $226 $ 697 $1,195 $2,361(2)
Class C - With Redemption(1) $347 $ 761 $1,301 $2,776
Class C - Without Redemption $247 $ 761 $1,301 $2,776
Class K(3) $223 $ 690 $1,184 $2,543
REAL ESTATE OPPORTUNITY FUND
Investor Class $246 $ 758 $1,296 $2,766
Class A(1) $709 $1,045 $1,403 $2,407
Class B - With Redemption(1),(3) $778 $1,351 $2,043 $3,454(2)
Class B - Without Redemption(3) $278 $1,051 $1,843 $3,454(2)
Class C - With Redemption(1),(3) $378 $1,053 $1,847 $3,921
Class C - Without Redemption(3) $278 $1,053 $1,847 $3,921
TECHNOLOGY FUND
Investor Class $180 $ 557 $ 959 $2,084
Class A(1) $695 $1,001 $1,328 $2,252
Class B - With Redemption(1) $777 $1,150 $1,650 $2,773(2)
Class B - Without Redemption $277 $ 850 $1,450 $2,773(2)
Class C - With Redemption(1),(3) $378 $1,094 $1,928 $4,089
Class C - Without Redemption(3) $278 $1,094 $1,928 $4,089
Class K(3) $223 $ 748 $1,300 $2,804
TELECOMMUNICATIONS FUND
Investor Class $279 $ 856 $1,459 $3,090
Class A(1) $709 $1,045 $1,403 $2,407
Class B - With Redemption(1),(3) $778 $2,888 $4,780 $7,273(2)
Class B - Without Redemption(3) $278 $2,588 $4,580 $7,273(2)
Class C - With Redemption(1),(3) $378 $1,447 $2,598 $5,401
Class C - Without Redemption(3) $278 $1,447 $2,598 $5,401
Class K(3) $223 $ 913 $1,627 $3,520
UTILITIES FUND
Investor Class $193 $ 597 $1,026 $2,222
Class A(1) $708 $1,039 $1,393 $2,387
Class B - With Redemption(1) $772 $1,135 $1,625 $2,768(2)
Class B - Without Redemption $272 $ 835 $1,425 $2,768(2)
Class C - With Redemption(1),(3) $378 $1,045 $1,831 $3,889
Class C - Without Redemption(3) $278 $1,045 $1,831 $3,889
(1) Based on initial sales charge for Class A shares at the beginning of each period shown and CDSC
charges for Class B and C shares based on redemption at the end of each period shown. Please see "How
To Buy Shares."
(2) Assumes conversion of Class B to Class A at the end of the eighth year. Please see "How To Buy
Shares."
(3) Class expenses remain the same for each period (except that the Example reflects the contractual
expense reimbursements by INVESCO for the one-year period and the first year of the three-, five-, and
ten-year periods).
[ARROWS ICON] INVESTMENT RISKS
BEFORE INVESTING IN A FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH WHICH
YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER, INCOME
LEVEL, AND TIME HORIZON.
You should determine the level of risk with which you are comfortable before you
invest. The principal risks of investing in any mutual fund, including these
Funds, are:
NOT INSURED. Mutual funds are not insured by the FDIC or any other government
agency, unlike bank deposits such as CDs or savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its performance, nor
assure you that the market value of your investment will increase. You may lose
the money you invest, and the Funds will not reimburse you for any of these
losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease with
changes in the value of a Fund's underlying investments and changes in the
equity markets as a whole.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Funds are designed to be only a part
of your personal investment plan.
[ARROWS ICON] PRINCIPAL RISKS ASSOCIATED WITH THE FUNDS
You should consider the special risk factors discussed below associated with the
Funds' policies in determining the appropriateness of investing in a Fund. See
the Statement of Additional Information for a discussion of additional risk
factors.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of a Fund's
investments. Certain stocks selected for any Fund's portfolio may decline in
value more than the overall stock market. In general, the securities of small
companies are more volatile than those of mid-size companies or large companies.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory, and diplomatic risks. Energy, Financial
Services, Health Sciences, Leisure, Real Estate Opportunity, Technology, and
Utilities Funds may invest up to 25% of their respective assets in securities of
non-U.S. issuers. Securities of Canadian issuers and American Depositary
Receipts are not subject to this 25% limitation. Foreign securities risks are
potentially greater for Gold & Precious Metals and Telecommunications Funds,
since those Funds have the ability to invest more than 25% of their respective
assets in the securities of non-U.S. issuers.
CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of a Fund's investment in a security
valued in the foreign currency, or based on that currency value.
POLITICAL RISK. Political actions, events, or instability may result in
unfavorable changes in the value of a security.
REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.
DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
LIQUIDITY RISK
A Fund's portfolio is liquid if the Fund is able to sell the securities it owns
at a fair price within a reasonable time. Liquidity is generally related to the
market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some manner,
from the price of another security, index, asset, or rate. Derivatives include
options and futures contracts, among a wide range of other instruments. The
principal risk of investments in derivatives is that the fluctuations in their
values may not correlate perfectly with the overall securities markets. Some
derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk,
described below.
Options and futures are common types of derivatives that a Fund may occasionally
use to hedge its investments. An option is the right to buy and sell a security
or other instrument, index, or commodity at a specific price on or before a
specific date. A future is an agreement to buy or sell a security or other
instrument, index, or commodity at a specific price on a specific date. The use
of options and futures may increase the performance of the Fund, but also may
increase market risk. Other types of derivatives include swaps, caps, floors,
and collars.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with a
Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete, or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
PORTFOLIO TURNOVER RISK
A Fund's investments may be bought and sold relatively frequently. A high
turnover rate may affect a Fund's performance because it results in higher
brokerage commissions and may result in taxable gain distributions to a Fund's
shareholders.
----------------------------------------------
Although each Fund generally invests in equity securities of companies in the
economic sector described by its name, the Funds also may invest in other types
of securities and other financial instruments, indicated in the chart below.
Although these investments typically are not part of any Fund's principal
investment strategy, they may constitute a significant portion of a Fund's
portfolio, thereby possibly exposing a Fund and its investors to the following
additional risks.
- --------------------------------------------------------------------------------
INVESTMENT RISKS APPLIES TO THESE FUNDS
- --------------------------------------------------------------------------------
AMERICAN DEPOSITARY RECEIPTS
(ADRs)
These are securities issued Market, Information, All Funds
by U.S. banks that represent Political, Regulatory,
shares of foreign corpora- Diplomatic, Liquidity,
tions held by those banks. and Currency Risks
Although traded in U.S.
securities markets and
valued in U.S. dollars, ADRs
carry most of the risks of
investing directly in
foreign securities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT RISKS APPLIES TO THESE FUNDS
- --------------------------------------------------------------------------------
FUTURES
A futures contract is an Market, Liquidity, Technology
agreement to buy or sell a and Derivatives Risks Telecommunications
specific amount of a
financial instrument (such
as an index option) at a
stated price on a stated
date. A Fund may use futures
contracts to pro- vide
liquidity and to hedge
portfolio value.
- --------------------------------------------------------------------------------
OPTIONS
The obligation or right to Information, Liquidity, Technology
deliver or receive a and Derivatives Risks Telecommunications
security or other
instrument, index, or
commodity, or cash payment
depending on the price of
the underlying security or
the performance of an index
or other benchmark. Includes
options on specific
securities and stock
indices, and options on
stock index futures. May be
used in a Fund's portfolio
to provide liquidity and
hedge portfolio value.
- --------------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS
These may include forward Counterparty, Currency, Technology
contracts, swaps, caps, Liquidity, Market, and Telecommunications
floors, and collars. They Regulatory Risks
may be used to try to manage
a Fund's foreign currency
exposure and other
investment risks, which can
cause its net asset value to
rise or fall. A Fund may use
these financial instruments,
commonly known as
"derivatives," to increase
or decrease its exposure to
changing securities prices,
interest rates, currency
exchange rates, or other
factors.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A contract under which the Counterparty Risk All Funds
seller of a security agrees
to buy it back at an
agreed-upon price and time
in the future.
- --------------------------------------------------------------------------------
[ARROWS ICON] TEMPORARY DEFENSIVE POSITIONS
When securities markets or economic conditions are unfavorable or unsettled, we
might try to protect the assets of a Fund by investing in securities that are
highly liquid, such as high-quality money market instruments like shortterm U.S.
government obligations, commercial paper, or repurchase agreements, even though
that is not the normal investment strategy of any Fund. We have the right to
invest up to 100% of a Fund's assets in these securities, although we are
unlikely to do so. Even though the securities purchased for defensive purposes
often are considered the equivalent of cash, they also have their own risks.
Investments that are highly liquid or comparatively safe tend to offer lower
returns. Therefore, a Fund's performance could be comparatively lower if it
concentrates in defensive holdings.
[ARROWS ICON] PORTFOLIO TURNOVER
We actively manage and trade the Funds' portfolios. Therefore, some of the Funds
may have a higher portfolio turnover rate compared to many other mutual funds.
The Funds with higher-than-average portfolio turnover rates for the fiscal year
ended March 31, 2003, were:
Energy 144%
Health Sciences 179%
Real Estate Opportunity 248%
Technology 107%(1)
Telecommunications 137%(1)
(1) The increase in the Funds' portfolio turnover rates was greater than
expected during the year due to active trading undertaken in response to
market conditions.
A portfolio turnover rate of 200%, for example, is equivalent to a Fund buying
and selling all of the securities in its portfolio two times in the course of a
year. A comparatively high turnover rate may affect a Fund's performance because
it results in higher brokerage commissions and may result in taxable capital
gain distributions to a Fund's shareholders.
[INVESCO ICON] FUND MANAGEMENT
INVESTMENT ADVISOR
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT MANAGEMENT
COMPANY THAT MANAGES MORE THAN $318.5 BILLION IN ASSETS WORLDWIDE. AMVESCAP IS
BASED IN LONDON, WITH MONEY M ANAGERS LOCATED IN EUROPE, NORTH AND SOUTH AMEICA,
AND THE FAR EAST.
INVESCO, located at 4350 South Monaco Street, Denver, Colorado, is the
investment advisor of the Funds. INVESCO was founded in 1932 and manages over
$17 billion for 2,848,927 shareholder accounts in 47 INVESCO mutual funds as of
March 31, 2003. INVESCO performs a wide variety of other services for the Funds,
including administrative and transfer agency functions (the processing of
purchases, sales, and exchanges of Fund shares).
ADI is the Funds' distributor and is responsible for the sale of the Funds'
shares.
INVESCO and ADI are subsidiaries of AMVESCAP PLC.
The following table shows the fees the Funds paid to INVESCO for its advisory
services in the fiscal year ended March 31, 2003.
- --------------------------------------------------------------------------------
ADVISORY FEE AS A PERCENTAGE OF
FUND AVERAGE ANNUAL NET ASSETS UNDER MANAGEMENT
- --------------------------------------------------------------------------------
Energy 0.75%
Financial Services 0.66%
Gold & Precious Metals 0.75%
Health Sciences 0.64%
Leisure 0.69%
Real Estate Opportunity 0.75%
Technology 0.60%
Telecommunications 0.65%
Utilities 0.75%
- --------------------------------------------------------------------------------
[INVESCO ICON] PORTFOLIO MANAGERS
The following individuals are primarily responsible for the daytoday management
of their respective Fund's or Funds' portfolio holdings:
FUND PORTFOLIO MANAGER
Energy John S. Segner
Financial Services Joseph W. Skornicka
Gold & Precious Metals John S. Segner
Health Sciences Thomas R. Wald
Andy Summers
Leisure Mark D. Greenberg
Real Estate Opportunity Joe V. Rodriguez, Jr.
Mark Blackburn
James W. Trowbridge
Technology William R. Keithler
Chris Dries
Telecommunications William R. Keithler
Utilities Jeffrey G. Morris
MARK BLACKBURN, Portfolio Manager, has been responsible for INVESCO Real Estate
Opportunity Fund since July 1, 2003. He has been responsible for A I M Real
Estate Fund since 2000 and has been associated with the subadvisor and/or its
affiliates since 1998. From 1995 to 1997, he was Senior Analyst and Associate
Director of Research for Southwest Securities.
CHRIS DRIES is the Assistant Portfolio Manager for the INVESCO Technology Fund.
Chris joined INVESCO in 1993, and was promoted to the investment division in
1995. He previously held the position of manager of investment operations for
the investment division at INVESCO. Chris received his master's degree in
finance from the University of Colorado at Denver and his bachelor's degree in
finance from University of Colorado at Boulder.
MARK D. GREENBERG, a senior vice president of INVESCO, is the portfolio manager
of Leisure Fund. Before joining INVESCO in 1996, Mark was a vice president and
global media and entertainment analyst with Scudder, Stevens & Clark. He is a
CFA charterholder. Mark holds a B.S.B.A. from Marquette University.
WILLIAM R. KEITHLER, Director of Sector Management and a senior vice president
of INVESCO, is the lead portfolio manager of Technology Fund and heads the
Technology Team at INVESCO. Before rejoining INVESCO in 1998, Bill was a
portfolio manager with Berger Associates, Inc. He is a CFA charterholder. Bill
holds an M.S. from the University of Wisconsin--Madison and a B.A. from Webster
College.
JEFFREY G. MORRIS, a vice president of INVESCO, is the portfolio manager of
Utilities Fund. Jeff joined INVESCO in 1991 and is a CFA charterholder. He holds
an M.S. in Finance from the University of Colorado--Denver and a B.S. in
Business Administration from Colorado State University.
JOE V. RODRIGUEZ, JR., (lead manager), Portfolio Manager, has been responsible
for INVESCO Real Estate Opportunity Fund since July 1, 2003. He has been
responsible for A I M Real Estate Fund since 1995 and has been associated with
the subadvisor and/or its affiliates since 1990.
JOHN S. SEGNER, a senior vice president of INVESCO, is the portfolio manager of
Energy and Gold & Precious Metals Funds. Before joining INVESCO in 1997, John
was a managing director and principal with The Mitchell Group, Inc. He holds an
M.B.A. in Finance from the University of Texas-Austin and a B.S. in Civil
Engineering from the University of Alabama.
JOSEPH W. SKORNICKA, a vice president of INVESCO, is the portfolio manager of
Financial Services Fund. Before joining INVESCO in 2001, Joe was a senior equity
analyst and fund manager with Munder Capital Management and an assistant vice
president for Comerica Incorporated. He is a CFA charterholder. Joe holds an
M.B.A. from the University of Michigan and a B.A. from Michigan State
University.
ANDY SUMMERS is an Assistant Portfolio Manager for all INVESCO Health Sciences
portfolios. Andy joined the INVESCO Health Sciences investment team in 1998. He
is a CFA charterholder. Prior to joining INVESCO, Andy worked as an analyst for
Denver Investment Advisors. He received his master's degree in finance from the
University of Wisconsin at Madison in 1998. He received hid bachelor's degree in
finance from the University of Wisconsin at Whitewater in 1996.
JAMES W. TROWBRIDGE, Portfolio Manager, has been responsible for INVESCO Real
Estate Opportunity Fund since July 1, 2003. He has been responsible for A I M
Real Estate Fund since 1995 and has been associated with the subadvisor and/or
its affiliates since 1989.
THOMAS R. WALD, a vice president of INVESCO, is the portfolio manager of Health
Sciences Fund. Before joining INVESCO in 1997, Tom was an analyst with Munder
Capital Management, Duff & Phelps and Prudential Investment Corp. He is a CFA
charterholder. Tom holds an M.B.A. from the Wharton School at the University of
Pennsylvania and a B.A. from Tulane University.
Effective July 1, 2003, Messrs. Blackburn, Rodriguez, and Trowbridge are dual
employees of INVESCO Funds Group, Inc. (the "advisor") and INVESCO Institutional
(N.A.) Inc. (the "subadvisor").
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD YOU
ATTEMPT TO USE THE FUNDS FOR SHORT-TERM TRADING PURPOSES.
The Funds offer shareholders the potential to increase the value of their
capital over time; Real Estate Opportunity, Telecommunications, and Utilities
Funds also offer the opportunity for current income. Like most mutual funds,
each Fund seeks to provide higher returns than the market or its competitors,
but cannot guarantee that performance. While each Fund invests in a single
targeted market sector, each seeks to minimize risk by investing in many
different companies.
SUITABILITY FOR INVESTORS
Only you can determine if an investment in a Fund is right for you based upon
your own economic situation, the risk level with which you are comfortable and
other factors. In general, the Funds are most suitable for investors who:
o are willing to grow their capital over the long-term (at least five years)
o can accept the additional risks and volatility associated with sector
investing
o understand that shares of a Fund can, and likely will, have daily price
fluctuations
o are investing through tax-deferred retirement accounts, such as traditional
and Roth Individual Retirement Accounts ("IRAs"), as well as
employer-sponsored qualified retirement plans, including 401(k)s and
403(b)s, all of which have longer investment horizons.
You probably do not want to invest in the Funds if you are:
o primarily seeking current dividend income (although Real Estate Opportunity,
Telecommunications, and Utilities Funds do seek to provide income in
addition to capital growth)
o unwilling to accept potentially significant changes in the price of Fund
shares
o speculating on short-term fluctuations in the stock markets.
[INVESCO ICON] SHARE PRICE
CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- --------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV)
The value of your Fund shares is likely to change daily. This value is known as
the Net Asset Value per share, or NAV. INVESCO determines the market value of
each investment in each Fund's portfolio each day that the New York Stock
Exchange ("NYSE") is open, at the close of the regular trading day on that
exchange (normally 4:00 p.m. Eastern time), except that securities traded
primarily on the Nasdaq Stock Market ("Nasdaq") are normally valued by a Fund at
the Nasdaq Official Closing Price provided by Nasdaq each business day. Shares
of the Funds are not priced on days when the NYSE is closed, which generally is
on weekends, most national holidays in the U.S., and Good Friday.
NAV is calculated by adding together the current market price of all of a Fund's
investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares. Because
their expenses vary, NAV is calculated separately for each class.
All purchases, sales, and exchanges of Fund shares are made by INVESCO at the
NAV next calculated after INVESCO receives proper instructions from you, your
financial intermediary, or your plan or program sponsor. Instructions must be
received by INVESCO no later than the close of the NYSE to effect transactions
at that day's NAV. If INVESCO receives instructions from you, your financial
intermediary, or your plan or program sponsor after that time, the instructions
will be processed at the NAV next calculated after receipt of these
instructions. Financial institutions that process customer transactions through
the National Securities Clearing Corporation's Fund/SERV and Networking
facilities must obtain their customers' permission for each transaction, and
each financial institution retains responsibility to its customers for any
errors or irregularities related to these transactions.
Foreign securities exchanges, which set the prices for foreign securities held
by the Funds, are not always open the same days as the NYSE, and may be open for
business on days the NYSE is not. For example, Thanksgiving Day is a holiday
observed by the NYSE and not by overseas exchanges. In this situation, the Funds
would not calculate NAV on Thanksgiving Day (and INVESCO would not buy, sell, or
exchange shares for you on that day), even though activity on foreign exchanges
could result in changes in the value of investments held by the Funds on that
day.
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE CLOSE
OF THE NYSE, NORMALLY 4:00 P.M. EASTERN TIME.
The Funds offer multiple classes of shares. The chart in this section shows
several convenient ways to invest in the shares of the Funds if you invest
directly through INVESCO. If you invest in a Fund through a financial
intermediary, please consult the financial intermediary, or with respect to
Class K shares, the plan or program sponsor, for more information on how to
purchase shares of a Fund. You may be charged a commission or transaction fee by
the financial intermediary or plan or program sponsor for purchases of Fund
shares.
With the exception of Class A shares, there is no charge to invest directly
through INVESCO. Class A shares are subject to a front-end sales charge. For
more information on this charge, please see the subsection entitled "Sales
Charges." If you buy $1,000,000 or more of Class A shares and redeem the shares
within eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the total original cost of the
shares may be assessed. With respect to redemption of Class C shares held
thirteen months or less, a CDSC of 1% of the total original cost of the shares
may be assessed. With respect to Class K shares, if you are a qualified plan and
elect to receive a dealer concession, you may pay a CDSC of 0.70% on your Class
K shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. In determining whether a CDSC
applies to a redemption from a non-qualified plan, it is assumed that the shares
being redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the shareholder's
account. These charges are not assessed upon Class A, B, C, or K shares acquired
through reinvestment of dividends or other distributions, or Class A, B, C, or K
shares exchanged for the same class of another INVESCO Fund. For more
information on CDSC charges, please see the subsection of the Prospectus
entitled "Choosing A Share Class" and the section of the Statement of Additional
Information entitled "Distributor - Sales Charges and Dealer Concessions."
For all new accounts, please send a completed application form, and specify the
fund or funds and class or classes of shares you wish to purchase. If you do not
specify a fund or funds, your initial investment and any subsequent purchases
will automatically go into INVESCO Cash Reserves Fund - Class A, a series of
INVESCO Money Market Funds, Inc. You will receive a confirmation of this
transaction and may contact INVESCO to exchange into the fund you choose.
A share of each class represents an identical interest in a Fund and has the
same rights, except that each class bears its own distribution and shareholder
servicing charges, and other expenses. The income attributable to each class and
the dividends payable on the shares of each class will be reduced by the amount
of the distribution fee, if applicable, and the other expenses payable by that
class.
INVESCO reserves the right to increase, reduce, or waive each Fund's minimum
investment requirements in its sole discretion, if it determines this action is
in the best interests of that Fund's shareholders. INVESCO also reserves the
right in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.
Please remember that if you pay by check, Automated Clearing House ("ACH"), or
wire and your funds do not clear, you will be responsible for any related loss
to a Fund or INVESCO. If you are already an INVESCO funds shareholder, the Fund
may seek reimbursement for any loss from your existing account(s).
MINIMUM INITIAL INVESTMENT. $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.
MINIMUM SUBSEQUENT INVESTMENT. $50 (Minimums are lower for certain retirement
plans.)
The following chart shows several ways to invest in a Fund if you invest
directly through INVESCO.
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY CHECK $1,000 for regular INVESCO does not
Mail to: accounts; $250 for an accept cash, credit
INVESCO Funds Group, Inc. IRA; $50 for each cards, travelers'
P.O. Box 173706 subsequent investment. cheques, credit card
Denver, CO 80217-3706. checks, instant loan
You may send your check by checks, money orders,
overnight courier to: 4350 or third party checks
South Monaco Street Denver, unless they are from
CO 80237. another financial
institution related to
a retirement plan
transfer.
- --------------------------------------------------------------------------------
BY WIRE $1,000 for regular
You may send your payment by accounts; $250 for an
bank wire (call IRA; $50 for each
1-800-525-8085 for subsequent investment.
instructions).
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $1,000 for regular You must provide your
Call 1-800-525-8085 to accounts; $250 for an bank account
request your purchase. Upon IRA; $50 for each information to INVESCO
your telephone instructions, subsequent investment. prior to using this
INVESCO will move money from option.
your designated bank/ credit
union checking or savings
account in order to purchase
shares.
- --------------------------------------------------------------------------------
BY INTERNET (INVESTOR CLASS - $1,000 for regular You will need a Web
GRANDFATHERED INVESTORS ONLY) accounts; $250 for an browser to use this
Go to the INVESCO Web site IRA; $50 for each service. Internet
at invescofunds.com. subsequent investment. transactions are
limited to a maximum
of $25,000.
- --------------------------------------------------------------------------------
REGULAR INVESTING WITH EASIVEST $50 per month for Like all regular
OR DIRECT PAYROLL PURCHASE EasiVest; $50 per pay investment plans,
You may enroll on your fund period for Direct neither EasiVest nor
application, or call us for Payroll Purchase. You Direct Payroll
a separate form and more may start or stop your Purchase ensures a
details. Investing the same regular investment profit or protects
amount on a monthly basis plan at any time, with against loss in a
allows you to buy more two weeks' notice to falling market.
shares when prices are low INVESCO. Because you'll invest
and fewer shares when prices continually,
are high. This "dollar cost regardless of varying
averaging" may help offset price levels, consider
market fluctuations. Over a your financial ability
period of time, your average to keep buying through
cost per share may be less low price levels. And
than the actual average net remember that you will
asset value per share. lose money if you
redeem your shares
when the market value
of all your shares is
less than their cost.
- --------------------------------------------------------------------------------
BY PERSONAL ACCOUNT LINE $50 for subsequent You must provide your
WITH ACH investments. bank account
Automated transactions by information to INVESCO
telephone are available for prior to using this
subsequent purchases and option. Automated
exchanges 24 hours a day. transactions are
Simply call 1-800-424-8085. limited to a maximum
of $25,000.
- --------------------------------------------------------------------------------
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000 for regular See "Exchange Policy."
Between the same class of accounts; $250 for an
any two INVESCO funds. Call IRA; $50 for each
1-800-525-8085 for subsequent investment.
prospectuses of other
INVESCO funds. Exchanges may
be made by phone or at our
Web site at
invescofunds.com. You may
also establish an automatic
monthly exchange service
between two INVESCO funds;
call us for further details
and the correct form.
GRANDFATHERED INVESTORS. Investor Class shares of a Fund can be purchased only
by:
o Persons or entities who had established an account in any of the funds
managed and distributed by INVESCO (the "INVESCO Funds") in Investor Class
shares prior to April 1, 2002 and have continuously maintained such account
in Investor Class shares since April 1, 2002;
o Any person or entity listed in the account registration for any INVESCO Funds
account in Investor Class shares that has been established prior to April 1,
2002 and continuously maintained since April 1, 2002, such as joint owners,
trustees, custodians, and designated beneficiaries;
o Customers of certain financial institutions, wrap accounts or other fee-based
advisory programs, or insurance company separate accounts, which have had
relationships with INVESCO and/or any of the INVESCO Funds' Investor Class
shares prior to April 1, 2002 and continuously maintained such relationships
since April 1, 2002;
o Defined benefit, defined contribution, and deferred compensation plans; and
o INVESCO employees, INVESCO Funds directors, AMVESCAP employees, AMVESCAP
directors, and their immediate families.
For more detailed information about eligibility, please call 1-800-525-8085. If
you hold INVESCO Funds Investor Class shares through a broker/dealer or other
financial institution, your eligibility to purchase Investor Class shares may
differ depending on that institution's policies.
EXCHANGE POLICY. You may exchange your shares in any of the Funds for shares of
the same class in another INVESCO fund on the basis of their respective NAVs at
the time of the exchange.
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR INVESTMENTS, OR
TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately followed by the purchase of
shares in another. Therefore, any gain or loss realized on the exchange is
recognizable for federal income tax purposes (unless, of course, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.
You will not pay a sales charge when exchanging Class B shares for other Class B
shares, Class C shares for other Class C shares, or Class K shares for other
Class K shares. If you make an exchange involving Class B, Class C, or Class K
shares, the amount of time you held the original shares will be added to the
holding period of the Class B, Class C, or Class K shares, respectively, into
which you exchanged for the purpose of calculating any CDSC that may be assessed
upon a subsequent redemption.
We have the following policies governing exchanges:
o Both fund accounts involved in the exchange must be registered in exactly the
same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of each Fund per twelve-month period.
o Each Fund reserves the right to reject any exchange request, or to modify or
terminate the exchange policy, if it is in the best interests of the Fund.
Notice of all such modifications or terminations that affect all shareholders
of the Fund will be given at least sixty days prior to the effective date of
the change, except in unusual instances, including a suspension of redemption
of the exchanged security under Section 22(e) of the Investment Company Act
of 1940.
In addition, the ability to exchange may be temporarily suspended at any time
that sales of the Fund into which you wish to exchange are temporarily stopped.
CHOOSING A SHARE 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 applicable to the
class, if any, (iii) the eligibility requirements that apply to purchases of a
particular class, and (iv) any services you may receive in making your
investment determination. Your financial intermediary can help you decide among
the various classes. Please contact your financial intermediary for several
convenient ways to invest in a Fund. Class A, B, C, and K shares of the Funds
are available primarily through financial intermediaries.
In addition, you should also consider the factors below:
Investor Class Class A Class B Class C Class K
-------------- ------- ------- ------- -------
Initial Sales Charge None 5.50% None None None
CDSC(1) None 1% on certain 1%-5% for 1% for 0.70% on cer-
purchases held shares held shares held tain purchases
less than 18 months less than 6 less than 13 held less than
years months 12 months
12b-1 Fee 0.25% 0.35% 1.00% 1.00% 0.45%
12b-1 Fee (Utilities Fund only)(3) 0.25% 0.25% 1.00% 1.00% 0.45%
Conversion No No Yes(2) No No
Purchase Order Maximum None None $250,000 $1,000,000 None
(1) Please see the subsection entitled "Sales Charges" below and the section of the Funds' Statement of Additional Information
entitled "Distributor - Sales Charges and Dealer Concessions" for more information regarding CDSC charges and dealer
concessions.
(2) Class B shares, along with the pro rata portion of the shares' reinvested dividends and distributions, automatically convert to
Class A shares at the end of the month which is eight years after the date on which such Class B shares were purchased.
(3) Effective July 1, 2003.
INTERNET TRANSACTIONS (INVESTOR CLASS - GRANDFATHERED INVESTORS ONLY). Investors
may open new accounts and exchange and redeem Investor Class shares of any
INVESCO fund through the INVESCO Web site. To use this service, you will need a
web browser (presently Netscape version 4.0 or higher, Microsoft Internet
Explorer version 4.0 or higher, or AOL version 5.0 or higher) and the ability to
use the INVESCO Web site. INVESCO will accept Internet purchase instructions
only for exchanges or if the purchase price is paid to INVESCO through debiting
your bank account, and any Internet cash redemptions will be paid only to the
same bank account from which the payment to INVESCO originated. INVESCO imposes
a limit of $25,000 on Internet purchase and redemption transactions. Other
minimum transaction amounts are discussed in this Prospectus. You may also
download an application to open an account from the Web site, complete it by
hand, and mail it to INVESCO, along with a check.
INVESCO employs reasonable procedures to confirm that transactions entered into
over the Internet are genuine. These procedures include the use of alphanumeric
passwords, secure socket layering, encryption, and other precautions reasonably
designed to protect the integrity, confidentiality, and security of shareholder
information. In order to enter into a transaction on the INVESCO Web site, you
will need an account number, your Social Security number, and an alphanumeric
password. If INVESCO follows these procedures, neither INVESCO, its affiliates
nor any INVESCO fund will be liable for any loss, liability, cost, or expense
for following instructions communicated via the Internet that are reasonably
believed to be genuine or that follow INVESCO's security procedures. By entering
into the user's agreement with INVESCO to open an account through our Web site,
you lose certain rights if someone gives fraudulent or unauthorized instructions
to INVESCO that result in a loss to you.
SALES CHARGES (CLASS A, B, C, AND K ONLY)
Sales charges on Class A shares of the Funds are detailed below. As used below,
the term "offering price" with respect to Class A shares includes the initial
sales charge.
INITIAL SALES CHARGES. Class A shares of the Funds are subject to the following
initial sales charges:
Investor's Sales Charge
Amount of investment As a % of As a % of
in a 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%
$1,000,000 or more NAV NAV
CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS A AND CLASS K SHARES. You can
purchase $1,000,000 or more of Class A shares at net asset value, and the
distributor may pay a dealer concession and/or a service fee for purchases of
$1,000,000 or more. However, if you purchase shares worth $1,000,000 or more,
they may be subject to a CDSC of 1% if you redeem them prior to eighteen months
after the date of purchase. We will use the "first-in, first-out" method to
determine your holding period. Under this method, the date of redemption will be
compared with the earliest purchase date of shares held in your account. If your
holding period is less than eighteen months, the CDSC may be assessed on the
amount of the total original cost of the shares. For qualified plans investing
in Class A shares, you may pay a CDSC of 1% if the plan is redeemed within
twelve months from initial deposit in the plan's INVESCO account. For qualified
plans investing in Class K shares, you may pay a CDSC of 0.70% if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account.
CDSC 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. If your holding period is less
than six years for Class B shares and thirteen months for Class C shares, the
CDSC may be assessed on the amount of the total original cost of the shares.
Year Since
Purchase Made Class B Class C
First 5% 1%(1)
Second 4% None
Third 3% None
Fourth 3% None
Fifth 2% None
Sixth 1% None
Seventh and following None(2) None
(1) The first year will consist of the first thirteen months.
(2) Class B shares, along with the pro rata portion of the shares' reinvested
dividends and distributions, automatically convert to Class A shares at the
end of the month which is eight years after the date on which such Class B
shares were purchased.
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 intermediary must provide sufficient
information at the time of purchase to verify that your purchase qualifies for
such treatment.
REDUCED SALES CHARGES. You may be eligible to buy Class A shares at reduced
initial sales charge rates under Right of Accumulation or Letter of Intent
under certain circumstances.
RIGHTS OF ACCUMULATION. You may combine your new purchases of Class A
shares with Class A shares that were previously purchased for the
purpose of qualifying for the lower initial sales charge rates that
apply to larger purchases. The applicable initial sales charge for the
new purchase is based on the total of your current purchase and the
current value of all Class A shares you own.
LETTER OF INTENT. Under a Letter of Intent (LOI), you commit to
purchase a specified dollar amount of Class A shares of the Fund
during a thirteen-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 thirteen-month period,
your account will be adjusted to the higher initial sales charge level
for the amount actually invested.
INITIAL SALES CHARGE/CDSC EXCEPTIONS.
You will not pay initial sales charges:
o on shares purchased by reinvesting dividends and distributions;
o when exchanging shares of the same class among certain INVESCO
funds;
o when using the reinstatement privilege;
o when a merger, consolidation, or acquisition of assets of an
INVESCO fund occurs; and
o upon automatic conversion of Class B to Class A.
You will not pay a CDSC:
o if you purchase less than $1,000,000 of Class A shares;
o if you purchase $1,000,000 or more of Class A shares and hold those
shares for more than eighteen months;
o if you redeem Class B shares you held for more than six years;
o if you redeem Class C shares you held for more than thirteen
months;
o if you participate in the periodic withdrawal program and withdraw
up to 10% of the value of your shares that are subject to a CDSC in
any twelve-month period. The value of your shares, and applicable
twelve-month period, will be calculated based upon the value of
your account on, and the date of, the first periodic withdrawal;
o if you redeem shares acquired through reinvestment of dividends and
distributions;
o if you are a qualified plan investing in Class A or Class K shares
and elect to forego any dealer concession;
o on increases in the net asset value of your shares;
o to pay account fees;
o for IRA distributions due to death or disability or periodic
distributions based on life expectancy;
o to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
o for redemptions following the death of a shareholder or beneficial
owner.
There may be other situations when you may be able to purchase or redeem shares
at reduced or no sales charges. Consult the Funds' Statement of Additional
Information for further details.
DISTRIBUTION EXPENSES. We have adopted a Master Distribution Plan and Agreement
(commonly known as a "12b-1 Plan") for each class of shares of the Funds. The
12b-1 fees paid by each Fund's classes of shares are used to pay distribution
and service fees to ADI for the sale and distribution of the Funds' shares and
to pay for services provided to shareholders. These services include
compensation to financial intermediaries that sell Fund shares and/or service
shareholder accounts. Because each Fund's shares pay these fees out of their
assets on an ongoing basis, these fees increase the cost of your investment.
Under each Plan, payments are limited to an amount computed at each class's
applicable 12b-1 fee. If distribution expenses for a class exceed these computed
amounts, ADI pays the difference. Conversely, if distribution fees are less than
computed amounts, ADI retains the difference.
[INVESCO ICON] YOUR ACCOUNT SERVICES
With the exception of householding, the following information pertains only to
shareholders who hold their shares directly through INVESCO.
SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains your
current Fund holdings. The Funds do not issue share certificates.
INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL, OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.
QUARTERLY INVESTMENT SUMMARIES. Each calendar quarter, you receive a written
statement which consolidates and summarizes account activity and value at the
beginning and end of the period for each of your INVESCO funds.
TRANSACTION CONFIRMATIONS. You receive detailed confirmations of individual
purchases, exchanges, and sales. If you choose certain recurring transaction
plans (for instance, EasiVest), your transactions are confirmed on your
quarterly Investment Summaries.
TELEPHONE TRANSACTIONS. You and your financial intermediary or plan or program
sponsor may buy, exchange, and sell Fund shares by telephone, unless these
privileges are specifically declined when the INVESCO new account Application is
filled out.
YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, INVESCOFUNDS.COM.
Unless you decline the telephone transaction privileges, when you fill out and
sign the new account Application, a Telephone Transaction Authorization Form, or
use your telephone transaction privileges, you lose certain rights if someone
gives fraudulent or unauthorized instructions to INVESCO that result in a loss
to you. In general, if INVESCO has followed reasonable procedures, such as
recording telephone instructions and sending written transaction confirmations,
INVESCO is not liable for following telephone instructions that it believes to
be genuine. Therefore, you have the risk of loss due to unauthorized or
fraudulent instructions.
HOUSEHOLDING. To save money for the Funds, you may receive only one copy of a
prospectus or financial report to each household address. This process, known as
"householding," is used for most required shareholder mailings. It does not
apply to account statements. You may, of course, request an additional copy of a
prospectus or financial report at any time by calling or writing INVESCO. You
may also request that householding be eliminated from all your required
mailings.
IRAS AND OTHER RETIREMENT PLANS. Shares of any INVESCO mutual fund may be
purchased for IRAs and many other types of tax-deferred retirement plans. Please
call INVESCO for information and forms to establish or transfer your existing
retirement plan or account.
[INVESCO ICON] HOW TO SELL SHARES
The chart in this section shows several convenient ways to sell your Fund shares
if you invest directly through INVESCO. If you invest in a Fund through a
financial intermediary, please consult the financial intermediary, or with
respect to Class K shares, the plan or program sponsor, for information on how
to sell shares of a Fund. You may be charged a commission or transaction fee by
your financial intermediary or plan or program sponsor for sales of Fund shares.
Shares of the Funds may be sold at any time at the next NAV calculated after
your request to sell is received by INVESCO in proper form. Depending on Fund
performance, the NAV at the time you sell your shares may be more or less than
the price you paid to purchase your shares.
Various fees may apply to Fund redemptions. You may be charged a CDSC at the
time of redemption depending on how long you have held your shares.If you buy
$1,000,000 or more of Class A shares and redeem the shares within eighteen
months from the date of purchase, you may pay a 1% CDSC at the time of
redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the total original cost of the
shares may be assessed. With respect to redemption of Class C shares held
thirteen months or less, a CDSC of 1% of the total original cost of the shares
may be assessed. With respect to Class K shares, if you are a qualified plan and
elect to receive a dealer concession, you may pay a CDSC of 0.70% on your Class
K shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. In determining whether a CDSC
applies to a redemption from a non-qualified plan, it is assumed that the shares
being redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the shareholder's
account. These charges are not assessed upon Class A, B, C, or K shares acquired
through reinvestment of dividends or other distributions, or Class A, B, C, or K
shares exchanged for the same class of another INVESCO Fund. For more
information on CDSC charges, please see the subsection of the Prospectus
entitled "Choosing A Share Class" and the section of the Statement of Additional
Information entitled "Distributor - Sales Charges and Dealer Concessions."
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00 P.M.
EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell and specify the class of shares. Remember that any sale
or exchange of shares in a non-retirement account will likely result in a
taxable gain or loss.
While INVESCO attempts to process telephone redemptions promptly, there may be
times -- particularly in periods of severe economic or market disruption -- when
you may experience delays in redeeming shares by telephone.
INVESCO usually forwards the proceeds from the sale of fund shares within seven
days after we receive your request to sell in proper form. However, payment may
be postponed under unusual circumstances -- for instance, if normal trading is
not taking place on the NYSE, or during an emergency as defined by the
Securities and Exchange Commission. If your INVESCO fund shares were purchased
by a check which has not yet cleared, payment will be made promptly when your
purchase check does clear; that can take up to twelve business days.
If you participate in EasiVest, the Funds' automatic monthly investment program,
and sell all of the shares in your account, we will not make any additional
EasiVest purchases unless you give us other instructions.
Because of the Funds' expense structures, it costs as much to handle a small
account as it does to handle a large one. If the value of your account in a Fund
falls below $250 as a result of your actions (for example, sale of your Fund
shares), the Fund reserves the right to sell all of your shares, send the
proceeds of the sale to you and close your account. Before this is done, you
will be notified and given sixty days to increase the value of your account to
$250 or more.
REDEMPTION FEES. Except for any applicable CDSC, we will not charge you any fees
to redeem your shares; however, your financial intermediary may charge service
fees for handling these transactions.
REINSTATEMENT PRIVILEGE (CLASS A AND CLASS B ONLY). You may, within ninety days
after you sell Class A or Class B shares, reinvest all or part of your
redemption proceeds in Class A shares of a Fund at net asset value in an
identically registered account. You will not pay any sales charges on the amount
reinvested. You must notify INVESCO in writing at the time you reinstate that
you are exercising your reinstatement privilege. You may exercise this privilege
only once per calendar year.
The following chart shows several ways to sell your shares of the Funds if you
invest directly through INVESCO.
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY TELEPHONE Any amount. You must provide an IRA
Call us toll-free at: redemption form to
1-800-525-8085. INVESCO prior to making
an IRA redemption by
telephone. INVESCO's
telephone redemption
privileges may be
modified or terminated in
the future at INVESCO's
discretion. The maximum
amount which may be
redeemed by telephone is
generally $25,000.
- --------------------------------------------------------------------------------
IN WRITING Any amount. The redemption request
Mail your request to: must be signed by all
INVESCO Funds Group, Inc. registered account
P.O. Box 173706 owners. Payment will be
Denver, CO 80217-3706. mailed to your address as
You may also send your it appears on INVESCO's
request by overnight records, or to a bank
courier to: designated by you in
4350 South Monaco Street writing.
Denver, CO 80237.
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH Any amount. You must provide your
Call 1-800-525-8085 to bank account information
request your redemption. or IRA redemption form to
INVESCO prior to using
this option. INVESCO will
automatically pay the
proceeds into your
designated bank account.
- --------------------------------------------------------------------------------
BY INTERNET (INVESTOR Any amount. IRA You will need a Web
CLASS - GRANDFATHERED redemptions are not browser to use this
INVESTORS ONLY) permitted via the service. Internet
Go to the INVESCO Web site internet. transactions are limited
at invescofunds.com. to a maximum of $25,000.
INVESCO will
automatically pay the
proceeds into your
designated bank account.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BY PERSONAL ACCOUNT LINE $50. Be sure to write down the
WITH ACH (INVESTOR CLASS - confirmation number
GRANDFATHERED INVESTORS provided to you. You must
ONLY) provide your bank account
Automated transactions by information to INVESCO
telephone are available prior to using this
for redemptions and option.
exchanges 24 hours a day.
Simply call 1-800-424-8085.
- --------------------------------------------------------------------------------
PERIODIC WITHDRAWAL PLAN $100 per payment on a You must have at least
You may call us to request monthly or quarterly $10,000 total invested
the appropriate form and basis. The redemption with the INVESCO funds
more information at check may be made with at least $5,000 of
1-800-525-8085. payable to any party that total invested in
you designate. the fund from which
withdrawals will be made.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD PARTY Any amount. All registered account
Mail your request to: owners must sign the
INVESCO Funds Group, Inc. request, with signature
P.O. Box 173706 guarantees from an
Denver, CO 80217-3706. eligible guarantor
financial institution,
such as a commercial bank
or a recognized national
or regional securities
firm.
[GRAPH ICON] TAXES
Everyone's tax status is unique. We manage the Funds in an effort to provide
maximum total returns to all shareholders of the Funds. INVESCO generally
focuses on pre-tax results and ordinarily does not manage a Fund to minimize
taxes. We may, nevertheless, take advantage of opportunities to mitigate taxes
through management of capital gains and losses. We encourage you to consult your
own tax adviser on the tax impact to you of investing directly or indirectly in
the Funds.
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.
Each Fund customarily distributes to its shareholders substantially all of its
net investment income, net capital gains and net gains from foreign currency
transactions, if any. You receive a proportionate part of these distributions,
depending on the percentage of a Fund's shares that you own. These distributions
are required under federal tax laws governing mutual funds. It is the policy of
each Fund to distribute all investment company taxable income and net capital
gains. As a result of this policy and each Fund's qualification as a regulated
investment company, it is anticipated that none of the Funds will pay any
federal income or excise taxes. Instead, each Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
However, unless you are (or your account is) exempt from income taxes, you must
include all dividends and capital gain distributions paid to you by a Fund in
your taxable income for federal, state, and local income tax purposes. You also
may realize capital gains or losses when you sell shares of a Fund at more or
less than the price you originally paid. An exchange is treated as a sale, and
is a taxable event. Dividends and other distributions usually are taxable
whether you receive them in cash or automatically reinvest them in shares of the
distributing Fund(s) or other INVESCO funds.
If you have not provided INVESCO with complete, correct tax information, the
Funds are required by law to withhold from your distributions, and any money
that you receive from the sale of shares of the Funds, a backup withholding tax
at the rate in effect on the date of the transaction.
Unless your account is held through a financial intermediary, we will provide
you with detailed information every year about your dividends and capital gain
distributions. Depending on the activity in your individual account, we may also
be able to assist with cost basis figures for shares you sell.
[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Funds earn ordinary or investment income from dividends and interest on
their investments. Energy, Financial Services, Gold & Precious Metals, Health
Sciences, Leisure, Technology, and Telecommunications Funds expect to distribute
their respective investment income, less Fund expenses, to shareholders
annually. Real Estate Opportunity and Utilities Funds expect to make such
distributions quarterly. All Funds can make distributions at other times, if
they choose to do so. Please note that classes with higher expenses are expected
to have lower dividends.
NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN
ADDITIONAL SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT OR TAX-DEFERRED
ACCOUNTS).
Each Fund also realizes capital gains or losses when it sells securities in its
portfolio for more or less than it had paid for them. If total gains on sales
exceed total losses (including losses carried forward from previous years), a
Fund has a net realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually, usually in November or December.
Dividends and capital gain distributions are paid to you if you hold shares on
the record date of the distribution regardless of how long you have held your
shares.
Under present federal income tax laws, capital gains may be taxable at different
rates, depending on how long a Fund has held the underlying investment.
Short-term capital gains, which are derived from the sale of assets held one
year or less, are taxed as ordinary income. Long-term capital gains, which are
derived from the sale of assets held for more than one year, are taxed at up to
the maximum capital gains rate, currently 20% for individuals.
A Fund's daily NAV reflects all realized capital gains that have not yet been
distributed to shareholders. Therefore, a Fund's NAV will drop by the amount of
a distribution, net of market fluctuations, on the day the distribution is
declared. If you buy shares of a Fund just before a distribution is declared,
you may wind up "buying a distribution." This means that if the Fund declares a
dividend or capital gain distribution shortly after you buy, you will receive
some of your investment back as a taxable distribution. Although purchasing your
shares at the resulting higher NAV may mean a smaller capital gain or greater
loss upon sale of the shares, most shareholders want to avoid the purchase of
shares immediately before the distribution record date. However, keep in mind
that your basis in the Fund will be increased to the extent such distributions
are reinvested in the Fund. If you sell your shares of a Fund at a loss for tax
purposes and then replace those shares with a substantially identical investment
either thirty days before or after that sale, the transaction is usually
considered a "wash sale" and you will not be able to claim a tax loss.
Dividends and capital gain distributions paid by each Fund are automatically
reinvested in additional Fund shares at the NAV on the ex-distribution date,
unless you choose to have them automatically reinvested in another INVESCO fund
or paid to you by check or electronic funds transfer. If you choose to be paid
by check, the minimum amount of the check must be at least $10; amounts less
than that will be automatically reinvested. Dividends and other distributions,
whether received in cash or reinvested in additional Fund shares, are generally
subject to federal income tax.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the various classes of each Fund for the past five years (or, if
shorter, the period of the class's operations). Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the annual percentages that an investor would have earned (or lost) on
an investment in a Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the financial statements, is
included in INVESCO Sector Funds, Inc.'s 2003 Annual Report to Shareholders,
which is incorporated by reference into the Statement of Additional Information.
This Report is available without charge by contacting ADI at the address or
telephone number on the back cover of this Prospectus.
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
ENERGY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30 $ 19.38
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.10) (0.07) (0.08) (0.00) (0.00) 0.00
Net Investment Income(Loss)(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.35) (0.40) 3.84 3.72 2.39 (5.04)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.45) (0.47) 3.76 3.72 2.39 (5.04)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00 0.01 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.81 $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30
====================================================================================================================================
TOTAL RETURN (12.72%) (2.38%) 23.09% 27.19%(d) 21.19% (28.51%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 231,023 $ 358,439 $ 445,845 $ 221,432 $ 196,136 $ 137,455
Ratio of Expenses to Average Net Assets(e) 1.69% 1.53% 1.41% 1.60%(f) 1.68% 1.58%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.57%) (0.34%) (0.35%) (0.26%)(f) (0.05%) 0.01%
Portfolio Turnover Rate 144% 144% 166% 109%(d) 279% 192%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001.
(c) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis for the period ended March 31, 2000 and the years
ended October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 19.26 $ 19.26
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.05) (0.17)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (2.36) (2.38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.41) (2.55)
====================================================================================================================================
Net Asset Value--End of Period $ 16.85 $ 16.71
====================================================================================================================================
TOTAL RETURN(c)
RATIOS (12.51%) (13.24%)
Net Assets--End of Period ($000 Omitted) $ 9,131 $ 1,502
Ratio of Expenses to Average Net Assets(d)(e) 1.46% 2.33%
Ratio of Net Investment Loss to Average Net Assets(e) (0.33%) (1.16%)
Portfolio Turnover Rate 144% 144%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charge for Class A or CDSC for Class B is not included in the Total Return Calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 2.41% and ratio of net investment
loss to average net assets would have been (1.24%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------------
2003 2002 2001 2000(a)
ENERGY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 18.98 $ 19.58 $ 17.39 $ 14.35
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.11) (0.07) (0.05) (0.01)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (2.42) (0.53) 3.67 3.05
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.53) (0.60) 3.62 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.45 $ 18.98 $ 19.58 $ 17.39
====================================================================================================================================
TOTAL RETURN(c) (13.33%) (3.06%) 22.35% 21.11%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 9,566 $ 12,324 $ 8,704 $ 16
Ratio of Expenses to Average Net Assets(e)(f) 2.33% 2.27% 2.05% 2.05%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.22%) (1.08%) (1.10%) (1.11%)(g)
Portfolio Turnover Rate 144% 144% 166% 109%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.53% and ratio of net investment loss to
average net assets would have been (1.42%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
--------------------------------------------------------
2003 2002 2001(a)
ENERGY FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 17.98 $ 19.62 $ 16.76
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.14) (0.05) (0.15)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (2.29) (1.59) 3.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.43) (1.64) 2.86
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 15.55 $ 17.98 $ 19.62
====================================================================================================================================
TOTAL RETURN (13.52%) (8.36%) 17.06%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 289 $ 37 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 2.07% 11.62% 3.11%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.90%) (10.45%) (2.34%)(f)
Portfolio Turnover Rate 144% 144% 166%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2003.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 5.36% and ratio of net investment loss to
average net assets would have been (4.19%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-----------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
FINANCIAL SERVICES FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45 $ 29.14
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.10 0.07 0.10 0.03 0.08 0.25
Net Investment Income
Net Gains or (Losses) on Securities (Both
Realized and Unrealized) (6.42) 0.94 2.97 0.05 3.52 3.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.32) 1.01 3.07 0.08 3.60 3.26
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.13 1.67 1.32 2.68 2.32 3.95
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.77 $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45
====================================================================================================================================
TOTAL RETURN (22.39%) 3.82% 11.25% 0.60%(b) 13.52% 11.76%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 734,440 $ 1,234,230 $ 1,368,583 $ 1,133,350 $ 1,242,555 $ 1,417,655
Ratio of Expenses to Average Net Assets(c) 1.40% 1.27% 1.25% 1.29%(d) 1.26% 1.05%
Ratio of Net Investment Income to
Average Net Assets 0.38% 0.24% 0.36% 0.25%(d) 0.25% 0.85%
Portfolio Turnover Rate 60% 81% 99% 38%(b) 83% 52%
(a) From November 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(d) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 28.22 $ 28.22
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.06 (0.03)
Net Investment Income (Loss)
Net Losses on Securities (Both Realized and Unrealized) (6.37) (6.30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.31) (6.33)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.23 0.15
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.68 $ 21.74
====================================================================================================================================
TOTAL RETURN(b) (22.36%) (22.48%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,311 $ 990
Ratio of Expenses to Average Net Assets(c)(d) 1.38% 2.09%
Ratio of Net Investment Income (Loss) to Average Net Assets(d) 0.49% (0.20%)
Portfolio Turnover Rate 60% 60%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of each Class were absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been 1.51% for Class A and 2.40% for Class B and ratio
of net investment income (loss) to average net assets would have been 0.36% for Class A and (0.51%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------
2003 2002 2001 2000(a)
FINANCIAL SERVICES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 27.89 $ 28.72 $ 27.06 $ 23.66
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.25) (0.10) (0.09) 0.00
Net Investment Income (Loss)(c)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.22) 0.87 3.05 3.48
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.47) 0.77 2.96 3.48
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.04 1.60 1.30 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.38 $ 27.89 $ 28.72 $ 27.06
====================================================================================================================================
TOTAL RETURN(d) (23.22%) 2.98% 10.87% 14.72%(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 10,026 $ 16,880 $ 12,221 $ 138
Ratio of Expenses to Average Net Assets(f) 2.45% 2.07% 1.85% 1.63%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.68%) (0.57%) (0.31%) 0.39%(g)
Portfolio Turnover Rate 60% 81% 99% 38%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Income aggregated less than $0.01 on a per share basis for the period ended March 31, 2000.
(d) The applicable CDSC is not included in the Total Return Calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------
2003 2002 2001(a)
FINANCIAL SERVICES FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 27.69 $ 28.67 $ 29.35
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) 0.15 (0.03) (0.17)
Net Investment Income (Loss)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.14) 0.90 (0.38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.26) 0.87 (0.55)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.16 1.85 0.13
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.27 $ 27.69 $ 28.67
====================================================================================================================================
TOTAL RETURN (22.62%) 3.38% (1.97%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,348 $ 1,033 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.78% 1.63% 3.35%(f)
Ratio of Net Investment Loss to Average Net Assets(e) 0.18% (0.12%) (1.80%)(f)
Portfolio Turnover Rate 60% 81% 99%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.13% and ratio of net investment loss to
average net assets would have been (0.17%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
GOLD & PRECIOUS METALS
FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90 $ 3.21
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.02) (0.01) (0.01) (0.01) (0.03) 0.01
OPERATIONS(b)
Net Investment Income (Loss)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.13) 0.87 (0.12) (0.22) (0.04) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.11 0.86 (0.13) (0.23) (0.07) (1.28)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00 0.00 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.40 $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90
====================================================================================================================================
TOTAL RETURN 4.80% 60.14% (8.38%) (12.58%)(c) (3.68%) (39.98%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 98,388 $ 104,831 $ 64,429 $ 81,470 $ 99,753 $ 107,249
Ratio of Expenses to Average Net Assets(d) 1.88% 2.10% 2.34% 2.08%(e) 2.20% 1.90%
Ratio of Net Investment
Loss to Average Net Assets (0.79%) (0.80%) (0.99%) (0.76%)(e) (1.60%) (0.93%)
Portfolio Turnover Rate 84% 46% 90% 37%(c) 141% 133%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003 and 2001 and October 31, 1999.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(e) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
--------------------------------------------------
GOLD & PRECIOUS METALS FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.29 $ 2.29
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.02) (0.02)
Net Investment Loss
Net Gains on Securities (Both Realized and Unrealized) 0.12 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.39 $ 2.39
====================================================================================================================================
TOTAL RETURN(c) 4.37% 4.37%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,514 $ 2,315
Ratio of Expenses to Average Net Assets(d)(e) 2.09% 2.18%
Ratio of Net Investment Loss to Average Net Assets(e) (1.09%) (1.12%)
Portfolio Turnover Rate 84% 84%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of Class A were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class A, ratio of expenses to average net assets would have been 2.11% and ratio of net investment
loss to average net assets would have been (1.11%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------
2003 2002 2001 2000(a)
GOLD & PRECIOUS METALS FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.42 $ 1.53 $ 1.60 $ 1.75
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.00) (0.07) (0.01) (0.00)
Net Investment Loss(c)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.10) 0.96 (0.02) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.89 (0.03) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.52 $ 2.42 $ 1.53 $ 1.60
====================================================================================================================================
TOTAL RETURN(d) 4.13% 58.17% (1.95%) ( 8.57%)(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,459 $ 515 $ 57 $ 1
Ratio of Expenses to Average Net Assets(f) 2.65% 3.33% 3.38% 3.54%(g)
Ratio of Net Investment Loss to Average Net Assets (1.60%) (1.67%) (1.41%) (0.82%)(g)
Portfolio Turnover Rate 84% 46% 90% 37%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2003 and the period ended March
31, 2000.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
----------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
HEALTH SCIENCES FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12 $ 57.50
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS(b)
Net Investment Income (Loss) (0.28) (0.38) (0.12) (0.06) 0.14 0.13
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (8.75) 2.18 (0.51) 3.53 5.02 13.55
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.03) 1.80 (0.63) 3.47 5.16 13.68
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 9.11 6.34 8.89 9.06
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 38.53 $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12
====================================================================================================================================
TOTAL RETURN (18.99%) 3.95% (4.12%) 6.30%(d) 8.44% 28.58%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 954,765 $ 1,475,313 $ 1,580,378 $ 1,622,624 $ 1,574,020 $ 1,328,196
Ratio of Expenses to Average Net Assets(e) 1.44% 1.31% 1.23% 1.18%(f) 1.22% 1.12%
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.68%) (0.75%) (0.20%) (0.22%)(f) 0.07% 0.25%
Portfolio Turnover Rate 179% 160% 177% 107%(d) 127% 92%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 47.56 $ 47.56
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.22) (0.44)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (8.78) (8.78)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.00) (9.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 38.56 $ 38.34
====================================================================================================================================
TOTAL RETURN(c) (18.92%) (19.39)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 3,731 $ 621
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.06%
Ratio of Net Investment Loss to Average Net Assets(e) (0.69%) (1.22%)
Portfolio Turnover Rate 179% 179%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.88% for Class A and 2.51% for Class B and
ratio of net investment loss to average net assets would have been (1.16%) for Class A and (1.67%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------------
2003 2002 2001 2000(a)
HEALTH SCIENCES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 46.68 $ 45.40 $ 55.50 $ 62.05
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (1.20) (0.35) (0.05) (0.03)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.21) 1.65 (0.94) (6.52)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.41) 1.30 (0.99) (6.55)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS (0.00) 0.02(c) 9.11 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 37.27 $ 46.68 $ 45.40 $ 55.50
====================================================================================================================================
TOTAL RETURN(d) (20.16%) 2.85% (4.79%) (10.56%)(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,846 $ 15,892 $ 10,767 $ 470
Ratio of Expenses to Average Net Assets(f)(g) 2.81% 2.26% 2.03% 1.65%(h)
Ratio of Net Investment Loss to Average Net Assets(g) (2.04%) (1.70%) (1.08%) (0.54%)(h)
Portfolio Turnover Rate 179% 160% 177% 107%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 3.27% and ratio of net investment loss to
average net assets would have been (2.50%).
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-----------------------------------------------------------
2003 2002 2001(a)
HEALTH SCIENCES FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 46.98 $ 45.43 $ 55.84
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.23) (0.48) (0.22)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.94) 2.05 (10.19)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.17) 1.57 (10.41)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 37.81 $ 46.98 $ 45.43
====================================================================================================================================
TOTAL RETURN (19.50%) 3.42% (18.64%)(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,990 $ 2,405 $ 1
Ratio of Expenses to Average Net Assets(e) 2.07% 1.71% 3.62%(f)
Ratio of Net Investment Loss to Average Net Assets (1.29%) (1.09%) (2.75%)(f)
Portfolio Turnover Rate 179% 160% 177%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
LEISURE FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92 $ 27.21
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.23) (0.03) (0.00) (0.13) (0.00) (0.00)
OPERATIONS(b)
Net Investment Loss(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (7.89) 2.21 (3.05) 7.27 17.20 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.12) 2.18 (3.05) 7.14 17.20 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 3.23 1.91 2.98
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.83 $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92
====================================================================================================================================
TOTAL RETURN (20.87%) 6.01% (5.50%) 17.34%(d) 65.13% 15.16%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 536,108 $ 799,465 $ 607,428 $ 549,523 $ 443,348 $ 228,681
Ratio of Expenses to Average Net Assets(e) 1.50% 1.40% 1.36% 1.28%(f) 1.44% 1.41%
Ratio of Net Investment Loss
to Average Net Assets (0.69%) (0.64%) (0.51%) (0.65%)(f) (0.68%) (0.09%)
Portfolio Turnover Rate 20% 27% 28% 23%(d) 35% 31%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2003 and the period ended March 31,
2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001 and the years ended
October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
LEISURE FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.96 $ 38.96
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.17) (0.38)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (7.91) (7.93)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.08) (8.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.88 $ 30.65
====================================================================================================================================
TOTAL RETURN(c) (20.74%) (21.33%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 27,175 $ 8,268
Ratio of Expenses to Average Net Assets(d)(e) 1.42% 2.14%
Ratio of Net Investment Loss to Average Net Assets(e) (0.56%) (1.29%)
Portfolio Turnover Rate 20% 20%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return Calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expenses
offset arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 2.23% and ratio of net investment
loss to average net assets would have been (1.38%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------
2003 2002 2001 2000(a)
LEISURE FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.29 $ 36.80 $ 47.09 $ 45.51
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.18) (0.17) (0.13) (0.02)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.11) 2.02 (3.22) 1.60
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.29) 1.85 (3.35) 1.58
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.00 $ 38.29 $ 36.80 $ 47.09
====================================================================================================================================
TOTAL RETURN(c) (21.65%) 5.10% (6.18%) 3.47%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 17,768 $ 16,307 $ 5,388 $ 84
Ratio of Expenses to Average Net Assets(e) 2.44% 2.26% 2.08% 1.71%(f)
Ratio of Net Investment Loss to Average Net Assets (1.62%) (1.48%) (1.08%) (0.42%)(f)
Portfolio Turnover Rate 20% 27% 28% 23%(g)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED PERIOD ENDED
MARCH 31 MARCH 31
---------------------------------------------
2003 2002(a)
LEISURE FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.98 $ 36.11
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.06) (0.09)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.18) 2.96
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.24) 2.87
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.74 $ 38.98
====================================================================================================================================
TOTAL RETURN (21.14%) 7.95%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 67,465 $ 62,226
Ratio of Expenses to Average Net Assets(d)(e) 1.87% 1.23%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.05%) (0.48%)(f)
Portfolio Turnover Rate 20% 27%(g)
(a) From December 17, 2001, inception of Class, to March 31, 2002.
(b) The per share information was computed based on average shares for the period ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.21% and ratio of net investment loss to
average net assets would have been (1.39%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2002.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
----------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
REAL ESTATE OPPORTUNITY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15 $ 10.99
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.24 0.26 0.27 0.33 0.38
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.37) 0.78 0.48 (0.28) (1.56) (0.96)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.09) 1.02 0.74 (0.01) (1.23) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.27 0.25 0.25 0.26 1.02 1.26
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.53 $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15
====================================================================================================================================
TOTAL RETURN (1.12%) 14.67% 11.05% (0.03%)(b) (13.29%) (6.49%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 20,313 $ 20,345 $ 28,546 $ 20,046 $ 17,406 $ 23,548
Ratio of Expenses to Average Net Assets(c)(d) 1.60% 1.61% 1.60% 1.34%(e) 1.34% 1.22%
Ratio of Net Investment Income to Average Net Assets(d) 3.92% 3.58% 3.52% 5.54%(e) 4.23% 3.53%
Portfolio Turnover Rate 248% 196% 338%(f) 272%(b)(f) 697%(f) 258%
(a) From August 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001, the
period ended March 31, 2000 and the years ended July 31, 1999 and 1998. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.43%, 2.25%, 2.03%, 2.73% (annualized), 2.76%, and 1.97%, respectively,
and ratio of net investment income to average net assets would have been 3.09%, 2.94%, 3.09%, 4.15% (annualized), 2.81%, and
2.78%, respectively.
(e) Annualized
(f) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.89 $ 7.89
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.28 0.21
Net Investment Income
Net Losses on Securities (Both Realized and Unrealized) (0.39) (0.36)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.11) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.34 0.32
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.44 $ 7.42
====================================================================================================================================
TOTAL RETURN(b) (1.45%) (1.94%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,409 $ 133
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.36%
Ratio of Net Investment Income to Average Net Assets(d) 4.57% 3.49%
Portfolio Turnover Rate 248% 248%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expense had not been
voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 3.73% and ratio of net investment
income to average net assets would have been 2.12%.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------
2003 2002 2001 2000(a)
REAL ESTATE OPPORTUNITY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.95 $ 7.10 $ 6.62 $ 6.58
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.14 0.14 0.20 0.08
Net Investment Income
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.28) 0.82 0.48 0.06
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.14) 0.96 0.68 0.14
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.08 0.11 0.20 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.73 $ 7.95 $ 7.10 $ 6.62
====================================================================================================================================
TOTAL RETURN(b) (1.81%) 13.69% 10.20% 2.10%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 838 $ 484 $ 1,336 $ 143
Ratio of Expenses to Average Net Assets(d)(e) 2.35% 2.37% 2.26% 1.77%(f)
Ratio of Net Investment Income to Average Net Assets(e) 3.25% 2.72% 2.90% 19.13%(f)
Portfolio Turnover Rate 248% 196% 338%(g) 272%(g)(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The applicable CDSC is not included in the Total Return Calculation.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 3.74%, 2.72%, 2.26%, and 2.04% (annualized), respectively, and ratio of net investment income to average net assets
would have been 1.86%, 2.37%, 2.90%, and 18.86% (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
---------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
TECHNOLOGY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07 $ 35.97
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.41) (0.08) (0.10) (0.03) (0.07) (0.00)
OPERATIONS
Net Investment Loss(b)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (13.37) (5.11) (63.58) 47.69 30.17 (1.45)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.51) (5.19) (63.68) 47.66 30.10 (1.45)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 3.91 0.00 6.45
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.90 $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07
====================================================================================================================================
TOTAL RETURN (44.43% (14.58%) (63.54%) 85.87%(c) 107.23% (2.47%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 853,530 $ 1,865,251 $ 2,181,879 $ 5,034,087 $ 2,081,613 $ 1,008,771
Ratio of Expenses to Average Net Assets(d) 1.77% 1.37% 0.98% 0.88%(e) 1.20% 1.17%
Ratio of Net Investment Loss
to Average Net Assets (1.46% (1.08%) (0.47%) (0.48%)(e) (0.79%) (0.49%)
Portfolio Turnover Rate 107% 79% 85% 28%(c) 143% 178%
(a) From November 1, 1999 to March 31, 2000.
(b) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended October 31, 1998.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(e) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.41 $ 30.41
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.20) (0.27)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (13.23) (13.30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.43) (13.57)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.98 $ 16.84
====================================================================================================================================
TOTAL RETURN(c) (44.16%) (44.62%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 4,460 $ 532
Ratio of Expenses to Average Net Assets(d)(e) 1.47% 2.15%
Ratio of Net Investment Loss to Average Net Assets(e) (1.12%) (1.71%)
Portfolio Turnover Rate 107% 107%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of each Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.51% for Class A and 2.74% for Class B and
ratio of net investment loss to average net assets would have been (1.16%) for Class A and (2.30%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------------
2003 2002 2001 2000(a)
TECHNOLOGY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 29.73 $ 35.22 $ 101.85 $ 95.51
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.62) (0.22) (0.18) (0.15)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (12.72) (5.27) (63.81) 6.49
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.34) (5.49) (63.99) 6.34
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.39 $ 29.73 $ 35.22$ 101.85
====================================================================================================================================
TOTAL RETURN(c) (44.87%) (15.59%) (63.89%) 6.63%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,759 $ 18,910 $ 15,919 $ 2,970
Ratio of Expenses to Average Net Assets(e)(f) 2.69% 2.54% 1.86% 1.45%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (2.39%) (2.26%) (1.30%) (1.03%)(g)
Portfolio Turnover Rate 107% 79% 85% 28%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 3.95%, and ratio of net investment loss to
average net assets would have been (3.65%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
----------------------------------------------------------
2003 2002 2001(a)
TECHNOLOGY FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.22 $ 35.09 $ 60.01
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.07) (0.27) (0.82)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (13.37) (4.60) (24.10)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.44) (4.87) (24.92)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.78 $ 30.22 $ 35.09
====================================================================================================================================
TOTAL RETURN (44.47%) (13.85%) (41.54%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 22,156 $ 27,147 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.88% 1.28% 5.18%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.55%) (1.15%) (4.67%)(f)
Portfolio Turnover Rate 107% 79% 85%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO , if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.49%, and ratio of net investment loss to
average net assets would have been (2.16%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
--------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
TELECOMMUNICATIONS FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60 $ 15.31
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS(b)
Net Investment Income (Loss)(c) (0.04) (0.11) (0.16) (0.10) (0.00) 0.01
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (4.36) (11.42) (38.91) 32.87 12.57 5.32
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.53) (39.07) 32.77 12.57 5.33
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.15 0.37 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.96 $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60
====================================================================================================================================
TOTAL RETURN (35.60%) (48.26%) (61.42%) 103.25%(d) 65.52% 36.79%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 274,947 $ 573,969 $ 1,486,660 $ 4,125,890 $ 1,029,256 $ 276,577
Ratio of Expenses to Average Net Assets(e)(f) 1.81% 1.70% 1.10% 0.99%(g) 1.24% 1.32%
Ratio of Net Investment Loss to Average
Net Assets(f) (0.49%) (0.57%) (0.32%) (0.32%)(g) (0.49%) (0.16%)
Portfolio Turnover Rate 137% 91% 61% 24%(d) 62% 55%
(a) From August 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended July 31, 1999.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian, distribution, and transfer agent fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.76%, and ratio of net investment loss to
average net assets would have been (1.44%).
(g) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.36 $ 12.36
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS (0.08) (0.03)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (4.36) (4.44)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.44) (4.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.92 $ 7.89
====================================================================================================================================
TOTAL RETURN(b) (35.92%) (36.17%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 326 $ 16
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.57%
Ratio of Net Investment Loss to Average Net Assets(d) (0.65%) (1.44%)
Portfolio Turnover Rate 137% 137%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 12.15% and ratio of net
investment loss to average net assets would have been (11.02%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------
2003 2002 2001 2000(a)
TELECOMMUNICATIONS FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.10 $ 23.70 $ 64.37 $ 59.28
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.34) (0.04) (0.13) (0.06)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (4.04) (11.56) (39.08) 5.15
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.38) (11.60) (39.21) 5.09
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.72 $ 12.10 $ 23.70 $ 64.37
====================================================================================================================================
TOTAL RETURN(c) (36.20%) (48.95%) (61.69%) 8.59%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,188 $ 10,392 $ 11,980 $ 2,530
Ratio of Expenses to Average Net Assets(e)(f) 2.63% 2.60% 1.99% 1.49%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.18%) (1.52%) (1.18%) (0.86%)(g)
Portfolio Turnover Rate 137% 91% 61% 24%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed , ratio of expenses to average net assets would have been 5.76% and ratio of net investment loss to
average net assets would have been (4.31%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-----------------------------------------------------
2003 2002 2001(a)
TELECOMMUNICATIONS FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.30 $ 23.80 $ 36.43
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.02) (0.15) (0.19)
Net Losses on Securities (Both Realized and Unrealized) (4.38) (11.35) (12.44)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.50) (12.63)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.90 $ 12.30 $ 23.80
====================================================================================================================================
TOTAL RETURN (35.77%) (48.32%) (34.67%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 666 $ 864 $ 1
Ratio of Expenses to Average Net Assets(d)(e) $ 2.06% 2.21% 2.30%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.77%) (1.32%) (1.52%)(f)
Portfolio Turnover Rate 137% 91% 61%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003 and 2002 and the period
ended March 31, 2001. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have
been 3.30%, 2.42% and 3.38% (annualized), respectively, and ratio of net investment loss to average net assets would have been
(2.01%), (1.53%) and (2.60%) (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-----------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
UTILITIES FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73 $ 12.42
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT 0.23 0.15 0.13 0.04 0.17 0.30
OPERATIONS
Net Investment Income
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.46) (5.54) (3.22) 3.95 3.20 2.56
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.23) (5.39) (3.09) 3.99 3.37 2.86
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.24(b) 0.15 1.13 1.25 0.42 0.55
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.19 $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73
====================================================================================================================================
TOTAL RETURN (20.99%) (33.34%) (15.18%) 23.99%(c) 23.22% 23.44%
RATIOS
Net Assets--End of Period ($000
Omitted) $ 72,749 $ 124,578 $ 232,877 $ 260,554 $ 223,334 $ 177,309
Ratio of Expenses to Average Net Assets(d)(e) 1.30% 1.30% 1.30% 1.24%(f) 1.26% 1.29%
Ratio of Net Investment Income to
Average Net Assets(e) 2.63% 1.09% 0.74% 0.50%(f) 1.02% 1.82%
Portfolio Turnover Rate 64% 56% 49% 18%(c) 32% 47%
(a) From November 1, 1999 to March 31, 2000.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian, distribution, and transfer agent fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002 and 2001, the period
ended March 31, 2000 and the years ended October 31, 1999, and 1998. If such expenses had not been voluntarily absorbed, ratio
of expenses to average net assets would have been 1.90%, 1.57%, 1.40%, 1.33% (annualized), 1.43% and 1.36%, respectively, and
ratio of net investment income to average net assets would have been 2.03%, 0.82%, 0.64%, 0.41% (annualized), 0.85% and 1.75%,
respectively.
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.66 $ 10.66
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.16 0.13
Net Investment Income
Net Losses on Securities (Both Realized and Unrealized) (2.40) (2.43)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.24) (2.30)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENTS AND DISTRIBUTIONS 0.29(b) 0.21(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.13 $ 8.15
====================================================================================================================================
TOTAL RETURN(c) (21.05%) (21.67%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 450 $ 193
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.14%
Ratio of Net Investment Income to Average Net Assets(e) 2.79% 1.84%
Portfolio Turnover Rate 64% 64%
(a) Class commenced operations on April 1, 2002.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expenses offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.74% for Class A and 2.69% for Class B and
ratio of net investment income to average net assets would have been 2.46% for Class A and 1.29% for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------
2003 2002 2001 2000(a)
UTILITIES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.63 $ 16.08 $ 20.40 $ 19.91
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) 0.15 0.03 (0.00) (0.01)
Net Investment Income (Loss)(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.47) (5.48) (3.22) 0.52
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.32) (5.45) (3.22) 0.51
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.09 0.00 1.10 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.22 $ 10.63 $ 16.08 $ 20.40
====================================================================================================================================
TOTAL RETURN(d) (21.85%) (33.87%) (15.83%) 2.58%(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 667 $ 1,799 $ 3,579 $ 248
Ratio of Expenses to Average Net Assets(f)(g) 2.05% 2.04% 2.07% 1.83%(h)
Ratio of Net Investment Income (Loss) to Average Net Assets(g) 1.75% 0.32% (0.02%) (0.32%)(h)
Portfolio Turnover Rate 64% 56% 49% 18%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001.
(d) The applicable CDSC is included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 3.70%, 2.45%, 2.11% and 1.83% (annualized), respectively, and ratio of net investment income (loss) to average net
assets would have been 0.10% (0.09%), (0.06%) and (0.32%) (annualized), respectively.
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
JULY 31, 2003
INVESCO SECTOR FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & PRECIOUS METALS FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO REAL ESTATE OPPORTUNITY FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO UTILITIES FUND--INVESTOR CLASS, CLASS A, B, AND C
You may obtain additional information about the Funds from several sources:
FINANCIAL REPORTS. Although this Prospectus describes the Funds' anticipated
investments and operations, the Funds also prepare annual and semiannual reports
that detail the Funds' actual investments at the report date. These reports
include discussion of each Fund's recent performance, as well as the effect of
market and general economic trends and a Fund's investment strategy on each
Fund's performance. The annual report also includes the report of the Funds'
independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI dated July 31, 2003 is a supplement
to this Prospectus and has detailed information about the Funds and their
investment policies and practices. A current SAI for the Funds is on file with
the Securities and Exchange Commission and is incorporated into this Prospectus
by reference; in other words, the SAI is legally a part of this Prospectus, and
you are considered to be aware of the contents of the SAI.
INTERNET. The current Prospectuses of the Funds may be accessed through the
INVESCO Web site at invescofunds.com. In addition, the Prospectuses, SAI, annual
report, and semiannual report of the Funds are available on the SEC Web site at
www.sec.gov.
To obtain a free copy of the current Prospectuses, SAI, annual report, or
semiannual report, write to A I M Fund Services, Inc., P.O. Box 4739, Houston,
Texas 77210-4739; or call 1-800-347-4246. Copies of these materials are also
available (with a copying charge) from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information on
the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 1-202-942-8090. This information can be
obtained by electronic request at the following E-mail address:
publicinfo@sec.gov. The SEC file numbers for the Funds are 811-3826 and
002-85905.
811-3826
APPENDIX III
YOUR FUND'S REPORT
TECHNOLOGY FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
The past fiscal year was characterized by continued weak performance of
technology stocks in the April through October period as a result of the failure
of the economy to recover which disappointed optimistc expectations held by
investors at the beginning of the year. During this period, investors were
shaken by one unnerving development after another. In the summer, several
high-profile accounting scandals and rising tensions in the Middle East
undermined confidence. With the fall came concerns about war with Iraq and
declining consumer confidence. Underlying all of these headline developments was
persistent economic weakness. The technology sector continued to be acutely
affected by the economic malaise. Demand for technology products, from consumers
or corporations, remained weak.
TECH STOCKS PERFORMED WELL DURING THE SECOND HALF
The second half of the period was a different story, however, as the sector
bounced sharply off the October lows. This strength could be attributed to the
market's anticipation of rising holiday consumer demand and corporate year-end
spending on technology upgrades. Further fueling the optimism was guidance from
several high-profile companies in the sector that indicated business had likely
stopped its cyclical deterioration. Although tech stocks lost some of their
momentum in January following the sharp increase off the October lows, the
sector managed to finish the fiscal year on a positive note. During the first
quarter of 2003, while most market sectors declined in the face of the war,
slipping consumer confidence and rising unemployment claims and energy prices,
the technology sector managed to outperform the broader market.
- --------------------------------------------------------------------------------
TECHNOLOGY FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Microsoft Corp............................6.57%
Intel Corp................................3.82%
Cisco Systems.............................3.55%
Symantec Corp.............................2.90%
Dell Computer.............................2.89%
eBay Inc..................................2.76%
Oracle Corp...............................2.50%
International Business Machines...........2.11%
Linear Technology.........................1.90%
BEA Systems...............................1.88%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
But those late gains could not offset earlier losses. As such, the value of
Technology Fund-Investor Class shares declined 44.43% for the one-year period
ended March 31, 2003. The fund under-performed the S&P 500 Index,(R) which
declined 24.75% during that same period. (Of course, past performance is not a
guarantee of future results.)(13),(14) For performance of other share classes,
please see page 2.
MOST TECH SUB-SECTORS ENDURED SHARP DECLINES
The selling was so intense throughout the tech sector during the period that
there weren't many industries that advanced. Information technology consulting,
software, communications equipment, computers, electronic equipment, and
semiconductors all suffered severe declines. Even more conservative tech stocks,
such as those in the aerospace and defense industry and commercial services
companies, could not resist the market weakness.
The fund's lone bright spot was in the Internet space, where Amazon.com Inc,
Yahoo! Inc, Hotels.com, and eBay Inc all advanced sharply. A handful of
companies also made positive relative contributions to performance by declining
less than the broader market. Included in this group were several technology
"blue chips," such as Microsoft Corp, Oracle Corp, and International Business
Machines. Dell Computer was another standout, as it managed to finish the period
in the black. Wireless telecommunications services stocks, such as Nextel
Communications, also performed well, on the heels of impressive subscriber
growth. Indeed, wireless communications was one of the few areas that saw demand
improve. Security software was another, led by Symantec Corp, as network
security has been one of the few areas in which corporations have demonstrated a
willingness to invest.
WE BELIEVE DEMAND FOR TECH PRODUCTS REMAINS WEAK BUT LIKELY TO IMPROVE
Going forward, we believe the coming quarter could be volatile for technology
stocks, as stocks are up sharply and expectations have risen following better
guidance than expected after first quarter earnings reports. We believe
investors might be more forgiving of companies that report disappointing
profits, as they are coming to focus more on improving prospects than current
weakness in business.
LINE GRAPH: INVESCO TECHNOLOGY FUND - INVESTOR CLASS GROWTH OF $10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Investor Class to the value of a $10,000 investment in the S&P 500
Index(R)(14), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO TECHNOLOGY FUND -
INVESTOR CLASS S&P 500 INDEX(14)
3/93 $ 10,000 $10,000
3/94 $ 11,785 $10,146
3/95 $ 14,192 $11,723
3/96 $ 19,426 $15,482
3/97 $ 21,371 $18,551
3/98 $ 28,039 $27,448
3/99 $ 37,453 $32,523
3/00 $100,781 $38,354
3/01 $ 36,749 $30,043
3/02 $ 31,392 $30,115
3/02 $ 17,446 $22,661
LINE GRAPH: INVESCO TECHNOLOGY FUND - INSTITUTIONAL CLASS, GROWTH OF
$10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Institutional Class to the value of a $10,000 investment in the S&P 500
Index(R)(14), assuming in each case reinvestment of all dividends and capital
gain distributions, for the period since inception (12/98) through 3/31/03.
INVESCO TECHNOLOGY FUND -
INSTITUTIONAL CLASS S&P 500 INDEX(R)(14)
12/98 $10,000 $10,000
3/99 $11,888 $10,498
3/00 $32,129 $12,380
3/01 $11,764 $ 9,697
3/02 $10,112 $ 9,721
3/03 $ 5,669 $ 7,315
LINE GRAPH: INVESCO TECHNOLOGY FUND - CLASS A & B, GROWTH OF $10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Class A and the value of a $10,000 investment in INVESCO Technology Fund
- - Class B to the value of a $10,000 investment in the S&P 500 Index(R)(14),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the cases of INVESCO Technology Fund - Class A and Class B
inclusion of front-end sales charge and contingent deferred sales charge,
respectively, for the period since inception (4/02) through 3/31/03.
INVESCO TECHNOLOGY INVESCO TECHNOLOGY S&P 500 INDEX(R)(14)
FUND - CLASS A FUND - CLASS B
4/02 $10,000 $10,000 $10,000
3/03 $ 5,277 $ 5,038 $ 7,525
PIE CHART: TECHNOLOGY FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Semiconductors................16.87%
Systems Software..............16.45%
Application Software..........10.47%
Computer Hardware..............7.82%
Computer Storage & Peripherals.5.55%
Electronic Equipment
& Instruments..................5.22%
Telecommunications Equipment...4.92%
Networking Equipment...........4.46%
Semiconductor Equipment........4.21%
Data Processing Services.......3.89%
Other Industries..............13.12%
Net Cash & Cash Equivalents....7.02%
FUND MANAGEMENT
[PHOTOGRAPH OF WILLIAM R. KEITHLER OMITTED]
WILLIAM R. KEITHLER, CFA
BILL KEITHLER IS A SENIOR VICE PRESIDENT AND DIRECTOR OF SECTOR MANAGEMENT OF
INVESCO FUNDS GROUP. A CHARTERED FINANCIAL ANALYST CHARTERHOLDER, BILL RECEIVED
AN MS FROM THE UNIVERSITY OF WISCONSIN-MADISON AND A BA FROM WEBSTER COLLEGE. HE
BEGAN HIS INVESTMENT CAREER IN 1982.
As the period came to a close, we did not see any change in the fundamental
outlook for the group. Current demand remains fairly weak. Our channel surveys
have revealed inventory build-ups in the personal computer and wireless
telecommunications sub-sectors. Demand for enterprise hardware has weakened
modestly, which is likely a function of seasonal trends. And telecom and
networking equipment companies have also seen their revenues stagnate, as their
primary customers continue to rein in capital expenditures.
Nevertheless, we believe there are reasons for optimism. For example, we expect
the second quarter of 2003 will see companies recapture the business that was
lost due to first quarter war considerations, a trend that could result in some
upside surprises. We will need a sustained period of improving business before
enterprises have the confidence to commit to spending on major projects.
However, there are glimmers of hope offered by mostly anecdotal data points
which suggest modestly improving business for technology companies, which we
believe reflects more than seasonal strength. The stocks may move in advance of
confirmation of this in reported numbers.
Prospects for consumer spending are not encouraging. And a recent decision by
the Federal Communications Commission (FCC), which forces regional Bell
operating companies (RBOCs) to continue to lease their networks to competitors
at wholesale rates, could throw cold water on the thesis of a recovery in the
telecom sector this year. However, although the FCC's ruling discourages
investments in legacy voice networks, the ruling encourages the RBOCs to build
out their data networks, which could benefit the data-related networking
equipment companies. In short, we believe opportunities can still be found in
the sector, and identifying the best of them remains our focus.
LINE GRAPH: INVESCO TECHNOLOGY FUND - CLASS C GROWTH OF $10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Class C to the value of a $10,000 investment in the S&P 500 Index(R)(14),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the case of INVESCO Technology Fund - Class C, inclusion
of contingent deferred sales charge, for the period since inception (2/00)
through 3/31/03.
INVESCO TECHNOLOGY FUND -
CLASS C S&P 500 INDEX(R)(14)
2/00 $10,000 $10,000
3/00 $10,663 $10,978
3/01 $ 3,851 $ 8,599
3/02 $ 3,251 $ 8,620
3/03 $ 1,792 $ 6,486
LINE GRAPH: INVESCO TECHNOLOGY FUND - CLASS K GROWTH OF $10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Class K to the value of a $10,000 investment in the S&P 500 Index(R)(14),
assuming in each case reinvestment of all dividends and capital gain
distributions, for the period since inception (12/00) through 3/31/03.
INVESCO TECHNOLOGY FUND -
CLASS K S&P 500 INDEX(R)(14)
12/00 $10,000 $10,000
3/01 $ 5,846 $ 8,858
3/02 $ 5,036 $ 8,879
3/03 $ 2,796 $ 6,682
(13)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEX DOES NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED ITS PERFORMANCE.
(14)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE INDEX IS NOT MANAGED; THEREFORE,
ITS PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED
WITH THE FUND INCLUDING FRONT-END SALES CHARGES AND CDSC. INVESTORS CANNOT
INVEST DIRECTLY IN ANY MARKET INDEX.
APPENDIX IV
[REGISTRANT]
MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this day of , 200 , by and between
[Registrant], a Delaware statutory trust (the "Trust") with respect to its
series of shares shown on the Appendix A attached hereto, as the same may be
amended from time to time, and A I M Advisors, Inc., a Delaware corporation (the
"Advisor").
RECITALS
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, diversified management investment
company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Trust's Agreement and Declaration of Trust (the "Declaration
of Trust") authorizes the Board of Trustees of the Trust (the "Board of
Trustees") to create separate series of shares of beneficial interest of the
Trust, and as of the date of this Agreement, the Board of Trustees has created
separate series portfolios (such portfolios and any other portfolios
hereafter added to the Trust being referred to collectively herein as the
"Funds"); and
WHEREAS, the Trust and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor for the
Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Board of Trustees. The Advisor shall give the Trust
and the Funds the benefit of its best judgment, efforts and facilities in
rendering its services as investment advisor.
2. Investment Analysis and Implementation. In carrying out its
obligations under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Funds,
and whether concerning the individual issuers whose securities are included
in the assets of the Funds or the activities in which such issuers engage,
or with respect to securities which the Advisor considers desirable for
inclusion in the Funds' assets;
(c) determine which issuers and securities shall be represented in the
Funds' investment portfolios and regularly report thereon to the Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Board of Trustees; and
(e) take, on behalf of the Trust and the Funds, all actions which
appear to the Trust and the Funds necessary to carry into effect such
purchase and sale programs and supervisory functions as aforesaid,
including but not limited to the placing of orders for the purchase and
sale of securities for the Funds.
IV-1
3. Securities Lending Duties and Fees. The Advisor agrees to provide the
following services in connection with the securities lending activities of each
Fund: (a) oversee participation in the securities lending program to ensure
compliance with all applicable regulatory and investment guidelines; (b) assist
the securities lending agent or principal (the "Agent") in determining which
specific securities are available for loan; (c) monitor the Agent to ensure that
securities loans are effected in accordance with the Advisor's instructions and
with procedures adopted by the Board of Trustees; (d) prepare appropriate
periodic reports for, and seek appropriate approvals from, the Board of Trustees
with respect to securities lending activities; (e) respond to Agent inquiries;
and (f) perform such other duties as necessary.
As compensation for such services provided by the Advisor in connection
with securities lending activities of each Fund, a lending Fund shall pay the
Advisor a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities.
4. Delegation of Responsibilities. The Advisor is authorized to delegate
any or all of its rights, duties and obligations under this Agreement to one or
more sub-advisors, and may enter into agreements with sub-advisors, and may
replace any such sub-advisors from time to time in its discretion, in accordance
with the 1940 Act, the Advisers Act, and rules and regulations thereunder, as
such statutes, rules and regulations are amended from time to time or are
interpreted from time to time by the staff of the Securities and Exchange
Commission ("SEC"), and if applicable, exemptive orders or similar relief
granted by the SEC and upon receipt of approval of such sub-advisors by the
Board of Trustees and by shareholders (unless any such approval is not required
by such statutes, rules, regulations, interpretations, orders or similar
relief).
5. Independent Contractors. The Advisor and any sub-advisors shall for
all purposes herein be deemed to be independent contractors and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed to be an agent of the
Trust.
6. Control by Board of Trustees. Any investment program undertaken by the
Advisor pursuant to this Agreement, as well as any other activities undertaken
by the Advisor on behalf of the Funds, shall at all times be subject to any
directives of the Board of Trustees.
7. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the Advisers Act and
any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Trust, as the
same may be amended from time to time under the Securities Act of 1933 and
the 1940 Act;
(c) the provisions of the Declaration of Trust, as the same may be
amended from time to time;
(d) the provisions of the by-laws of the Trust, as the same may be
amended from time to time; and
(e) any other applicable provisions of state, federal or foreign law.
8. Broker-Dealer Relationships. The Advisor is responsible for decisions
to buy and sell securities for the Funds, broker-dealer selection, and
negotiation of brokerage commission rates.
(a) The Advisor's primary consideration in effecting a security
transaction will be to obtain the best execution.
(b) In selecting a broker-dealer to execute each particular
transaction, the Advisor will take the following into consideration: the
best net price available; the reliability, integrity and financial
condition of the broker-dealer; the size of and the difficulty in executing
the order; and the value of the expected contribution of the broker-dealer
to the investment performance of the Funds on a continuing basis.
Accordingly, the price to the Funds in any transaction may be less
favorable than
IV-2
that available from another broker-dealer if the difference is reasonably
justified by other aspects of the fund execution services offered.
(c) Subject to such policies as the Board of Trustees may from time to
time determine, the Advisor shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Funds to pay a broker or dealer that
provides brokerage and research services to the Advisor an amount of
commission for effecting a fund investment transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction, if the Advisor determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Advisor's overall
responsibilities with respect to a particular Fund, other Funds of the
Trust, and to other clients of the Advisor as to which the Advisor
exercises investment discretion. The Advisor is further authorized to
allocate the orders placed by it on behalf of the Funds to such brokers and
dealers who also provide research or statistical material, or other
services to the Funds, to the Advisor, or to any sub-advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocations regularly to the
Board of Trustees indicating the brokers to whom such allocations have been
made and the basis therefor.
(d) With respect to one or more Funds, to the extent the Advisor does
not delegate trading responsibility to one or more sub-advisors, in making
decisions regarding broker-dealer relationships, the Advisor may take into
consideration the recommendations of any sub-advisor appointed to provide
investment research or advisory services in connection with the Funds, and
may take into consideration any research services provided to such
sub-advisor by broker-dealers.
(e) Subject to the other provisions of this Section 8, the 1940 Act,
the Securities Exchange Act of 1934, and rules and regulations thereunder,
as such statutes, rules and regulations are amended from time to time or
are interpreted from time to time by the staff of the SEC, any exemptive
orders issued by the SEC, and any other applicable provisions of law, the
Advisor may select brokers or dealers with which it or the Funds are
affiliated.
9. Compensation. The compensation that each Fund shall pay the Advisor is
set forth in Appendix B attached hereto.
10. Expenses of the Funds. All of the ordinary business expenses incurred
in the operations of the Funds and the offering of their shares shall be borne
by the Funds unless specifically provided otherwise in this Agreement. These
expenses borne by the Funds include but are not limited to brokerage
commissions, taxes, legal, accounting, auditing, or governmental fees, the cost
of preparing share certificates, custodian, transfer and shareholder service
agent costs, expenses of issue, sale, redemption and repurchase of shares,
expenses of registering and qualifying shares for sale, expenses relating to
trustees and shareholder meetings, the cost of preparing and distributing
reports and notices to shareholders, the fees and other expenses incurred by the
Trust on behalf of the Funds 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.
11. Services to Other Companies or Accounts. The Trust understands that
the Advisor now acts, will continue to act and may act in the future as
investment manager or advisor to fiduciary and other managed accounts, and as
investment manager or advisor to other investment companies, including any
offshore entities, or accounts, and the Trust has no objection to the Advisor so
acting, provided that whenever the Trust and one or more other investment
companies or accounts managed or advised by the Advisor have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each company and account.
The Trust recognizes that in some cases this procedure may adversely affect the
size of the positions obtainable and the prices realized for the Funds.
IV-3
12. Non-Exclusivity. The Trust understands that the persons employed by
the Advisor to assist in the performance of the Advisor's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of the Advisor
or any affiliate of the Advisor to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature. The Trust
further understands and agrees that officers or directors of the Advisor may
serve as officers or trustees of the Trust, and that officers or trustees of the
Trust may serve as officers or directors of the Advisor to the extent permitted
by law; and that the officers and directors of the Advisor are not prohibited
from engaging in any other business activity or from rendering services to any
other person, or from serving as partners, officers, directors or trustees of
any other firm or trust, including other investment advisory companies.
13. Effective Date, Term and Approval. This Agreement shall become
effective with respect to a Fund, if approved by the shareholders of such Fund,
on the Effective Date for such Fund, as set forth in Appendix A attached hereto.
If so approved, this Agreement shall thereafter continue in force and effect
until , 200 , and may be continued from year to year thereafter,
provided that the continuation of the Agreement is specifically approved at
least annually:
(a) (i) by the Board of Trustees or (ii) by the vote of "a majority of
the outstanding voting securities" of such Fund (as defined in Section
2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or "interested persons" (as defined in the 1940
Act) of a party to this Agreement (other than as trustees of the Trust), by
votes cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated as to the Trust or as
to any one or more of the Funds at any time, without the payment of any penalty,
by vote of the Board of Trustees or by vote of a majority of the outstanding
voting securities of the applicable Fund, or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by the party entitled to receipt thereof. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" for purposes of
this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act.
15. Amendment. No amendment of this Agreement shall be effective unless
it is in writing and signed by the party against which enforcement of the
amendment is sought.
16. Liability of Advisor and Fund. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Trust or to the
Funds or to any shareholder of the Funds 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
the Advisor to one Fund shall not automatically impart liability on the part of
the Advisor to any other Fund. No Fund shall be liable for the obligations of
any other Fund.
17. Liability of Shareholders. Notice is hereby given that, as provided
by applicable law, the obligations of or arising out of this Agreement are not
binding upon any of the shareholders of the Trust individually but are binding
only upon the assets and property of the Trust and that the shareholders shall
be entitled, to the fullest extent permitted by applicable law, to the same
limitation on personal liability as shareholders of private corporations for
profit.
18. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Trust and that of the Advisor shall be 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
19. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act or the
IV-4
Advisers Act shall be resolved by reference to such term or provision of the
1940 Act or the Advisers Act and to interpretations thereof, if any, by the
United States Courts or in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to said Acts.
In addition, where the effect of a requirement of the 1940 Act or the Advisers
Act reflected in any provision of the Agreement is revised by rule, regulation
or order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. Subject to the foregoing, this Agreement shall
be governed by and construed in accordance with the laws (without reference to
conflicts of law provisions) of the State of Texas.
20. License Agreement. The Trust shall have the non-exclusive right to
use the name "AIM" to designate any current or future series of shares only so
long as A I M Advisors, Inc. serves as investment manager or advisor to the
Trust with respect to such series of shares.
IV-5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
[REGISTRANT]
(a Delaware statutory trust)
Attest:
<Table>
- ----------------------------------------- By: ----------------------------------------------------
Assistant Secretary
President
(SEAL)
Attest:
A I M ADVISORS, INC.
- -----------------------------------------
By: ----------------------------------------------------
Assistant Secretary
President
(SEAL)
</Table>
IV-6
APPENDIX A
FUNDS AND EFFECTIVE DATES
<Table>
<Caption>
NAME OF FUND EFFECTIVE DATE OF ADVISORY AGREEMENT
- ------------ ------------------------------------
[To Be Added] [To Be Added]
</Table>
A-1
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.
[To Be Added -- Please see Exhibit P for the annual rates applicable to
your Fund]
B-1
APPENDIX V
MASTER INTERGROUP SUB-ADVISORY CONTRACT FOR MUTUAL FUNDS
This contract is made as of , 200 , between A I M Advisors, Inc.
hereinafter "Adviser," 11 Greenway Plaza, Suite 100, Houston, Texas 77046, and
[INVESCO Institutional (N.A.), Inc.] "Sub-Adviser," 1360 Peachtree Street, N.E.,
Suite 100 Atlanta, Georgia 30309.
WHEREAS:
A) Adviser has entered into an investment advisory agreement with
[Registrant] (hereinafter "Trust"), an open-end management investment
company registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), with respect to the funds set forth in Exhibit A
attached hereto (each a "Fund");
B) Sub-Adviser represents that it is licensed under the Investment Advisers
Act of 1940 ("Advisers Act") as an investment adviser and engages in the
business of acting as an investment adviser;
C) Adviser is authorized to delegate certain, any or all of its rights,
duties and obligations under investment advisory agreements to
sub-advisers, including sub-advisers that are affiliated with Adviser.
NOW THEREFORE, in consideration of the promises and the mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser as Sub-Adviser of
each Fund for the period and on the terms set forth herein. Sub-Adviser accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
(a) Subject to the supervision of the Trust's Board of Trustees ("Board")
and Adviser, the Sub-Adviser will provide a continuous investment program for
each Fund, including investment research and management, with respect to all or
a portion of the securities and investments and cash equivalents of the Fund
(the "Sub-Advised Assets"), such Sub-Advised Assets to be determined by the
Adviser. The Sub-Adviser will determine from time to time what securities and
other investments will be purchased, retained or sold with respect to the
Sub-Advised Assets of each Fund, and the brokers and dealers through whom trades
will be executed.
(b) The Sub-Adviser agrees that, in placing orders with brokers and
dealers, it will attempt to obtain the best net result in terms of price and
execution. Consistent with this obligation, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities from and to brokers and
dealers who sell shares of the Funds or provide the Funds, Adviser's other
clients, or Sub-Adviser's other clients with research, analysis, advice and
similar services. The Sub-Adviser may pay to brokers and dealers, in return for
such research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to the Sub-Adviser determining in good faith
that such commission or spread is reasonable in terms either of the particular
transaction or of the overall responsibility of the Adviser and the Sub-Adviser
to the Funds and their other clients and that the total commissions or spreads
paid by each Fund will be reasonable in relation to the benefits to the Fund
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the applicable securities laws and the rules and regulations
thereunder and any exemptive orders currently in effect. Whenever the
Sub-Adviser simultaneously places orders to purchase or sell the same security
on behalf of a Fund and one or more other accounts advised by the Sub-Adviser,
such orders will be allocated as to price and amount among all such accounts in
a manner believed to be equitable to each account.
(c) The Sub-Adviser will maintain all required books and records with
respect to the securities transactions of the Funds, and will furnish the Board
and Adviser with such periodic and special reports as
V-1
the Board or Adviser reasonably may request. Sub-Adviser hereby agrees that all
records which it maintains for the Adviser are the property of the Adviser, and
agrees to preserve for the periods prescribed by applicable law any records
which it maintains for the Adviser and which are required to be maintained, and
further agrees to surrender promptly to the Adviser any records which it
maintains for the Adviser upon request by the Adviser.
3. Further Duties. In all matters relating to the performance of this
Contract, Sub-Adviser will act in conformity with the Agreement and Declaration
of Trust, By-Laws and Registration Statement of the Trust and with the
instructions and directions of the Board and will comply with the requirements
of the 1940 Act, the rules, regulations, exemptive orders and no-action
positions thereunder, and all other applicable laws and regulations. Sub-Adviser
shall maintain compliance procedures for the Funds that it and the Adviser
reasonably believe are adequate to ensure compliance with the 1940 Act and the
investment objective(s) and policies as stated in the prospectuses and
statements of additional information.
4. Services Not Exclusive. The services furnished by Sub-Adviser
hereunder are not to be deemed exclusive and Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Sub-Adviser, who may also be a
Trustee, officer or employee of the Trust, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar nature or a dissimilar nature.
5. Compensation.
(a) For the services provided to a Fund under this Contract, Adviser will
pay Sub-Adviser a fee, computed daily and paid monthly, at the rate of 40% of
the Adviser's compensation on the Sub-Advised Assets per year, on or before the
last business day of the next succeeding calendar month.
(b) If this Contract becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
6. Fee Waivers and Expense Limitations. If, for any fiscal year of the
Trust, the amount of the advisory fee which the Fund would otherwise be
obligated to pay to the Adviser is reduced because of contractual or voluntary
fee waivers or expense limitations by the Adviser, the fee payable hereunder to
the Sub-Adviser shall be reduced proportionately; and to the extent that the
Adviser reimburses the Fund as a result of such expense limitations, the
Sub-Adviser shall reimburse the Adviser that proportion of such reimbursement
payments which the sub-advisory fee hereunder bears to the advisory fee under
this Contract.
7. Limitation of Liability of Sub-Adviser and
Indemnification. Sub-Adviser shall not be liable for any costs or liabilities
arising from any error of judgment or mistake of law or any loss suffered by the
Fund or the Trust in connection with the matters to which this Contract relates
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of Sub-Adviser in the performance by Sub-Adviser of its duties or
from reckless disregard by Sub-Adviser of its obligations and duties under this
Contract. Any person, even though also an officer, partner, employee, or agent
of Sub-Adviser, who may be or become a Trustee, officer, employee or agent of
the Trust, shall be deemed, when rendering services to a Fund or the Trust or
acting with respect to any business of a Fund or the Trust to be rendering such
service to or acting solely for the Fund or the Trust and not as an officer,
partner, employee, or agent or one under the control or direction of Sub-Adviser
even though paid by it.
8. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove written,
provided that this Contract shall not take effect with respect to any Fund
unless it has first been approved (i) by a vote of a majority of the independent
Trustees who are not parties to this Contract or "interested persons" (as
defined in the 1940 Act) of a party to this Contract, other than as Board
members ("Independent Trustees"), cast in
V-2
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of that Fund's outstanding voting securities, when
required by the 1940 Act.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in force and effect until , 200 . Thereafter, if not
terminated, with respect to each Fund, this Contract shall continue
automatically for successive periods not to exceed twelve months each, provided
that such continuance is specifically approved at least annually (i) by a vote
of a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by vote of
a majority of the outstanding voting securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this Contract
may be terminated at any time, without the payment of any penalty, (i) by vote
of the Board or by a vote of a majority of the outstanding voting securities of
the Fund on sixty days' written notice to Sub-Adviser; or (ii) by the Adviser on
sixty days' written notice to Sub-Adviser; or (iii) by the Sub-Adviser on sixty
days' written notice to the Trust. Termination of this Contract with respect to
one Fund shall not affect the continued effectiveness of this Contract with
respect to any other Fund. This Contract will automatically terminate in the
event of its assignment.
9. Amendment. No provision of this Contract may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and, when required by the 1940 Act, no amendment of this
Contract shall be effective until approved by vote of a majority of the Fund's
outstanding voting securities.
10. Notices. Any notices under this Contract shall be writing, addressed
and delivered, telecopied or mailed postage paid, to the other party entitled to
receipt thereof at such address as such party may designate for the receipt of
such notice. Until further notice to the other party, it is agreed that the
address of the Trust and the Adviser shall be 11 Greenway Plaza, Suite 100,
Houston, Texas 77046. Until further notice to the other party, it is agreed that
the address of the Sub-Adviser shall be 1360 Peachtree Street, N.E., Suite 100,
Atlanta, Georgia 30309.
11. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Texas and the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
12. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. Any question of
interpretation of any term or provision of this Contract having a counterpart in
or otherwise derived from a term or provision of the 1940 Act or the Advisers
Act shall be resolved by reference to such term or provision of the 1940 Act or
the Advisers Act and to interpretations thereof, if any, by the United States
Courts or in the absence of any controlling decision of any such court, by
rules, regulations or orders of the Securities and Exchange Commission ("SEC")
issued pursuant to said Acts. In addition, where the effect of a requirement of
the 1940 Act or the Advisers Act reflected in any provision of the Contract is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
V-3
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
<Table>
A I M ADVISORS, INC. [INVESCO INSTITUTIONAL (N.A.), INC.]
Adviser Sub-adviser
By:
- -----------------------------------------
By: ----------------------------------------------------
Name:
- -----------------------------------------
Name: -------------------------------------------------
Title:
- ----------------------------------------- Title:
--------------------------------------------------
</Table>
V-4
EXHIBIT A
TO
MASTER INTERGROUP SUB-ADVISORY CONTRACT FOR MUTUAL FUNDS
FUND
[To Be Added]
V-5
APPENDIX VI
[NAME OF INVESCO FUND]
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of August
13, 2003, by and between [name of current INVESCO Fund], a Maryland corporation
(the "Company"), acting on its own behalf and on behalf of each of its series
portfolios, all of which are identified on Schedule A to this Agreement, and
[name of new Delaware statutory trust], a Delaware statutory trust (the
"Trust"), acting on its own behalf and on behalf of each of its series
portfolios, all of which are identified on Schedule A.
BACKGROUND
The Company is organized as a series management investment company and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended. The Company currently publicly offers shares of
common stock representing interests in one or more separate series portfolios.
Each of these series portfolios is listed on Schedule A and is referred to in
this Agreement as a "Current Fund."
The Board of Directors of the Company has designated one or more classes of
common stock that represent interests in each Current Fund. Each of these
classes is listed on Schedule B to this Agreement and is referred to in this
Agreement as a "Current Fund Class."
The Company desires to change its form and place of organization by
reorganizing as the Trust. In anticipation of such reorganization, the Board of
Trustees of the Trust has established a series portfolio corresponding to each
of the Current Funds (each a "New Fund"), and has designated one or more classes
of shares of beneficial interest in each New Fund corresponding to the Current
Fund Classes (each a "New Fund Class"). Schedule A lists the New Funds and
Schedule B lists the New Fund Classes.
Each Current Fund desires to provide for its Reorganization (each, a
"Reorganization" and collectively, the "Reorganizations") through the transfer
of all of its assets to the corresponding New Fund in exchange for the
assumption by such New Fund of the liabilities of the corresponding Current Fund
and the issuance by the Trust to such Current Fund of shares of beneficial
interest in the New Fund ("New Fund Shares"). New Fund Shares received by a
Current Fund will have an aggregate net asset value equal to the aggregate net
asset value of the shares of the Current Fund immediately prior to the
Reorganization (the "Current Fund Shares"). Each Current Fund will then
distribute the New Fund Shares it has received to its shareholders.
Each Reorganization of each Current Fund is dependent upon the consummation
of the Reorganization of all of the other Current Funds, so that the
Reorganizations of all of the Current Funds must be consummated if any of them
are to be consummated. For convenience, the balance of this Agreement refers
only to a single Reorganization, but the terms and conditions hereof shall apply
separately to each Reorganization and to the Current Fund and the corresponding
New Fund participating therein, as applicable.
The Reorganization is subject to, and shall be effected in accordance with,
the terms of this Agreement. This Agreement is intended to be and is adopted by
the Company, on its own behalf and on behalf of the Current Funds, and by the
Trust, on its own behalf and on behalf of the New Funds, as a Plan of
Reorganization within the meaning of the regulations under Section 368(a) of the
Internal Revenue Code of 1986, as amended.
VI-1
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS
Any capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the preamble or background to this Agreement. In addition,
the following terms shall have the following meanings:
1.1 "Assets" shall mean all assets including, without limitation, all
cash, cash equivalents, securities, receivables (including interest and
dividends receivable), claims and rights of action, rights to register shares
under applicable securities laws, books and records, deferred and prepaid
expenses shown as assets on a Current Fund's books, and other property owned by
a Current Fund at the Effective Time.
1.2 "Closing" shall mean the consummation of the transfer of Assets,
assumption of Liabilities and issuance of shares described in Sections 2.1 and
2.2 of this Agreement, together with the related acts necessary to consummate
the Reorganization, to occur on the date set forth in Section 3.1.
1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.4 "Current Fund" shall mean each of the series portfolios of the Company
as shown on Schedule A.
1.5 "Current Fund Class" shall mean each class of common stock of the
Company representing an interest in a Current Fund as shown on Schedule B.
1.6 "Current Fund Shares" shall mean the shares of a Current Fund
outstanding immediately prior to the Reorganization.
1.7 "Effective Time" shall have the meaning set forth in Section 3.1.
1.8 "Liabilities" shall mean all liabilities of a Current Fund including,
without limitation, all debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
determinable at the Effective Time, and whether or not specifically referred to
herein.
1.9 "New Fund" shall mean each of the series portfolios of the Trust, one
of which shall correspond to one of the Current Funds as shown on Schedule A.
1.10 "New Fund Class" shall mean each class of shares of beneficial
interest in a New Fund, one of which shall correspond to one of the Current Fund
Classes as shown on Schedule B.
1.11 "New Fund Shares" shall mean those shares of beneficial interest in a
New Fund issued to a Current Fund hereunder.
1.12 "Registration Statement" shall have the meaning set forth in Section
5.4.
1.13 "RIC" shall mean a "regulated investment company" (as defined under
Subchapter M of the Code).
1.14 "SEC" shall mean the Securities and Exchange Commission.
1.15 "Shareholder(s)" shall mean a Current Fund's shareholder(s) of
record, determined as of the Effective Time.
1.16 "Shareholders Meeting" shall have the meaning set forth in Section
5.1.
1.17 "Transfer Agent" shall have the meaning set forth in Section 2.2.
1.18 "1940 Act" shall mean the Investment Company Act of 1940, as amended.
VI-2
2. PLAN OF REORGANIZATION
2.1 The Company agrees, on behalf of each Current Fund, to assign, sell,
convey, transfer and deliver all of the Assets of each Current Fund to its
corresponding New Fund. The Trust, on behalf of each New Fund, agrees in
exchange therefor:
(a) to issue and deliver to the corresponding Current Fund the number
of full and fractional (rounded to the third decimal place) New Fund Shares
of each New Fund Class designated on Schedule B equal to the number of full
and fractional Current Fund Shares of each corresponding Current Fund Class
designated on Schedule B; and
(b) to assume all of the Current Fund's Liabilities.
Such transactions shall take place at the Closing.
2.2 At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the New Fund Shares issued pursuant to Section 5.2 shall be
redeemed by each New Fund for $10.00 and (b) each Current Fund shall distribute
the New Fund Shares received by it pursuant to Section 2.1 to the Current Fund's
Shareholders in exchange for such Shareholders' Current Fund Shares. Such
distribution shall be accomplished through opening accounts, by the transfer
agent for the Trust (the "Transfer Agent"), on each New Fund's share transfer
books in the Shareholders' names and transferring New Fund Shares to such
accounts. Each Shareholder's account shall be credited with the respective pro
rata number of full and fractional (rounded to the third decimal place) New Fund
Shares of each New Fund Class due that Shareholder. All outstanding Current Fund
Shares, including those represented by certificates, shall simultaneously be
canceled on each Current Fund's share transfer books. The Trust shall not issue
certificates representing the New Fund Shares in connection with the
Reorganization. However, certificates representing Current Fund Shares shall
represent New Fund Shares after the Reorganization.
2.3 Following receipt of the required shareholder vote and as soon as
reasonably practicable after the Closing, the status of each Current Fund as a
designated series of the Company shall be terminated; provided, however, that
the termination of each Current Fund as a designated series of the Company shall
not be required if the Reorganization shall not have been consummated.
2.4 Following receipt of the required shareholder vote and as soon as
reasonably practicable after distribution of the New Fund Shares pursuant to
Section 2.2, the Company and the Trust shall cause Articles of Transfer to be
filed with the State Department of Assessments and Taxation of Maryland and,
following the filing of Articles of Transfer, the Company shall file Articles of
Dissolution with the State Department of Assessments and Taxation of Maryland to
dissolve the Company as a Maryland corporation; provided, however, that the
filing of Articles of Transfer and Articles of Dissolution as aforesaid shall
not be required if the Reorganization shall not have been consummated.
2.5 Any transfer taxes payable on issuance of New Fund Shares in a name
other than that of the registered holder of the Current Fund Shares exchanged
therefor shall be paid by the person to whom such New Fund Shares are to be
issued, as a condition of such transfer.
2.6 Any reporting responsibility of the Company or each Current Fund to a
public authority is and shall remain its responsibility up to and including the
date on which it is terminated.
3. CLOSING
3.1 The Closing shall occur at the principal office of the Company on
[date], 2003, or on such other date and at such other place upon which the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the Company's and the Trust's close of business on
the date of the Closing or at such other time as the parties may agree (the
"Effective Time").
3.2 The Company or its fund accounting agent shall deliver to the Trust at
the Closing, a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities, transferred by the Current Funds to
the New
VI-3
Funds, as reflected on the New Funds' books immediately following the Closing,
does or will conform to such information on the Current Funds' books immediately
before the Closing. The Company shall cause the custodian for each Current Fund
to deliver at the Closing a certificate of an authorized officer of the
custodian stating that (a) the Assets held by the custodian will be transferred
to each corresponding New Fund at the Effective Time and (b) all necessary taxes
in conjunction with the delivery of the Assets, including all applicable federal
and state stock transfer stamps, if any, have been paid or provision for payment
has been made.
3.3 The Company shall deliver to the Trust at the Closing a list of the
names and addresses of each Shareholder of each Current Fund and the number of
outstanding Current Fund Shares of the Current Fund Class owned by each
Shareholder, all as of the Effective Time, certified by the Company's Secretary
or Assistant Secretary. The Trust shall cause the Transfer Agent to deliver at
the Closing a certificate as to the opening on each New Fund's share transfer
books of accounts in the Shareholders' names. The Trust shall issue and deliver
a confirmation to the Company evidencing the New Fund Shares to be credited to
each corresponding Current Fund at the Effective Time or provide evidence
satisfactory to the Company that such shares have been credited to each Current
Fund's account on such books. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, stock certificates, receipts, or
other documents as the other party or its counsel may reasonably request.
3.4 The Company and the Trust shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Company represents and warrants on its own behalf and on behalf of
each Current Fund as follows:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and its Charter
is on file with the Maryland Department of Assessments and Taxation;
(b) The Company is duly registered as an open-end series management
investment company under the 1940 Act, and such registration is in full
force and effect;
(c) Each Current Fund is a duly established and designated series of
the Company;
(d) At the Closing, each Current Fund will have good and marketable
title to its Assets and full right, power, and authority to sell, assign,
transfer, and deliver its Assets free of any liens or other encumbrances;
and upon delivery and payment for the Assets, the corresponding New Fund
will acquire good and marketable title to the Assets;
(e) The New Fund Shares are not being acquired for the purpose of
making any distribution thereof, other than in accordance with the terms
hereof;
(f) Each Current Fund is a "fund" as defined in Section 851(g)(2) of
the Code; each Current Fund qualified for treatment as a RIC for each
taxable year since it commenced operations that has ended (or will end)
before the Closing and will continue to meet all the requirements for such
qualification for its current taxable year (and the Assets will be invested
at all times through the Effective Time in a manner that ensures compliance
with the foregoing); each Current Fund has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did
not apply to it; and each Current Fund has made all distributions for each
calendar year that has ended (or will end) before the Closing that are
necessary to avoid the imposition of federal excise tax or has paid or
provided for the payment of any excise tax imposed for any such calendar
year;
VI-4
(g) During the five-year period ending on the date of the
Reorganization, neither Company nor any person related to Company (as
defined in Section 1.368-1(e)(3) of the Federal income tax regulations
adopted pursuant to the Code without regard to Section 1.368-1(e)(3)(i)(A))
will have directly or through any transaction, agreement, or arrangement
with any other person, (i) acquired shares of a Current Fund for
consideration other than shares of such Current Fund, except for shares
redeemed in the ordinary course of such Current Fund's business as an
open-end investment company as required by the 1940 Act, or (ii) made
distributions with respect to a Current Fund's shares, except for (a)
distributions necessary to satisfy the requirements of Sections 852 and
4982 of the Code for qualification as a regulated investment company and
avoidance of excise tax liability and (b) additional distributions, to the
extent such additional distributions do not exceed 50 percent of the value
(without giving effect to such distributions) of the proprietary interest
in such Current Fund at the Effective Time. There is no plan or intention
of the Shareholders who individually own 5% or more of any Current Fund
Shares and, to the best of the Company's knowledge, there is no plan or
intention of the remaining Shareholders to redeem or otherwise dispose of
any New Fund Shares to be received by them in the Reorganization. The
Company does not anticipate dispositions of those shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
redemptions of shares of the Current Fund as a series of an open-end
investment company. Consequently, the Company is not aware of any plan that
would cause the percentage of Shareholder interests, if any, that will be
disposed of as a result of or at the time of the Reorganization to be one
percent (1%) or more of the shares of the Current Fund outstanding as of
the Effective Time;
(h) The Liabilities were incurred by the Current Funds in the ordinary
course of their business and are associated with the Assets;
(i) The Company is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of Section 368(a)(3)(A) of the Code;
(j) As of the Effective Time, no Current Fund will have outstanding
any warrants, options, convertible securities, or any other type of rights
pursuant to which any person could acquire Current Fund Shares except for
the right of investors to acquire its shares at net asset value in the
normal course of its business as a series of an open-end diversified
management investment company operating under the 1940 Act;
(k) At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by the Company's
shareholders;
(l) Throughout the five-year period ending on the date of the Closing,
each Current Fund will have conducted its historic business within the
meaning of Section 1.368-1(d) of the Income Tax Regulations under the Code
in a substantially unchanged manner;
(m) The fair market value of the Assets of each Current Fund
transferred to the corresponding New Fund will equal or exceed the sum of
the Liabilities assumed by the New Fund plus the amount of Liabilities, if
any, to which the transferred Assets are subject; and
(n) The total adjusted basis of the Assets of each Current Fund
transferred to the corresponding New Fund will equal or exceed the sum of
the Liabilities assumed by the New Fund plus the amount of Liabilities, if
any, to which the transferred assets are subject.
4.2 The Trust represents and warrants on its own behalf and on behalf of
each New Fund as follows:
(a) The Trust is a statutory trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware, and its
Certificate of Trust has been duly filed in the office of the Secretary of
State of Delaware;
(b) The Trust is duly registered as an open-end management investment
company under the 1940 Act. At the Effective Time, the New Fund Shares to
be issued pursuant to Section 2.1 of this Agreement shall be duly
registered under the Securities Act of 1933 by a Registration Statement
filed with the SEC;
VI-5
(c) At the Effective Time, each New Fund will be a duly established
and designated series of the Trust;
(d) No New Fund has commenced operations nor will it commence
operations until after the Closing;
(e) Prior to the Effective Time, there will be no issued and
outstanding shares in any New Fund or any other securities issued by the
Trust on behalf of any New Fund, except as provided in Section 5.2;
(f) No consideration other than New Fund Shares (and each New Fund's
assumption of the Liabilities) will be issued in exchange for the Assets in
the Reorganization;
(g) The New Fund Shares to be issued and delivered to each
corresponding Current Fund hereunder will, at the Effective Time, have been
duly authorized and, when issued and delivered as provided herein, will be
duly and validly issued and outstanding shares of the New Fund, fully paid
and nonassessable;
(h) Each New Fund will be a "fund" as defined in Section 851(g)(2) of
the Code and will meet all the requirements to qualify for treatment as a
RIC for its taxable year in which the Reorganization occurs;
(i) The Trust, on behalf of the New Funds, has no plan or intention to
issue additional New Fund Shares following the Reorganization except for
shares issued in the ordinary course of its business as an open-end
investment company; nor does the Trust, on behalf of the New Funds, have
any plan or intention to redeem or otherwise reacquire any New Fund Shares
issued pursuant to the Reorganization, other than in the ordinary course of
such business or to the extent necessary to comply with its legal
obligation under Section 22(e) of the 1940 Act;
(j) Each New Fund will actively continue the corresponding Current
Fund's business in substantially the same manner that the Current Fund
conducted that business immediately before the Reorganization; and no New
Fund has any plan or intention to sell or otherwise dispose of any of the
Assets, except for dispositions made in the ordinary course of its business
or dispositions necessary to maintain its qualification as a RIC, although
in the ordinary course of its business the New Fund will continuously
review its investment portfolio (as each Current Fund did before the
Reorganization) to determine whether to retain or dispose of particular
stocks or securities, including those included in the Assets, provided,
however that this Section 4.2(j) shall not preclude any of the combinations
of funds set forth on Schedule C to this Agreement; and
(k) There is no plan or intention for any of the New Funds to be
dissolved or merged into another corporation or statutory trust or "fund"
thereof (within the meaning of Section 851(g)(2) of the Code) following the
Reorganization, provided, however that this Section 4.2(k) shall not
preclude any of the combinations of Funds set forth on Schedule C.
4.3 Each of the Company and the Trust, on its own behalf and on behalf of
each Current Fund or each New Fund, as appropriate, represents and warrants as
follows:
(a) The fair market value of the New Fund Shares of each New Fund
received by each Shareholder will be equal to the fair market value of the
Current Fund Shares of the corresponding Current Fund surrendered in
exchange therefor;
(b) Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares of each New Fund and will own
such shares solely by reason of their ownership of the Current Fund Shares
of the corresponding Current Fund immediately before the Reorganization;
(c) The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
VI-6
(d) There is no intercompany indebtedness between a Current Fund and a
New Fund that was issued or acquired, or will be settled, at a discount;
and
(e) Immediately following consummation of the Reorganization, each New
Fund will hold the same assets, except for assets distributed to
shareholders in the course of its business as a RIC and assets used to pay
expenses incurred in connection with the Reorganization, and be subject to
the same liabilities that the corresponding Current Fund held or was
subject to immediately prior to the Reorganization. Assets used to pay (i)
expenses, (ii) all redemptions (other than redemptions at the usual rate
and frequency of the Current Fund as a series of an open-end investment
company), and (iii) distributions (other than regular, normal
distributions), made by a Current Fund after the date of this Agreement
will, in the aggregate, constitute less than one percent (1%) of its net
assets.
5. COVENANTS
5.1 As soon as practicable after the date of this Agreement, the Company
shall call a meeting of its shareholders (the "Shareholders Meeting") to
consider and act on this Agreement and, in connection therewith, the sale of all
of the Company's assets and the dissolution of the Company as a Maryland
corporation. The Board of Directors of the Company shall recommend that
shareholders approve this Agreement and, in connection therewith, sale of all of
the Company's assets and the dissolution of the Company as a Maryland
corporation. Approval by shareholders of this Agreement will authorize the
Company, and the Company hereby agrees, to vote on the matters referred to in
Sections 5.2 and 5.3.
5.2 Prior to the Closing, the Company shall acquire one New Fund Share in
each New Fund Class of each New Fund for the purpose of enabling the Company to
elect the Company's directors as the Trust's trustees (to serve without limit in
time, except as they may resign or be removed by action of the Trust's trustees
or shareholders), to ratify the selection of the Trust's independent
accountants, and to vote on the matters referred to in Section 5.3.
5.3 Immediately prior to the Closing, the Trust (on its own behalf and
with respect to each New Fund or each New Fund Class, as appropriate) shall
enter into a Master Investment Advisory Agreement, a Master Sub-Advisory
Agreement, if applicable, a Master Administrative Services Agreement, Master
Distribution Agreements, a Custodian Agreement, and a Transfer Agency and
Servicing Agreement; shall adopt plans of distribution pursuant to Rule 12b-l of
the 1940 Act, a multiple class plan pursuant to Rule 18f-3 of the 1940 Act; and
shall enter into or adopt, as appropriate, such other agreements and plans as
are necessary for each New Fund's operation as a series of an open-end
investment company. Each such agreement and plan shall have been approved by the
Trust's trustees and, to the extent required by law, by such of those trustees
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
by the Company as the sole shareholder of each New Fund.
5.4 The Company or the Trust, as appropriate, shall file with the SEC one
or more post-effective amendments to the Company's Registration Statement on
Form N-lA under the Securities Act of 1933, as amended, and the 1940 Act, as
amended (the "Registration Statement"), (i) which will contain such amendments
to such Registration Statement as are determined by the Company to be necessary
and appropriate to effect the Reorganization, (ii) which will register the New
Fund Shares to be issued pursuant to Section 2.1 of this Agreement, and (iii) if
applicable, under which the Trust will succeed to the Registration Statement,
and shall use its best efforts to have such post-effective amendment or
amendments to the Registration Statement become effective as of the Closing.
6. CONDITIONS PRECEDENT
The obligations of the Company, on its own behalf and on behalf of each
Current Fund, and the Trust, on its own behalf and on behalf of each New Fund,
will be subject to (a) performance by the other party of all its obligations to
be performed hereunder at or before the Effective Time, (b) all representations
and warranties of the other party contained herein being true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated
VI-7
hereby, as of the Effective Time, with the same force and effect as if made on
and as of the Effective Time, and (c) the further conditions that, at or before
the Effective Time:
6.1 The shareholders of the Company shall have approved this
Agreement and the transactions contemplated by this Agreement in accordance
with applicable law.
6.2 All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received
that any other or further action is required to permit the parties to carry
out the transactions contemplated hereby. All consents, orders, and permits
of federal, state, and local regulatory authorities (including the SEC and
state securities authorities) deemed necessary by either the Company or the
Trust to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to
obtain such consults, orders, and permits would not involve a risk of a
material adverse effect on the assets or properties of either a Current
Fund or a New Fund, provided that either the Company or the Trust may for
itself waive any of such conditions.
6.3 Each of the Company and the Trust shall have received an opinion
from Ballard Spahr Andrews & Ingersoll, LLP as to the federal income tax
consequences mentioned below. In rendering such opinion, such counsel may
rely as to factual matters, exclusively and without independent
verification, on the representations made in this Agreement (or in separate
letters of representation that the Company and the Trust shall use their
best efforts to deliver to such counsel) and the certificates delivered
pursuant to Section 3.4. Such opinion shall be substantially to the effect
that, based on the facts and assumptions stated therein and conditioned on
consummation of the Reorganization in accordance with this Agreement, for
federal income tax purposes:
(a) The Reorganization will constitute a reorganization within the
meaning of section 368(a) of the Code, and each Current Fund and each
New Fund will be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
(b) No gain or loss will be recognized to a Current Fund on the
transfer of its Assets to the corresponding New Fund in exchange solely
for the New Fund's New Fund Shares and the New Fund's assumption of the
Current Fund's Liabilities or on the subsequent distribution of those
New Fund Shares to its Shareholders, in constructive exchange for their
Current Fund Shares, in liquidation of the Current Fund;
(c) No gain or loss will be recognized to a New Fund on its receipt
of the corresponding Current Fund's Assets in exchange for New Fund
Shares and its assumption of the Current Fund's Liabilities;
(d) Each New Fund's basis for the corresponding Current Fund's
Assets will be the same as the basis thereof in the Current Fund's hands
immediately before the Reorganization, and the New Fund's holding period
for those Assets will include the Current Fund's holding period
therefor;
(e) A Shareholder will recognize no gain or loss on the
constructive exchange of Current Fund Shares solely for New Fund Shares
pursuant to the Reorganization; and
(f) A Shareholder's basis for the New Fund Shares of each New Fund
to be received in the Reorganization will be the same as the basis for
the Current Fund Shares of the corresponding Current Fund to be
constructively surrendered in exchange for such New Fund Shares, and a
Shareholder's holding period for such New Fund Shares will include its
holding period for such Current Fund Shares, provided that such Current
Fund Shares are held as capital assets by the Shareholder at the
Effective Time.
6.4 No stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall
have been initiated or threatened by the SEC (and not withdrawn or
terminated).
VI-8
At any time prior to the Closing, any of the foregoing conditions (except
those set forth in Sections 6.1 and 6.3) may be waived by the directors/trustees
of either the Company or the Trust if, in their judgment, such waiver will not
have a material adverse effect on the interests of the Current Fund's
Shareholders.
7. EXPENSES
Except as otherwise provided in Section 4.3(c), all expenses incurred in
connection with the transactions contemplated by this Agreement (regardless of
whether they are consummated) will be borne by the parties as they mutually
agree.
8. ENTIRE AGREEMENT
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties.
9. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding its approval by the Company's shareholders, in such manner as
may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
shareholders' interests.
10. TERMINATION
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by the Company's shareholders:
10.1 By either the Company or the Trust (a) in the event of the other
party's material breach of any representation, warranty, or covenant
contained herein to be performed at or prior to the Effective Time, (b) if
a condition to its obligations has not been met and it reasonably appears
that such condition will not or cannot be met, or (c) if the Closing has
not occurred on or before December 31, 2003; or
10.2 By the parties' mutual agreement.
Except as otherwise provided in Section 7, in the event of termination
under Sections 10.1(c) or 10.2, there shall be no liability for damages on the
part of either the Company or the Trust or any Current Fund or corresponding New
Fund, to the other.
11. MISCELLANEOUS
11.1 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3 The execution and delivery of this Agreement have been authorized by
the Trust's trustees, and this Agreement has been executed and delivered by a
duly authorized officer of the Trust in his or her capacity as an officer of the
Trust intending to bind the Trust as provided herein, and no officer, trustee or
shareholder of the Trust shall be personally liable for the liabilities or
obligations of the Trust incurred hereunder. The liabilities and obligations of
the Trust pursuant to this Agreement shall be enforceable against the assets of
the New Funds only and not against the assets of the Trust generally.
VI-9
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
<Table>
Attest: [NAME OF MARYLAND CORPORATION],
on behalf of each of its series listed in Schedule A
By:
- -------------------------------------------- --------------------------------------------------------
Title:
--------------------------------------------------------
Attest: [NAME OF DELAWARE STATUTORY TRUST],
on behalf of each of its series listed in Schedule A
By:
- -------------------------------------------- --------------------------------------------------------
Title:
--------------------------------------------------------
</Table>
VI-10
SCHEDULE A
<Table>
<Caption>
SERIES OF CORRESPONDING SERIES OF
[MARYLAND CORPORATION] [DELAWARE STATUTORY TRUST]
(EACH A "CURRENT FUND") (EACH A "NEW FUND")
- ----------------------- --------------------------
[To Be Added]............................................... [To Be Added]
</Table>
VI-11
SCHEDULE B
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF EACH CURRENT FUND EACH NEW FUND
- ---------------------------- ------------------------
[To Be Added]............................................... [To Be Added]
</Table>
VI-12
SCHEDULE C
PERMITTED COMBINATIONS OF FUNDS
<Table>
INVESCO Advantage Fund into AIM Opportunities III Fund
INVESCO Growth Fund into AIM Large Cap Growth Fund
INVESCO Growth & Income Fund into AIM Blue Chip Fund
INVESCO European Fund into AIM European Growth Fund
AIM International Core Equity Fund into INVESCO
International Blue Chip Value Fund
AIM New Technology Fund into INVESCO Technology Fund
AIM Global Science and Technology Fund into INVESCO
Technology Fund
INVESCO Telecommunications Fund into INVESCO Technology Fund
AIM Global Financial Services Fund into INVESCO Financial
Services Fund
AIM Global Energy Fund into INVESCO Energy Fund
AIM Global Utilities Fund into INVESCO Utilities Fund
INVESCO Real Estate Opportunity Fund into AIM Real Estate
Fund
INVESCO Tax-Free Bond Fund into AIM Municipal Bond Fund
INVESCO High Yield Fund into AIM High Yield Fund
INVESCO Select Income Fund into AIM Income Fund
INVESCO U.S. Government Securities Fund into AIM
Intermediate Government Fund
INVESCO Cash Reserves Fund into AIM Money Market Fund
INVESCO Tax-Free Money Fund into AIM Tax-Exempt Cash Fund
INVESCO Balanced Fund into INVESCO Total Return Fund
INVESCO Value Equity Fund into AIM Large Cap Basic Value
Fund
AIM Premier Equity Fund II into AIM Premier Equity Fund
</Table>
VI-13
GROUP E-ANT/AGS&T/IT
(AIM LOGO)
AIM GLOBAL UTILITIES FUND,
A PORTFOLIO OF
AIM FUNDS GROUP
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
August 25, 2003
Dear Shareholder:
As you may be aware, AMVESCAP PLC, the parent company of your Fund's
investment advisor, has undertaken an integration initiative for its North
American mutual fund operations.
In the first phase of the integration initiative, A I M Distributors, Inc.
became the sole distributor for all AMVESCAP PLC mutual funds in the United
States. A I M Distributors, Inc. is now the distributor for all INVESCO Funds
and the AIM Funds (including your Fund).
AMVESCAP PLC also reviewed all AIM Funds and INVESCO Funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete for limited shareholder assets and to consolidate certain
funds having similar investment objectives and strategies. Your Fund is one of
the funds that AMVESCAP PLC recommended, and your Board of Trustees approved, be
consolidated with another fund. The attached proxy statement/prospectus seeks
your approval of this consolidation.
Finally, the independent trustees of your Board believe that your interests
would best be served if the AIM Funds and the INVESCO Funds had a unified board
of directors/trustees. The attached proxy statement/prospectus seeks your vote
in favor of the persons nominated to serve as trustees.
Your vote is important. Please take a moment after reviewing the enclosed
materials to sign and return your proxy card in the enclosed postage paid return
envelope. If you attend the meeting, you may vote your shares in person. If you
expect to attend the meeting in person, or have questions, please notify us by
calling (800) 952-3502. You may also vote your shares by telephone or through a
website established for that purpose by following the instructions that appear
on the enclosed proxy card. If we do not hear from you after a reasonable amount
of time, you may receive a telephone call from our proxy solicitor, Georgeson
Shareholder Communications Inc., reminding you to vote your shares.
Sincerely,
-s- Robert H. Graham
Robert H. Graham
Chairman and President
AIM GLOBAL UTILITIES FUND,
A PORTFOLIO OF
AIM FUNDS GROUP
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 21, 2003
To the Shareholders of AIM Global Utilities Fund:
We cordially invite you to attend our Special Meeting of Shareholders to:
1. Approve an Agreement and Plan of Reorganization (the "Agreement")
under which all of the assets of your Fund, an investment portfolio of AIM
Funds Group ("Trust"), will be transferred to INVESCO Utilities Fund
("Buying Fund"), an investment portfolio of INVESCO Sector Funds, Inc.
("Buyer"), Buying Fund will assume the liabilities of your Fund and Buyer
will issue shares of each class of Buying Fund to shareholders of the
corresponding class of shares of your Fund and, in connection therewith,
the sale of all of your Fund's assets and the termination of your Fund as a
designated series of Trust.
2. Elect 16 trustees to the Board of Trustees of Trust, each of whom
will serve until his or her successor is elected and qualified.
3. Transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.
We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 on October 21, 2003, at 3:00 p.m., Central Time.
Shareholders of record as of the close of business on July 25, 2003 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment of
the Special Meeting.
WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF
TRUST. YOU MAY ALSO VOTE YOUR SHARES BY TELEPHONE OR THROUGH A WEBSITE
ESTABLISHED FOR THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY
MATERIALS. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE
SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY
EXECUTING AND SUBMITTING A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION
TO THE SECRETARY OF TRUST OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
-s- NANCY L. MARTIN
Nancy L. Martin
Secretary
August 25, 2003
<Table>
AIM GLOBAL UTILITIES FUND, INVESCO UTILITIES FUND,
A PORTFOLIO OF A PORTFOLIO OF
AIM FUNDS GROUP INVESCO SECTOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100 4350 SOUTH MONACO STREET
HOUSTON, TEXAS 77046-1173 DENVER, COLORADO 80237
(800) 347-4246 (800) 525-8085
</Table>
COMBINED PROXY STATEMENT AND PROSPECTUS
AUGUST 25, 2003
This document is a combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus"). We are sending you this Proxy Statement/Prospectus in
connection with the Special Meeting of Shareholders (the "Special Meeting") of
AIM Global Utilities Fund (your Fund). The Special Meeting will be held on
October 21, 2003. We intend to mail this Proxy Statement/Prospectus, the
enclosed Notice of Special Meeting of Shareholders and the enclosed proxy card
on or about August 25, 2003 to all shareholders entitled to vote.
At the Special Meeting, we are asking shareholders of your Fund to vote on
three Proposals. The first Proposal to be voted on is an Agreement and Plan of
Reorganization (the "Agreement") which provides for the combination of your
Fund, an investment portfolio of AIM Funds Group ("Trust"), with INVESCO
Utilities Fund ("Buying Fund"), an investment portfolio of INVESCO Sector Funds,
Inc. ("Buyer") (the "Reorganization") and, in connection therewith, the sale of
all of your Fund's assets and the termination of your Fund as a designated
series of Trust.
Under the Agreement, all of the assets of your Fund will be transferred to
Buying Fund, Buying Fund will assume the liabilities of your Fund and Buyer will
issue shares of each class of Buying Fund to shareholders of the corresponding
class of shares of your Fund, as set forth on Exhibit A.
The value of your account with Buying Fund immediately after the
Reorganization will be the same as the value of your account with your Fund
immediately prior to the Reorganization. The Reorganization has been structured
as a tax-free transaction. No sales charges will be imposed in connection with
the Reorganization.
The Board of Trustees of Trust (the "Board") has approved the Agreement and
the Reorganization as being in the best interests of your Fund.
Trust and Buyer are both registered open-end management investment
companies that issue their shares in separate series. Your Fund is a series of
Trust and Buying Fund is a series of Buyer. A I M Advisors, Inc. ("AIM") serves
as the investment advisor to your Fund and INVESCO Funds Group, Inc. ("INVESCO")
serves as the investment advisor to Buying Fund. Both AIM and INVESCO are wholly
owned subsidiaries of AMVESCAP PLC ("AMVESCAP"), an independent global
investment management company.
The investment objective of Buying Fund is similar to that of your Fund.
See "Comparison of Investment Objectives and Principal Strategies."
This Proxy Statement/Prospectus sets forth the information that you should
know before voting on the Agreement and the other Proposal described below. It
is both the Proxy Statement of your Fund and the Prospectus of Buying Fund. You
should read and retain this Proxy Statement/Prospectus for future reference.
The Prospectus of your Fund dated May 1, 2003 (the "Selling Fund
Prospectus"), as supplemented June 12, 2003, together with the related Statement
of Additional Information dated May 1, 2003, as supplemented June 12, 2003, are
on file with the Securities and Exchange Commission (the "SEC"). The Selling
Fund Prospectus is incorporated by reference into this Proxy
Statement/Prospectus. The Prospectus of Buying Fund dated July 31, 2003, as
supplemented August 1, 2003 and August 14, 2003
i
(the "Buying Fund Prospectus"), and the related Statement of Additional
Information dated July 31, 2003, as supplemented August 14, 2003, and the
Statement of Additional Information relating to the Reorganization, dated August
15, 2003, are on file with the SEC. The Buying Fund Prospectus is incorporated
by reference into this Proxy Statement/Prospectus and a copy of the Buying Fund
Prospectus is attached as Appendix II to this Proxy Statement/Prospectus. The
Statement of Additional Information relating to the Reorganization dated August
15, 2003 also is incorporated by reference into this Proxy Statement/Prospectus.
The SEC maintains a website at www.sec.gov that contains the Prospectuses and
Statements of Additional Information described above, material incorporated by
reference, and other information about Trust and Buyer.
Copies of the Buying Fund Prospectus, the Selling Fund Prospectus and the
related Statements of Additional Information are available without charge by
writing to A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739,
or by calling (800) 347-4246. Additional information about your Fund and Buying
Fund may be obtained on the internet at www.aiminvestments.com.
The remaining Proposal to be voted on is the election of 16 trustees to the
Board of Trustees of Trust. The Board has approved the nomination of the persons
set forth in this Proxy Statement/Prospectus for election as trustees of Trust.
Both Proposals are being submitted to you to implement an integration
initiative undertaken by AMVESCAP with respect to its North American mutual fund
operations, which includes your Fund.
Trust has previously sent to shareholders the most recent annual report for
your Fund, including financial statements, and the most recent semiannual report
succeeding the annual report, if any. If you have not received such report(s) or
would like to receive an additional copy, please contact A I M Fund Services,
Inc., P.O. Box 4739, Houston, Texas 77210-4739, or call (800) 347-4246. Such
report(s) will be furnished free of charge.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
ii
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
INTRODUCTION................................................ 1
PROPOSAL 1 -- APPROVAL OF THE AGREEMENT TO COMBINE YOUR FUND
AND BUYING FUND........................................... 2
SUMMARY..................................................... 2
The Reorganization........................................ 2
Comparison of Investment Objectives and Principal
Strategies............................................. 3
Comparison of Principal Service Providers................. 5
Comparison of Performance................................. 5
Comparison of Fees and Expenses........................... 5
Comparison of Multiple Class Structures................... 5
Comparison of Sales Charges............................... 6
Comparison of Distribution, Purchase and Redemption
Procedures and Exchange Rights......................... 6
The Board's Recommendation on Proposal 1.................. 7
RISK FACTORS................................................ 8
Risks Associated with Buying Fund......................... 8
Comparison of Risks of Buying Fund and Your Fund.......... 10
INFORMATION ABOUT BUYING FUND............................... 10
Description of Buying Fund Shares......................... 10
Management's Discussion of Fund Performance............... 10
Financial Highlights...................................... 10
Pending Shareholder Proposals for Buying Fund............. 11
ADDITIONAL INFORMATION ABOUT THE AGREEMENT.................. 11
Terms of the Reorganization............................... 11
The Reorganization........................................ 11
Board Considerations...................................... 11
Other Terms............................................... 12
Federal Income Tax Consequences........................... 13
Accounting Treatment...................................... 14
RIGHTS OF SHAREHOLDERS...................................... 14
General................................................... 14
Liability of Shareholders................................. 14
Election of Directors/Trustees; Terms..................... 15
Removal of Directors/Trustees............................. 15
Meetings of Shareholders.................................. 15
Liability of Directors/Trustees and Officers;
Indemnification........................................ 15
Dissolution and Termination............................... 16
Voting Rights of Shareholders............................. 16
Dissenters' Rights........................................ 16
Amendments to Organization Documents...................... 17
CAPITALIZATION.............................................. 18
INTERESTS OF CERTAIN PERSONS................................ 19
LEGAL MATTERS............................................... 19
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND...... 19
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION................................................ 19
</Table>
iii
<Table>
<Caption>
PAGE
----
PROPOSAL 2 -- ELECTION OF TRUSTEES.......................... 20
Background................................................ 20
Structure of the Board of Trustees........................ 20
Nominees for Trustees..................................... 20
The Board's Recommendation on Proposal 2.................. 23
Committees of the Board................................... 23
Board and Committee Meeting Attendance.................... 25
Trustee's Compensation.................................... 25
Retirement Plan for Trustees.............................. 25
Deferred Compensation Agreements.......................... 25
Officers of Trust......................................... 26
Security Ownership of Management.......................... 26
Trustee Ownership of Your Fund's Shares................... 26
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING............ 26
Proxy Statement/Prospectus................................ 26
Time and Place of Special Meeting......................... 26
Voting in Person.......................................... 27
Voting by Proxy........................................... 27
Voting by Telephone or the Internet....................... 27
Quorum Requirement and Adjournment........................ 27
Vote Necessary to Approve Each Proposal................... 28
Proxy Solicitation........................................ 28
Other Matters............................................. 28
Shareholder Proposals..................................... 28
Ownership of Shares....................................... 29
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 29
Fees Paid to the Auditor Related to Trust................. 29
Fees Paid to the Auditor Not Related to Trust............. 29
</Table>
<Table>
EXHIBIT A -- Classes of Shares of Your Fund and Corresponding Classes of
Shares of Buying Fund....................................... A-1
EXHIBIT B -- Comparison of Performance of Your Fund and Buying Fund...... B-1
EXHIBIT C -- Comparison Fee Table and Expense Example.................... C-1
EXHIBIT D -- Trustee Compensation Table.................................. D-1
EXHIBIT E -- Officers of Trust........................................... E-1
EXHIBIT F -- Security Ownership of Management............................ F-1
EXHIBIT G -- Trustee Ownership of Fund Shares............................ G-1
EXHIBIT H -- Shares Outstanding of Each Class of Your Fund on Record
Date........................................................ H-1
EXHIBIT I -- Ownership of Shares of Your Fund............................ I-1
EXHIBIT J -- Ownership of Shares of Buying Fund.......................... J-1
APPENDIX I -- Agreement and Plan of Reorganization for Your Fund (to
Effect the Reorganization)
APPENDIX II -- Prospectus of Buying Fund
APPENDIX III -- Discussion of Performance of Buying Fund
</Table>
THE AIM FAMILY OF FUNDS, AIM AND DESIGN, AIM, AIM FUNDS, AIM FUNDS AND
DESIGN, AIM INVESTOR, AIM LIFETIME AMERICA, AIM LINK, AIM INSTITUTIONAL FUNDS,
AIMFUNDS.COM, LA FAMILIA AIM
iv
DE FONDOS, LA FAMILIA AIM DE FONDOS AND DESIGN, INVIERTA CON DISCIPLINA AND
INVEST WITH DISCIPLINE ARE REGISTERED SERVICE MARKS AND AIM BANK CONNECTION, AIM
INTERNET CONNECT, AIM PRIVATE ASSET MANAGEMENT, AIM PRIVATE ASSET MANAGEMENT AND
DESIGN, AIM STYLIZED AND/OR DESIGN, AIM ALTERNATIVE ASSETS AND DESIGN, AIM
INVESTMENTS, AIM INVESTMENTS AND DESIGN, MYAIM.COM, THE AIM COLLEGE SAVINGS
PLAN, AIM SOLO 401(k) AND YOUR GOALS. OUR SOLUTIONS. ARE SERVICE MARKS OF A I M
MANAGEMENT GROUP INC.
INVESCO, THE OPEN CIRCLE DESIGN, INVESCO FUNDS, INVESCO FUNDS GROUP,
INVESCO -- YOUR GLOBAL INVESTMENT PARTNER AND YOU SHOULD KNOW WHAT INVESCO KNOWS
ARE REGISTERED SERVICE MARKS OF AMVESCAP PLC.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this
Proxy Statement/Prospectus, and you should not rely on such other information or
representations.
v
INTRODUCTION
Your Fund is one of 86 portfolios advised by AIM and Buying Fund is one of
46 portfolios advised by INVESCO. Proposals 1 and 2 that you are being asked to
vote on relate to or result from an integration initiative announced on March
27, 2003, by AMVESCAP, the parent company of AIM and INVESCO, with respect to
its North American mutual fund operations. The primary components of AMVESCAP's
integration initiative are:
- Using a single distributor for all AMVESCAP mutual funds in the United
States. To that end, A I M Distributors, Inc., the distributor for the
retail mutual funds advised by AIM (the "AIM Funds"), replaced INVESCO
Distributors, Inc. as the distributor for the retail mutual funds advised
by INVESCO (the "INVESCO Funds") effective July 1, 2003.
- Integrating back office support and creating a single platform for back
office support of AMVESCAP's mutual fund operations in the United States,
including such support services as transfer agency and information
technology. One result of this integration will be that shares of the AIM
Funds and shares of the INVESCO Funds generally will be able to be
exchanged for shares of the same or a similar class of each other.
- Rationalizing and streamlining of the various AIM Funds and INVESCO
Funds. In that regard, AMVESCAP has undertaken an extensive review of
these funds and concluded that it would be appropriate to reduce the
number of smaller and less efficient funds that compete for limited
shareholder assets and to consolidate certain funds having similar
investment objectives and strategies. Reducing both the number of AIM
Funds and INVESCO Funds will allow AIM and INVESCO to concentrate on
managing their core products. The Reorganization is one of a number of
fund reorganizations proposed by AMVESCAP as a result of this review
process. AMVESCAP's belief is that the Reorganization will allow Buying
Fund the best available opportunities for investment management, growth
prospects and potential economies of scale. Proposal 1 relates to this
component of AMVESCAP's integration initiative.
- Rationalizing the contractual arrangements for the provision of
investment advisory and administrative services to the AIM Funds and the
INVESCO Funds. The objective of this component is to have AIM assume
primary responsibility for the investment advisory, administrative,
accounting and legal and compliance services for the INVESCO Funds. To
implement this component, each INVESCO Fund, including Buying Fund, is
seeking shareholder approval to enter into a new investment advisory
agreement with AIM. These changes will simplify AMVESCAP's mutual fund
operations in the United States in that there will be a uniform
arrangement for investment management for both the AIM Funds and the
INVESCO Funds.
- Simplifying the organizational structure of the AIM Funds and the INVESCO
Funds so that they are all organized as Delaware statutory trusts, using
as few entities as practicable. To implement this component, each AIM
Fund and each INVESCO Fund that currently is organized as a Maryland
corporation is seeking shareholder approval to redomesticated as new a
Delaware statutory trust, which also should provide these Funds with
greater flexibility in conducting their business operations. In addition,
certain series portfolios of AIM Funds with few portfolios are seeking
shareholder approval to be restructured as new series portfolios of
existing AIM Funds that are organized as Delaware statutory trusts.
In considering the integration initiative proposed by AMVESCAP, the
directors/trustees of the AIM Funds and the directors of the INVESCO Funds who
are not "interested persons" (as defined in the Investment Company Act of 1940
(the "1940 Act")) of the Funds or their advisors determined that the
shareholders of both the AIM Funds and the INVESCO Funds would benefit if one
set of directors/ trustees was responsible for overseeing the operation of both
the AIM Funds and the INVESCO Funds and the services provided by AIM, INVESCO
and their affiliates. Accordingly, these directors/trustees agreed to combine
the separate boards and create a unified board of directors/trustees. Proposal 2
relates to the election of trustees of your Fund.
1
You are being asked to approve Proposal 2 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to take advantage of
these other benefits of AMVESCAP's integration initiative. We will be unable to
determine whether Proposal 2 should go forward until we have determined whether
Proposal 1 has been approved. Therefore, even if you vote in favor of Proposal
1, it is still important that you vote on Proposal 2. For information about the
Special Meeting and voting on Proposals 1 and 2, see "Information About the
Special Meeting and Voting." For a description of the vote necessary to approve
each of Proposals 1 and 2, see "Information About the Special Meeting and
Voting -- Vote Necessary to Approve Each Proposal."
PROPOSAL 1 --
APPROVAL OF THE AGREEMENT
TO COMBINE YOUR FUND AND BUYING FUND
SUMMARY
The Board, including the independent trustees, has determined that the
Reorganization is in the best interests of your Fund and that the interests of
the shareholders of your Fund will not be diluted as a result of the
Reorganization. The Board believes that a larger combined fund should be more
viable and have greater market presence and should have greater investment
leverage in that portfolio managers should have broader investment opportunities
and lower trading costs. The Board also believes that a larger combined fund
also should result in greater operating efficiencies by providing economies of
scale to the combined fund in that certain fixed costs, such as legal,
accounting, shareholder services and director/trustee expenses, will be spread
over the greater assets of the combined fund. For additional information
concerning the factors the Board considered in approving the Agreement, see
"Additional Information About the Agreement -- Board Considerations."
The following summary discusses some of the key features of the
Reorganization and highlights certain differences between your Fund and Buying
Fund. This summary is not complete and does not contain all of the information
that you should consider before voting on whether to approve the Agreement. For
more complete information, please read this entire Proxy Statement/Prospectus.
THE REORGANIZATION
The Reorganization will result in the combination of your Fund with Buying
Fund. Your Fund is a series of Trust, a Delaware statutory trust. Buying Fund is
a series of Buyer, a Maryland corporation. The Board of Directors of Buyer is
soliciting the proxies of the shareholders of Buyer's series portfolios to vote
on an agreement and plan of reorganization to redomesticate Buyer as a Delaware
statutory trust in order to provide Buyer with greater flexibility in conducting
its business operations. If approved by Buyer's shareholders, the consummation
of the redomestication of Buyer as a Delaware statutory trust will occur prior
to the consummation of the Reorganization.
If shareholders of your Fund approve the Agreement and other closing
conditions are satisfied, all of the assets of your Fund will be transferred to
Buying Fund and Buying Fund will assume the liabilities of your Fund, and Buyer
will issue shares of each class of Buying Fund to shareholders of the
corresponding class of shares of your Fund, as set forth on Exhibit A. For a
description of certain of the closing conditions that must be satisfied, see
"Additional Information About the Agreement -- Other Terms."
The shares of Buying Fund issued in the Reorganization will have an
aggregate net asset value equal to the net value of the assets of your Fund
transferred to Buying Fund. The value of your account with Buying Fund
immediately after the Reorganization will be the same as the value of your
account with your Fund immediately prior to the Reorganization. A copy of the
Agreement is attached as Appendix I to this Proxy Statement/Prospectus. See
"Additional Information About the Agreement."
Trust and Buyer will receive an opinion of Kirkpatrick & Lockhart LLP to
the effect that the Reorganization will constitute a tax-free reorganization for
Federal income tax purposes. Thus, shareholders will not have to pay additional
Federal income tax as a result of the Reorganization except to
2
the extent your Fund disposes of securities at a net gain in anticipation of the
Reorganization, which gain would be included in a taxable distribution. See
"Additional Information About the Agreement -- Federal Income Tax Consequences."
No sales charges will be imposed in connection with the Reorganization.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
Your Fund and Buying Fund pursue similar investment objectives and invest
in similar types of securities. As a result, the Reorganization is not expected
to cause significant portfolio turnover or transaction expenses from the sale of
securities that are incompatible with the investment objective of Buying Fund.
The investment objective or goal of Buying Fund is classified as
fundamental, which means that the Board of Directors of Buyer cannot change it
without shareholder approval. The investment objective of your Fund is not
classified as fundamental, which means that the Board can change it without
shareholder approval.
A description of the fundamental and non-fundamental restrictions and
policies applicable to your Fund and Buying Fund can be found in each Fund's
Statement of Additional Information. While your Fund and Buying Fund have
slightly different approaches to disclosing and characterizing these
restrictions and policies, in substance your Fund and Buying Fund operate under
the same general restrictions and are subject to the same general policies,
although your Fund is a non-diversified fund and Buying Fund is a diversified
fund.
As a non-diversified fund, your Fund may, with respect to 50% of its
assets, invest more than 5% of its assets in the securities of any one issuer.
In contrast, Buying Fund may not, with respect to 75% of its total assets,
purchase the securities of any one issuer if, as a result, (i) more than 5% of
Buying Fund's total assets would be invested in the securities of that issuer,
or (ii) Buying Fund would hold more than 10% of the outstanding voting
securities of that issuer. The foregoing percentage limitation applicable to
Buying Fund does not extend to securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities, or securities of other
investment companies.
The chart below provides a summary for comparison purposes of the
investment objectives and principal investment strategies of your Fund and
Buying Fund. You can find more detailed information about the investment
objectives, strategies and other investment policies of your Fund and Buying
Fund in the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
<Table>
<Caption>
AIM GLOBAL UTILITIES FUND INVESCO UTILITIES FUND
(YOUR FUND) (BUYING FUND)
------------------------- ----------------------
INVESTMENT OBJECTIVE
- - high total return - capital growth and income
INVESTMENT STRATEGIES
- - invests at least 80% of its assets in - invests at least 80% of its net assets in
securities of domestic and foreign public the equity securities and equity-related
utility companies instruments of companies engaged in the
- - invests primarily in marketable equity utilities-related industries
securities, including convertible - considers a company to be in the utilities
securities and debt securities, but its sector if it meets at least one of the
investments may include synthetic following tests:
instruments such as warrants, futures, -- at least 50% of its gross income or its
options, exchange-traded funds and American net sales must come from activities in
Depositary Receipts the sector;
-- at least 50% of its assets must be
devoted to producing revenues from the
sector; or
-- based on other available information, it
is determined that its primary business
is within the sector
</Table>
3
<Table>
<Caption>
AIM GLOBAL UTILITIES FUND INVESCO UTILITIES FUND
(YOUR FUND) (BUYING FUND)
------------------------- ----------------------
- utilities-related sector companies
includes, but are not limited to, companies
that produce, generate, transmit, or
distribute natural gas or electricity, as
well as companies that provide
telecommunications services, including
local, long distance and wireless
- - may invest in non-utility securities, but - INVESCO seeks to keep the portfolio divided
generally will invest in securities of among the electric utilities, natural gas,
companies that derive revenues from and telecommunications industries;
utility-related activities such as weightings within the various industry
providing services, equipment or fuel segments are continually monitored, and
sources to utilities INVESCO adjusts the portfolio weightings
- - such companies may include those that depending on the prevailing economic
provide maintenance service to electric, conditions.
telephone or natural gas utilities;
companies that provide energy sources such
as coal or uranium; fuel services and
equipment companies; companies that provide
pollution control for water utilities; and
companies that build pipelines or turbines
which help produce electricity
- - may invest up to 80% of its total assets in - may invest up to 25% of its assets in
foreign securities, including up to 20% of securities of non-U.S. issuers (securities
its assets in securities of issuers located of Canadian issuers and American Depositary
in developing countries Receipts are not subject to this 25%
limitation)
- - invests in the securities of companies - no corresponding strategy
located in at least four different
countries, including the U.S., and may
invest a significant amount of its assets
in the securities of U.S. issuers
- - may invest up to 25% of its total assets in - may purchase convertible securities
convertible securities including convertible debt obligations and
convertible preferred stock, although not a
principal investment strategy
- - may invest up to 25% of its total assets in - may invest in debt securities, although not
non-convertible bonds a principal investment strategy
- - may invest up to 10% of its total assets in - may invest in junk bonds which INVESCO
lower-quality debt securities (i.e. junk believes are not highly speculative and
bonds) which are rated at least CCC by S&P or Caa
by Moody's, although not a principal
investment strategy
- - non-diversified - diversified
- - focuses on securities that have favorable - uses a research-orientated bottom-up
prospects for high total return investment approach, focusing on company
fundamentals and growth prospects when
selecting securities, and generally
emphasizes companies that INVESCO believes
are strongly managed and will generate
above-average long-term capital
appreciation
- invests primarily in equity securities that
INVESCO believes will rise in price faster
than other securities, as well as in
options and other investments whose values
are based upon the values of equity
securities
</Table>
4
COMPARISON OF PRINCIPAL SERVICE PROVIDERS
The following is a list of the current principal service providers for your
Fund and Buying Fund.
<Table>
<Caption>
SERVICE PROVIDERS
-----------------------------------------------------------------
AIM GLOBAL UTILITIES FUND INVESCO UTILITIES FUND
SERVICE (YOUR FUND) (BUYING FUND)
- ------- ------------------------------- -------------------------------
Investment Advisor............. A I M Advisors, Inc. INVESCO Funds Group, Inc.*
11 Greenway Plaza, Suite 100 4350 South Monaco Street
Houston, Texas 77046-1173 Denver, Colorado 80237
Distributor.................... A I M Distributors, Inc. A I M Distributors, Inc.**
11 Greenway Plaza, Suite 100 11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173 Houston, Texas 77046-1173
Administrator.................. A I M Advisors, Inc. INVESCO Funds Group, Inc.***
11 Greenway Plaza, Suite 100 4350 South Monaco Street
Houston, Texas 77046-1173 Denver, Colorado 80237
Custodian...................... State Street Bank and Trust State Street Bank and Trust
Company Company
Transfer Agent and Dividend
Disbursing Agent............. A I M Fund Services, Inc. INVESCO Funds Group, Inc.****
Independent Auditors........... PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
</Table>
- ---------------
* If the shareholders of Buying Fund approve a new investment advisory
agreement with AIM, AIM will replace INVESCO as investment advisor for your
Fund effective November 5, 2003.
** A I M Distributors, Inc. replaced INVESCO Distributors, Inc. as distributor
of Buying Fund effective July 1, 2003.
*** If the shareholders of Buying Fund approve a new investment advisory
agreement with AIM, AIM will replace INVESCO as administrator for Buying
Fund effective November 5, 2003.
**** A I M Fund Services, Inc. will replace INVESCO as transfer agent and
dividend disbursing agent for Buying Fund on or about October 1, 2003.
COMPARISON OF PERFORMANCE
A bar chart showing the annual total returns for calendar years ended
December 31 for Class A shares of your Fund and Investor Class shares of Buying
Fund can be found at Exhibit B. Also included as part of Exhibit B is a table
showing the average annual total returns for the periods indicated for your Fund
and Buying Fund, including sales charges. For more information regarding the
total return of your Fund, see the "Financial Highlights" section of the Selling
Fund Prospectus, which has been made a part of this Proxy Statement/Prospectus
by reference. For more information regarding the total return of Buying Fund,
see "Information About Buying Fund -- Financial Highlights." Past performance
cannot guarantee comparable future results.
COMPARISON OF FEES AND EXPENSES
A comparison of shareholder fees and annual operating expenses of each
class of shares of your Fund, as of March 31, 2003, and Buying Fund, as of March
31, 2003, expressed as a percentage of net assets ("Expense Ratio"), can be
found at Exhibit C. Pro forma estimated Expense Ratios for each class of shares
of Buying Fund after giving effect to the Reorganization are also provided as of
March 31, 2003 as part of Exhibit C.
COMPARISON OF MULTIPLE CLASS STRUCTURES
A comparison of the share classes of your Fund that are available to
investors and the corresponding share classes of Buying Fund that shareholders
of your Fund will receive in the Reorganization can be
5
found as Exhibit A. In addition to the share classes of Buying Fund listed on
Exhibit A, Investor Class shares of Buying Fund are available to investors. This
class is not involved in the Reorganization. For information regarding the
features of the various share classes of your Fund and Buying Fund, see the
Selling Fund Prospectus and the Buying Fund Prospectus, respectively.
COMPARISON OF SALES CHARGES
No initial sales charges are applicable to shares of Buying Fund received
by holders of your Fund's shares in connection with the Reorganization. No
redemption of your Fund's shares that could cause the imposition of a contingent
deferred sales charge ("CDSC") will result in connection with the
Reorganization. The holding period for purposes of determining whether to charge
a CDSC upon redemptions of shares of Buying Fund received by holders of your
Fund's shares in connection with the Reorganization will begin at the time your
Fund's shares were originally purchased.
The chart below provides a summary for comparison purposes of the initial
sales charges and CDSCs applicable to each class of shares of your Fund and
Buying Fund. The fee tables at Exhibit C include comparative information about
maximum initial sales charges on purchases of Class A shares of your Fund and
Buying Fund and the maximum CDSC on redemptions of certain classes of shares of
your Fund and Buying Fund. For more detailed information on initial sales
charges, including volume purchase breakpoints and waivers, and reductions of
CDSCs over time, see the Selling Fund Prospectus and the Buying Fund Prospectus.
<Table>
<Caption>
CLASS A CLASS B CLASS C
------- ------- -------
- - subject to an initial sales - not subject to an initial - not subject to an initial
charge* sales charge sales charge
- - may be subject to a CDSC on - subject to a CDSC on certain - subject to a CDSC on certain
redemptions made within 18 redemptions made within 6 redemptions made within 12
months from the date of years from the date of months from the date of
certain large purchases** purchase purchase***
</Table>
<Table>
<Caption>
INVESTOR CLASS
(BUYING FUND ONLY)
------------------
- - not subject to an initial
sales charge
- - not subject to a CDSC
</Table>
- ---------------
* Both your Fund and Buying Fund waive initial sales charges on Class A shares
for certain categories of investors, including certain of their affiliated
entities and certain of their employees, officers and directors/trustees and
those of their investment advisor.
** For qualified plans investing in Class A shares of Buying Fund, this period
is 12 months rather than 18 months.
*** Prior to August 18, 2003, Class C shares of Buying Fund are subject to a
CDSC on certain redemptions made within 13 months from the date of purchase.
This 13 month period changes to 12 months effective August 18, 2003.
The CDSC on redemptions of shares of your Fund is computed based on the
lower of their original purchase price or current market value. Prior to August
18, 2003, the CDSC on redemptions of shares of Buying Fund is computed based on
their original purchase price. This method of computation changes to conform to
your Fund's method of computation effective August 18, 2003.
COMPARISON OF DISTRIBUTION, PURCHASE AND REDEMPTION PROCEDURES AND EXCHANGE
RIGHTS
Shares of your Fund and Buying Fund are distributed by A I M Distributors,
Inc. ("AIM Distributors"), a registered broker-dealer and wholly owned
subsidiary of AIM. AIM Distributors replaced INVESCO Distributors, Inc. as
distributor of Buying Fund effective July 1, 2003.
6
Both your Fund and Buying Fund have adopted a distribution plan that allows
the payment of distribution and service fees for the sale and distribution of
the shares of each of their respective classes. Both your Fund and Buying Fund
have engaged AIM Distributors to provide such services either directly or
through third parties. The fee tables at Exhibit C include comparative
information about the distribution and service fees payable by each class of
shares of your Fund and Buying Fund. Overall, each class of shares of Buying
Fund has the same or lower aggregate distribution and service fees as the
corresponding class of shares of your Fund.
Although there are differences in the purchase, redemption and exchange
procedures of your Fund and Buying Fund as of the date of this Proxy
Statement/Prospectus, it is currently anticipated that the purchase, redemption
and exchange procedures of your Fund and/or Buying Fund will be changed so that
they are substantially the same prior to the consummation of the Reorganization.
For information regarding the current purchase, redemption and exchange
procedures of your Fund and Buying Fund, see the Selling Fund Prospectus and the
Buying Fund Prospectus, respectively.
As of the date of this Proxy Statement/Prospectus, shares of your Fund
generally may be exchanged for shares of the same or a similar class of funds
within The AIM Family of Funds(R) and shares of Buying Fund generally may be
exchanged for shares of the same or a similar class of funds within the INVESCO
Family of Funds. It is currently anticipated that, prior to the consummation of
the Reorganization, shares of The AIM Family of Funds(R) and shares of the
INVESCO Family of Funds generally will be able to be exchanged for shares of the
same or a similar class of each other. If this exchangeability feature is not
offered to shareholders prior to the consummation of the Reorganization, the
consummation of the Reorganization will be delayed until such time as it is
offered. See "Additional Information About the Agreement -- The Reorganization."
For more detailed information regarding the current exchange rights of your Fund
and Buying Fund, see the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
THE BOARD'S RECOMMENDATION ON PROPOSAL 1
Your Board, including the independent trustees, unanimously recommends that
you vote "FOR" this Proposal.
7
RISK FACTORS
RISKS ASSOCIATED WITH BUYING FUND
The following is a discussion of the principal risks associated with Buying
Fund.
Buying Fund is generally subject to risks that affect the utilities sector.
Governmental regulation, difficulties in obtaining adequate financing and
investment return, environmental issues, prices of fuel for generation of
electricity, availability of natural gas, risks associated with power marketing
and trading, and risks associated with nuclear power facilities may adversely
affect the market value of Buying Fund's holdings. The recent trend towards
deregulation in the utilities industries presents special risks. Some companies
may be faced with increased competition and may become less profitable. Buying
Fund is also subject to the following specific risks:
INVESTMENT STYLE RISK
Growth investing may be more volatile than other investment styles because
growth stocks are more sensitive to investor perceptions of an issuing company's
growth potential. Growth-oriented funds typically will underperform
value-oriented funds when investor sentiment favors the value investing style.
SECTOR RISK
Buying Fund is concentrated in a comparatively narrow segment of the
economy. This means Buying Fund's investment concentration in the utilities
sector is higher than most mutual funds and the broad securities market.
Consequently, Buying Fund tends to be more volatile than other mutual funds, and
the value of its portfolio investments and consequently the value of an
investment in Buying Fund tend to go up and down more rapidly.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of Buying
Fund's investment. Certain stocks selected for Buying Fund's portfolio may
decline in value more than the overall stock market. In general, the securities
of small companies have more volatility than those of mid-size or large
companies.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory, and diplomatic risks. Buying Fund may invest up
to 25% of its assets in securities of non-U.S. issuers. Securities of Canadian
issuers and American Depository Receipts are not subject to this 25% limitation.
Foreign securities risks also includes the following:
Currency Risk. A change in the exchange rate between U.S. Dollars and a
foreign currency may reduce the value of Buying Fund's investment in a security
valued in the foreign currency, or based on that currency value.
Political Risk. Political actions, events, or instability may result in
unfavorable changes in the value of a security.
Regulatory Risk. Government regulations may affect the value of a
security. In foreign countries, securities markets that are less regulated than
those in the U.S. may permit trading practices that are not allowed in the U.S.
Diplomatic Risk. A change in the diplomatic relations between the U.S. and
a foreign country could affect the value or liquidity of investments.
8
LIQUIDITY RISK
Buying Fund's portfolio is liquid if Buying Fund is able to sell the
securities it owns at a fair price within a reasonable time. Liquidity is
generally related to the market trading volume for a particular security.
Investments in smaller companies or in foreign companies or companies in
emerging markets are subject to a variety of risks, including potential lack of
liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some
manner, from the price of another security, index, asset, or rate. Derivatives
include options and futures contracts, among a wide range of other instruments.
The principal risk of investments in derivatives is that the fluctuations in
their values may not correlate perfectly with the overall securities markets.
Some derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk, as
described below.
Options and futures are common types of derivatives that Buying Fund may
occasionally use to hedge its investments. An option is the right to buy and
sell a security or other instrument, index, or commodity at a specific price on
or before a specific date. A future is an agreement to buy or sell a security or
other instrument, index, or commodity at a specific price on a specific date.
The use of options and futures may increase the performance of Buying Fund, but
also may increase market risk. Other types of derivatives include swaps, caps,
floors, and collars.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with
Buying Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete, or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
PORTFOLIO TURNOVER RISK
Buying Fund's investments may be bought and sold relatively frequently. A
high turnover rate may affect Buying Fund's performance because it results in
higher brokerage commissions and may result in taxable gain distributions to
Buying Fund's shareholders.
GENERAL RISKS
Not Insured. Mutual funds are not insured by the FDIC or any other
government agency, unlike bank deposits such as CDs or savings accounts.
No Guarantee. No mutual fund can guarantee that it will meet its
investment objectives.
Possible Loss of Investment. A mutual fund cannot guarantee its
performance, nor assure you that the market value of your investment will
increase. You may lose the money you invest, and Buying Fund will not reimburse
you for any of these losses.
Volatility. The price of your mutual fund shares will increase or decrease
with changes in the value of Buying Fund's underlying investments and changes in
the equity markets as a whole.
Not a Complete Investment Plan. An investment in any mutual fund does not
constitute a complete investment plan. Buying Fund is designed to be only a part
of your personal investment plan.
9
COMPARISON OF RISKS OF BUYING FUND AND YOUR FUND
The risks associated with an investment in your Fund are similar to those
described above for Buying Fund because of the similarities in their investment
objectives and strategies. Set forth below is a discussion of certain risks that
differ between Buying Fund and your Fund. You can find more detailed
descriptions of specific risks associated with your Fund in the Selling Fund
Prospectus.
Your Fund is a non-diversified fund and Buying Fund is a diversified fund.
This means that your Fund may invest in fewer issuers than Buying Fund. As a
result, your Fund's performance is affected to a greater extent by the
performance of any individual security it holds than is the performance of
Buying Fund. Further, your Fund may be subject to greater investment and credit
risk than the more broadly invested Buying Fund. However, since Buying Fund
seeks to keep its portfolio divided among three industries, Buying Fund may be
subject to greater industry sector risk than your Fund.
Your Fund has a greater ability to invest in foreign securities compared to
Buying Fund, which can only invest up to 25% of its total assets in foreign
securities. Because your Fund has no such restrictions, it may be subject to
greater foreign securities exposure than Buying Fund.
Your Fund may invest up to 25% of its total assets in debt securities,
including up to 10% of its total assets in lower quality debt-securities such as
junk bonds, which are particularly vulnerable to credit risk and interest rate
fluctuations. Interest rate increases can cause the price of a debt security to
decrease. Buying Fund may invest in debt securities including junk bonds, but it
is not a principal investment strategy of Buying Fund. As a result, your Fund's
potentially greater exposure to junk bonds may give it greater exposure to
credit risks.
Your Fund may participate in the initial public offering (IPO) market in
some market cycles. Because of your Fund's small asset base, any investment it
may make in IPOs may significantly affect the fund's total return. As your
Fund's assets grow, the impact of IPO investments will decline, which may reduce
the effect of IPO investments on your Fund's total return.
INFORMATION ABOUT BUYING FUND
DESCRIPTION OF BUYING FUND SHARES
Shares of Buying Fund 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 Buyer in certain circumstances. Each share
of Buying Fund represents an equal proportionate interest in Buying Fund with
each other share and is entitled to such dividends and distributions out of the
income belonging to Buying Fund as are declared by the Board of Directors of
Buying Fund. Each share of Buying Fund generally has the same voting, dividend,
liquidation and other rights; however, each class of shares of Buying Fund is
subject to different sales loads, conversion features, exchange privileges and
class-specific expenses. When issued, shares of Buying 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.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Buying Fund taken from its annual report
to shareholders for the fiscal year ended March 31, 2003 is set forth in
Appendix III to this Proxy Statement/Prospectus.
FINANCIAL HIGHLIGHTS
For more information about Buying Fund's financial performance, see the
"Financial Highlights" section of the Buying Fund Prospectus, which is attached
to this Proxy Statement/Prospectus as Appendix II.
10
PENDING SHAREHOLDER PROPOSALS FOR BUYING FUND
As previously discussed, the Board of Directors of Buyer is soliciting the
shareholders of Buying Fund to vote on a new investment advisory agreement
between AIM and Buying Fund, a new sub-advisory agreement between AIM and
INVESCO Institutional (N.A.), Inc., an affiliate of INVESCO, for Buying Fund,
and an agreement and plan of reorganization to redomesticate Buyer as a Delaware
statutory trust.
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Agreement. Significant provisions of the Agreement are
summarized below; however, this summary is qualified in its entirety by
reference to the Agreement, a copy of which is attached as Appendix I to this
Proxy Statement/Prospectus.
THE REORGANIZATION
Consummation of the Reorganization (the "Closing") is expected to occur on
October 27, 2003, at 8:00 a.m., Eastern Time (the "Effective Time") on the basis
of values calculated as of the close of regular trading on the New York Stock
Exchange on October 24, 2003 (the "Valuation Date"). At the Effective Time, all
of the assets of your Fund will be delivered to Buyer's custodian for the
account of Buying Fund in exchange for the assumption by Buying Fund of the
liabilities of your Fund and delivery by Buyer directly to the holders of record
as of the Effective Time of the issued and outstanding shares of each class of
your Fund of a number of shares of each corresponding class of Buying Fund
(including, if applicable, fractional shares rounded to the nearest thousandth),
having an aggregate net asset value equal to the value of the net assets of your
Fund so transferred, assigned and delivered, all determined and adjusted as
provided in the Agreement. Upon delivery of such assets, Buying Fund will
receive good and marketable title to such assets free and clear of all liens.
In order to ensure continued qualification of your Fund for treatment as a
"regulated investment company" for tax purposes and to eliminate any tax
liability of your Fund arising by reason of undistributed investment company
taxable income or net capital gain, Trust will declare on or prior to the
Valuation Date to the shareholders of your Fund a dividend or dividends that,
together with all previous such dividends, shall have the effect of distributing
(a) all of your Fund's investment company taxable income (determined without
regard to any deductions for dividends paid) for the taxable year ended December
31, 2002 and for the short taxable year beginning on January 1, 2003 and ending
on the Closing and (b) all of your Fund's net capital gain recognized in its
taxable year ended December 31, 2002 and in such short taxable year (after
reduction for any capital loss carryover).
Buying Fund will proceed with the Reorganization if the shareholders of
your Fund approve the Agreement.
It is anticipated that, prior to the Closing, shares of The AIM Family of
Funds(R) and shares of the INVESCO Family of Funds generally will be able to be
exchanged for shares of the same or a similar class of each other. If this
exchangeability feature is not offered to shareholders prior to the Closing, the
Closing will be postponed until a mutually acceptable date not later than
December 31, 2003 (the "Termination Date").
BOARD CONSIDERATIONS
AMVESCAP initially proposed that the Board consider the Reorganization at
an in-person meeting of the Board held on May 13-14, 2003, at which preliminary
discussions of the Reorganization took place. The Board determined that the
Reorganization is in the best interests of your Fund and will not dilute the
interests of your Fund's shareholders, and approved the Agreement and the
Reorganization, at an in-person meeting of the Board held on June 10-11, 2003.
11
Over the course of the two Board meetings, the Board received from AIM and
INVESCO written materials that contained information concerning your Fund and
Buying Fund, including comparative total return and fee and expense information,
a comparison of investment objectives and strategies of your Fund and Buying
Fund and pro forma expense ratios for Buying Fund. AIM and INVESCO also provided
the Board with written materials concerning the structure of the proposed
Reorganization and the Federal tax consequences of the Reorganization.
In evaluating the Reorganization, the Board considered a number of factors,
including:
- The investment objective and principal investment strategies of your Fund
and Buying Fund.
- The comparative expenses of your Fund and Buying Fund and the pro forma
expenses of Buying Fund after giving effect to the Reorganization.
- The comparative performance of your Fund and Buying Fund.
- The comparative sizes of your Fund and Buying Fund.
- The consequences of the Reorganization for Federal income tax purposes,
including the treatment of capital loss carryforwards, if any, available
to offset future capital gains of both your Fund and Buying Fund.
- Any fees and expenses that will be borne directly or indirectly by your
Fund or Buying Fund in connection with the Reorganization.
The Board noted that your Fund and AMVESCAP, on behalf of AIM, will each
bear one half of the costs and expenses incurred in connection with the
Reorganization.
The Board also noted that no sales charges or other charges would be
imposed on any of the shares of Buying Fund issued to the shareholders of your
Fund in connection with the Reorganization.
Based on the foregoing and the information presented at the two Board
meetings discussed above, the Board determined that the Reorganization is in the
best interests of your Fund and will not dilute the interests of your Fund's
shareholders. Therefore, the Board recommends the approval of the Agreement by
the shareholders of your Fund at the Special Meeting.
AMVESCAP initially proposed that the Board of Directors of Buyer consider
the Reorganization at a telephone meeting of the Board of Directors held on May
5, 2003. Preliminary discussions of the Reorganization took place at the May 5,
2003 telephone meeting and at an in-person meeting of the Board of Directors
held on May 13-15, 2003. The Board of Directors of Buyer determined that the
Reorganization is in the best interests of Buying Fund and will not dilute the
interests of Buying Fund shareholders, and approved the Agreement and the
Reorganization, at an in-person meeting of the Board of Directors held on June
9, 2003.
OTHER TERMS
If any amendment is made to the Agreement which would have a material
adverse effect on shareholders, such change will be submitted to the affected
shareholders for their approval. However, the Agreement may be amended without
shareholder approval by mutual agreement of the parties.
Trust and Buyer have made representations and warranties in the Agreement
that are customary in matters such as the Reorganization. The obligations of
Trust and Buyer pursuant to the Agreement are subject to various conditions,
including the following mutual conditions:
- the assets of your Fund to be acquired by Buying Fund shall constitute at
least 90% of the fair market value of the net assets and at least 70% of
the fair market value of the gross assets held by your Fund immediately
prior to the Reorganization;
- Buyer's Registration Statement on Form N-14 under the Securities Act of
1933 (the "1933 Act") shall have been filed with the SEC and such
Registration Statement shall have become effective,
12
and no stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose
shall have been initiated or threatened by the SEC (and not withdrawn or
terminated);
- the shareholders of your Fund shall have approved the Agreement; and
- Trust and Buyer shall have received an opinion from Kirkpatrick &
Lockhart LLP that the consummation of the transactions contemplated by
the Agreement will not result in the recognition of gain or loss for
Federal income tax purposes for your Fund, Buying Fund or their
shareholders.
The Board of Trustees of Trust and the Board of Directors of Buyer may
waive without shareholder approval any default by Trust or Buyer or any failure
by Trust or Buyer to satisfy any of the above conditions as long as such a
waiver is mutual and will not have a material adverse effect on the benefits
intended under the Agreement for the shareholders of your Fund. The Agreement
may be terminated and the Reorganization may be abandoned at any time by mutual
agreement of the parties, or by either party if the shareholders of your Fund do
not approve the Agreement or if the Closing does not occur on or before the
Termination Date.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Reorganization and is based upon the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the existing U.S.
Treasury regulations thereunder, current administrative rulings of the Internal
Revenue Service ("IRS") and published judicial decisions, all of which are
subject to change. The principal Federal income tax consequences that are
expected to result from the Reorganization, under currently applicable law, are
as follows:
- the Reorganization will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code;
- no gain or loss will be recognized by your Fund upon the transfer of its
assets to Buying Fund solely in exchange for shares of Buying Fund and
Buying Fund's assumption of the liabilities of your Fund or on the
distribution of those shares to your Fund's shareholders; notwithstanding
the foregoing, no conclusion is expressed as to the effect of the
Reorganization on your Fund or any shareholder of your Fund with respect
to any asset as to which any unrealized gain or loss is required to be
recognized for Federal income tax purposes at the end of a taxable year
(or on the termination or transfer of a taxpayer's rights (or
obligations) with respect to such asset) under a mark-to-market system of
accounting;
- no gain or loss will be recognized by Buying Fund on its receipt of
assets of your Fund in exchange for shares of Buying Fund issued directly
to your Fund's shareholders;
- no gain or loss will be recognized by any shareholder of your Fund upon
the exchange of shares of your Fund for shares of Buying Fund;
- the tax basis of the shares of Buying Fund to be received by a
shareholder of your Fund will be the same as the shareholder's tax basis
of the shares of your Fund surrendered in exchange therefor;
- the holding period of the shares of Buying Fund to be received by a
shareholder of your Fund will include the period for which such
shareholder held the shares of your Fund exchanged therefor, provided
that such shares of your Fund are capital assets in the hands of such
shareholder as of the Closing; and
- the tax year of your Fund will end on the date of the Closing, and Buying
Fund will thereafter succeed to and take into account any capital loss
carryover and certain other tax attributes of your Fund, subject to all
relevant conditions and limitations on the use of such tax benefits.
Neither Trust nor Buyer has requested or will request an advance ruling
from the IRS as to the Federal tax consequences of the Reorganization. As a
condition to Closing, Kirkpatrick & Lockhart LLP
13
will render a favorable opinion to Trust and Buyer as to the foregoing Federal
income tax consequences of the Reorganization, which opinion will be conditioned
upon, among other things, the accuracy, as of the Effective Time, of certain
representations of Trust and Buyer upon which Kirkpatrick & Lockhart LLP will
rely in rendering its opinion. The conclusions reached in that opinion could be
jeopardized if the representations of Trust or Buyer are incorrect in any
material respect.
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF YOUR FUND. YOUR FUND'S SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE
REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Buying Fund of the assets of your Fund will
be the same as the book cost basis of such assets to your Fund.
RIGHTS OF SHAREHOLDERS
GENERAL
Buyer is a Maryland corporation. Trust is a Delaware statutory trust. There
is much that is similar between Maryland corporations and Delaware statutory
trusts. For example, the responsibilities, powers and fiduciary duties of the
directors of Buyer are substantially similar to those of the trustees of Trust.
There are, however, certain differences between the two forms of
organization. The operations of Buyer, as a Maryland corporation, are governed
by its Articles of Incorporation, and any restatements, amendments and
supplements thereto (the "Articles of Incorporation"), and applicable Maryland
law. The operations of Trust, as a Delaware statutory trust, are governed by its
Amended and Restated Agreement and Declaration of Trust, as amended (the
"Declaration of Trust"), and applicable Delaware law.
As discussed above under "Summary -- The Reorganization," if approved by
Buyer's shareholders, Buyer will be redomesticated as a Delaware statutory trust
prior to the consummation of the Reorganization. If such redomestication occurs,
the discussion below of the rights of shareholders of a Maryland corporation
will be inapplicable to Buyer.
LIABILITY OF SHAREHOLDERS
Shareholders of a Maryland corporation generally do not have personal
liability for the corporation's obligations, except that a shareholder may be
liable to the extent that he or she receives any distribution which exceeds the
amount which he or she could properly receive under Maryland law or where such
liability is necessary to prevent fraud.
The Delaware Statutory Trust Act provides that 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, however, a remote
possibility that, under certain circumstances, shareholders of a Delaware
statutory trust might be held personally liable for the trust's obligations to
the extent the courts of another state that does not recognize such limited
liability were to apply the laws of such state to a controversy involving such
obligations. The Declaration of Trust provides that shareholders of the Trust
shall not be subject to any personal liability for acts or obligations of the
Trust and that every written agreement, obligation or other undertaking made or
issued by the Trust shall contain a provision to the effect that shareholders
are not personally liable thereunder. In addition, the Declaration of Trust
provides for indemnification out of the Trust's property for any shareholder
held personally liable solely by reason of his or her being or having been a
shareholder. Therefore, the risk of any shareholder incurring financial loss
beyond his or her investment due to shareholder liability is limited to
circumstances in which the Trust itself is unable to meet its obligations and
the express disclaimer of shareholder liabilities is determined not
14
to be effective. Given the nature of the assets and operations of the Trust, the
possibility of the Trust being unable to meet its obligations is considered
remote, and even if a claim were brought against the Trust and a court
determined that shareholders were personally liable, it would likely not impose
a material obligation on a shareholder.
ELECTION OF DIRECTORS/TRUSTEES; TERMS
The shareholders of Buyer have elected a majority of the directors of
Buyer. Each director serves until a successor is elected, subject to his or her
earlier death, resignation or removal in the manner provided by law (see below).
In the case of a vacancy on the Board of Directors (other than a vacancy created
by removal by the shareholders), a majority of the directors may appoint a
successor to fill such vacancy. The right of the Board of Directors to appoint
directors to fill vacancies without shareholder approval is subject to the
provisions of the 1940 Act.
The shareholders of Trust have elected a majority of the trustees of Trust.
Such trustees serve for the life of Trust, subject to their earlier death,
incapacitation, resignation, retirement or removal (see below). In the case of
any vacancy on the Board of Trustees, a majority of the trustees may appoint a
successor to fill such vacancy. The right of the Board of Trustees to appoint
trustees to fill vacancies without shareholder approval is subject to the
provisions of the 1940 Act.
REMOVAL OF DIRECTORS/TRUSTEES
A director of Buyer may be removed by the affirmative vote of a majority of
the Board of Directors, a committee of the Board of Directors appointed for such
purpose, or the holders of a majority of the outstanding shares of Buyer.
A trustee of Trust may be removed at any time by a written instrument
signed by at least two-thirds of the trustees or by vote of two-thirds of the
outstanding shares of Trust.
MEETINGS OF SHAREHOLDERS
Buyer is not required to hold annual meetings of shareholders and does not
intend to do so unless required by the 1940 Act. The bylaws of Buyer provide
that a special meeting of shareholders may be called by the president or, in his
or her absence, the vice-president or by a majority of the Board of Directors or
holders of shares entitled to cast at least 10% of the votes entitled to be cast
at the special meeting. Requests for special meetings must, among other things,
state the purpose of such meeting and the matters to be voted upon. No special
meeting need be called to consider any matter previously voted upon at a special
meeting called by the shareholders during the preceding twelve months, unless
requested by a majority of all shares entitled to vote at such meeting.
Trust is not required to hold annual meetings of shareholders unless
required by the 1940 Act and does not intend to do so. The bylaws of Trust
provide that any trustee may call a special meeting of shareholders and the
trustees shall call a special meeting of the shareholders solely for the purpose
of removing one or more trustees upon written request of the holders of not less
than 10% of the outstanding shares of Trust. Special meetings may be called for
the purpose of electing trustees or for any other action requiring shareholder
approval, or for any matter deemed by the trustees to be necessary or desirable.
LIABILITY OF DIRECTORS/TRUSTEES AND OFFICERS; INDEMNIFICATION
Maryland law permits a corporation to eliminate liability of its directors
and officers to the corporation or its stockholders, except for liability
arising from receipt of an improper benefit or profit and from active and
deliberate dishonesty. The Articles of Incorporation eliminate director and
officer liability to the fullest extent permitted under Maryland law. Under
Maryland law, indemnification of a corporation's directors and officers is
mandatory if a director or officer has been successful on the merits or
otherwise in the defense of certain proceedings. Maryland law permits
indemnification for other matters unless it is
15
established that the act or omission giving rise to the proceeding was committed
in bad faith, a result of active and deliberate dishonesty, or one in which a
director or officer actually received an improper benefit.
Delaware law provides that trustees of a statutory trust shall not be
liable to the statutory trust or its shareholders for acting in good faith
reliance on the provisions of its governing instrument and that the trustee's
liabilities may be expanded or restricted by such instrument. Under the
Declaration of Trust, the trustees and officers of Trust are not liable for any
act or omission or any conduct whatsoever in their capacity as trustees, except
for liability to the trust or shareholders due to willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of trustee. Delaware law allows a statutory trust to
indemnify and hold harmless any trustee or other person against any and all
claims and demands. The Declaration of Trust provides for the indemnification of
its trustees and officers to the extent that such trustees and officers act in
good faith and reasonably believe that their conduct is in the best interests of
Trust, except with respect to any matter in which it has been determined that
such trustee acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.
DISSOLUTION AND TERMINATION
Maryland law provides that Buyer may be dissolved by the vote of a majority
of the Board of Directors and two-thirds of the shares entitled to vote on the
dissolution; however the Articles of Incorporation reduce the required
shareholder vote from two-thirds to a majority of the shares entitled to vote on
the dissolution.
Pursuant to the Declaration of Trust, Trust or any series or class of
shares of beneficial interest in Trust may be terminated by: (1) a majority
shareholder vote of Trust or the affected series or class, respectively; or (2)
if there are fewer than 100 shareholders of record of Trust or of such
terminating series or class, the trustees pursuant to written notice to the
shareholders of Trust or the affected series or class.
VOTING RIGHTS OF SHAREHOLDERS
Shareholders of a Maryland corporation such as Buyer are entitled to vote
on, among other things, those matters which effect fundamental changes in the
corporate structure (such as a merger, consolidation or sale of substantially
all of the assets of the corporation) as provided by Maryland law.
The Declaration of Trust grants shareholders power to vote only with
respect to the following: (i) election of trustees, provided that a meeting of
shareholders has been called for that purpose; (ii) removal of trustees,
provided that a meeting of shareholders has been called for that purpose; (iii)
termination of Trust or a series or class of its shares of beneficial interest,
provided that a meeting of shareholders has been called for that purpose; (iv)
sale of all or substantially all of the assets of Trust or one of its investment
portfolios; (v) merger or consolidation of Trust or any of its investment
portfolios, with certain exceptions; (vi) approval of any amendments to
shareholders' voting rights under the Declaration of Trust; and (vii) approval
of such additional matters as may be required by law or as the trustees, in
their sole discretion, shall determine.
DISSENTERS' RIGHTS
Under Maryland law, shareholders may not demand the fair value of their
shares from the successor company in a transaction involving the transfer of the
corporation's assets and are, therefore, bound by the terms of the transaction
if the stock is that of an open-end investment company registered with the SEC
under the 1940 Act and the value placed on the stock in the transaction is its
net asset value.
Neither Delaware law nor the Declaration of Trust confers upon shareholders
rights of appraisal or dissenters' rights.
16
AMENDMENTS TO ORGANIZATION DOCUMENTS
Consistent with Maryland law, Buyer reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation in the
manner prescribed by statute, including any amendment that alters the contract
rights, as expressly set forth in the Articles of Incorporation, of any
outstanding stock, and all rights conferred on shareholders are granted subject
to this reservation. The Board of Directors of Buyer may approve amendments to
the Articles of Incorporation to classify or reclassify unissued shares of a
class of stock without shareholder approval. Other amendments to the Articles of
Incorporation may be adopted if approved by the affirmative vote of a majority
of all the votes entitled to be cast on the matter. The directors shall have the
power to alter, amend or repeal the bylaws of Buyer or adopt new bylaws at any
time.
Consistent with Delaware law, the Board of Trustees of Trust may, without
shareholder approval, amend the Declaration of Trust at any time, except to
eliminate any voting rights pertaining to the shares of Trust, without approval
of the majority of the shares of Trust. The trustees shall have the power to
alter, amend or repeal the bylaws of Trust or adopt new bylaws at any time.
17
CAPITALIZATION
The following table sets forth, as of March 31, 2003, (i) the
capitalization of each class of shares of your Fund, (ii) the capitalization of
each class of shares of Buying Fund, and (iii) the pro forma capitalization of
each class of shares of Buying Fund as adjusted to give effect to the
transactions contemplated by the Agreement.
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
CLASS A SHARES CLASS A SHARES CLASS A SHARES
-------------- -------------- --------------
Net Assets.......................................... $94,533,203 $449,557 $94,982,760
Shares Outstanding.................................. 8,973,360 55,310 11,677,632
Net Asset Value Per Share........................... $ 10.53 $ 8.13 $ 8.13
</Table>
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
CLASS B SHARES CLASS B SHARES CLASS B SHARES
-------------- -------------- --------------
Net Assets.......................................... $37,175,750 $192,632 $37,368,382
Shares Outstanding.................................. 3,535,980 23,629 4,583,525
Net Asset Value Per Share........................... $ 10.51 $ 8.15 $ 8.15
</Table>
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
CLASS C SHARES CLASS C SHARES CLASS C SHARES
-------------- -------------- --------------
Net Assets.......................................... $5,632,434 $666,810 $6,299,244
Shares Outstanding.................................. 535,972 81,170 767,292
Net Asset Value Per Share........................... $ 10.51 $ 8.21 $ 8.21
</Table>
<Table>
<Caption>
PRO FORMA
BUYING FUND BUYING FUND
INVESTOR CLASS SHARES INVESTOR CLASS SHARES
--------------------- ---------------------
Net Assets............................................... $72,749,091 $72,749,091
Shares Outstanding....................................... 8,881,313 8,881,313
Net Asset Value Per Share................................ $ 8.19 $ 8.19
</Table>
18
INTERESTS OF CERTAIN PERSONS
If the Reorganization is consummated and if the shareholders of Buying Fund
do not approve a proposed new investment advisory agreement with AIM, INVESCO,
as the current investment advisor of Buying Fund, will gain approximately $137
million in additional assets under management (based on your Fund's net assets
as of March 31, 2003), upon which INVESCO will receive advisory fees. Exhibit C
sets forth INVESCO's advisory fees applicable to Buying Fund.
LEGAL MATTERS
Certain legal matters concerning the tax consequences of the Reorganization
will be passed upon by Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
NW, Washington, DC 20036-1221.
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND
For more information with respect to your Fund concerning the following
topics, please refer to the following sections of the Selling Fund Prospectus,
which has been made a part of this Proxy Statement/ Prospectus by reference: (i)
see "Performance Information" for more information about the performance of your
Fund; (ii) see "Fund Management" for more information about the management of
your Fund; (iii) see "Other Information" for more information about your Fund's
policy with respect to dividends and distributions; and (iv) see "Other
Information" and "Shareholder Information" for more information about sales
charges, including contingent deferred sales charges, applicable to shares of
your Fund, the pricing, purchase, redemption and repurchase of shares of your
Fund, tax consequences to shareholders of various transactions in shares of your
Fund, distribution arrangements and the multiple class structure of your Fund.
For more information with respect to Buying Fund concerning the following
topics, please refer to the following sections of the Buying Fund Prospectus,
which has been made a part of this Proxy Statement/ Prospectus by reference and
which is attached to this Proxy Statement/Prospectus as Appendix II: (i) see
"Fund Performance" for more information about the performance of Buying Fund;
(ii) see "Fund Management" and "Portfolio Managers" for more information about
the management of Buying Fund; (iii) see "Share Price" for more information
about the pricing of shares of Buying Fund; (iv) see "Taxes" for more
information about tax consequences to shareholders of various transactions in
shares of Buying Fund; (v) see "Dividends And Capital Gain Distributions" for
more information about Buying Fund's policy with respect to dividends and
distributions; and (vi) see "How To Buy Shares", "How To Sell Shares" and "Your
Account Services" for more information about sales charges, including contingent
deferred sales charges, applicable to shares of Buying Fund, the purchase,
redemption and repurchase of shares of Buying Fund, distribution arrangements
and the multiple class structure of Buying Fund.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which Trust and
Buyer have filed with the SEC pursuant to the requirements of the 1933 Act and
the 1940 Act, to which reference is hereby made. The SEC file number of Trust's
registration statement containing the Selling Fund Prospectus and related
Statement of Additional Information is Registration No. 811-01540. Such Selling
Fund Prospectus is incorporated herein by reference. The SEC file number for
Buyer's registration statement containing the Buying Fund Prospectus and related
Statement of Additional Information is Registration No. 811-03826. Such Buying
Fund Prospectus is incorporated herein by reference.
Trust and Buyer are subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith
file reports and other information with the SEC. Reports, proxy material,
registration statements and other information filed by Trust and Buyer
(including the
19
Registration Statement of Buyer relating to Buying Fund on Form N-14 of which
this Proxy Statement/ Prospectus is a part) may be inspected without charge and
copied at the public reference facilities maintained by the SEC at Room 1014,
Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the
following regional office of the SEC: 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, NW, Washington, DC
20549, at the prescribed rates. The SEC maintains a website at www.sec.gov that
contains information regarding Trust and Buyer and other registrants that file
electronically with the SEC.
PROPOSAL 2 --
ELECTION OF TRUSTEES
BACKGROUND
In considering the integration initiative proposed by AMVESCAP, the
independent directors/trustees of the AIM Funds and the independent directors of
the INVESCO Funds determined that the shareholders of all the AIM Funds and the
INVESCO Funds would benefit if a unified board of directors/trustees was
responsible for overseeing the operation of both the AIM Funds and the INVESCO
Funds and the services provided by AIM, INVESCO and their affiliates.
Accordingly, the Boards of Directors/Trustees of the AIM Funds and the Boards of
Directors of the INVESCO Funds agreed to combine the separate boards and create
a unified board of directors/trustees.
You are being asked to approve Proposal 2 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to benefit from having
a combined board of trustees.
STRUCTURE OF THE BOARD OF TRUSTEES
The Board currently consists of 12 persons. Ten of the current trustees are
"independent," meaning they are not "interested persons" of Trust within the
meaning of the 1940 Act. Two of the current trustees are "interested persons"
because of their business and financial relationships with Trust and AIM, its
investment advisor, and/or AIM's parent, AMVESCAP.
NOMINEES FOR TRUSTEES
Trust's Committee on Directors/Trustees (which consists solely of
independent trustees) has approved the nomination of each of the 12 current
trustees, as set forth below, to serve as trustee until his or her successor is
elected and qualified. In addition, the Committee on Directors/Trustees has
approved the nomination of four new nominees, as set forth below, to serve as
trustee until his or her successor is elected and qualified. These four new
nominees were nominated to effect the proposed combination of the Boards of
Directors/Trustees of the AIM Funds and the Boards of Directors of the INVESCO
Funds.
Each nominee who is a current trustee serves as a director or trustee of
the 17 registered investment companies comprising the AIM Funds. Each nominee
who is a current trustee oversees 86 portfolios which comprise the AIM Funds.
The business address of each nominee who is a current trustee is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
Each new nominee serves as a director of the ten registered investment
companies comprising the INVESCO Funds. Each new nominee currently oversees 46
portfolios which comprise the INVESCO Funds. The business address of each new
nominee is 4350 South Monaco Street, Denver, Colorado 80237.
If elected, each nominee would oversee a total of 27 registered investment
companies currently comprising 132 portfolios.
20
NOMINEES WHO CURRENTLY ARE INDEPENDENT TRUSTEES
<Table>
<Caption>
TRUSTEE PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ------- ----------------------- --------------------------
Frank S. Bayley -- 1939........ 2001 Of Counsel, law firm of Baker Badgley Funds, Inc.
& McKenzie (registered investment
company)
Bruce L. Crockett -- 1944...... 1997 Chairman, Crockett Technology ACE Limited (insurance
Associates (technology company); Captaris, Inc.
consulting company) and (unified messaging provider)
Captaris, Inc. (unified
messaging provider)
Albert R. Dowden -- 1941....... 2000 Director of a number of public Cortland Trust, Inc.
and private business (Chairman) (registered
corporations, including the investment company); Annuity
Boss Group, Ltd. (private and Life Re (Holdings), Ltd.
investment and management) and (insurance company)
Magellan Insurance Company;
formerly President, Chief
Executive Officer and
Director, Volvo Group North
America, Inc.; Senior Vice
President, AB Volvo and
director of various affiliated
Volvo Group companies
Edward K. Dunn, Jr. -- 1935.... 1998 Formerly, Chairman, Mercantile None
Mortgage Corp.; President and
Chief Operating Officer,
Mercantile-Safe Deposit &
Trust Co.; and President,
Mercantile Bankshares Corp.
Jack M. Fields -- 1952......... 1997 Chief Executive Officer, Administaff
Twenty First Century Group,
Inc. (government affairs
company) and Texana Timber LP
Carl Frischling -- 1937........ 1993 Partner, law firm of Kramer Cortland Trust, Inc.
Levin Naftalis & Frankel LLP (registered investment
company)
Prema Mathai-Davis -- 1950..... 1998 Formerly, Chief Executive None
Officer, YWCA of the USA
Lewis F. Pennock -- 1942....... 1992 Partner, law firm of Pennock & None
Cooper
Ruth H. Quigley -- 1935........ 2001 Retired None
Louis S. Sklar -- 1939......... 1993 Executive Vice President, None
Development and Operations,
Hines Interests Limited
Partnership (real estate
development company)
</Table>
21
NOMINEES WHO CURRENTLY ARE INTERESTED PERSONS
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S)
POSITION(S) HELD WITH TRUST SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- --------------------------- ------- ----------------------- --------------------------
Robert H. Graham(1) -- 1946.... 1992 Director and Chairman, A I M None
Chairman and President Management Group Inc.
(financial services holding
company); and Director and
Vice Chairman, AMVESCAP PLC
(parent of AIM and a global
investment management firm)
and Chairman, AMVESCAP
PLC -- AIM Division; 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), A I M Fund
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 Director of each of the ten
Executive Vice President Executive Officer, A I M INVESCO Funds
Management Group Inc.;
Director, Chairman and
President, A I M Advisors,
Inc. (registered investment
advisor); Director, A I M
Distributors, Inc. (registered
broker dealer); and Chief
Executive Officer of the AIM
Division of AMVESCAP PLC
(2003-present); formerly,
Chief Executive Officer,
Managed Products Division,
AMVESCAP PLC (2001-2002);
Chairman of the Board
(1998-2002), President
(1998-2002) and Chief
Executive Officer (1998-2002)
of INVESCO Funds Group, Inc.
(registered investment
advisor) and INVESCO
Distributors, Inc. (registered
broker dealer); Chief
Operating Officer and Chairman
of the Board of INVESCO Global
Health Sciences Fund; Chairman
and Chief Executive Officer of
NationsBanc Advisors, Inc.;
and Chairman of NationsBanc
Investments, Inc.
</Table>
- ---------------
(1) Mr. Graham is considered an interested person of Trust because he is a
director of AMVESCAP PLC, parent of the advisor to, and principal
underwriter of, Trust.
(2) Mr. Williamson is considered an interested person of Trust because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, Trust.
22
NEW NOMINEES WHO WILL BE INDEPENDENT TRUSTEES
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
- ---------------------- ----------------------- --------------------------
Bob R. Baker -- 1936.............. Consultant (2000-present); None
formerly, President and Chief
Executive Officer (1988-2000) of
AMC Cancer Research Center,
Denver, Colorado; until
mid-December 1988, Vice Chairman
of the Board of First Columbia
Financial Corporation, Englewood,
Colorado; formerly, Chairman of
the Board and Chief Executive
Officer of First Columbia
Financial Corporation.
James T. Bunch -- 1942............ Co-President and Founder of None
Green, Manning & Bunch Ltd.,
Denver, Colorado (1988-present)
(investment banking firm);
Director and Vice President of
Western Golf Association and
Evans Scholars Foundation;
Executive Committee, United
States Golf Association;
formerly, General Counsel and
Director of Boettcher & Co.,
Denver, Colorado; and formerly,
Chairman and Managing Partner,
law firm of Davis, Graham &
Stubbs, Denver, Colorado.
Gerald J. Lewis -- 1933........... Chairman of Lawsuit Resolution General Chemical Group, Inc.,
Services, San Diego, California Hampdon, New Hampshire (1996-
(1987-present); formerly, present), Wheelabrator
Associate Justice of the Technologies, Inc. (waste
California Court of Appeals; and management company), Fisher
Of Counsel, law firm of Latham & Scientific, Inc. (laboratory
Watkins, San Diego, California supplies), Henley Manufacturing,
(1987-1997). Inc., and California Coastal
Properties, Inc.
Larry Soll, Ph.D. -- 1942......... Retired; formerly, Chairman of Synergen Inc. (since
the Board (1987-1994), Chief incorporation in 1982) and Isis
Executive Officer (1982-1989 and Pharmaceuticals, Inc.
1993-1994) and President
(1982-1989) of Synergen Inc.
(biotechnology company); and
formerly, trustee of INVESCO
Global Health Sciences Fund.
</Table>
THE BOARD'S RECOMMENDATION ON PROPOSAL 2
Your Board, including the independent trustees, unanimously recommends that
you vote "FOR" these 16 nominees.
COMMITTEES OF THE BOARD
The Board has four standing committees: an Audit Committee, an Investments
Committee, a Valuation Committee and a Committee on Directors/Trustees. These
committees will remain as part of the proposed combined board.
AUDIT COMMITTEE
The Audit Committee is comprised entirely of independent trustees. The
current members of the Audit Committee are Messrs. Frank S. Bayley, Bruce L.
Crockett, Albert R. Dowden (Vice Chair), Edward K. Dunn, Jr. (Chair), Jack M.
Fields, Lewis F. Pennock, Louis S. Sklar, Dr. Prema Mathai-
23
Davis and Miss Ruth H. Quigley. The Audit Committee is responsible for: (i) the
appointment, compensation and oversight of any independent auditors employed by
your Fund (including resolution of disagreements between your Fund's management
and the auditor regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work; (ii) overseeing the financial reporting
process of your Fund; (iii) monitoring the process and the resulting financial
statements prepared by management to promote accuracy of financial reporting and
asset valuation; and (iv) pre-approving permissible non-audit services that are
provided to your Fund by its independent auditors.
COMMITTEE ON DIRECTORS/TRUSTEES
The Committee on Directors/Trustees is comprised entirely of independent
trustees. The current members of the Committee on Directors/Trustees are Messrs.
Bayley, Crockett (Chair), Dowden, Dunn, Fields (Vice Chair), Pennock and Sklar,
Dr. Mathai-Davis and Miss Quigley. The Committee on Directors/Trustees is
responsible for: (i) nominating persons who are not interested persons of Trust
for election or appointment: (a) as additions to the Board, (b) to fill
vacancies which, from time to time, may occur in the Board and (c) for election
by shareholders of Trust at meetings called for the election of trustees; (ii)
nominating persons who are not interested persons of Trust for selection as
members of each committee of the Board, including, without limitation, the Audit
Committee, the Committee on Directors/ Trustees, the Investments Committee and
the Valuation Committee, and to nominate persons for selection as chair and vice
chair of each such committee; (iii) reviewing from time to time the compensation
payable to the independent trustees and making recommendations to the Board
regarding compensation; (iv) reviewing and evaluating from time to time the
functioning of the Board and the various committees of the Board; (v) selecting
independent legal counsel to the independent trustees and approving the
compensation paid to independent legal counsel; and (vi) approving the
compensation paid to independent counsel and other advisers, if any, to the
Audit Committee of Trust.
The Committee on Directors/Trustees will consider nominees recommended by a
shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Committee on Directors/Trustees or the Board, as applicable, shall
make the final determination of persons to be nominated.
Notice procedures set forth in Trust's bylaws require that any shareholder
of your Fund desiring to nominate a trustee for election at a shareholder
meeting must submit to the Secretary of Trust 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 meeting and not earlier than the close of business
on the 120th day prior to the meeting. The notice must set forth: (i) as to each
person whom the shareholder proposes to nominate for election or reelection as a
trustee all information relating to such person that is required to be disclosed
in solicitations of proxies for election of trustees in an election contest, or
is otherwise required, in each case pursuant to Regulation 14A of the Securities
Exchange Act of 1934 (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a trustee if elected); and
(ii) as to the shareholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination is made: (a) the name and address of such
shareholder, as they appear on Trust's books, and of such beneficial owner; and
(b) the number of shares of each series portfolio of Trust which are owned of
record or beneficially by such shareholder and such beneficial owner.
INVESTMENTS COMMITTEE
The current members of the Investments Committee are Messrs. Bayley,
Crockett, Dowden, Dunn, Fields, Carl Frischling, Pennock and Sklar (Chair), Dr.
Mathai-Davis (Vice Chair) and Miss Quigley. The Investments Committee is
responsible for: (i) overseeing AIM's investment-related compliance systems and
procedures to ensure their continued adequacy; and (ii) considering and acting,
on an interim basis between meetings of the full Board, on investment-related
matters requiring Board consideration, including dividends and distributions,
brokerage policies and pricing matters.
24
VALUATION COMMITTEE
The current members of the Valuation Committee are Messrs. Dunn and Pennock
(Chair), and Miss Quigley (Vice Chair). The Valuation Committee is responsible
for: (i) periodically reviewing AIM's Procedures for Valuing Securities
("Procedures"), and making any recommendations to AIM with respect thereto; (ii)
reviewing proposed changes to the Procedures recommended by AIM from time to
time; (iii) periodically reviewing information provided by AIM regarding
industry developments in connection with valuation; (iv) periodically reviewing
information from AIM regarding fair value and liquidity determinations made
pursuant to the Procedures, and making recommendations to the full Board in
connection therewith (whether such information is provided only to the Committee
or to the Committee and the full Board simultaneously); and (v) if requested by
AIM, assisting AIM's internal valuation committee and/or the full Board in
resolving particular valuation anomalies.
BOARD AND COMMITTEE MEETING ATTENDANCE
During the fiscal year ended December 31, 2002, the Board met ten times,
the Audit Committee met six times, the Committee on Directors/Trustees met five
times, the Investments Committee met four times and the Valuation Committee met
one time. All of the current trustees then serving attended at least 75% of the
meetings of the Board or applicable committee during the most recent fiscal
year.
TRUSTEE'S COMPENSATION
Each trustee who is not affiliated with AIM is compensated for his or her
services according to a fee schedule which recognizes the fact that such trustee
also serves as a director or trustee of other AIM Funds. Each such trustee
receives a fee, allocated among the AIM Funds for which he or she serves as a
director or trustee, which consists of an annual retainer component and a
meeting fee component.
Information regarding compensation paid or accrued for each trustee of
Trust who was not affiliated with AIM during the year ended December 31, 2002 is
found in Exhibit D.
RETIREMENT PLAN FOR TRUSTEES
The trustees have adopted a retirement plan for the trustees of 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 Trust and/or the other AIM Funds (each, a "Covered Fund") who has at least
five years of credited service as a trustee (including service to a predecessor
fund) for a Covered Fund. The retirement benefits will equal 75% of the
trustee's annual retainer paid or accrued by any Covered Fund to such trustee
during the twelve-month period prior to retirement, including the amount of any
retainer deferred under a separate deferred compensation agreement between the
Covered Fund and the trustee. The annual retirement benefits are payable in
quarterly installments for a number of years equal to the lesser of (i) ten or
(ii) the number of such trustee's credited years of service. A death benefit is
also available under the plan that provides a surviving spouse with a quarterly
installment of 50% of a deceased trustee's retirement benefits for the same
length of time that the trustee would have received the benefits 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. Payment of benefits
under the plan is not secured or funded by Trust.
DEFERRED COMPENSATION AGREEMENTS
Messrs. Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (for
purposes of this paragraph only, the "Deferring Trustees") have each executed a
Deferred Compensation Agreement (collectively, the
25
"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 Trust, and such amounts are placed into a deferral
account. Currently, the Deferring Trustees have the option to select various AIM
Funds in which all or part of their deferral accounts shall be deemed to be
invested. Distributions from the Deferring Trustees' deferral accounts will be
paid in cash, generally in equal quarterly installments over a period of up to
ten (10) years (depending on the Compensation Agreement) beginning on the date
selected under the Compensation Agreement. The Board in its sole discretion, may
accelerate or extend the distribution of such deferral accounts after the
Deferring Trustees' 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 Trustees' termination of service as a
trustee of 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 Trust
and of each other AIM Fund from which they are deferring compensation.
OFFICERS OF TRUST
Information regarding the current officers of Trust can be found in Exhibit
E.
SECURITY OWNERSHIP OF MANAGEMENT
Information regarding the ownership of each class of your Fund's shares by
trustees, nominees, and current executive officers of Trust can be found in
Exhibit F.
TRUSTEE OWNERSHIP OF YOUR FUND'S SHARES
The dollar range of equity securities beneficially owned by each trustee
and nominee as of December 31, 2002 (i) in your Fund and (ii) on an aggregate
basis, in all registered investment companies overseen by the trustee within the
AIM Funds complex can be found in Exhibit G.
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
PROXY STATEMENT/PROSPECTUS
We are sending you this Proxy Statement/Prospectus and the enclosed proxy
card because the Board is soliciting your proxy to vote at the Special Meeting
and at any adjournments of the Special Meeting. This Proxy Statement/Prospectus
gives you information about the business to be conducted at the Special Meeting.
However, you do not need to attend the Special Meeting to vote your shares.
Instead, you may simply complete, sign and return the enclosed proxy card or
vote by telephone or through a website established for that purpose.
Trust intends to mail this Proxy Statement/Prospectus, the enclosed Notice
of Special Meeting of Shareholders and the enclosed proxy card on or about
August 25, 2003 to all shareholders entitled to vote. Shareholders of record as
of the close of business on July 25, 2003 (the "Record Date") are entitled to
vote at the Special Meeting. The number of shares outstanding of each class of
shares of your Fund on the Record Date can be found at Exhibit H.
Each share is entitled to one vote for each full share held, and a
fractional vote for a fractional share held.
TIME AND PLACE OF SPECIAL MEETING
We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 on October 21, 2003, at 3:00 p.m., Central Time.
26
VOTING IN PERSON
If you do attend the Special Meeting and wish to vote in person, we will
provide you with a ballot prior to the vote. However, if your shares are held in
the name of your broker, bank or other nominee, you must bring a letter from the
nominee indicating that you are the beneficial owner of the shares on the Record
Date and authorizing you to vote. Please call Trust at (800) 952-3502 if you
plan to attend the Special Meeting.
VOTING BY PROXY
Whether you plan to attend the Special Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the Special Meeting and vote.
If you properly fill in and sign your proxy card and send it to us in time
to vote at the Special Meeting, your "proxy" (the individual named on your proxy
card) will vote your shares as you have directed. If you sign your proxy card
but do not make specific choices, your proxy will vote your shares as
recommended by the Board as follows and in accordance with management's
recommendation on other matters:
- FOR the proposal to approve the Agreement.
- FOR the election of all 16 nominees for trustee.
Your proxy will have the authority to vote and act on your behalf at any
adjournment of the Special Meeting.
If you authorize a proxy, you may revoke it at any time before it is
exercised by sending in another proxy card with a later date or by notifying the
Secretary of Trust in writing to the address of Trust set forth on the cover
page of this Proxy Statement/Prospectus before the Special Meeting that you have
revoked your proxy. In addition, although merely attending the Special Meeting
will not revoke your proxy, if you are present at the Special Meeting you may
withdraw your proxy and vote in person. Shareholders may also transact any other
business not currently contemplated that may properly come before the Special
Meeting in the discretion of the proxies or their substitutes.
VOTING BY TELEPHONE OR THE INTERNET
You may vote your shares by telephone or through a website established for
that purpose by following the instructions that appear on the proxy card
accompanying this Proxy Statement/Prospectus.
QUORUM REQUIREMENT AND ADJOURNMENT
A quorum of shareholders is necessary to hold a valid meeting. A quorum
will exist for Proposal 1 if shareholders entitled to vote one-third of the
issued and outstanding shares of your Fund on the Record Date are present at the
Special Meeting in person or by proxy. A quorum will exist for Proposal 2 if
shareholders entitled to vote one-third of the issued and outstanding shares of
Trust on the Record Date are present at the Special Meeting in person or by
proxy.
Under the rules applicable to broker-dealers, if your broker holds your
shares in its name, the broker will not be entitled to vote your shares if it
has not received instructions from you. A "broker non-vote" occurs when a broker
has not received voting instructions from a shareholder and is barred from
voting the shares without shareholder instructions because the proposal is
non-routine.
Abstentions and broker non-votes will count as shares present at the
Special Meeting for purposes of establishing a quorum.
If a quorum is not present at the Special Meeting or a quorum is present
but sufficient votes to approve a Proposal are not received, the persons named
as proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies. Any such adjournment will require the
27
affirmative vote of a majority of those shares represented at the Special
Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR a Proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST such
Proposal against such adjournment. A shareholder vote may be taken on a Proposal
in this Proxy Statement/ Prospectus prior to any such adjournment if sufficient
votes have been received and it is otherwise appropriate.
VOTE NECESSARY TO APPROVE EACH PROPOSAL
PROPOSAL 1. Approval of Proposal 1 requires the lesser of (a) the
affirmative vote of 67% or more of the voting securities of your Fund present or
represented by proxy at the Special Meeting, if the holders of more than 50% of
the outstanding voting securities of your Fund are present or represented by
proxy, or (b) the affirmative vote of more than 50% of the outstanding voting
securities of your Fund. Abstentions and broker non-votes are counted as present
but are not considered votes cast at the Special Meeting. As a result, they have
the same effect as a vote against Proposal 1 because approval of Proposal 1
requires the affirmative vote of a percentage of the voting securities present
or represented by proxy or a percentage of the outstanding voting securities.
PROPOSAL 2. The affirmative vote of a plurality of votes cast at the
Special Meeting is necessary to elect trustees, meaning that the trustee nominee
with the most affirmative votes for a particular slot is elected for that slot.
In an uncontested election for trustees, the plurality requirement is not a
factor. Abstentions and broker non-votes will not count as votes cast and will
have no effect on the outcome of this proposal.
PROXY SOLICITATION
Trust has engaged the services of Georgeson Shareholder Communications Inc.
("Solicitor") to assist in the solicitation of proxies for the Special Meeting.
Solicitor's costs are estimated to be approximately $43,800. Trust expects to
solicit proxies principally by mail, but Trust or Solicitor may also solicit
proxies by telephone, facsimile or personal interview. Trust's officers will not
receive any additional or special compensation for any such solicitation. Your
Fund and AMVESCAP, on behalf of AIM, will bear the costs and expenses incurred
in connection with the Reorganization, including Solicitor's costs.
OTHER MATTERS
Management does not know of any matters to be presented at the Special
Meeting other than those discussed in this Proxy Statement/Prospectus. If any
other matters properly come before the Special Meeting, the shares represented
by proxies will be voted with respect thereto in accordance with management's
recommendation.
SHAREHOLDER PROPOSALS
As a general matter, your Fund does not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of your Fund, you should send such proposal to Trust at the address
set forth on the first page of this Proxy Statement/Prospectus. To be considered
for presentation at a meeting of shareholders, Trust must receive proposals a
reasonable time before proxy materials are prepared for the meeting. Your
proposal also must comply with applicable law.
For a discussion of procedures that you must follow if you want to propose
an individual for nomination as a trustee, please refer to the section of this
Proxy Statement/Prospectus entitled "Proposal 2 -- Committees of the
Board -- Committee on Directors/Trustees."
28
OWNERSHIP OF SHARES
A list of the name, address and percent ownership of each person who, as of
July 25, 2003 to the knowledge of Trust owned 5% or more of any class of the
outstanding shares of your Fund can be found at Exhibit I.
A list of the name, address and percent ownership of each person who, as of
July 25, 2003 to the knowledge of Buyer owned 5% or more of any class of the
outstanding shares of Buying Fund can be found at Exhibit J.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP
(the "Auditor") as Trust's independent public accountants for the fiscal year
ending December 31, 2003. A representative of the Auditor is expected to be
available at the Special Meeting and to have the opportunity to make a statement
and respond to appropriate questions from the shareholders. The Audit Committee
of the Board has considered whether the provision of the services below is
compatible with maintaining the Auditor's independence.
FEES PAID TO THE AUDITOR RELATED TO TRUST
The Auditor billed Trust (consisting of twelve separate series portfolios)
aggregate fees for professional services rendered for the 2002 fiscal year as
follows:
<Table>
Audit Fees.................................................. $292,970
Financial Information Systems Design and Implementation
Fees...................................................... 0
All Other Fees*............................................. 52,214
--------
Total Fees.................................................. $345,184
</Table>
- ---------------
* All Other Fees includes fees billed for all other non-audit services,
including fees for tax-related services rendered to Trust.
FEES PAID TO THE AUDITOR NOT RELATED TO TRUST
The Auditor billed AIM aggregate fees for professional services rendered
for the 2002 fiscal year to AIM, or any affiliate that provided services to
Trust, as follows:
<Table>
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees**............................................ 346,364
--------
Total Fees.................................................. $346,364
</Table>
- ---------------
** As required by SEC rules, All Other Fees includes amounts paid to the Auditor
by your Fund's advisor and other related entities that provides support for
the operations of Trust. All Other Fees include business advisory services
performed for the selection of a transfer agent and its conversion. The
services provided benefited many legal entities of AIM, including many other
funds within the AIM Fund complex.
29
EXHIBIT A
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF SHARES OF YOUR FUND SHARES OF BUYING FUND
------------------------------ ------------------------
Class A shares.............................................. Class A shares
Class B shares.............................................. Class B shares
Class C shares.............................................. Class C shares
</Table>
A-1
EXHIBIT B
COMPARISON OF PERFORMANCE OF YOUR FUND AND BUYING FUND
AIM GLOBAL UTILITIES FUND (YOUR FUND)
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.
ANNUAL TOTAL RETURNS(1)
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.
<Table>
<Caption>
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
1993................................................................... 12.32%
1994................................................................... -11.57%
1995................................................................... 28.07%
1996................................................................... 13.88%
1997................................................................... 23.71%
1998................................................................... 16.01%
1999................................................................... 34.15%
2000................................................................... -2.54%
2001................................................................... -28.33%
2002................................................................... -25.96%
</Table>
The Class A shares' year-to-date total return as of March 31, 2003 was
- -5.35%.
During the periods shown in the bar chart, the highest quarterly return was
26.35% (quarter ended December 31, 1999) and the lowest quarterly return was
- -20.60% (quarter ended September 30, 2002).
B-1
PERFORMANCE TABLE(1)
The following performance table compares the fund's performance to that of
a broad-based securities market index and a peer group index. The fund's
performance reflects payment of sales loads. The indices do not reflect payment
of fees, expenses or taxes.
Average Annual Total Returns (for the periods ended December 31, 2002)
<Table>
<Caption>
INCEPTION
1 YEAR 5 YEARS 10 YEARS DATE
-------- -------- -------- ---------
Class A....................... 01/19/88
Return Before Taxes......... (30.03)% (5.32)% 3.15%
Return After Taxes on
Distributions............ (30.87) (7.11) 1.32
Return After Taxes on
Distributions and Sale of
Fund Shares.............. (18.40) (4.22) 2.07
S&P 500(2).................... (22.09) (0.58) 9.34
Lipper Utility Fund
Index(3).................... (22.07) (2.19) 4.87
</Table>
- ---------------
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on an investor's tax situation and may
differ from those shown, and after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts.
(1) A significant portion of the fund's returns during certain periods prior to
2001 was attributable to its investments in IPOs. These investments had a
magnified impact when the fund's asset base was relatively small. As the
fund's assets grow, the impact of IPO investments will decline, which may
reduce the effect of IPO investments on the fund's total return. For
additional information regarding the impact of IPO investments on the fund's
performance, please see the "Financial Highlights" section of the
prospectus.
(2) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance. In
addition, the Lipper Utility Fund Index (which may or may not include the
fund) is included for comparison to a peer group.
(3) The Lipper Utility Fund Index measures the performance of the 30 largest
utilities funds chartered by Lipper Analytical Services, Inc., an
independent mutual funds performance monitor.
INVESCO UTILITIES FUND (BUYING FUND)
Performance information in the bar chart below is that of the Fund's
Investor Class shares, which has the longest operating history of the Fund's
classes.
The bar chart below shows the Fund's Investor Class shares actual yearly
performance (commonly known as their "total return") for the years ended
December 31 over the past decade. The table below shows the pre-tax and
after-tax average annual total returns of Investor Class for various periods
ended December 31, 2002 compared to the S&P 500 Index.
After-tax returns are provided on a pre-redemption and post-redemption
basis. Pre-redemption returns assume you continue to hold your shares and pay
taxes on Fund distributions (i.e., dividends and capital gains) but do not
reflect taxes that may be incurred upon selling or exchanging shares.
Post-redemption returns assume payment of taxes on fund distributions and also
that you close your account and pay remaining federal taxes. After-tax returns
are calculated using the highest individual federal income tax rates in effect
at the time the distribution is paid. State and local taxes are not considered.
Actual after-tax returns depend on an investor's tax situation and may differ
from those shown. For investors holding their
B-2
shares in tax-deferred arrangements such as 401(k) plans or individual
retirement accounts, the after-tax return shown is not relevant.
The information in the bar chart and table illustrates the variability of
the Fund's total return and how its performance compared to a broad measure of
market performance. Remember, past performance (before and after taxes) does not
indicate how the Fund will perform in the future.
UTILITIES FUND -- INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1)(2)
<Table>
'93......................................................... 21.20%
'94......................................................... (9.94)%
'95......................................................... 25.25%
'96......................................................... 12.75%
'97......................................................... 24.38%
'98......................................................... 24.30%
'99......................................................... 19.88%
'00......................................................... 4.14%
'01......................................................... (33.98)%
'02......................................................... (22.29)%
</Table>
Best Calendar Qtr. 12/98 16.33%
Worst Calendar Qtr. 9/01 (23.67%)
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/02
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Utilities Fund(1)(2)
Return Before Taxes.................................... (22.29)% (4.46)% 4.32%
Return After Taxes on Distributions.................... (23.10)% (5.55)% 2.14%
Return After Taxes on Distributions and Sale of Fund
Shares................................................ (13.67)% (3.41)% 2.79%
S&P 500 Index(3)
(reflects no deduction for fees, expenses or taxes).... (22.09)% (0.58)% 9.35%
</Table>
- ---------------
(1) Total return figures include reinvested dividends and capital gain
distributions and the effect of each class' expenses.
(2) Returns before taxes for Investor Class shares of Utilities Fund
year-to-date as of the calendar quarter ended June 30, 2003 was 9.35%.
(3) The S&P 500 Index is an unmanaged index considered representative of the
performance of the broad U.S. stock market. Please keep in mind that the
Indexes do not pay brokerage, management, administrative, or distribution
expenses, all of which are paid by the classes and are reflected in their
annual returns. Index returns also do not include sales charges or CDSCs
that may be paid by the shareholder.
B-3
EXHIBIT C
COMPARISON FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table compares the shareholder fees and annual operating expenses,
expressed as a percentage of net assets ("Expense Ratios"), of Class A, Class B
and Class C shares of AIM Global Utilities Fund ("Selling Fund"), and of Class
A, Class B, Class C and Investor Class shares of INVESCO Utilities Fund ("Buying
Fund"). Pro Forma Combined Expense Ratios of Buying Fund giving effect to the
reorganization of Selling Fund into Buying Fund are also provided.
<Table>
<Caption>
SELLING FUND BUYING FUND
(AS OF 3/31/03) (AS OF 3/31/03)
------------------------------ -----------------------------------------
INVESTOR
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- ------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 5.50% None None 5.50% None None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(2)(3) 5.00% 1.00% None(3)(4) 5.00% 1.00% None
ANNUAL FUND OPERATING EXPENSES(5)
(expenses that are deducted from
fund assets)
Management fees(6)................. 0.60% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1)
Fees(7)(8)........................ 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25%
Other Expenses..................... 0.48% 0.48% 0.48% 0.64% 0.94% 1.95% 0.90%
Total Annual Fund Operating
Expenses(9)....................... 1.33% 2.08% 2.08% 1.64% 2.69% 3.70% 1.90%
Fee Waiver......................... None None None None None 0.95% None
Net Expenses....................... 1.33% 2.08% 2.08% 1.64% 2.69% 2.75% 1.90%
<Caption>
BUYING FUND
PRO FORMA COMBINED
(AS OF 3/31/03)
-----------------------------------------
INVESTOR
CLASS A CLASS B CLASS C CLASS
SHARES SHARES SHARES SHARES
------- ------- ------- --------
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 5.50% None None None
Maximum Deferred Sales Charge
(Load)(1)......................... None(3)(4) 5.00% 1.00% None
ANNUAL FUND OPERATING EXPENSES(5)
(expenses that are deducted from
fund assets)
Management fees(6)................. 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1)
Fees(7)(8)........................ 0.25% 1.00% 1.00% 0.25%
Other Expenses..................... 0.49% 0.56% 0.79% 0.87%
Total Annual Fund Operating
Expenses(9)....................... 1.49% 2.31% 2.54% 1.87%
Fee Waiver......................... None None None None
Net Expenses....................... 1.49% 2.31% 2.54% 1.87%
</Table>
- ---------------
(1) For Selling Fund, calculated as a percentage of original purchase price or
redemption proceeds, whichever is less. For Buying Fund and Buying Fund Pro
Forma Combined, calculated as a percentage of original purchase price.
(2) Effective November 1, 2002, if you are a retirement plan participant and you
bought $1,000,000 or more of Class A shares, you may pay a 1% contingent
deferred sales charge (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 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% CDSC at the
time of redemption.
(4) For qualified plans investing in Class A shares, you may pay a CDSC of 1% on
your Class A shares if the plan is redeemed within 12 months from the
initial deposit in the plan's INVESCO account.
C-1
(5) There is no guarantee that actual expenses will be the same as those shown
in the table.
(6) Effective September 23, 2002 through September 22, 2003, AIM has agreed to
waive advisory fees of Selling Fund in the amount of 0.02% of average net
assets. Total Annual Fund Operating Expenses were the same net of this
waiver.
(7) Because each class pays a 12b-1 distribution and service fee which is based
upon each class's assets, if you own shares for a long period of time, you
may pay more than the economic equivalent of the maximum front-end sales
charge permitted for mutual funds by the National Association of Securities
Dealers, Inc.
(8) 12b-1 distribution and service fee for Buying Fund Class A shares has been
restated to reflect 12b-1 fee arrangement effective July 1, 2003.
(9) INVESCO has contractually agreed to waive fees and bear any expenses on
Buying Fund through April 30, 2004 to limit Total Annual Operating Expenses
(excluding interest, taxes, brokerage commissions, extraordinary expenses
and increases due to expense offset arrangements, if any) to 2.10%, 2.75%
and 2.75% on Class A, Class B and Class C shares, respectively. INVESCO has
also voluntarily agreed to limit Total Annual Operating Expenses (excluding
interest, taxes, brokerage commissions, extraordinary expenses and increases
in expenses due to expense offset arrangements, if any) to 1.40%, 2.05%,
2.05% and 1.30% on Class A, Class B, Class C and Investor Class shares,
respectively. The voluntary expense limitations cannot be revoked by INVESCO
prior to May 2004. Effective June 1, 2002, INVESCO is entitled to
reimbursement from the classes for fees and expenses absorbed pursuant to
voluntary and contractual expense limitation commitments between INVESCO and
Buying Fund if such reimbursement does not cause a class to exceed expense
limitations and the reimbursement is made within three years after INVESCO
incurred the expense.
C-2
EXPENSE EXAMPLE
This Example is intended to help you compare the costs of investing in
different classes of Selling Fund and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes
of Buying Fund giving effect to the reorganization of Selling Fund into Buying
Fund are also provided. All costs are based upon the information set forth in
the Fee Table above.
The Example assumes that you invest $10,000 for the time periods indicated
and shows the expenses that you would pay both if you redeem all of your shares
at the end of those periods and if you do not redeem your shares. The Example
also assumes that your investment has a 5% return each year and that the
operating expenses remain the same. The Example reflects fee waivers and/or
expense reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent fees are
waived and/or expenses are reimbursed on a voluntary basis, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
SELLING FUND
Class A shares(1)
Assuming complete redemption at end of period..... $678 $ 948 $1,239 $2,063
Assuming no redemption............................ $678 $ 948 $1,239 $2,063
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $711 $ 952 $1,319 $2,219
Assuming no redemption(3)......................... $211 $ 652 $1,119 $2,219
Class C shares
Assuming complete redemption at end of
period(2)...................................... $311 $ 652 $1,119 $2,410
Assuming no redemption............................ $211 $ 652 $1,119 $2,410
BUYING FUND
Class A shares(1)
Assuming complete redemption at end of period..... $708 $1,039 $1,393 $2,387
Assuming no redemption............................ $708 $1,039 $1,393 $2,387
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $772 $1,135 $1,625 $2,793
Assuming no redemption(3)......................... $272 $ 835 $1,425 $2,793
Class C shares
Assuming complete redemption at end of
period(2)...................................... $378 $1,045 $1,831 $3,889
Assuming no redemption............................ $278 $1,045 $1,831 $3,889
Investor Class shares
Assuming complete redemption at end of period..... $193 $ 597 $1,026 $2,222
Assuming no redemption............................ $193 $ 597 $1,026 $2,222
BUYING FUND -- PRO FORMA COMBINED
Class A shares(1)
Assuming complete redemption at end of period..... $693 $ 995 $1,318 $2,232
Assuming no redemption............................ $693 $ 995 $1,318 $2,232
Class B shares
Assuming complete redemption at end of
period(2)(3)................................... $734 $1,021 $1,435 $2,441
Assuming no redemption(3)......................... $234 $ 721 $1,235 $2,441
</Table>
C-3
<Table>
<Caption>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
Class C shares
Assuming complete redemption at end of
period(2)...................................... $357 $ 791 $1,350 $2,875
Assuming no redemption............................ $257 $ 791 $1,350 $2,875
Investor Class shares
Assuming complete redemption at end of period..... $190 $ 588 $1,011 $2,190
Assuming no redemption............................ $190 $ 588 $1,011 $2,190
</Table>
- ---------------
(1) Assumes payment of the maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) Assumes conversion of Class B shares to Class A shares at the end of the
eighth year.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. SELLING
FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND
DOES NOT REPRESENT SELLING FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
C-4
EXHIBIT D
TRUSTEE COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for
each trustee of Trust who was not affiliated with AIM during the year ended
December 31, 2002:
<Table>
<Caption>
TOTAL
ESTIMATED COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL FROM ALL
COMPENSATION ACCRUED BY ALL BENEFITS UPON AIM
NAME OF TRUSTEE FROM TRUST(1) AIM FUNDS(2) RETIREMENT(3) FUNDS(4)
- --------------- ------------- ------------------- ------------- ------------
Frank S. Bayley...................... $20,222 $142,800 $90,000 $150,000
Bruce L. Crockett.................... 20,094 50,132 90,000 149,000
Albert R. Dowden..................... 20,222 57,955 90,000 150,000
Edward K. Dunn, Jr. ................. 20,094 94,149 90,000 149,000
Jack M. Fields....................... 20,222 29,153 90,000 153,000
Carl Frischling(5)................... 20,222 74,511 90,000 150,000
Prema Mathai-Davis................... 20,222 33,931 90,000 150,000
Lewis F. Pennock..................... 20,811 54,802 90,000 154,000
Ruth H. Quigley...................... 20,222 142,502 90,000 153,000
Louis S. Sklar....................... 20,683 78,500 90,000 153,000
</Table>
- ---------------
(1) Amounts shown are based on the fiscal year ended December 31, 2002. The
total amount of compensation deferred by all trustees of Trust during the
fiscal year ended December 31, 2002, including earnings, was $89,867.
(2) During the fiscal year ended December 31, 2002, the total amount of expenses
allocated to Trust in respect of such retirement benefits was $102,009.
(3) Amounts shown assume each trustee serves until his or her normal retirement
date.
(4) All trustees currently serve as directors or trustees of 17 registered
investment companies advised by AIM.
(5) During the fiscal year ended December 31, 2002, Trust paid $64,893 in legal
fees to Kramer Levin Naftalis & Frankel LLP for services rendered by such
firm as counsel to the independent trustees of Trust. Mr. Frischling is a
partner of such firm.
D-1
EXHIBIT E
OFFICERS OF TRUST
The following table provides information with respect to the current
officers of Trust. Each officer is elected by the Board and serves until his or
her successor is chosen and qualified or until his or her resignation or removal
by the Board. The business address of all officers of Trust is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND OFFICER
POSITION(S) HELD WITH TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- --------------------------- ------- -------------------------------------------
Robert H. Graham -- 1946.......... 1992 Director and Chairman, A I M Management Group Inc.
Chairman and President (financial services holding company); and Director and
Vice Chairman, AMVESCAP PLC (parent of AIM and a global
investment management firm) and Chairman, AMVESCAP
PLC -- AIM Division; 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), A I M Fund Services, Inc. (registered transfer
agent), and Fund Management Company (registered broker
dealer); and Chief Executive Officer, AMVESCAP
PLC-Managed Products
Mark H. Williamson -- 1951........ 2003 Director, President and Chief Executive Officer, A I M
Executive Vice President Management Group Inc.; Director, Chairman and
President, A I M Advisors, Inc. (registered investment
advisor); Director, A I M Distributors, Inc.
(registered broker dealer); and Chief Executive Officer
of the AIM Division of AMVESCAP PLC (2003-present);
formerly, Chief Executive Officer, Managed Products
Division, AMVESCAP PLC (2001-2002); Chairman of the
Board (1998-2002), President (1998-2002) and Chief
Executive Officer (1998-2002) of INVESCO Funds Group,
Inc. (registered investment advisor) and INVESCO
Distributors, Inc. (registered broker dealer); Chief
Operating Officer and Chairman of the Board of INVESCO
Global Health Sciences Fund; Chairman and Chief
Executive Officer of NationsBanc Advisors, Inc.; and
Chairman of NationsBanc Investments, Inc.
Kevin M. Carome -- 1956........... 2003 Director, Senior Vice President and General Counsel,
Senior Vice President A I M Management Group Inc. (financial services holding
company) and A I M Advisors, Inc.; and Vice President,
A I M Capital Management, Inc., A I M Distributors,
Inc. and A I M Fund Services; Director, Vice President
and General Counsel, Fund Management Company
Gary T. Crum -- 1947.............. 1992 Director, Chairman and Director of Investments, A I M
Senior Vice President Capital Management, Inc.; Director and Executive Vice
President, A I M Management Group, Inc.; Director and
Senior Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP PLC;
formerly Chief Executive Officer and President, A I M
Capital Management, Inc.
Robert G. Alley -- 1948........... 1992 Managing Director and Chief Fixed Income Office, A I M
Vice President Capital Management, Inc.; and Vice President, A I M
Advisors, Inc.
</Table>
E-1
<Table>
<Caption>
NAME, YEAR OF BIRTH AND OFFICER
POSITION(S) HELD WITH TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- --------------------------- ------- -------------------------------------------
Stuart W. Coco -- 1955............ 1992 Managing Director and Chief Research Officer -- Fixed
Vice President Income, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
Melville B. Cox -- 1943........... 1992 Vice President and Chief Compliance Officer, A I M
Vice President Advisors, Inc. and A I M Capital Management, Inc.; and
Vice President, A I M Fund Services, Inc.
Karen Dunn Kelley -- 1960......... 1992 Managing Director and Chief Cash Management Officer,
Vice President A I M Capital Management, Inc.; Director and President,
Fund Management Company; and Vice President, A I M
Advisors, Inc.
Edgar M. Larsen -- 1940........... 1999 Vice President, A I M Advisors, Inc.; and President,
Vice President Chief Executive Officer and Chief Investment Officer,
A I M Capital Management, Inc.
Dana R. Sutton -- 1959............ 1992 Vice President and Fund Treasurer, A I M Advisors, Inc.
Vice President and Treasurer
Nancy L. Martin -- 1957........... 2003 Vice President, A I M Advisors, Inc.; and Vice
Secretary President and General Counsel, A I M Capital
Management, Inc.
</Table>
E-2
EXHIBIT F
SECURITY OWNERSHIP OF MANAGEMENT
To the best knowledge of Trust, the following table sets forth certain
information regarding the ownership as of July 25, 2003 of the shares of
beneficial interest of each class of each series portfolio of Trust by the
trustees, nominees, and current executive officers of Trust.
<Table>
<Caption>
NUMBER OF SHARES
OWNED BENEFICIALLY AND
SERIES AND CLASS PERCENTAGE OF CLASS*
---------------- ------------------------
Frank S. Bayley...........................................
Bruce L. Crockett.........................................
Albert R. Dowden..........................................
Edward K. Dunn, Jr. ......................................
Jack M. Fields............................................
Carl Frischling...........................................
Robert H. Graham..........................................
Prema Mathai-Davis........................................
Lewis F. Pennock..........................................
Ruth H. Quigley...........................................
Louis S. Sklar............................................
Mark H. Williamson........................................
Bob R. Baker..............................................
James T. Bunch............................................
Gerald J. Lewis...........................................
Larry Soll, Ph.D. ........................................
Kevin M. Carome...........................................
Gary T. Crum..............................................
Robert G. Alley...........................................
Stuart W. Coco............................................
Melville B. Cox...........................................
Karen Dunn Kelley.........................................
Edgar M. Larsen...........................................
Dana R. Sutton............................................
Nancy L. Martin...........................................
</Table>
- ---------------
* To the best knowledge of Trust, the ownership of shares of each series
portfolio of Trust by trustees, nominees, and current executive officers of
Trust as a group constituted less than 1% of each class of each series
portfolio of Trust as of July 25, 2003.
F-1
EXHIBIT G
TRUSTEE OWNERSHIP OF FUND SHARES
Set forth below is the dollar range of equity securities beneficially owned
by each trustee and nominee as of December 31, 2002 (i) in your Fund and (ii) on
an aggregate basis, in all registered investment companies overseen by the
trustee within the AIM Funds complex:
<Table>
<Caption>
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
COMPANIES OVERSEEN
DOLLAR RANGE OF EQUITY BY TRUSTEE IN THE
NAME OF TRUSTEE SECURITIES IN YOUR FUND AIM FUNDS COMPLEX(1)
- --------------- ----------------------- -------------------------
INTERESTED TRUSTEES
Robert H. Graham................................... None Over $100,000
Mark H. Williamson................................. None $10,001-$50,000
INDEPENDENT TRUSTEES
Frank S. Bayley.................................... None $10,001-$50,000
Bruce L. Crockett.................................. None $1-$10,000
Albert R. Dowden................................... None $50,001-$100,000
Edward K. Dunn, Jr.(1)............................. None Over $100,000
Jack M. Fields(1).................................. None Over $100,000
Carl Frischling(1)................................. None Over $100,000
Prema Mathai-Davis(1).............................. None Over $100,000
Lewis F. Pennock................................... None $50,001-$100,000
Ruth H. Quigley.................................... None $1-$10,000
Louis S. Sklar(1).................................. None Over $100,000
INDEPENDENT NOMINEES
Bob R. Baker....................................... None None
James T. Bunch..................................... None None
Gerald J. Lewis.................................... None None
Larry Soll, Ph.D................................... None None
</Table>
- ---------------
(1) Includes the total amount of compensation deferred by the trustee at his or
her election pursuant to a deferred compensation plan. Such deferred
compensation is placed in a deferral account and deemed to be invested in
one or more of the AIM Funds.
G-1
EXHIBIT H
SHARES OUTSTANDING OF EACH CLASS OF YOUR FUND ON RECORD DATE
As of June 25, 2003, there were the following number of shares outstanding
of each class of your Fund:
CLASS A SHARES
[ADD]
CLASS B SHARES
[ADD]
CLASS C SHARES
[ADD]
H-1
EXHIBIT I
OWNERSHIP OF SHARES OF YOUR FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of Trust owned 5% or more of any
class of the outstanding shares of your Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of your Fund is presumed
to "control" your Fund as defined in the 1940 Act. Such control may affect the
voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- -------- ------------ -------------
</Table>
- ---------------
* Trust has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
I-1
EXHIBIT J
OWNERSHIP OF SHARES OF BUYING FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of July 25, 2003, to the best knowledge of Buyer owned 5% or more of any
class of the outstanding shares of Buying Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of Buying Fund is
presumed to "control" Buying Fund as defined in the 1940 Act. Such control may
affect the voting rights of other shareholders.
<Table>
<Caption>
CLASS OF NUMBER OF PERCENT OWNED
NAME AND ADDRESS SHARES SHARES OWNED OF RECORD*
- ---------------- -------- ------------ -------------
</Table>
- ---------------
* Buyer has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
J-1
APPENDIX I
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
AIM GLOBAL UTILITIES FUND,
A SEPARATE PORTFOLIO OF
AIM FUNDS GROUP
AUGUST 13, 2003
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE 1 DEFINITIONS........................................................ I-1
SECTION 1.1. Definitions................................................. I-1
ARTICLE 2 TRANSFER OF ASSETS................................................. I-4
SECTION 2.1. Reorganization of Selling Fund.............................. I-4
SECTION 2.2. Computation of Net Asset Value.............................. I-4
SECTION 2.3. Valuation Date.............................................. I-4
SECTION 2.4. Delivery.................................................... I-5
SECTION 2.5. Termination of Series....................................... I-5
SECTION 2.6. Issuance of Buying Fund Shares.............................. I-5
SECTION 2.7. Investment Securities....................................... I-5
SECTION 2.8. Liabilities................................................. I-5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER........................... I-6
SECTION 3.1. Organization; Authority..................................... I-6
SECTION 3.2. Registration and Regulation of Seller....................... I-6
SECTION 3.3. Financial Statements........................................ I-6
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities......... I-6
SECTION 3.5. Selling Fund Shares; Business Operations.................... I-6
SECTION 3.6. Accountants................................................. I-7
SECTION 3.7. Binding Obligation.......................................... I-7
SECTION 3.8. No Breaches or Defaults..................................... I-7
SECTION 3.9. Authorizations or Consents.................................. I-7
SECTION 3.10. Permits..................................................... I-8
SECTION 3.11. No Actions, Suits or Proceedings............................ I-8
SECTION 3.12. Contracts................................................... I-8
SECTION 3.13. Properties and Assets....................................... I-8
SECTION 3.14 Taxes....................................................... I-8
SECTION 3.15. Benefit and Employment Obligations.......................... I-9
SECTION 3.16. Brokers..................................................... I-9
SECTION 3.17. Voting Requirements......................................... I-9
SECTION 3.18. State Takeover Statutes..................................... I-9
SECTION 3.19. Books and Records........................................... I-9
SECTION 3.20. Prospectus and Statement of Additional Information.......... I-9
SECTION 3.21. No Distribution............................................. I-9
SECTION 3.22. Liabilities of Selling Fund................................. I-9
SECTION 3.23. Value of Shares............................................. I-10
SECTION 3.24. Shareholder Expenses........................................ I-10
SECTION 3.25. Intercompany Indebtedness; Consideration.................... I-10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............................ I-10
SECTION 4.1. Organization; Authority..................................... I-10
SECTION 4.2. Registration and Regulation of Buyer........................ I-10
SECTION 4.3. Financial Statements........................................ I-10
</Table>
I-i
<Table>
<Caption>
PAGE
----
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities......... I-10
SECTION 4.5. Registration of Buying Fund Shares.......................... I-11
SECTION 4.6. Accountants................................................. I-11
SECTION 4.7. Binding Obligation.......................................... I-11
SECTION 4.8. No Breaches or Defaults..................................... I-11
SECTION 4.9. Authorizations or Consents.................................. I-12
SECTION 4.10. Permits..................................................... I-12
SECTION 4.11. No Actions, Suits or Proceedings............................ I-12
SECTION 4.12 Taxes....................................................... I-12
SECTION 4.13. Brokers..................................................... I-13
SECTION 4.14. Representations Concerning the Reorganization............... I-13
SECTION 4.15. Prospectus and Statement of Additional Information.......... I-13
SECTION 4.16. Value of Shares............................................. I-13
SECTION 4.17. Intercompany Indebtedness; Consideration.................... I-13
ARTICLE 5 COVENANTS.......................................................... I-14
SECTION 5.1. Conduct of Business......................................... I-14
SECTION 5.2. Announcements............................................... I-14
SECTION 5.3. Expenses.................................................... I-14
SECTION 5.4. Further Assurances.......................................... I-14
SECTION 5.5. Notice of Events............................................ I-14
SECTION 5.6. Access to Information....................................... I-15
SECTION 5.7. Consents, Approvals and Filings............................. I-15
SECTION 5.8. Submission of Agreement to Shareholders..................... I-15
SECTION 5.9. Delay of Consummation of Reorganization..................... I-15
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION......................... I-15
SECTION 6.1. Conditions Precedent of Buyer............................... I-15
SECTION 6.2. Mutual Conditions........................................... I-16
SECTION 6.3. Conditions Precedent of Seller.............................. I-17
ARTICLE 7 TERMINATION OF AGREEMENT........................................... I-17
SECTION 7.1 Termination................................................. I-17
SECTION 7.2. Survival After Termination.................................. I-17
ARTICLE 8 MISCELLANEOUS...................................................... I-18
SECTION 8.1. Survival of Representations, Warranties and Covenants....... I-18
SECTION 8.2. Governing Law............................................... I-18
SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment........... I-18
SECTION 8.4. Obligations of Buyer and Seller............................. I-18
SECTION 8.5. Amendments.................................................. I-18
SECTION 8.6. Enforcement................................................. I-18
SECTION 8.7. Interpretation.............................................. I-18
SECTION 8.8. Counterparts................................................ I-19
SECTION 8.9. Entire Agreement; Exhibits and Schedules.................... I-19
</Table>
I-ii
<Table>
<Caption>
PAGE
----
SECTION 8.10. Notices..................................................... I-19
SECTION 8.11. Representations by Seller Investment Adviser................ I-19
SECTION 8.12. Representations by Buyer Investment Adviser................. I-19
SECTION 8.13. Successors and Assigns; Assignment.......................... I-20
Exhibit A Excluded Liabilities of Selling Fund
Schedule 2.1 Classes of Shares of Selling Fund and Corresponding Classes
of Shares of Buying Fund
Schedule 3.4 Certain Contingent Liabilities of Selling Fund
Schedule 3.5(d) Permitted Restructurings and Redomestications of Funds
Schedule 4.4 Certain Contingent Liabilities of Buying Fund
Schedule 4.5(a) Portfolios of Buyer
Schedule 4.5(b) Classes of Shares of Buying Fund and Number of Shares of
Each Class Buyer is Authorized to Issue
Schedule 5.1 Permitted Combinations of Funds
Schedule 6.2(f) Tax Opinions
</Table>
I-iii
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 13, 2003 (this
"Agreement"), by and among AIM Funds Group, a Delaware statutory trust
("Seller"), acting on behalf of AIM Global Utilities Fund ("Selling Fund"), a
separate series of Seller, INVESCO Sector Funds, Inc., a Maryland corporation
("Buyer"), acting on behalf of INVESCO Utilities Fund ("Buying Fund"), a
separate series of Buyer, A I M Advisors, Inc., a Delaware corporation, and
INVESCO Funds Group, Inc., a Delaware corporation.
WITNESSETH
WHEREAS, Seller is a management investment company registered with the SEC
(as defined below) under the Investment Company Act (as defined below) that
offers separate series of its shares representing interests in its investment
portfolios, including Selling Fund, for sale to the public; and
WHEREAS, Buyer is a management investment company registered with the SEC
under the Investment Company Act that offers separate series of its shares
representing interests in investment portfolios, including Buying Fund, for sale
to the public; and
WHEREAS, Buyer Investment Adviser (as defined below) provides investment
advisory services to Buyer; and
WHEREAS, Seller Investment Adviser (as defined below) provides investment
advisory services to Seller; and
WHEREAS, Selling Fund desires to provide for its reorganization through the
transfer of all of its assets to Buying Fund in exchange for the assumption by
Buying Fund of all of the Liabilities (as defined below) of Selling Fund and the
issuance by Buyer of shares of Buying Fund in the manner set forth in this
Agreement; and
WHEREAS, this Agreement is intended to be and is adopted by the parties
hereto as a Plan of Reorganization within the meaning of the regulations under
Section 368(a) of the Code (as defined below).
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and undertakings contained in this Agreement, Seller, Buyer, Buyer
Investment Adviser and Seller Investment Adviser agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. For all purposes in this Agreement, the
following terms shall have the respective meanings set forth in this Section 1.1
(such definitions to be equally applicable to both the singular and plural forms
of the terms herein defined):
"Advisers Act" means the Investment Advisers Act of 1940, as amended, and
all rules and regulations of the SEC adopted pursuant thereto.
"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.
"Agreement" means this Agreement and Plan of Reorganization, together with
all exhibits and schedules attached hereto and all amendments hereto and
thereof.
"Applicable Law" means the applicable laws of the state in which each of
Buyer and Seller has been organized and shall include, as applicable, the
Delaware Statutory Trust Act and the Maryland General Corporation Law.
I-1
"Benefit Plan" means any material "employee benefit plan" (as defined in
Section 3(3) of ERISA) and any material bonus, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, retirement, profit sharing, welfare plans or other plan, arrangement
or understanding maintained or contributed to by Seller on behalf of Selling
Fund, or otherwise providing benefits to any current or former employee, officer
or director/trustee of Seller.
"Buyer" means INVESCO Sector Funds, Inc., a Maryland corporation.
"Buyer Counsel" means Kirkpatrick & Lockhart LLP.
"Buyer Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of Buying Fund.
"Buyer Investment Adviser" means INVESCO Funds Group, Inc.
"Buyer Registration Statement" means the registration statement on Form
N-1A of Buyer, as amended, 1940 Act Registration No. 811-03826.
"Buying Fund" means INVESCO Utilities Fund, a separate series of Buyer.
"Buying Fund Auditors" means PricewaterhouseCoopers LLP.
"Buying Fund Financial Statements" means the audited financial statements
of Buying Fund for the fiscal year ended March 31, 2003.
"Buying Fund Shares" means shares of each class of Buying Fund issued
pursuant to Section 2.6 of this Agreement.
"Closing" means the transfer of the assets of Selling Fund to Buying Fund,
the assumption of all of Selling Fund's Liabilities by Buying Fund and the
issuance of Buying Fund Shares directly to Selling Fund Shareholders as
described in Section 2.1 of this Agreement.
"Closing Date" means October 27, 2003, or such other date as the parties
may mutually agree upon.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations adopted pursuant thereto.
"corresponding" means, when used with respect to a class of shares of
Selling Fund or Buying Fund, the classes of their shares set forth opposite each
other on Schedule 2.1.
"Effective Time" means 8:00 a.m. Eastern Time on the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations adopted pursuant thereto.
"Exchangeability Date" means the first date on which Buyer Investment
Adviser determines that shares of retail mutual funds advised by Buyer
Investment Adviser and shares of retail mutual funds advised by Seller
Investment Adviser generally may be exchanged for shares of the same or a
similar class of each other.
"Governing Documents" means the organic documents which govern the business
and operations of each of Buyer and Seller and shall include, as applicable, the
Charter, Amended and Restated Agreement and Declaration of Trust, Amended and
Restated Bylaws and Bylaws.
"Governmental Authority" means any foreign, United States or state
government, government agency, department, board, commission (including the SEC)
or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the NASD Regulation, Inc., the
Commodity Futures Trading
I-2
Commission, the National Futures Association, the Investment Management
Regulatory Organization Limited and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Liabilities" means all of the liabilities of any kind of Selling Fund,
including without limitation all liabilities included in the calculation of the
net asset value per share of each class of Selling Fund Shares on the Closing
Date, but not including the excluded liabilities set forth on Exhibit A.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a change in the
condition (financial or otherwise), properties, assets or prospects of an entity
having an adverse monetary effect in an amount equal to or greater than $50,000.
"NYSE" means the New York Stock Exchange.
"Permits" shall have the meaning set forth in Section 3.10 of this
Agreement.
"Person" means an individual or a corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of the assets of Selling Fund by
Buying Fund in consideration of the assumption by Buying Fund of all of the
Liabilities of Selling Fund and the issuance by Buyer of Buying Fund Shares
directly to Selling Fund Shareholders as described in this Agreement, and the
termination of Selling Fund's status as a designated series of shares of Seller.
"Required Shareholder Vote" means the lesser of (a) the affirmative vote of
67% or more of the voting securities of Selling Fund present or represented by
proxy at the Shareholders Meeting, if the holders of more than 50% of the
outstanding voting securities of Selling Fund are present or represented by
proxy, or (b) the affirmative vote of more than 50% of the outstanding voting
securities of Selling Fund.
"Return" means any return, report or form or any attachment thereto
required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
"Seller" means AIM Funds Group, a Delaware statutory trust.
"Seller Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of Selling Fund.
"Seller Investment Adviser" means A I M Advisors, Inc.
"Seller Registration Statement" means the registration statement on Form
N-1A of Seller, as amended, 1940 Act Registration No. 811-01540.
"Selling Fund" means AIM Global Utilities Fund, a separate series of
Seller.
"Selling Fund Auditors" means PricewaterhouseCoopers LLP.
"Selling Fund Financial Statements" means the audited financial statements
of Selling Fund for the fiscal year ended December 31, 2002.
"Selling Fund Shareholders" means the holders of record of the outstanding
shares of each class of Selling Fund as of the close of regular trading on the
NYSE on the Valuation Date.
"Selling Fund Shares" means the outstanding shares of each class of Selling
Fund.
I-3
"Shareholders Meeting" means a meeting of the shareholders of Selling Fund
convened in accordance with Applicable Law and the Governing Documents of Seller
to consider and vote upon the approval of this Agreement and, in connection
therewith, the sale of all of Selling Fund's assets and the termination of
Selling Fund as a designated series of Seller.
"Tax" means any tax or similar governmental charge, impost or levy
(including income taxes (including alternative minimum tax and estimated tax),
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes, or windfall
profit taxes), together with any related penalties, fines, additions to tax or
interest, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof.
"Termination Date" means December 31, 2003, or such later date as the
parties may mutually agree upon.
"Treasury Regulations" means the Federal income tax regulations adopted
pursuant to the Code.
"Valuation Date" shall have the meaning set forth in Section 2.2 of this
Agreement.
ARTICLE 2
TRANSFER OF ASSETS
SECTION 2.1. Reorganization of Selling Fund. At the Effective Time, all
of the assets of Selling Fund shall be delivered to Buyer Custodian for the
account of Buying Fund in exchange for the assumption by Buying Fund of all of
the Liabilities of Selling Fund and delivery by Buyer directly to the holders of
record as of the Effective Time of the issued and outstanding shares of each
class of Selling Fund of a number of shares of each corresponding class of
Buying Fund, as set forth on Schedule 2.1 (including, if applicable, fractional
shares rounded to the nearest thousandth), having an aggregate net asset value
equal to the value of the net assets of Selling Fund so transferred, assigned
and delivered, all determined and adjusted as provided in Section 2.2 below.
Upon delivery of such assets, Buying Fund will receive good and marketable title
to such assets free and clear of all Liens.
SECTION 2.2. Computation of Net Asset Value.
(a) The net asset value per share of each class of Buying Fund Shares, and
the value of the assets and the amount of the Liabilities of Selling Fund,
shall, in each case, be determined as of the close of regular trading on the
NYSE on the business day next preceding the Closing Date (the "Valuation Date").
(b) The net asset value per share of each class of Buying Fund Shares shall
be computed in accordance with the policies and procedures of Buying Fund as
described in the Buyer Registration Statement.
(c) The value of the assets and the amount of the Liabilities of Selling
Fund to be transferred to Buying Fund pursuant to this Agreement shall be
computed in accordance with the policies and procedures of Selling Fund as
described in the Seller Registration Statement.
(d) Subject to Sections 2.2(b) and (c) above, all computations of value
regarding the assets and Liabilities of Selling Fund and the net asset value per
share of each class of Buying Fund Shares to be issued pursuant to this
Agreement shall be made by agreement of Seller and Buyer. The parties agree to
use commercially reasonable efforts to resolve any material pricing differences
between the prices of portfolio securities determined in accordance with their
respective pricing policies and procedures.
SECTION 2.3. Valuation Date. The share transfer books of Selling Fund
will be permanently closed as of the close of business on the Valuation Date and
only requests for the redemption of shares of Selling Fund received in proper
form prior to the close of regular trading on the NYSE on the Valuation Date
shall be accepted by Selling Fund. Redemption requests thereafter received by
Selling Fund shall be
I-4
deemed to be redemption requests for Buying Fund Shares of the corresponding
class (assuming that the transactions contemplated by this Agreement have been
consummated), to be distributed to Selling Fund Shareholders under this
Agreement.
SECTION 2.4. Delivery.
(a) No later than three (3) business days preceding the Closing Date,
Seller shall instruct Seller Custodian to transfer all assets held by Selling
Fund to the account of Buying Fund maintained at Buyer Custodian. Such assets
shall be delivered by Seller to Buyer Custodian on the Closing Date. The assets
so delivered shall be duly endorsed in proper form for transfer in such
condition as to constitute a good delivery thereof, in accordance with the
custom of brokers, and shall be accompanied by all necessary state stock
transfer stamps, if any, or a check for the appropriate purchase price thereof.
Cash held by Selling Fund shall be delivered on the Closing Date and shall be in
the form of currency or wire transfer in Federal funds, payable to the order of
the account of Buying Fund at Buyer Custodian.
(b) If, on the Closing Date, Selling Fund is unable to make delivery in the
manner contemplated by Section 2.4(a) of securities held by Selling Fund for the
reason that any of such securities purchased prior to the Closing Date have not
yet been delivered to Selling Fund or its broker, then Buyer shall waive the
delivery requirements of Section 2.4(a) with respect to said undelivered
securities if Selling Fund has delivered to Buyer Custodian by or on the Closing
Date, and with respect to said undelivered securities, executed copies of an
agreement of assignment and escrow and due bills executed on behalf of said
broker or brokers, together with such other documents as may be required by
Buyer or Buyer Custodian, including brokers' confirmation slips.
SECTION 2.5. Termination of Series. Following receipt of the Required
Shareholder Vote and as soon as reasonably practicable after the Closing Date,
the status of Selling Fund as a designated series of Seller shall be terminated;
provided, however, that the termination of Selling Fund as a designated series
of Seller shall not be required if the Reorganization shall not have been
consummated.
SECTION 2.6. Issuance of Buying Fund Shares. At the Effective Time,
Selling Fund Shareholders holding shares of a class of Selling Fund shall be
issued that number of full and fractional shares of the corresponding class of
Buying Fund having a net asset value equal to the net asset value of such shares
of such class of Selling Fund held by Selling Fund Shareholders on the Valuation
Date. All issued and outstanding shares of Selling Fund shall thereupon be
canceled on the books of Seller. Seller shall provide instructions to the
transfer agent of Buyer with respect to the shares of each class of Buying Fund
to be issued to Selling Fund Shareholders. Buyer shall have no obligation to
inquire as to the validity, propriety or correctness of any such instruction,
but shall, in each case, assume that such instruction is valid, proper and
correct. Buyer shall record on its books the ownership of the shares of each
class of Buying Fund by Selling Fund Shareholders and shall forward a
confirmation of such ownership to Selling Fund Shareholders. No redemption or
repurchase of such shares credited to former Selling Fund Shareholders in
respect of Selling Fund Shares represented by unsurrendered share certificates
shall be permitted until such certificates have been surrendered to Buyer for
cancellation, or if such certificates are lost or misplaced, until lost
certificate affidavits have been executed and delivered to Buyer.
SECTION 2.7. Investment Securities. On or prior to the Valuation Date,
Seller shall deliver a list setting forth the securities Selling Fund then owned
together with the respective Federal income tax bases thereof and holding
periods therefor. Seller shall provide to Buyer on or before the Valuation Date
detailed tax basis accounting records for each security to be transferred to it
pursuant to this Agreement. Such records shall be prepared in accordance with
the requirements for specific identification tax lot accounting and clearly
reflect the bases used for determination of gain and loss realized on the sale
of any security transferred to Buying Fund hereunder. Such records shall be made
available by Seller prior to the Valuation Date for inspection by the Treasurer
(or his or her designee) or the auditors of Buyer upon reasonable request.
SECTION 2.8. Liabilities. Selling Fund shall use reasonable best efforts
to discharge all of its known liabilities, so far as may be possible, prior to
the Closing Date.
I-5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, on behalf of Selling Fund, represents and warrants to Buyer as
follows:
SECTION 3.1. Organization; Authority. Seller is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 3.2. Registration and Regulation of Seller. Seller is duly
registered with the SEC as an investment company under the Investment Company
Act and all Selling Fund Shares which have been or are being offered for sale
have been duly registered under the Securities Act and have been duly
registered, qualified or are exempt from registration or qualification under the
securities laws of each state or other jurisdiction in which such shares have
been or are being offered for sale, and no action has been taken by Seller to
revoke or rescind any such registration or qualification. Selling Fund is in
compliance in all material respects with all applicable laws, rules and
regulations, including, without limitation, the Investment Company Act, the
Securities Act, the Exchange Act and all applicable state securities laws.
Selling Fund is in compliance in all material respects with the investment
policies and restrictions applicable to it set forth in the Seller Registration
Statement. The value of the net assets of Selling Fund is determined using
portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the policies of Selling Fund and
all purchases and redemptions of Selling Fund Shares have been effected at the
net asset value per share calculated in such manner.
SECTION 3.3. Financial Statements. The books of account and related
records of Selling Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited Selling Fund Financial
Statements previously delivered to Buyer present fairly in all material respects
the financial position of Selling Fund as of the date(s) indicated and the
results of operations and changes in net assets for the period(s) then ended in
accordance with generally accepted accounting principles applied on a consistent
basis for the period(s) then ended.
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Selling Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Selling
Fund or the status of Selling Fund as a regulated investment company under the
Code, other than changes resulting from any change in general conditions in the
financial or securities markets or the performance of any investments made by
Selling Fund or occurring in the ordinary course of business of Selling Fund or
Seller. Except as set forth on Schedule 3.4, there are no contingent liabilities
of Selling Fund not disclosed in the Selling Fund Financial Statements and no
contingent liabilities of Selling Fund have arisen since the date of the most
recent financial statements included in the Selling Fund Financial Statements.
SECTION 3.5. Selling Fund Shares; Business Operations.
(a) Selling Fund Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(b) During the five-year period ending on the date of the Reorganization,
neither Selling Fund nor any person related to Selling Fund (as defined in
Section 1.368-1(e)(3) of the Treasury Regulations without regard to Section
1.368-1(e)(3)(i)(A)) will have directly or through any transaction, agreement,
or arrangement with any other person, (i) acquired shares of Selling Fund for
consideration other than shares of Selling Fund, except for shares redeemed in
the ordinary course of Selling Fund's business as an open-end investment company
as required by the Investment Company Act, or (ii) made distributions with
respect to Selling Fund's shares, except for (a) distributions necessary to
satisfy the requirements of Sections 852 and 4982 of the Code for qualification
as a regulated investment company and avoidance of excise tax liability and (b)
additional distributions, to the extent such additional distributions do not
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exceed 50 percent of the value (without giving effect to such distributions) of
the proprietary interest in Selling Fund on the Effective Date.
(c) At the time of its Reorganization, Selling Fund shall not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any Person could acquire Selling Fund Shares, except for
the right of investors to acquire Selling Fund Shares at net asset value in the
normal course of its business as a series of an open-end management investment
company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the Closing Date,
Selling Fund will have conducted its historic business within the meaning of
Section 1.368-1(d)(2) of the Treasury Regulations in a substantially unchanged
manner. In anticipation of its Reorganization, Selling Fund will not dispose of
assets that, in the aggregate, will result in less than fifty percent (50%) of
its historic business assets (within the meaning of Section 1.368-1(d)(3) of the
Treasury Regulations) being transferred to Buying Fund; provided, however, that
this Section 3.5(d) shall not preclude any of the restructurings or
redomestications of funds set forth on Schedule 3.5(d).
(e) Seller does not have, and has not had during the six (6) months prior
to the date of this Agreement, any employees, and shall not hire any employees
from and after the date of this Agreement through the Closing Date.
SECTION 3.6. Accountants. Selling Fund Auditors, which have reported upon
the Selling Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Selling Fund Financial Statements are independent public accountants as
required by the Securities Act and the Exchange Act.
SECTION 3.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Seller on behalf of Selling Fund and, assuming this
Agreement has been duly executed and delivered by Buyer and approved by the
shareholders of Selling Fund, constitutes the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms
from and with respect to the revenues and assets of Selling Fund, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization
or similar laws relating to or affecting creditors rights generally, or by
general equity principles (whether applied in a court of law or a court of
equity and including limitations on the availability of specific performance or
other equitable remedies).
SECTION 3.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Seller on behalf of Selling Fund and performance by Seller of its
obligations hereunder has been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Seller, other than approval by the
shareholders of Selling Fund, and (i) do not, and on the Closing Date will not,
result in any violation of the Governing Documents of Seller and (ii) do not,
and on the Closing Date will not, result in a breach of any of the terms or
provisions of, or constitute (with or without the giving of notice or the lapse
of time or both) a default under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation or imposition of any Lien upon any
property or assets of Selling Fund (except for such breaches or defaults or
Liens that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect) under (A) any indenture, mortgage or loan
agreement or any other material agreement or instrument to which Seller is a
party or by which it may be bound and which relates to the assets of Selling
Fund or to which any property of Selling Fund may be subject; (B) any Permit (as
defined below); or (C) any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over Seller or
any property of Selling Fund. Seller is not under the jurisdiction of a court in
a proceeding under Title 11 of the United States Code or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.9. Authorizations or Consents. Other than those which shall
have been obtained or made on or prior to the Closing Date and those that must
be made after the Closing Date to comply with Section 2.5 of this Agreement, no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority will be required to be obtained or made by Seller in
connection with
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the due execution and delivery by Seller of this Agreement and the consummation
by Seller of the transactions contemplated hereby.
SECTION 3.10. Permits. Seller has in full force and effect all approvals,
consents, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights of Governmental Authorities (collectively, "Permits")
necessary for it to conduct its business as presently conducted as it relates to
Selling Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of Seller there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 3.11. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of Seller, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Seller before any Governmental Authority which
questions the validity or legality of this Agreement or of the actions
contemplated hereby or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of Seller, threatened in
writing or, if probable of assertion, orally, against Seller affecting any
property, asset, interest or right of Selling Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Selling Fund. There are not in existence on the date hereof any
plea agreements, judgments, injunctions, consents, decrees, exceptions or orders
that were entered by, filed with or issued by any Governmental Authority
relating to Seller's conduct of the business of Selling Fund affecting in any
significant respect the conduct of such business. Seller is not, and has not
been, to the knowledge of Seller, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Selling Fund.
SECTION 3.12. Contracts. Seller is not in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party and which involves or affects the assets of Selling Fund,
by which the assets, business, or operations of Selling Fund may be bound or
affected, or under which it or the assets, business or operations of Selling
Fund receives benefits, and which default could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and, to the
knowledge of Seller there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
SECTION 3.13. Properties and Assets. Selling Fund has good and marketable
title to all properties and assets reflected in the Selling Fund Financial
Statements as owned by it, free and clear of all Liens, except as described in
the Selling Fund Financial Statements.
SECTION 3.14. Taxes.
(a) Selling Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Selling Fund has qualified for treatment as a
regulated investment company for each taxable year since inception that has
ended prior to the Closing Date and will have satisfied the requirements of Part
I of Subchapter M of the Code to maintain such qualification for the period
beginning on the first day of its current taxable year and ending on the Closing
Date. Selling Fund has no earnings and profits accumulated in any taxable year
in which the provisions of Subchapter M of the Code did not apply to it. In
order to (i) ensure continued qualification of Selling Fund for treatment as a
"regulated investment company" for tax purposes and (ii) eliminate any tax
liability of Selling Fund arising by reason of undistributed investment company
taxable income or net capital gain, Seller will declare on or prior to the
Valuation Date to the shareholders of Selling Fund a dividend or dividends that,
together with all previous such dividends, shall have the effect of distributing
(A) all of Selling Fund's investment company taxable income (determined without
regard to any deductions for dividends paid) for the taxable year ended December
31, 2002 and for the
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short taxable year beginning on January 1, 2003 and ending on the Closing Date
and (B) all of Selling Fund's net capital gain recognized in its taxable year
ended December 31, 2002 and in such short taxable year (after reduction for any
capital loss carryover).
(b) Selling Fund has timely filed all Returns required to be filed by it
and all Taxes with respect thereto have been paid, except where the failure so
to file or so to pay, would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Adequate provision has been made
in the Selling Fund Financial Statements for all Taxes in respect of all periods
ended on or before the date of such financial statements, except where the
failure to make such provisions would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. No deficiencies for any
Taxes have been proposed, assessed or asserted in writing by any taxing
authority against Selling Fund, and no deficiency has been proposed, assessed or
asserted, in writing, where such deficiency would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No waivers
of the time to assess any such Taxes are outstanding nor are any written
requests for such waivers pending and no Return of Selling Fund is currently
being or has been audited with respect to income taxes or other Taxes by any
Federal, state, local or foreign Tax authority.
SECTION 3.15. Benefit and Employment Obligations. As of the Closing Date,
Selling Fund will have no obligation to provide any post-retirement or
post-employment benefit to any Person, including but not limited to under any
Benefit Plan, and will have no obligation to provide unfunded deferred
compensation or other unfunded or self-funded benefits to any Person.
SECTION 3.16. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Seller in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Seller or any action taken by it.
SECTION 3.17. Voting Requirements. The Required Shareholder Vote is the
only vote of the holders of any class of shares of Selling Fund necessary to
approve this Agreement and, in connection therewith, the sale of all of Selling
Fund's assets and the termination of Selling Fund as a designated series of
Seller.
SECTION 3.18. State Takeover Statutes. No state takeover statute or
similar statute or regulation applies or purports to apply to this Agreement or
any of the transactions contemplated by this Agreement.
SECTION 3.19. Books and Records. The books and records of Seller relating
to Selling Fund, reflecting, among other things, the purchase and sale of
Selling Fund Shares, the number of issued and outstanding shares owned by each
Selling Fund Shareholder and the state or other jurisdiction in which such
shares were offered and sold, are complete and accurate in all material
respects.
SECTION 3.20. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Selling Fund as
of the date on which they were issued did not contain, and as supplemented by
any supplement thereto dated prior to or on the Closing Date do not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 3.21. No Distribution. Buying Fund Shares are not being acquired
for the purpose of any distribution thereof, other than in accordance with the
terms of this Agreement.
SECTION 3.22. Liabilities of Selling Fund. The Liabilities of Selling
Fund that are to be assumed by Buying Fund in connection with the
Reorganization, or to which the assets of Selling Fund to be transferred in the
Reorganization are subject, were incurred by Selling Fund in the ordinary course
of its business. The fair market value of the assets of Selling Fund to be
transferred to Buying Fund in the Reorganization will equal or exceed the sum of
the Liabilities to be assumed by Buying Fund, plus the amount of liabilities, if
any, to which such transferred assets will be subject. The total adjusted basis
of the assets of Selling Fund to be transferred to Buying Fund in the
Reorganization will equal or exceed the
I-9
sum of the Liabilities to be assumed by Buying Fund, plus the amount of
liabilities, if any, to which such transferred assets will be subject.
SECTION 3.23. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
SECTION 3.24. Shareholder Expenses. Selling Fund Shareholders will pay
their own expenses, if any, incurred in connection with the Reorganization.
SECTION 3.25. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration other than Buying Fund
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including
for this purpose any liabilities to which the assets of Selling Fund are
subject) will be given in exchange for the assets of Selling Fund acquired by
Buying Fund in connection with the Reorganization.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer, on behalf of Buying Fund, represents and warrants to Seller as
follows:
SECTION 4.1. Organization; Authority. Buyer is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 4.2. Registration and Regulation of Buyer. Buyer is duly
registered with the SEC as an investment company under the Investment Company
Act. Buying Fund is in compliance in all material respects with all applicable
laws, rules and regulations, including, without limitation, the Investment
Company Act, the Securities Act, the Exchange Act and all applicable state
securities laws. Buying Fund is in compliance in all material respects with the
applicable investment policies and restrictions set forth in the Buyer
Registration Statement. The value of the net assets of Buying Fund is determined
using portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the policies of Buying Fund and
all purchases and redemptions of Buying Fund Shares have been effected at the
net asset value per share calculated in such manner.
SECTION 4.3. Financial Statements. The books of account and related
records of Buying Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited Buying Fund Financial
Statements previously delivered to Seller present fairly in all material
respects the financial position of Buying Fund as of the date(s) indicated and
the results of operations and changes in net assets for the period(s) then ended
in accordance with generally accepted accounting principles applied on a
consistent basis for the period(s) then ended.
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Buying Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Buying Fund
or the status of Buying Fund as a regulated investment company under the Code,
other than changes resulting from any change in general conditions in the
financial or securities markets or the performance of any investments made by
Buying Fund or occurring in the ordinary course of business of Buying Fund or
Buyer. There are no contingent liabilities of Buying Fund not disclosed in the
Buying Fund Financial Statements which are required to be disclosed in
accordance with generally accepted accounting principles. Except as set forth on
Schedule 4.4, no contingent liabilities of Buying Fund have arisen since the
date of the most recent financial statements included in the Buying Fund
Financial Statements which are required to be disclosed in accordance with
generally accepted accounting principles.
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SECTION 4.5. Registration of Buying Fund Shares.
(a) The shares of Buyer are divided into those portfolios, including Buying
Fund, that are set forth on Schedule 4.5(a).
(b) Buying Fund currently has those classes of shares that are set forth on
Schedule 4.5(b). Under its Governing Documents, Buyer is authorized to issue the
number of shares of each such class that is set forth on Schedule 4.5(b).
(c) Buying Fund Shares to be issued pursuant to Section 2.6 shall on the
Closing Date be duly registered under the Securities Act by a Registration
Statement on Form N-14 of Buyer then in effect.
(d) Buying Fund Shares to be issued pursuant to Section 2.6 are duly
authorized and on the Closing Date will be validly issued and fully paid and
non-assessable and will conform to the description thereof contained in the
Registration Statement on Form N-14 then in effect. At the time of its
Reorganization, Buying Fund shall not have outstanding any warrants, options,
convertible securities or any other type of right pursuant to which any Person
could acquire shares of Buying Fund, except for the right of investors to
acquire shares of Buying Fund at net asset value in the normal course of its
business as a series of an open-end management investment company operating
under the Investment Company Act.
(e) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus"), which forms a part of Buyer's Registration Statement on
Form N-14, shall be furnished to the shareholders of Selling Fund entitled to
vote at the Shareholders Meeting. The Combined Proxy Statement/Prospectus and
related Statement of Additional Information of Buying Fund, when they become
effective, shall conform to the applicable requirements of the Securities Act
and the Investment Company Act and shall not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading, provided, however, that no
representation or warranty is made with respect to written information provided
by Seller for inclusion in the Combined Proxy Statement/Prospectus.
(f) The shares of Buying Fund which have been or are being offered for sale
(other than the Buying Fund Shares to be issued in connection with the
Reorganization) have been duly registered under the Securities Act by the Buyer
Registration Statement and have been duly registered, qualified or are exempt
from registration or qualification under the securities laws of each state or
other jurisdiction in which such shares have been or are being offered for sale,
and no action has been taken by Buyer to revoke or rescind any such registration
or qualification.
SECTION 4.6. Accountants. Buying Fund Auditors, which have reported upon
the Buying Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Buying Fund Financial Statements are independent public accountants as
required by the Securities Act and the Exchange Act.
SECTION 4.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Buyer on behalf of Buying Fund and, assuming this
Agreement has been duly executed and delivered by Seller, constitutes the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms from and with respect to the revenues and assets of Buying Fund,
except as the enforceability hereof may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting creditors' rights
generally, or by general equity principles (whether applied in a court or law or
a court of equity and including limitations on the availability of specific
performance or other equitable remedies).
SECTION 4.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Buyer on behalf of Buying Fund and performance by Buyer of its
obligations hereunder have been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Buyer and (i) do not, and on the
Closing Date will not, result in any violation of the Governing Documents of
Buyer and (ii) do not, and on the Closing Date will not, result in a breach of
any of the terms or provisions of, or constitute (with or
I-11
without the giving of notice or the lapse of time or both) a default under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, or result in the creation
or imposition of any Lien upon any property or assets of Buying Fund (except for
such breaches or defaults or Liens that would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect) under (A)
any indenture, mortgage or loan agreement or any other material agreement or
instrument to which Buyer is a party or by which it may be bound and which
relates to the assets of Buying Fund or to which any properties of Buying Fund
may be subject; (B) any Permit; or (C) any existing applicable law, rule,
regulation, judgment, order or decree of any Governmental Authority having
jurisdiction over Buyer or any property of Buying Fund. Buyer is not under the
jurisdiction of a court in a proceeding under Title 11 of the United States Code
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
SECTION 4.9. Authorizations or Consents. Other than those which shall
have been obtained or made on or prior to the Closing Date, no authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority will be required to be obtained or made by Buyer in connection with
the due execution and delivery by Buyer of this Agreement and the consummation
by Buyer of the transactions contemplated hereby.
SECTION 4.10. Permits. Buyer has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
Buying Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of Buyer there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 4.11. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of Buyer, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Buyer before any Governmental Authority which
questions the validity or legality of this Agreement or of the transactions
contemplated hereby, or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of Buyer, threatened in
writing or, if probable of assertion, orally, against Buyer, affecting any
property, asset, interest or right of Buying Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Buying Fund. There are not in existence on the date hereof any
plea agreements, judgments, injunctions, consents, decrees, exceptions or orders
that were entered by, filed with or issued by any Governmental Authority
relating to Buyer's conduct of the business of Buying Fund affecting in any
significant respect the conduct of such business. Buyer is not, and has not
been, to the knowledge of Buyer, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Buying Fund.
SECTION 4.12. Taxes.
(a) Buying Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Buying Fund has qualified for treatment as a
regulated investment company for each taxable year since inception that has
ended prior to the Closing Date and will satisfy the requirements of Part I of
Subchapter M of the Code to maintain such qualification for its current taxable
year. Buying Fund has no earnings or profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it.
(b) Buying Fund has timely filed all Returns required to be filed by it and
all Taxes with respect thereto have been paid, except where the failure so to
file or so to pay, would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Adequate provision has been made
in the Buying Fund Financial Statements for all Taxes in respect of all periods
ending on or before the date
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of such financial statements, except where the failure to make such provisions
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect. No deficiencies for any Taxes have been proposed,
assessed or asserted in writing by any taxing authority against Buying Fund, and
no deficiency has been proposed, assessed or asserted, in writing, where such
deficiency would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. No waivers of the time to assess any such Taxes
are outstanding nor are any written requests for such waivers pending and no
Return of Buying Fund is currently being or has been audited with respect to
income taxes or other Taxes by any Federal, state, local or foreign Tax
authority.
SECTION 4.13. Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Buyer in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with Buyer or any action taken by it.
SECTION 4.14. Representations Concerning the Reorganization.
(a) Buyer has no plan or intention to reacquire any Buying Fund Shares
issued in the Reorganization, except to the extent that Buying Fund is required
by the Investment Company Act to redeem any of its shares presented for
redemption at net asset value in the ordinary course of its business as an
open-end, management investment company.
(b) Buying Fund has no plan or intention to sell or otherwise dispose of
any of the assets of Selling Fund acquired in the Reorganization, other than in
the ordinary course of its business and to the extent necessary to maintain its
status as a "regulated investment company" under the Code; provided, however,
that this Section 4.14(b) shall not preclude any of the restructurings or
redomestications of funds set forth on Schedule 3.5(d).
(c) Following the Reorganization, Buying Fund will continue an "historic
business" of Selling Fund or use a significant portion of Selling Fund's
"historic business assets" in a business. For purposes of this representation,
the terms "historic business" and "historic business assets" shall have the
meanings ascribed to them in Section 1.368-1(d) of the Treasury Regulations;
provided, however, that this Section 4.14(c) shall not preclude any of the
restructurings or redomestications of funds set forth on Schedule 3.5(d).
(d) Prior to or in the Reorganization, neither Buying Fund nor any person
related to Buying Fund (for purposes of this paragraph as defined in Section
1.368-1(e)(3) of the Treasury Regulations) will have acquired directly or
through any transaction, agreement or arrangement with any other person, shares
of Selling Fund with consideration other than shares of Buying Fund. There is no
plan or intention by Buying Fund or any person related to Buying Fund to acquire
or redeem any of the Buying Fund Shares issued in the Reorganization either
directly or through any transaction, agreement, or arrangement with any other
person, other than redemptions in the ordinary course of Buying Fund's business
as an open-end investment company as required by the Investment Company Act.
SECTION 4.15. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Buying Fund as of
the date on which it was issued does not contain, and as supplemented by any
supplement thereto dated prior to or on the Closing Date does not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 4.16. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
SECTION 4.17. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration
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other than Buying Fund Shares (and Buying Fund's assumption of Selling Fund's
Liabilities, including for this purpose any liabilities to which the assets of
Selling Fund are subject) will be given in exchange for the assets of Selling
Fund acquired by Buying Fund in connection with the Reorganization. The fair
market value of the assets of Selling Fund transferred to Buying Fund in the
Reorganization will equal or exceed the sum of the Liabilities assumed by Buying
Fund, plus the amount of liabilities, if any, to which such transferred assets
are subject.
ARTICLE 5
COVENANTS
SECTION 5.1. Conduct of Business.
(a) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), Seller shall conduct the business of Selling Fund only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business operations of Selling Fund in the
ordinary course in all material respects; provided, however, that this Section
5.1(a) shall not preclude any of the restructurings or redomestications of funds
set forth on Schedule 3.5(d) or any of the combinations of funds set forth on
Schedule 5.1.
(b) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), Buyer shall conduct the business of Buying Fund only in the ordinary
course and substantially in accordance with past practices, and shall use its
reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business operations of Buying Fund in the
ordinary course in all material respects; provided, however, that this Section
5.1(b) shall not preclude any of the restructurings or redomestications of funds
set forth on Schedule 3.5(d) or any of the combinations of funds set forth on
Schedule 5.1.
SECTION 5.2. Announcements. Seller and Buyer shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement and the transactions contemplated by this
Agreement, and neither Seller nor Buyer shall issue any such press release or
make any public statement without the prior written approval of the other party
to this Agreement, such approval not to be unreasonably withheld, except as may
be required by law.
SECTION 5.3. Expenses. Selling Fund and AMVESCAP PLC, on behalf of either
Buyer Investment Adviser or Seller Investment Adviser, shall each, respectively,
bear one half of the costs and expenses incurred in connection with this
Agreement and the Reorganization and other transactions contemplated hereby;
provided that any such expenses incurred by or on behalf of Buying Fund or
Selling Fund shall not be reimbursed or paid for by another Person unless those
expenses are solely and directly related to the Reorganization.
SECTION 5.4. Further Assurances. Each of the parties hereto shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall, on or prior to the Closing Date, use
its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to the consummation of the Reorganization, including the
execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the Reorganization.
SECTION 5.5. Notice of Events. Buyer shall give prompt notice to Seller,
and Seller shall give prompt notice to Buyer, of (a) the occurrence or
non-occurrence of any event which to the knowledge of Buyer or to the knowledge
of Seller, the occurrence or non-occurrence of which would be likely to result
in any of the conditions specified in (i) in the case of Seller, Sections 6.1
and 6.2 or (ii) in the case of Buyer, Sections 6.2 and 6.3, not being satisfied
so as to permit the consummation of the Reorganization
I-14
and (b) any material failure on its part, or on the part of the other party
hereto of which it has knowledge, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.5
shall not limit or otherwise affect the remedies available hereunder to any
party.
SECTION 5.6. Access to Information.
(a) Seller will, during regular business hours and on reasonable prior
notice, allow Buyer and its authorized representatives reasonable access to the
books and records of Seller pertaining to the assets of Selling Fund and to
officers of Seller knowledgeable thereof; provided, however, that any such
access shall not significantly interfere with the business or operations of
Seller.
(b) Buyer will, during regular business hours and on reasonable prior
notice, allow Seller and its authorized representatives reasonable access to the
books and records of Buyer pertaining to the assets of Buying Fund and to
officers of Buyer knowledgeable thereof; provided, however, that any such access
shall not significantly interfere with the business or operations of Buyer.
SECTION 5.7. Consents, Approvals and Filings. Each of Seller and Buyer
shall make all necessary filings, as soon as reasonably practicable, including,
without limitation, those required under the Maryland General Corporation Law,
the Securities Act, the Exchange Act, the Investment Company Act and the
Advisers Act, in order to facilitate prompt consummation of the Reorganization
and the other transactions contemplated by this Agreement. In addition, each of
Seller and Buyer shall use its reasonable best efforts, and shall cooperate
fully with each other (i) to comply as promptly as reasonably practicable with
all requirements of Governmental Authorities applicable to the Reorganization
and the other transactions contemplated herein and (ii) to obtain as promptly as
reasonably practicable all necessary permits, orders or other consents of
Governmental Authorities and consents of all third parties necessary for the
consummation of the Reorganization and the other transactions contemplated
herein. Each of Seller and Buyer shall use reasonable efforts to provide such
information and communications to Governmental Authorities as such Governmental
Authorities may request.
SECTION 5.8. Submission of Agreement to Shareholders. Seller shall take
all action necessary in accordance with applicable law and its Governing
Documents to convene the Shareholders Meeting. Seller shall, through its Board
of Directors/Trustees, recommend to the shareholders of Selling Fund approval of
this Agreement and, in connection therewith, the sale of all of Selling Fund's
assets and the termination of Selling Fund as a designated series of Seller.
Seller shall use its reasonable best efforts to hold a Shareholders Meeting as
soon as practicable after the date hereof.
SECTION 5.9. Delay of Consummation of Reorganization. The parties
acknowledge and agree that if the Exchangeability Date has not occurred prior to
the Closing Date, consummation of the Reorganization shall not occur on the
Closing Date but instead shall be postponed until a mutually acceptable date
occurring subsequent to the Exchangeability Date; provided, however, that in no
event shall the consummation of the Reorganization occur on a date subsequent to
the Termination Date. In the case of such postponement of the consummation of
the Reorganization, the parties agree that the term "Closing Date" in this
Agreement shall mean in each instance such mutually acceptable date subsequent
to the Exchangeability Date as the parties may choose to consummate the
Reorganization.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
SECTION 6.1. Conditions Precedent of Buyer. The obligation of Buyer to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by Buyer.
(a) The representations and warranties of Seller on behalf of Selling Fund
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the
I-15
Closing Date with the same effect as though all such representations and
warranties had been made as of the Closing Date.
(b) Seller shall have complied with and satisfied in all material respects
all agreements and conditions relating to Selling Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Buyer shall have received at the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Seller, in such individual's capacity
as an officer of Seller and not as an individual, to the effect that the
conditions specified in Sections 6.1(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Seller certifying as to the accuracy and completeness of the
attached Governing Documents of Seller, and resolutions, consents and
authorizations of or regarding Seller with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
(d) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
(e) Buyer shall have received from Seller confirmations or other adequate
evidence as to the tax costs and holding periods of the assets and property of
Selling Fund transferred to Buying Fund in accordance with the terms of this
Agreement.
(f) To the extent applicable, Seller Investment Adviser shall have
terminated or waived, in either case in writing, any rights to reimbursement
from Selling Fund to which it is entitled for fees and expenses absorbed by
Seller Investment Adviser pursuant to voluntary and contractual fee waiver or
expense limitation commitments between Seller Investment Adviser and Selling
Fund.
SECTION 6.2. Mutual Conditions. The obligations of Seller and Buyer to
consummate the Reorganization are subject to the satisfaction, at or prior to
the Closing Date, of all of the following further conditions, any one or more of
which may be waived in writing by Seller and Buyer, but only if and to the
extent that such waiver is mutual.
(a) All filings required to be made prior to the Closing Date with, and all
consents, approvals, permits and authorizations required to be obtained on or
prior to the Closing Date from Governmental Authorities in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by Seller and Buyer shall have been made or
obtained, as the case may be; provided, however, that such consents, approvals,
permits and authorizations may be subject to conditions that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) This Agreement, the Reorganization of Selling Fund and related matters
shall have been approved and adopted at the Shareholders Meeting by the
shareholders of Selling Fund on the record date by the Required Shareholder
Vote.
(c) The assets of Selling Fund to be acquired by Buying Fund shall
constitute at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets held by Selling Fund
immediately prior to the Reorganization. For purposes of this Section 6.2(c),
assets used by Selling Fund to pay the expenses it incurs in connection with
this Agreement and the Reorganization and to effect all shareholder redemptions
and distributions (other than regular, normal dividends and regular, normal
redemptions pursuant to the Investment Company Act, and not in excess of the
requirements of Section 852 of the Code, occurring in the ordinary course of
Selling Fund's business as a series of an open-end management investment
company) after the date of this Agreement shall be included as assets of Selling
Fund held immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent injunction or
other order issued by any Governmental Authority preventing the consummation of
the Reorganization on the Closing Date shall be in effect; provided, however,
that the party or parties invoking this condition shall use reasonable efforts
to have any such order or injunction vacated.
I-16
(e) The Registration Statement on Form N-14 filed by Buyer with respect to
Buying Fund Shares to be issued to Selling Fund Shareholders in connection with
the Reorganization shall have become effective under the Securities Act and no
stop order suspending the effectiveness thereof shall have been issued and, to
the best knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or
contemplated under the Securities Act.
(f) Seller and Buyer shall have received on or before the Closing Date an
opinion of Buyer Counsel in form and substance reasonably acceptable to Seller
and Buyer, as to the matters set forth on Schedule 6.2(f). In rendering such
opinion, Buyer Counsel may request and rely upon representations contained in
certificates of officers of Seller, Buyer and others, and the officers of Seller
and Buyer shall use their best efforts to make available such truthful
certificates.
SECTION 6.3. Conditions Precedent of Seller. The obligation of Seller to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by Seller.
(a) The representations and warranties of Buyer on behalf of Buying Fund
set forth in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date with the same effect
as though all such representations and warranties had been made as of the
Closing Date.
(b) Buyer shall have complied with and satisfied in all material respects
all agreements and conditions relating to Buying Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Seller shall have received on the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Buyer, in such individual's capacity
as an officer of Buyer and not as an individual, to the effect that the
conditions specified in Sections 6.3(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Buyer certifying as to the accuracy and completeness of the
attached Governing Documents of Buyer and resolutions, consents and
authorizations of or regarding Buyer with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
ARTICLE 7
TERMINATION OF AGREEMENT
SECTION 7.1. Termination. This Agreement may be terminated on or prior to
the Closing Date as follows:
(a) by mutual written consent of Seller and Buyer; or
(b) at the election of Seller or Buyer, to be effectuated by the delivery
by the terminating party to the other party of a written notice of such
termination:
(i) if the Closing Date shall not be on or before the Termination
Date, unless the failure to consummate the Reorganization is the result of
a willful and material breach of this Agreement by the party seeking to
terminate this Agreement;
(ii) if, upon a vote at the Shareholders Meeting or any final
adjournment thereof, the Required Shareholder Vote shall not have been
obtained as contemplated by Section 5.8; or
(iii) if any Governmental Authority shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Reorganization and such order, decree, ruling or
other action shall have become final and nonappealable.
SECTION 7.2. Survival After Termination. If this Agreement is terminated
in accordance with Section 7.1 hereof and the Reorganization of Selling Fund is
not consummated, this Agreement shall
I-17
become void and of no further force and effect with respect to the
Reorganization and Selling Fund, except for the provisions of Section 5.3.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Survival of Representations, Warranties and Covenants. The
representations and warranties in this Agreement, and the covenants in this
Agreement that are required to be performed at or prior to the Closing Date,
shall terminate upon the consummation of the transactions contemplated
hereunder. The covenants in this Agreement that are required to be performed in
whole or in part subsequent to the Closing Date shall survive the consummation
of the transactions contemplated hereunder for a period of one (1) year
following the Closing Date.
SECTION 8.2. Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state.
SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns of the parties and such Persons.
Nothing in this Agreement is intended or shall be construed to confer upon any
entity or Person other than the parties hereto and their respective successors
and permitted assigns any right, remedy or claim under or by reason of this
Agreement or any part hereof. Without the prior written consent of the parties
hereto, this Agreement may not be assigned by any of the parties hereto.
SECTION 8.4. Obligations of Buyer and Seller.
(a) Seller and Buyer hereby acknowledge and agree that Buying Fund is a
separate investment portfolio of Buyer, that Buyer is executing this Agreement
on behalf of Buying Fund, and that any amounts payable by Buyer under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Buying Fund.
(b) Seller and Buyer hereby acknowledge and agree that Selling Fund is a
separate investment portfolio of Seller, that Seller is executing this Agreement
on behalf of Selling Fund and that any amounts payable by Seller under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Selling Fund. Buyer further acknowledges and agrees that this
Agreement has been executed by a duly authorized officer of Seller in his or her
capacity as an officer of Seller intending to bind Seller as provided herein,
and that no officer, trustee or shareholder of Seller shall be personally liable
for the liabilities or obligation of Seller incurred hereunder. Finally, Buyer
acknowledges and agrees that the liabilities and obligations of Selling Fund
pursuant to this Agreement shall be enforceable against the assets of Selling
Fund only and not against the assets of Seller generally or assets belonging to
any other series of Seller.
SECTION 8.5. Amendments. This Agreement may not be amended, altered or
modified except by a written instrument executed by Seller and Buyer.
SECTION 8.6. Enforcement. The parties agree irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
any state having jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity.
SECTION 8.7. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or a Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be
I-18
followed by the words "without limitation." Each representation and warranty
contained in Article 3 or 4 that relates to a general category of a subject
matter shall be deemed superseded by a specific representation and warranty
relating to a subcategory thereof to the extent of such specific representation
or warranty.
SECTION 8.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and each of which shall
constitute one and the same instrument.
SECTION 8.9. Entire Agreement; Exhibits and Schedules. This Agreement,
including the Exhibits, Schedules, certificates and lists referred to herein,
and any documents executed by the parties simultaneously herewith or pursuant
thereto, constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, written or oral, between the parties with respect
to such subject matter.
SECTION 8.10. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand or by overnight courier, two days after being
sent by registered mail, return receipt requested, or when sent by telecopier
(with receipt confirmed), provided, in the case of a telecopied notice, a copy
is also sent by registered mail, return receipt requested, or by courier,
addressed as follows (or to such other address as a party may designate by
notice to the other):
(a) If to Seller:
AIM Funds Group
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Kevin M. Carome
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attn: Martha J. Hays
(b) If to Buyer:
INVESCO Sector Funds, Inc.
4350 South Monaco Street
Denver, Colorado 80237
Attn: Glen A. Payne
with a copy to:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue N.W., 2nd Floor
Washington, D.C. 20036-1800
Attn: Clifford J. Alexander
SECTION 8.11. Representations by Seller Investment Adviser. In its
capacity as investment adviser to Seller, Seller Investment Adviser represents
to Buyer that to the best of its knowledge the representations and warranties of
Seller and Selling Fund contained in this Agreement are true and correct as of
the date of this Agreement. For purposes of this Section 8.11, the best
knowledge standard shall be deemed to mean that the officers of Seller
Investment Adviser who have substantive responsibility for the provision of
investment advisory services to Seller do not have actual knowledge to the
contrary after due inquiry.
SECTION 8.12. Representations by Buyer Investment Adviser. In its
capacity as investment adviser to Buyer, Buyer Investment Adviser represents to
Seller that to the best of its knowledge the
I-19
representations and warranties of Buyer and Buying Fund contained in this
Agreement are true and correct as of the date of this Agreement. For purposes of
this Section 8.12, the best knowledge standard shall be deemed to mean that the
officers of Buyer Investment Adviser who have substantive responsibility for the
provision of investment advisory services to Buyer do not have actual knowledge
to the contrary after due inquiry.
SECTION 8.13. Successors and Assigns; Assignment. This Agreement shall be
binding upon and inure to the benefit of Seller, on behalf of Selling Fund, and
Buyer, on behalf of Buying Fund, and their respective successors and assigns.
The parties hereto expressly acknowledge and agree that this Agreement shall be
binding upon and inure to the benefit of those Delaware statutory trusts that
are the resulting entities in the permitted restructurings and redomestications
of funds set forth on Schedule 3.5(d).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM FUNDS GROUP, acting on behalf of
AIM GLOBAL UTILITIES FUND
By: /s/ ROBERT H. GRAHAM
------------------------------------
INVESCO SECTOR FUNDS, INC., acting on
behalf of INVESCO UTILITIES FUND
By: /s/ RAYMOND R. CUNNINGHAM
------------------------------------
A I M ADVISORS, INC.
By: /s/ MARK H. WILLIAMSON
------------------------------------
INVESCO FUNDS GROUP, INC.
By: /s/ RAYMOND R. CUNNINGHAM
------------------------------------
I-20
EXHIBIT A
EXCLUDED LIABILITIES OF SELLING FUND
None.
SCHEDULE 2.1
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF SHARES OF SELLING FUND SHARES OF BUYING FUND
- --------------------------------- ------------------------
Class A shares.............................................. Class A shares
Class B shares.............................................. Class B shares
Class C shares.............................................. Class C shares
</Table>
SCHEDULE 3.4
CERTAIN CONTINGENT LIABILITIES OF SELLING FUND
None.
SCHEDULE 3.5(d)
PERMITTED RESTRUCTURINGS AND REDOMESTICATIONS OF FUNDS
<Table>
<Caption>
CURRENT FUNDS CORRESPONDING NEW FUNDS
- ------------- -----------------------
AIM ADVISOR FUNDS................................ AIM INVESTMENT SECURITIES FUNDS
(DELAWARE STATUTORY TRUST) (DELAWARE STATUTORY TRUST)
AIM International Core Equity Fund............... AIM International Core Equity Fund
AIM Real Estate Fund............................. AIM Real Estate Fund
AIM INTERNATIONAL FUNDS, INC. ................... AIM INTERNATIONAL MUTUAL FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
AIM European Growth Fund......................... AIM European Growth Fund
INVESCO BOND FUNDS, INC.......................... AIM BOND FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO High Yield Fund.......................... INVESCO High Yield Fund
INVESCO Select Income Fund....................... INVESCO Select Income Fund
INVESCO Tax-Free Bond Fund....................... INVESCO Tax-Free Bond Fund
INVESCO U.S. Government Securities Fund.......... INVESCO U.S. Government Securities Fund
INVESCO COMBINATION STOCK & BOND FUNDS, INC. .... AIM COMBINATION STOCK & BOND FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Balanced Fund............................ INVESCO Balanced Fund
INVESCO Total Return Fund........................ INVESCO Total Return Fund
INVESCO COUNSELOR SERIES FUNDS, INC.............. AIM COUNSELOR SERIES TRUST
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Advantage Fund........................... INVESCO Advantage Fund
INVESCO INTERNATIONAL FUNDS, INC. ............... AIM INTERNATIONAL MUTUAL FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO European Fund............................ INVESCO European Fund
INVESCO International Blue Chip Value Fund....... INVESCO International Blue Chip Value Fund
INVESCO MONEY MARKET FUNDS, INC.................. AIM TREASURER'S SERIES TRUST
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Cash Reserves Fund....................... INVESCO Cash Reserves Fund
INVESCO Tax-Free Money Fund...................... INVESCO Tax-Free Money Fund
INVESCO SECTOR FUNDS, INC........................ AIM SECTOR FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Energy Fund.............................. INVESCO Energy Fund
INVESCO Financial Services Fund.................. INVESCO Financial Services Fund
INVESCO Real Estate Opportunity Fund............. INVESCO Real Estate Opportunity Fund
INVESCO Technology Fund.......................... INVESCO Technology Fund
INVESCO Telecommunications Fund.................. INVESCO Telecommunications Fund
INVESCO Utilities Fund........................... INVESCO Utilities Fund
INVESCO STOCK FUNDS, INC. ....................... AIM STOCK FUNDS
(MARYLAND CORPORATION) (DELAWARE STATUTORY TRUST)
INVESCO Growth Fund.............................. INVESCO Growth Fund
INVESCO Growth & Income Fund..................... INVESCO Growth & Income Fund
INVESCO Value Equity Fund........................ INVESCO Value Equity Fund
</Table>
SCHEDULE 4.4
CERTAIN CONTINGENT LIABILITIES OF BUYING FUND
None.
SCHEDULE 4.5(a)
PORTFOLIOS OF BUYER
INVESCO Energy Fund
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Real Estate Opportunity Fund
INVESCO Technology Fund
INVESCO Telecommunications Fund
INVESCO Utilities Fund
SCHEDULE 4.5(b)
<Table>
<Caption>
NUMBER OF SHARES OF EACH CLASS
CLASSES OF SHARES OF BUYING FUND BUYER IS AUTHORIZED TO ISSUE
-------------------------------- ------------------------------
Class A shares.............................................. 100,000,000
Class B shares.............................................. 100,000,000
Class C shares.............................................. 100,000,000
Class K shares.............................................. 100,000,000
Investor Class shares....................................... 100,000,000
</Table>
SCHEDULE 5.1
PERMITTED COMBINATIONS OF FUNDS
<Table>
INVESCO Advantage Fund into AIM Opportunities III Fund
INVESCO Growth Fund into AIM Large Cap Growth Fund
INVESCO Growth & Income Fund into AIM Blue Chip Fund
INVESCO European Fund into AIM European Growth Fund
AIM International Core Equity Fund into INVESCO
International Blue Chip Value Fund
AIM New Technology Fund into INVESCO Technology Fund
AIM Global Science and Technology Fund into INVESCO
Technology Fund
INVESCO Telecommunications Fund into INVESCO Technology Fund
AIM Global Financial Services Fund into INVESCO Financial
Services Fund
AIM Global Energy Fund into INVESCO Energy Fund
AIM Global Utilities Fund into INVESCO Utilities Fund
INVESCO Real Estate Opportunity Fund into AIM Real Estate
Fund
INVESCO Tax-Free Bond Fund into AIM Municipal Bond Fund
INVESCO High Yield Fund into AIM High Yield Fund
INVESCO Select Income Fund into AIM Income Fund
INVESCO U.S. Government Securities Fund into AIM
Intermediate Government Fund
INVESCO Cash Reserves Fund into AIM Money Market Fund
INVESCO Tax-Free Money Fund into AIM Tax-Exempt Cash Fund
INVESCO Balanced Fund into INVESCO Total Return Fund
INVESCO Value Equity Fund into AIM Large Cap Basic Value
Fund
AIM Premier Equity Fund II into AIM Premier Equity Fund
</Table>
SCHEDULE 6.2(f)
TAX OPINIONS
(i) The transfer of the assets of Selling Fund to Buying Fund in exchange
solely for Buying Fund Shares distributed directly to Selling Fund Shareholders
and Buying Fund's assumption of the Liabilities, as provided in the Agreement,
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code and Selling Fund and Buying Fund will be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
(ii) In accordance with Section 361(a) and Section 361(c)(1) of the Code,
no gain or loss will be recognized by Selling Fund on the transfer of its assets
to Buying Fund solely in exchange for Buying Fund Shares and Buying Fund's
assumption of the Liabilities or on the distribution of Buying Fund Shares to
Selling Fund Shareholders; provided that, no opinion is expressed as to the
effect of the Reorganization on Selling Fund or any Selling Fund Shareholder
with respect to any asset as to which any unrealized gain or loss is required to
be recognized for Federal income tax purposes at the end of a taxable year (or
on the termination or transfer of a taxpayer's rights (or obligations) with
respect to such asset) under a mark-to-market system of accounting.
(iii) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange
for Buying Fund Shares issued directly to Selling Fund Shareholders.
(iv) In accordance with Section 354(a)(1) of the Code, no gain or loss will
be recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares
in exchange for Selling Fund Shares.
(v) In accordance with Section 362(b) of the Code, the basis to Buying Fund
of the assets of Selling Fund will be the same as the basis of such assets in
the hands of Selling Fund immediately prior to the Reorganization.
(vi) In accordance with Section 358(a) of the Code, a Selling Fund
Shareholder's basis for Buying Fund Shares received by the Selling Fund
Shareholder will be the same as his or her basis for Selling Fund Shares
exchanged therefor.
(vii) In accordance with Section 1223(1) of the Code, a Selling Fund
Shareholder's holding period for Buying Fund Shares will be determined by
including such Selling Fund Shareholder's holding period for Selling Fund Shares
exchanged therefor, provided that such Selling Fund Shareholder held such
Selling Fund Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the Code, the holding period
with respect to the assets of Selling Fund transferred to Buying Fund in the
Reorganization will include the holding period for such assets in the hands of
Selling Fund.
(ix) In accordance with Section 381(a)(2) of the Code, Buying Fund will
succeed to and take into account the items of Selling Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381 through 384 of the Code and the Treasury Regulations thereunder.
APPENDIX II
INVESCO SECTOR FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & Precious Metals Fund--Investor Class, Class A, B, and C
INVESCO Real Estate Opportunity Fund--Investor Class, Class A, B, and C
INVESCO Utilities Fund--Investor Class, Class A, B, and C
Supplement dated August 1, 2003 to the Prospectus dated August 1, 2003
INVESCO REAL ESTATE OPPORTUNITY FUND
The Board of Directors of INVESCO Sector Funds, Inc. ("Seller") unanimously
approved, on June 9, 2003, an Agreement and Plan of Reorganization (the "Plan")
pursuant to which INVESCO Real Estate Opportunity Fund ("Selling Fund"), a
series of Seller, would transfer all of its assets and liabilities to AIM Real
Estate Fund ("Buying Fund"), a series of AIM Advisor Funds (the
"Reorganization"). As a result of the Reorganization, shareholders of Selling
Fund would receive shares of Buying Fund in exchange for their shares of Selling
Fund, and Selling Fund would cease operations.
INVESCO Funds Group, Inc. ("INVESCO") serves as the investment advisor to
Selling Fund and A I M Advisors, Inc. ("AIM") serves as the investment advisor
to Buying Fund. Both investment advisors are wholly owned subsidiaries of
AMVESCAP PLC ("AMVESCAP"), an independent global investment management company.
The Reorganization is part of an integration initiative announced on March 27,
2003, by AMVESCAP, with respect to its North American mutual fund operations.
One component of AMVESCAP's integration initiative is the rationalization and
streamlining of the various funds within The AIM Family of Funds(R) and the
INVESCO Family of Funds. In that regard, AMVESCAP has undertaken an extensive
review of these funds and concluded that it would be appropriate to reduce the
number of smaller and less efficient funds that compete in the same space for
shareholder assets and to consolidate certain funds having similar investment
objectives and strategies. Reducing the number of funds both within The AIM
Family of Funds(R) and the INVESCO Family of Funds will allow AIM and INVESCO to
concentrate on managing their core products.
In AMVESCAP's view, AIM has best developed the expertise and resources for
managing funds with an investment objective and strategies similar to those of
Selling Fund and should therefore manage the combined fund. AMVESCAP's belief is
that the Reorganization will allow Buying Fund the best available opportunities
for investment management, growth prospects and potential economies of scale.
The Board of Directors of Seller, including the independent directors, has
determined that the Reorganization is advisable and in the best interests of
Selling Fund and that the interests of the shareholders of Selling Fund will not
be diluted as a result of the Reorganization.
The investment objectives of Selling Fund and Buying Fund are similar. Selling
Fund's investment objective is capital growth and income. Buying Fund's
investment objective is high total return.
The Plan requires approval of Selling Fund shareholders and will be submitted to
the shareholders for their consideration at a meeting to be held on or around
October 21, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
It is anticipated that Selling Fund will be closed to new investors during the
fourth quarter of 2003.
INVESCO TELECOMMUNICATIONS FUND
The Board of Directors of INVESCO Sector Funds, Inc. ("Seller") unanimously
approved, on June 9, 2003, an Agreement and Plan of Reorganization (the "Plan")
pursuant to which INVESCO Telecommunications Fund ("Selling Fund"), would
transfer all of its assets and liabilities to INVESCO Technology Fund ("Buying
Fund"), both of which are series of Seller (the "Reorganization"). As a result
of the Reorganization, shareholders of Selling Fund would receive shares of
Buying Fund in exchange for their shares of Selling Fund, and Selling Fund would
cease operations.
INVESCO Funds Group, Inc. ("INVESCO") serves as the investment advisor to both
Selling Fund and Buying Fund. The investment advisor is a wholly owned
subsidiary of AMVESCAP PLC ("AMVESCAP"), an independent global investment
management company. The Reorganization is part of an integration initiative
announced on March 27, 2003, by AMVESCAP, with respect to its North American
mutual fund operations.
One component of AMVESCAP's integration initiative is the rationalization and
streamlining of various funds within the INVESCO Family of Funds. In that
regard, AMVESCAP has undertaken an extensive review of these funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete in the same space for shareholder assets and to consolidate
certain funds having similar investment objectives and strategies. Reducing the
number of funds within the INVESCO Family of Funds will allow INVESCO to
concentrate on managing its core products.
AMVESCAP's belief is that the Reorganization will allow Buying Fund the best
available opportunities for investment management, growth prospects and
potential economies of scale.
The Board of Directors of Seller, including the independent directors, has
determined that the Reorganization is advisable and in the best interests of
Selling Fund and that the interests of the shareholders of Selling Fund will not
be diluted as a result of the Reorganization.
The investment objectives of Selling Fund and Buying Fund are the same. Selling
Fund's investment objective is capital growth and income. Buying Fund's
investment objective is capital growth.
The Plan requires approval of Selling Fund shareholders and will be submitted to
the shareholders for their consideration at a meeting to be held on or around
October 21, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
It is anticipated that Selling Fund will be closed to new investors during the
fourth quarter of 2003.
Effective August 18, 2003, the section of the Prospectus entitled "Fees And
Expenses" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Investor Class Class A Class B Class C Class K
Maximum Front-End Sales Charge
on purchases as a percentage of
offering price None 5.50% None None None
Maximum Contingent Deferred Sales
Charge (CDSC) as a percentage of
the lower of the total original cost or
current market value of the shares None None(1) 5.00%(2) 1.00%(2) None(1)
Maximum Sales Charge on reinvested
dividends/distributions None None None None None
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares
within eighteen months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) A 5% and 1% CDSC may
be charged on Class B and Class C shares, respectively. Please see the section
entitled "How To Buy Shares."
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
With the exception of Class A shares, there is no charge to invest directly
through INVESCO. Class A shares are subject to a front-end sales charge. For
more information on this charge, please see the subsection entitled "Sales
Charges." If you buy $1,000,000 or more of Class A shares and redeem the shares
within eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the lower of the total original
cost or current market value of the shares may be assessed. With respect to
redemption of Class C shares held twelve months or less, a CDSC of 1% of the
lower of the total original cost or current market value of the shares may be
assessed. With respect to Class K shares, if you are a qualified plan and elect
to receive a dealer concession, you may pay a CDSC of 0.70% on your Class K
shares if the plan is redeemed within twelve months from initial deposit in the
plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. For a non-qualified plan, in
determining whether a CDSC applies to a redemption, it is assumed that the
shares being redeemed first are any shares in the shareholder's Fund account
that are not subject to a CDSC, followed by shares held the longest in the
shareholder's account. These charges are not assessed upon Class A, B, C, or K
shares acquired through reinvestment of dividends or other distributions, or
Class A, B, C, or K shares exchanged for the same class of another INVESCO Fund.
For more information on CDSC charges, please see the subsection of the
Prospectus entitled "Choosing A Share Class" and the section of the Statement of
Additional Information entitled "Distributor - Sales Charges and Dealer
Concessions."
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares - Choosing A Share Class" is amended to (i) delete the second paragraph
in its entirety and (ii) substitute the following in its place:
In addition, you should also consider the factors below:
Investor
Class Class A Class B Class C Class K
Initial Sales Charge None 5.50% None None None
CDSC(1) None 1% on certain 1%-5% for 1% for shares 0.70% on certain
purchases held shares held held less than purchases
less than 18 less than 12 months held less than
months 6 years 12 months
12b-1 Fee 0.25% 0.35% 1.00% 1.00% 0.45%
12b-1 Fee
(Utilities Fund Only) 0.25% 0.25% 1.00% 1.00% None
Conversion No No Yes(2) No No
Purchase Order
Maximum None None $250,000 $1,000,000 None
(1) Please see the subsection entitled "Sales Charges" below and the section of
the Funds' Statement of Additional Information entitled "Distributor - Sales
Charges and Dealer Concessions" for more information regarding CDSC charges and
dealer concessions.
(2) Class B shares, along with the pro rata portion of the shares' reinvested
dividends and distributions, automatically convert to Class A shares at the end
of the month which is eight years after the date on which such Class B shares
were purchased.
Effective August 18, 2003, the section of the Prospectus entitled "How To Buy
Shares - Sales Charges (Class A, B, C And K Only)" is amended to (i) delete the
third, fourth, seventh, eighth, and tenth paragraphs in their entirety and (ii)
substitute the following, respectively, in their place:
CONTINGENT DEFERRED SALES CHARGE (CDSC) for Class A and Class K Shares. You
can purchase $1,000,000 or more of Class A shares at net asset value, and
the distributor may pay a dealer concession and/or a service fee for
purchases of $1,000,000 or more. However, if you purchase shares worth
$1,000,000 or more, they may be subject to a CDSC of 1% if you redeem them
prior to eighteen months after the date of purchase. We will use the
"first-in, first-out" method to determine your holding period. Under this
method, the date of redemption will be compared with the earliest purchase
date of shares held in your account. If your holding period is less than
eighteen months, the CDSC may be assessed on the amount of the lower of the
total original cost or current market value of the shares. For qualified
plans investing in Class A shares, you may pay a CDSC of 1% if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. For qualified plans investing in Class K shares, you may pay a
CDSC of 0.70% if the plan is redeemed within twelve months from initial
deposit in the plan's INVESCO account.
CDSC 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 CDSC in the following percentages. If your holding
period is less than six years for Class B shares and twelve months for
Class C shares, the CDSC may be assessed on the amount of the lower of the
total original cost or current market value of the shares.
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(1) None
(1) Class B shares, along with the pro rata portion of the shares'
reinvested dividends and distributions, automatically convert to Class A
shares at the end of the month which is eight years after the date on which
such Class B shares were purchased.
RIGHTS OF ACCUMULATION. You may combine your new purchases of Class A
shares with shares currently owned (Class A, B, C, or K) for the purpose of
qualifying for the lower initial sales charge rates that apply to larger
purchases. The applicable initial sales charge for the new purchase is
based on the total of your current purchase and the current value of all
other shares you own.
LETTER OF INTENT. Under a Letter of Intent (LOI), you commit to purchase a
specified dollar amount of Class A shares of a Fund during a thirteen-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 thirteen-month period, your account will be adjusted to the
higher initial sales charge level for the amount actually invested.
You will not pay a CDSC:
|X| if you purchase less than $1,000,000 of Class A shares;
|X| if you purchase $1,000,000 or more of Class A shares and hold
those shares for more than eighteen months;
|X| if you redeem Class B shares you held for more than six years;
|X| if you redeem Class C shares you held for more than twelve
months;
|X| if you participate in the periodic withdrawal program and
withdraw up to 12% of the value of your shares that are subject
to a CDSC in any twelve-month period. The value of your shares,
and applicable twelve-month period, will be calculated based upon
the value of your account on, and the date of, the first periodic
withdrawal;
|X| if you redeem shares acquired through reinvestment of dividends
and distributions;
|X| if you are a participant in a qualified retirement plan and
redeem Class C shares or Class K shares in order to fund a
distribution;
|X| if you are a qualified plan investing in Class A shares or Class
K shares and elect to forego any dealer concession;
|X| on increases in the net asset value of your shares;
|X| to pay account fees;
|X| for IRA distributions due to death or disability or periodic
distribution based on life expectancy;
|X| to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
|X| for redemptions following the death of a shareholder or
beneficial owner.
Effective August 18, 2003, the section of the Prospectus entitled "How To Sell
Shares" is amended to (i) delete the second paragraph in its entirety and (ii)
substitute the following in its place:
Various fees may apply to Fund redemptions. You may be charged a CDSC at
the time of redemption depending how long you have held your shares. If you
buy $1,000,000 or more of Class A shares and redeem the shares within
eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a
dealer concession, you may pay a CDSC of 1% on your Class A shares if the
plan is redeemed within twelve months from initial deposit in the plan's
INVESCO account. If you are a qualified plan and elect to forego the dealer
concession, you will not be charged a CDSC. With respect to redemption of
Class B shares held six years or less, a CDSC of 1% - 5% of the lower of
the total original cost or current market value of the shares may be
assessed. With respect to redemption of Class C shares held twelve months
or less, a CDSC of 1% of the lower of the total original cost or current
market value of the shares may be assessed. With respect to Class K shares,
if you are a qualified plan and elect to receive a dealer concession, you
may pay a CDSC of 0.70% on your Class K shares if the plan is redeemed
within twelve months from initial deposit in the plan's INVESCO account. If
you are a qualified plan and elect to forego the dealer concession, you
will not be charged a CDSC. For a non-qualified plan, in determining
whether a CDSC applies to a redemption, it is assumed that the shares being
redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the
shareholder's account. These charges are not assessed upon Class A, B, C,
or K shares acquired through reinvestment of dividends or other
distributions, or Class A, B, C, or K shares exchanged for the same class
of another INVESCO Fund. For more information on CDSC charges, please see
the subsection of the Prospectus entitled "Choosing A Share Class" and the
section of the Statement of Additional Information entitled "Distributor -
Sales Charges and Dealer Concessions."
INVESCO HEALTH SCIENCES FUND
Effective August 1, 2003, the section of the Prospectus entitled "Portfolio
Managers" is amended to add:
ANDY SUMMERS is a Portfolio Manager for all INVESCO Health Sciences portfolios.
Andy joined the INVESCO Health Sciences investment team in 1998. He is a CFA
charterholder. Prior to joining INVESCO, Andy worked as an analyst assistant for
Denver Investment Advisors. He received his master's degree in finance from the
University of Wisconsin at Madison in 1998. He received his bachelor's degree in
finance from the University of Wisconsin at Whitewater in 1996.
INVESCO TECHNOLOGY FUND
Effective August 1, 2003, the section of the Prospectus entitled "Portfolio
Managers" is amended to add:
CHRIS DRIES is a Portfolio Manager for the INVESCO Technology Fund. Chris
joined INVESCO in 1993, and was promoted to the investment division in 1995. He
previously held the position of manager of investment operations for the
investment division at INVESCO. Chris received his master's degree in finance
from the University of Colorado at Denver and his bachelor's degree in finance
from the University of Colorado at Boulder.
MICHELLE FENTON is a Portfolio Manager of INVESCO Dynamics Fund and INVESCO
Mid-Cap Growth Fund. Michelle is also a Portfolio Manager for the INVESCO
Technology Fund. She is a CFA charterholder. Michelle has more than eight years
of investment industry experience. Before joining the investment division of
INVESCO in 1998, Michelle worked at Berger Funds as an equity analyst. Prior to
that, she was a research analyst at Smith Barney. Michelle received her
bachelor's degree in finance from Montana State University.
PROSPECTUS | AUGUST 1, 2003
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YOU SHOULD KNOW WHAT INVESCO KNOWS(R)
- --------------------------------------------------------------------------------
INVESCO SECTOR
FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & PRECIOUS METALS FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO REAL ESTATE OPPORTUNITY FUND--INVESTOR CLASS, CLASS A, B AND C
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO UTILITIES FUND--INVESTOR CLASS, CLASS A, B, AND C
NINE MUTUAL FUNDS DESIGNED FOR INVESTORS SEEKING CAPITAL GROWTH THROUGH TARGETED
INVESTMENT OPPORTUNITIES.
INVESTOR CLASS SHARES OFFERED BY THIS PROSPECTUS ARE OFFERED ONLY TO
GRANDFATHERED INVESTORS. PLEASE SEE THE SECTION OF THE PROSPECTUS ENTITLED "HOW
TO BUY SHARES."
CLASS A, B, AND C SHARES ARE SOLD PRIMARILY THROUGH FINANCIAL INTERMEDIARIES.
CLASS K SHARES ARE SOLD TO QUALIFIED RETIREMENT PLANS, RETIREMENT SAVINGS
PROGRAMS, EDUCATIONAL SAVINGS PROGRAMS, AND WRAP PROGRAMS PRIMARILY THROUGH
FINANCIAL INTERMEDIARIES.
TABLE OF CONTENTS
Investment Goals, Strategies, And Risks....................2
Fund Performance...........................................5
Fees And Expenses.........................................10
Investment Risks..........................................14
Principal Risks Associated With The Funds.................14
Temporary Defensive Positions.............................16
Portfolio Turnover........................................16
Fund Management...........................................17
Portfolio Managers........................................17
Potential Rewards.........................................18
Share Price...............................................18
How To Buy Shares.........................................19
Your Account Services.....................................23
How To Sell Shares........................................24
Taxes.....................................................26
Dividends And Capital Gain Distributions..................26
Financial Highlights......................................27
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.
[INVESCO ICON] INVESCO(R)
The Securities and Exchange Commission has not approved or disapproved the
shares of these Funds. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is committing
a federal crime. INVESCO Funds Group, Inc. ("INVESCO") is the investment advisor
for the Funds. Together with our affiliated companies, we at INVESCO direct all
aspects of the management and sale of the Funds.
INVESCO Funds Group, Inc. ("INVESCO") is the investment advisor for the Funds.
Together with our affiliated companies, we at INVESCO direct all aspects of the
management and sale of the Funds.
This Prospectus contains important information about the Funds' Investor Class,
Class A, B, C, and, if applicable, K shares. Class A, B, and C shares are sold
primarily through financial intermediaries. Class K shares are sold to qualified
retirement plans, retirement savings programs, educational savings programs, and
wrap programs primarily through financial intermediaries. If you invest through
a financial intermediary, please contact your financial intermediary or, with
respect to Class K shares, your plan or program sponsor, for detailed
information on suitability and transactional issues (i.e., how to purchase or
sell shares, minimum investment amounts, and fees and expenses). INVESCO
Technology Fund also offers an additional class of shares through a separate
Prospectus. Each of the Fund's classes has varying expenses, with resulting
effects on their performance. You can choose the class of shares that is best
for you, based on how much you plan to invest and other relevant factors
discussed in "How To Buy Shares." To obtain additional information about the
other class of Technology Fund's shares, contact A I M Distributors, Inc.
("ADI") at 1-800-347-4246.
THIS PROSPECTUS WILL TELL YOU MORE ABOUT:
[KEY ICON] INVESTMENT GOALS & STRATEGIES
[ARROWS ICON] POTENTIAL INVESTMENT RISKS
[GRAPH ICON] PAST PERFORMANCE
[INVESCO ICON] WORKING WITH INVESCO
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[KEY ICON] [ARROWS ICON] INVESTMENT GOALS, STRATEGIES, AND RISKS
FACTORS COMMON TO ALL THE FUNDS
FOR MORE DETAILS ABOUT EACH FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK,
PLEASE SEE THE MOST RECENT ANNUAL OR SEMIANNUAL REPORT.
The Funds seek capital growth; Real Estate Opportunity, Telecommunications, and
Utilities Funds also attempt to earn income for you. The Funds are actively
managed. They invest primarily in equity securities that INVESCO believes will
rise in price faster than other securities, as well as in options and other
investments whose values are based upon the values of equity securities.
Each Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies doing business in the
economic sector described by its name. At any given time, 20% of each Fund's
assets is not required to be invested in the sector. To determine whether a
potential investment is truly doing business in a particular sector, a company
must meet at least one of the following tests:
o At least 50% of its gross income or its net sales must come from activities
in the sector;
o At least 50% of its assets must be devoted to producing revenues from the
sector;
o or Based on other available information, we determine that its primary
business is within the sector.
INVESCO uses a research oriented "bottom-up" investment approach to create each
Fund's investment portfolio, focusing on company fundamentals and growth
prospects when selecting securities. In general, the Funds emphasize companies
that INVESCO believes are strongly managed and will generate above-average
long-term capital appreciation.
Growth investing may be more volatile than other investment styles because
growth stocks are more sensitive to investor perceptions of an issuing company's
growth potential. Growth-oriented funds typically will underperform
value-oriented funds when investor sentiment favors the value investing style.
Value investing seeks securities, particularly stocks, that are currently
undervalued by the market -- companies that are performing well, or have solid
management and products, but whose stock prices do not reflect that value.
Through our value process, we seek to provide reasonably consistent returns over
a variety of market cycles. Value-oriented funds typically will underperform
growth-oriented funds when investor sentiment favors the growth investing style.
As sector funds, each portfolio is concentrated in a comparatively narrow
segment of the economy. This means a Fund's investment concentration in a sector
is higher than most mutual funds and the broad securities markets. Consequently,
the Funds tend to be more volatile than other mutual funds, and the value of
their portfolio investments and consequently the value of an investment in a
Fund tend to go up and down more rapidly.
The Funds are subject to other principal risks, as applicable, such as market,
foreign securities, liquidity, derivatives, counterparty, lack of timely
information, and portfolio turnover risks. These risks are described and
discussed later in the Prospectus under the headings "Investment Risks" and
"Principal Risks Associated With The Funds." An investment in a Fund is not a
deposit of any bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") or any other government agency. As with any
mutual fund, there is always a risk that you may lose money on your investment
in a Fund.
The Funds are concentrated in these sectors:
[KEY ICON] INVESCO ENERGY FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies within the energy sector.
These companies include, but are not limited to, oil companies, oil and gas
exploration companies, natural gas pipeline companies, refinery companies,
energy conservation companies, coal, alternative energy companies, and
innovative energy technology companies.
Generally, we prefer to keep the Fund's investments divided among the four main
energy subsectors: major oil companies, energy services, oil and gas
exploration/production companies, and natural gas pipeline companies. We adjust
portfolio weightings depending on current economic conditions. Although
individual security selection drives the performance of the Fund, short-term
fluctuations in commodity prices may influence Fund returns and increase price
fluctuations in the Fund's shares. The businesses in which we invest may be
adversely affected by foreign government, federal, or state regulations on
energy production, distribution, and sale.
[KEY ICON] INVESCO FINANCIAL SERVICES FUND -- INVESTOR CLASS, CLASS A, B, C,
AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies involved in the financial
services sector. These companies include, but are not limited to, banks
(regional and money-centers), insurance companies (life, property and casualty,
and multiline), investment and miscellaneous industries (asset managers,
brokerage firms, and government-sponsored agencies), and suppliers to financial
services companies.
We place a greater emphasis on companies that are increasing their revenue
streams along with their earnings. We seek companies that we believe can grow
their revenues and earnings in a variety of interest rate environments --
although securities prices of financial services companies generally are
interest rate sensitive. We seek companies with successful sales and marketing
cultures and that leverage technologies in their operations and distribution. We
adjust portfolio weightings depending on current economic conditions and
relative valuations of securities.
This sector generally is subject to extensive governmental regulation, which may
change frequently. In addition, the profitability of businesses in these
industries depends heavily upon the availability and cost of money, and may
fluctuate significantly in response to changes in interest rates, as well as
changes in general economic conditions. From time to time, severe competition
may also affect the profitability of these industries.
[KEY ICON] INVESCO GOLD & PRECIOUS METALS FUND -- INVESTOR CLASS, CLASS A, B,
AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies involved in exploring
for, mining, processing, or dealing and investing in gold, gold bullion, and
other precious metals, such as silver, platinum, and palladium, as well as
diamonds. The securities of these companies are highly dependent on the price of
precious metals at any given time.
Fluctuations in the price of gold directly -- and often dramatically -- affect
the profitability and market value of companies in this sector. Changes in
political or economic climate for the two largest gold producers -- South Africa
and the former Soviet Union -- may have a direct impact on the price of gold
worldwide. Up to 10% at the time of purchase of the Fund's assets may be
invested in gold bullion. The Fund's investments directly in gold bullion will
earn no income return; appreciation in the market price of gold is the sole
manner in which the Fund can realize gains on bullion investments. The Fund may
have higher storage and custody costs in connection with its ownership of
bullion than those associated with the purchase, holding and sale of more
traditional types of investments.
The Fund primarily focuses on those gold companies that have the ability to
increase production capacity at low costs, while having the potential to make
major gold discoveries around the world. Additionally, we try to identify
companies that leverage increasing gold prices; that is, companies that do not
hedge gold prices on the market. While the Fund may take positions in mid- to
small-sized exploration companies that may be more volatile than investments in
large, more established companies, it will primarily focus on major gold stocks
that are leaders in their fields. Up to 100% of the Fund's assets may be
invested in foreign companies.
[KEY ICON] INVESCO HEALTH SCIENCES FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies that develop, produce, or
distribute products or services related to health care. These companies include,
but are not limited to, medical equipment or supplies, pharmaceuticals,
biotechnology, and health care providers and services companies.
We focus on the dominant players in fast-growing therapeutic areas or companies
on the verge of exciting medical breakthroughs. We seek companies with strong,
commercially successful products as well as promising product pipelines. This
strategy may lead us to invest in both well-established health care firms and
faster-growing, more dynamic entities. Well-established health care companies
typically provide liquidity and earnings visibility for the portfolio and
represent core holdings in the Fund. The Fund also may invest in high growth,
earlier stage companies whose future profitability could be dependent upon
increasing market shares from one or a few key products. Such companies often
have limited operating histories and their potential profitability may be
dependent on regulatory approval of their products, which increases the
volatility of these companies' securities prices and could have an adverse
impact upon the companies' future growth and profitability.
Changes in government regulation could also have an adverse impact. Continuing
technological advances may mean rapid obsolescence of products and services.
[KEY ICON] INVESCO LEISURE FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in the design,
production, and distribution of products related to the leisure activities.
These industries include, but are not limited to, hotels/gaming, publishing,
advertising, beverages, audio/video, broadcasting-radio/TV, cable & satellite
operators, cable & satellite programmers, motion pictures & TV, recreation
services/entertainment, retail, and toys.
We seek firms that can grow their businesses regardless of the economic
environment. INVESCO attempts to keep the portfolio well diversified across the
leisure sector, adjusting portfolio weightings depending on prevailing economic
conditions and relative valuations of securities. This sector depends on
consumer discretionary spending, which generally falls during economic
downturns. Securities of gambling casinos often are subject to high price
volatility and are considered speculative. Video and electronic games are
subject to risks of rapid obsolescence.
[KEY ICON] INVESCO REAL ESTATE OPPORTUNITY FUND -- INVESTOR CLASS, CLASS A,
B, AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies doing business in the
real estate industry, including real estate investment trusts ("REITS"), which
invest in real estate or interests in real estate. No one property type will
represent more than 50% of the Fund's total assets. The companies in which the
Fund invests may also include, but are not limited to, real estate brokers, home
builders or real estate developers, companies with substantial real estate
holdings, and companies with significant involvement in the real estate industry
or other real estate-related companies.
The real estate industry is highly cyclical, and the value of securities issued
by companies doing business in that sector may fluctuate widely. The real estate
industry -- and, therefore, the performance of the Fund -- is highly sensitive
to national, regional and local economic conditions, interest rates, property
taxes, overbuilding, decline in value of real estate, and changes in rental
income. REITS are companies or trusts that own and/or operate income-producing
real estate. Shares of REITS are publicly traded and are subject to the same
risks as any other security, as well as risks specific to the real estate
industry.
[KEY ICON] INVESCO TECHNOLOGY FUND -- INVESTOR CLASS, CLASS A, B, C, AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in
technology-related industries. These include, but are not limited to, various
applied technologies, hardware, software, semiconductors, telecommunications
equipment and services, and service-related companies in information technology.
Many of these products and services are subject to rapid obsolescence, which may
lower the market value of the securities of the companies in this sector.
A core portion of the Fund's portfolio is invested in market-leading technology
companies among various subsectors in the technology universe that we believe
will maintain or improve their market share regardless of overall economic
conditions. These companies are leaders in their field and are believed to have
a strategic advantage over many of their competitors. The remainder of the
Fund's portfolio consists of faster-growing, more volatile technology companies
that INVESCO believes to be emerging leaders in their fields. The market prices
of these companies tend to rise and fall more rapidly than those of larger, more
established companies.
[KEY ICON] INVESCO TELECOMMUNICATIONS FUND -- INVESTOR CLASS, CLASS A, B, C,
AND K
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in the design,
development, manufacture, distribution, or sale of communications services and
equipment, and companies that are involved in supplying equipment or services to
such companies. The telecommunications sector includes, but is not limited to,
companies that offer telephone services, wireless communications, satellite
communications, television and movie programming, broadcasting, and Internet
access. Many of these products and services are subject to rapid obsolescence,
which may lower the market value of the securities of the companies in this
sector.
We select stocks based on projected total return for individual companies, while
also analyzing country specific factors that might affect stock performance or
influence company valuation. Normally, the Fund will invest primarily in
companies located in at least three different countries, although U.S. issuers
will often dominate the portfolio. The Fund's portfolio emphasizes strongly
managed market leaders, with a lesser weighting on smaller, faster growing
companies that offer new products or services and/or are increasing their market
share.
[KEY ICON] INVESCO UTILITIES FUND -- INVESTOR CLASS, CLASS A, B, AND C
The Fund normally invests at least 80% of its net assets in the equity
securities and equity-related instruments of companies engaged in
utilities-related industries. These include, but are not limited to, companies
that produce, generate, transmit, or distribute natural gas or electricity, as
well as companies that provide telecommunications services, including local,
long distance and wireless.
Governmental regulation, difficulties in obtaining adequate financing and
investment return, environmental issues, prices of fuel for generation of
electricity, availability of natural gas, risks associated with power marketing
and trading, and risks associated with nuclear power facilities may adversely
affect the market value of the Fund's holdings. The recent trend towards
deregulation in the utility industries presents special risks. Some companies
may be faced with increased competition and may become less profitable.
Normally, INVESCO seeks to keep the portfolio divided among the electric
utilities, natural gas, and telecommunications industries. Weightings within the
various industry segments are continually monitored, and INVESCO adjusts the
portfolio weightings depending on the prevailing economic conditions.
[GRAPH ICON] FUND PERFORMANCE
Performance information in the bar charts below is that of the Funds' Investor
Class shares, which has the longest operating history of the Funds' classes.
Information included in the table is that of Investor Class, Class C, and, if
applicable, Class K shares. Performance information for Class A and B shares is
not shown in the table as those classes do not yet have a full calendar year of
performance. Investor Class and Class A, B, C, and K returns would be similar
because all classes of shares invest in the same portfolio of securities. The
returns of the classes would differ, however, to the extent of differing levels
of expenses. In this regard, the returns reflected in the bar charts and table
reflect only the applicable total expenses of the class shown. If the effect of
the other classes' total expenses were reflected, the returns would be lower
than those shown because the other classes have higher total expenses.
The bar charts below show the Funds' Investor Class actual yearly performance
(commonly known as their "total return") for the years ended December 31 over
the past decade or since inception. The returns in the bar charts do not reflect
a 12b-1 fee in excess of 0.25%, the sales charge for Class A shares, or the
applicable contingent deferred sales charge (CDSC) for Class B or Class C
shares; if they did, the total returns shown would be lower. The table below
shows the pre-tax and after-tax average annual total returns of Investor Class
and pre-tax average annual total returns for Class C shares, and, if applicable,
Class K shares for various periods ended December 31, 2002 compared to the S&P
500 Index, the S&P 500 Financials Index with respect to Financial Services Fund,
and the NAREIT -- Equity REIT Index with respect to Real Estate Opportunity
Fund. The after-tax returns are shown only for the Investor Class shares.
After-tax returns for other classes of shares offered in this Prospectus will
vary.
After-tax returns are provided on a pre-redemption and post-redemption basis.
Pre-redemption returns assume you continue to hold your shares and pay taxes on
Fund distributions (i.e., dividends and capital gains) but do not reflect taxes
that may be incurred upon selling or exchanging shares. Post-redemption returns
assume payment of taxes on fund distributions and also that you close your
account and pay remaining federal taxes. After-tax returns are calculated using
the highest individual federal income tax rates in effect at the time the
distribution is paid. State and local taxes are not considered. Actual after-tax
returns depend on an investor's tax situation and may differ from those shown.
For investors holding their shares in tax-deferred arrangements such as 401(k)
plans or individual retirement accounts, the after-tax returns shown are not
relevant.
The information in the bar charts and table illustrates the variability of each
Fund's total return and how its performance compared to a broad measure of
market performance. Remember, past performance (before and after taxes) does not
indicate how a Fund will perform in the future.
- --------------------------------------------------------------------------------
ENERGY FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
16.71% (7.25%) 19.80% 38.84% 19.09% (27.83%) 41.88% 58.17% (16.81%) (4.32)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/97 28.24%
Worst Calendar Qtr. 9/98 (18.34%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
18.52% (5.89%) 39.81% 30.29% 44.79% 13.45% 0.73% 26.69% (10.17%) (15.56%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/00 22.76%
Worst Calendar Qtr. 9/98 (18.20%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLD & PRECIOUS METALS FUND--
INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
72.47% (27.85%) 12.72% 40.64% (55.50%) (22.54%) (8.99%) (12.98%) 17.12% 59.65%
- --------------------------------------------------------------------------------
Best Calendar Qtr. 3/96 46.17%
Worst Calendar Qtr. 12/97 (37.51%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
(8.41%) 0.94% 58.89% 11.41% 18.46% 43.40% 0.59% 25.80% (14.68%) (25.24%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/95 19.53%
Worst Calendar Qtr. 3/01 (22.91%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEISURE FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
35.73% (4.98%) 15.79% 9.08% 26.46% 29.78% 65.59% (7.97%) 4.10% (15.41%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 25.59%
Worst Calendar Qtr. 9/01 (24.06%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND--
INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(3)
================================================================================
[GRAPHIC OMITTED]
1997 1998 1999 2000 2001 2002
21.50% (23.48%) (5.50%) 24.72% (1.91%) 5.81%
- --------------------------------------------------------------------------------
Best Calendar Qtr. 9/97 14.19%
Worst Calendar Qtr. 9/98 (20.46%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TECHNOLOGY FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
15.03% 5.27% 45.80% 21.75% 8.85% 30.12% 144.94% (22.77%) (45.51%) (47.22%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 66.77%
Worst Calendar Qtr. 9/01 (41.44%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2),(4)
================================================================================
[GRAPHIC OMITTED]
1995 1996 1997 1998 1999 2000 2001 2002
27.37% 16.81% 30.29% 40.98% 144.28% (26.91%) (54.19%) (50.96%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/99 62.22%
Worst Calendar Qtr. 9/01 (41.40%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UTILITIES FUND--INVESTOR CLASS
ACTUAL ANNUAL TOTAL RETURN(1),(2)
================================================================================
[GRAPHIC OMITTED]
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
21.20% (9.94%) 25.25% 12.75% 24.38% 24.30% 19.88% 4.14% (33.98%) (22.29%)
- --------------------------------------------------------------------------------
Best Calendar Qtr. 12/98 16.33%
Worst Calendar Qtr. 9/01 (23.67%)
- --------------------------------------------------------------------------------
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
INVESTOR CLASS
Energy Fund(1),(2)
Return Before Taxes (4.32%) 5.21% 10.70%
Return After Taxes on Distributions (4.32%) 4.86% 9.21%
Return After Taxes on Distributions
and Sale of Fund Shares (2.65%) 4.24% 8.34%
Gold & Precious Metals Fund(1),(2)
Return Before Taxes 59.65% 2.78% 0.07%
Return After Taxes on Distributions 59.65% 2.58% (1.25%)
Return After Taxes on Distributions
and Sale of Fund Shares 36.62% 2.12% (0.26%)
Health Sciences Fund(1),(2)
Return Before Taxes (25.24%) 2.97% 8.42%
Return After Taxes on Distributions (25.24%) 0.99% 6.14%
Return After Taxes on Distributions
and Sale of Fund Shares (15.50%) 2.36% 6.54%
Leisure Fund(1),(2)
Return Before Taxes (15.41%) 11.73% 13.63%
Return After Taxes on Distributions (15.41%) 10.02% 11.35%
Return After Taxes on Distributions
and Sale of Fund Shares (9.46%) 9.43% 10.73%
Technology Fund(1),(2)
Return Before Taxes (47.22%) (6.67%) 5.18%
Return After Taxes on Distributions (47.22%) (7.16%) 2.46%
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
Return After Taxes on Distributions
and Sale of Fund Shares (28.99%) (4.64%) 3.64%
Utilities Fund(1),(2)
Return Before Taxes (22.29%) (4.46%) 4.32%
Return After Taxes on Distributions (23.10%) (5.55%) 2.14%
Return After Taxes on Distributions
and Sale of Fund Shares (13.67%) (3.41%) 2.79%
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.35%
Financial Services Fund(1),(2)
Return Before Taxes (15.56%) 1.89% 12.44%
Return After Taxes on Distributions (15.60%) 0.59% 9.48%
Return After Taxes on Distributions
and Sale of Fund Shares (9.53%) 1.43% 9.20%
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.35%
S&P 500 Financials Index6
(reflects no deduction for fees, expenses
or taxes) (14.64%) 2.53% 14.08%
Real Estate Opportunity Fund(1),(2)
Return Before Taxes 5.81% (1.32%) 2.17%(3)
Return After Taxes on Distributions 4.56% (3.55%) (0.55%)(3)
Return After Taxes on Distributions
and Sale of Fund Shares 3.58% (2.21%) 0.35%(3)
NAREIT-- Equity REIT Index(6)
(reflects no deduction for fees, expenses
or taxes) 3.82% 3.30% 5.95%(3)
Telecommunications Fund(1),(2)
Return Before Taxes (50.96%) (10.78%) 1.69%(4)
Return After Taxes on Distributions (50.96%) (11.09%) 0.21%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (31.29%) (7.89%) 1.12%(4)
S&P 500 Index(6)
(reflects no deduction for fees, expenses
or taxes) (22.09%) (0.58%) 9.96%(4)
CLASS C - RETURN BEFORE TAXES (INCLUDING CDSC)
Energy Fund(1),(7) (6.01%) N/A 7.54%(8)
Gold & Precious Metals Fund(1),(7) 56.69% N/A 19.78%(8)
Health Sciences Fund(1),(7) (27.28%) N/A (12.12%)(8)
Leisure Fund(1),(7) (17.21%) N/A (6.36%)(8)
Technology Fund(1),(7) (48.74%) N/A (44.62%)(8)
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN(5)
AS OF 12/31/02
- ------------------------------------------------------------------------------------------------------------------------------------
10 YEARS
1 YEAR 5 YEARS OR SINCE INCEPTION
Telecommunications Fund(1),(7) (52.53%) N/A (49.61%)(8)
Utilities Fund(1),(7) (24.11%) N/A (23.09%)(8)
S&P 500 Index(6) (22.09%) N/A (13.19%)(8)
Financial Services Fund(1),(7) (17.36%) N/A 2.05%(8)
S&P 500 Index(6) (22.09%) N/A (13.19%)(8)
S&P 500 Financials Index(6) (14.64%) N/A 4.45%(8)
Real Estate Opportunity Fund(1),(7) 3.94% N/A 7.99%(8)
NAREIT-- Equity REIT Index(6) 3.82% N/A 15.58%(8)
CLASS K - RETURN BEFORE TAXES
Energy Fund(1),(9) (7.29%) N/A (4.04%)(10)
Health Sciences Fund(1),(9) (25.71%) N/A (17.67%)(10)
Technology Fund(1),(9) (47.20%) N/A (45.27%)(10)
Telecommunications Fund(1),(9) (51.03%) N/A (51.38%)(10)
S&P 500 Index(6) (22.09%) N/A (16.32%)(10)
Financial Services Fund(1),(9) (15.88%) N/A (8.84%)(10)
S&P 500 Index(6) (22.09%) N/A (16.32%)(10)
S&P 500 Financials Index(6) (14.64%) N/A (7.64%)(10)
Leisure Fund(1),(9) (15.52%) N/A (11.49%)(11)
S&P 500 Index(6) (22.09%) N/A (22.09%)(11)
(1) Total return figures include reinvested dividends and capital gain distributions and the effect of each class's expenses.
(2) Returns before taxes for Investor Class shares of Energy, Financial Services, Gold & Precious Metals, Health Sciences, Leisure,
Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds year-to-date as of the calendar quarter ended June
30, 2003 were 10.05%, 11.02%, 0.37%, 16.16%, 12.19%, 15.14%, 17.80%, 15.21%, and 9.35%, respectively.
(3) The Fund (Investor Class shares) commenced investment operations on January 2, 1997. Index comparison begins on January 2,
1997.
(4) The Fund (Investor Class shares) commenced investment operations on August 1, 1994. Index comparison begins on August 1, 1994.
(5) The total returns are for those classes of shares with a full calendar year of performance. If the effect of the other classes'
total expenses, including 12b-1 fees, front-end sales charge for Class A, and CDSC for Class B were reflected, returns for
those classes would be lower than those shown.
(6) The S&P 500 Index is an unmanaged index considered representative of the performance of the broad U.S. stock market. The S&P
500 Financials Index is an unmanaged index that contains companies involved in activities such as banking, consumer finance,
investment banking and brokerage, asset management, insurance and investment, and real estate, including REITs. The NAREIT --
Equity REIT Index is an unmanaged index considered representative of the U.S. real estate investment trust equity market.
Please keep in mind that the Indexes do not pay brokerage, management, administrative, or distribution expenses, all of which
are paid by the classes and are reflected in their annual returns. Index returns also do not include sales charges or CDSCs
that may be paid by the shareholder.
(7) Returns before taxes, including CDSC, for Class C shares of Energy, Financial Services, Gold & Precious Metals, Health
Sciences, Leisure, Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds year-to-date as of the calendar
quarter ended June 30, 2003 were 8.76%, 9.38%, (1.00%), 14.43%, 10.69%, 13.73%, 16.57%, 13.90%, and 7.72%, respectively.
(8) Since inception of Class C shares on February 15, 2000. Index comparison begins on February 29, 2000.
(9) Returns before taxes for Class K shares of Energy, Financial Services, Health Sciences, Leisure, Technology, and
Telecommunications Funds year-to-date as of the calendar quarter ended June 30, 2003 were 10.01%, 11.00%, 15.74%, 11.82%,
17.56%, and 15.06%, respectively.
(10) Since inception of Class K shares on December 1, 2000. Index comparisons begin on December 1, 2000.
(11) Since inception of Class K shares on December 17, 2001. Index comparison begins on December 31, 2001.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Investor Class, Class A, Class B, Class C, or, if applicable, Class K shares of
the Funds. If you invest in the Funds through a financial intermediary, you may
be charged a commission or transaction fee by the financial intermediary for
purchases and sales of Fund shares.
SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT
Investor Class Class A Class B Class C Class K
Maximum Front-End Sales Charge
on purchases as a percentage of
offering price None 5.50% None None None
Maximum Contingent Deferred
Sales Charge (CDSC) as a percentage
of the total original cost of the shares None None(1) 5.00%(2) 1.00%(2) None(1)
Maximum Sales Charge on reinvested
dividends/distributions None None None None None
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
ENERGY FUND Investor Class Class A Class B Class C Class K
Management Fees 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.69% 0.36% 0.66%(6) 0.78%(7) 4.16%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.69% 1.46% 2.41%(6) 2.53%(7) 5.36%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 3.16%
Net Expenses(5),(9) 1.69% 1.46% 2.41%(6) 2.53%(7) 2.20%(8)
==== ==== ==== ==== ====
FINANCIAL SERVICES FUND Investor Class Class A Class B Class C Class K
Management Fees 0.66% 0.66% 0.66% 0.66% 0.66%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.49% 0.50%(10) 0.74%(6) 0.79% 1.02%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.40% 1.51%(10) 2.40%(6) 2.45% 2.13%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 0.00%
Net Expenses(5),(9) 1.40% 1.51%(10) 2.40%(6) 2.45% 2.13%(8)
==== ==== ==== ==== ====
GOLD & PRECIOUS METALS FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00%
Other Expenses(4),(5) 0.88% 1.01%(10) 0.43% 0.90%
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.88% 2.11%(10) 2.18% 2.65%
==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.01% 0.00% 0.00%
Net Expenses(5),(9) 1.88% 2.10%(10) 2.18% 2.65%
==== ==== ==== ====
HEALTH SCIENCES FUND Investor Class Class A Class B Class C Class K
Management Fees 0.64% 0.64% 0.64% 0.64% 0.64%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.55% 0.89%(10) 0.87%(6) 1.63%(7) 0.98%
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.44% 1.88%(10) 2.51%(6) 3.27%(7) 2.07%
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.52% 0.00%
Net Expenses(5),(9) 1.44% 1.88%(10) 2.51%(6) 2.75%(7) 2.07%
==== ==== ==== ==== ====
LEISURE FUND Investor Class Class A Class B Class C Class K
Management Fees 0.69% 0.69% 0.69% 0.69% 0.69%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.56% 0.38% 0.54%(6) 0.75% 1.07%(8)
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.50% 1.42% 2.23%(6) 2.44% 2.21%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.00% 0.01%
Net Expenses(5),(9) 1.50% 1.42% 2.23%(6) 2.44% 2.20%(8)
==== ==== ==== ==== ====
REAL ESTATE OPPORTUNITY FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00%
Other Expenses(4),(5) 1.43%(11) 0.56% 1.98%(6) 1.99%(7)
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 2.43%(11) 1.66% 3.73%(6) 3.74%(7)
==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.98% 0.99%
Net Expenses(5),(9) 2.43%(11) 1.66% 2.75%(6) 2.75%(7)
==== ==== ==== ====
TECHNOLOGY FUND Investor Class Class A Class B Class C Class K
Management Fees 0.60% 0.60% 0.60% 0.60% 0.60%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 0.92% 0.56%(10) 1.14%(6) 2.35%(7) 1.44%(8)
---- ---- ---- ----
Total Annual Fund Operating Expenses(4),(5) 1.77% 1.51%(10) 2.74%(6) 3.95%(7) 2.49%(8)
==== ==== ==== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 1.20% 0.29%
Net Expenses(5),(9) 1.77% 1.51%(10) 2.74%(6) 2.75%(7) 2.20%(8)
==== ==== ==== ==== ====
TELECOMMUNICATIONS FUND Investor Class Class A Class B Class C Class K
Management Fees 0.65% 0.65% 0.65% 0.65% 0.65%
Distribution and Service (12b-1) Fees(3) 0.25% 0.35% 1.00% 1.00% 0.45%
Other Expenses(4),(5) 1.86%(11) 0.66% 10.50%(6) 4.11%(7) 2.20%(8)
---- ---- ----- ---- ----
Total Annual Fund Operating Expenses(4),(5) 2.76%(11) 1.66% 12.15%(6) 5.76%(7) 3.30%(8)
==== ==== ===== ==== ====
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 9.40% 3.01% 1.10%
Net Expenses(5),(9) 2.76%(11) 1.66% 2.75%(6) 2.75%(7) 2.20%(8)
==== ==== ===== ==== ====
UTILITIES FUND Investor Class Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.25% 0.25%(12) 1.00% 1.00%
Other Expenses(4),(5) 0.90%(11) 0.64%(10) 0.94%(6) 1.95%(7)
---- ---- ----- ----
Total Annual Fund Operating Expenses(4),(5) 1.90%(11) 1.64%(10),(12)2.69%(6) 3.70%(7)
Fee Waivers/Reimbursements(5),(9) 0.00% 0.00% 0.00% 0.95%
==== ==== ===== ====
Net Expenses(5),(9) 1.90%(11) 1.64%(10),(12)2.69%(6) 2.75%(7)
==== ==== ===== ====
(1) If you buy $1,000,000 or more of Class A shares and redeem those shares within eighteen months from the date of purchase, you
may pay a 1% contingent deferred sales charge (CDSC) at the time of redemption. For qualified plans investing in Class A
shares, you may pay a CDSC of 1% on your Class A shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. For qualified plans investing in Class K shares, you may pay a CDSC of 0.70% on your Class K shares
if the plan is redeemed within twelve months from initial deposit in the plan's INVESCO account. Please see the sections
entitled "How to Buy Shares" and "How To Sell Shares."
(2) A 5% and 1% CDSC may be charged on Class B and Class C shares, respectively. Please see the section entitled "How To Buy
Shares."
(3) Because each class pays a 12b-1 distribution and service fee which is based upon each class's assets, if you own shares of a
Fund for a certain period of time, you may pay more than the economic equivalent of the maximum front-end sales charge
permitted for mutual funds by the National Association of Securities Dealers, Inc.
(4) Each Fund's actual Other Expenses and Total Annual Fund Operating Expenses were lower than the figures shown, because their
custodian fees were reduced under expense offset arrangements.
(5) INVESCO is entitled to reimbursement from the classes for fees and expenses absorbed pursuant to voluntary and contractual
expense limitation commitments between INVESCO and the Funds if such reimbursements do not cause a class to exceed expense
limitations and the reimbursement is made within three years after INVESCO incurred the expense. The voluntary expense
limitations may be changed at any time following consultation with the board of directors.
(6) Certain expenses of Class B shares of Energy, Financial Services, Health Sciences, Leisure, Real Estate Opportunity,
Technology, Telecommunications, and Utilities Funds were absorbed voluntarily by INVESCO pursuant to commitments between the
Funds and INVESCO. These commitments may be changed at any time following consultation with the board of directors. After
absorption, but excluding any expense offset arrangements, Energy Fund's Class B shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.58% and 2.33%, respectively, of the Fund's average net assets attributable to Class B shares;
Financial Services Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.43% and 2.09%,
respectively, of the Fund's average net assets attributable to Class B shares; Health Sciences Fund's Class B shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.42% and 2.06%, respectively, of the Fund's average net assets
attributable to Class B shares; Leisure Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were
0.45% and 2.14%, respectively, of the Fund's average net assets attributable to Class B shares; Real Estate Opportunity Fund's
Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.61% and 2.36%, respectively, of the Fund's
average net assets attributable to Class B shares; Technology Fund's Class B shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.55% and 2.15%, respectively, of the Fund's average net assets attributable to Class B shares;
Telecommunications Fund's Class B shares' Other Expenses and Total Annual Fund Operating Expenses were 0.92% and 2.57%,
respectively, of the Fund's average net assets attributable to Class B shares; and Utilities Fund's Class B shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.39% and 2.14%, respectively, of the Fund's average net assets
attributable to Class B shares.
(7) Certain expenses of Class C shares of Energy, Real Estate Opportunity, Technology, Telecommunications, and Utilities Funds were
absorbed voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any
time following consultation with the board of directors. Certain expenses of Class C shares of Health Sciences Fund were
absorbed by INVESCO pursuant to a contractual agreement between the Fund and INVESCO. After absorption, but excluding any
expense offset arrangements, Energy Fund's Class C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.58%
and 2.33%, respectively, of the Fund's average net assets attributable to Class C shares; Real Estate Opportunity Fund's Class
C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.60% and 2.35%, respectively, of the Fund's average net
assets attributable to Class C shares; Technology Fund's Class C shares' Other Expenses and Total Annual Fund Operating
Expenses were 1.09% and 2.69%, respectively, of the Fund's average net assets attributable to Class C shares;
Telecommunications Fund's Class C shares' Other Expenses and Total Annual Fund Operating Expenses were 0.98% and 2.63%,
respectively, of the Fund's average net assets attributable to Class C shares; and Utilities Fund's Class C shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.30% and 2.05%, respectively, of the Fund's average net assets
attributable to Class C shares.
(8) Certain expenses of Class K shares of Energy, Financial Services, and Telecommunications Funds were absorbed voluntarily by
INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time following
consultation with the board of directors. Certain expenses of Class K shares of Leisure and Technology Funds were absorbed by
INVESCO pursuant to contractual agreements between the Funds and INVESCO. After absorption, but excluding any expense offset
arrangement, Energy Fund's Class K shares' Other Expenses and Total Annual Fund Operating Expenses were 0.87% and 2.07%,
respectively, of the Fund's average net assets attributable to Class K shares; Financial Services Fund's Class K shares' Other
Expenses and Total Annual Fund Operating Expenses were 0.67% and 1.78%, respectively, of the Fund's average net assets
attributable to Class K shares; and Telecommunications Fund's Class K shares' Other Expenses and Total Annual Fund Operating
Expenses were 0.96% and 2.06%, respectively, of the Fund's average net assets attributable to Class K shares.
(9) To limit expenses, INVESCO has contractually obligated itself to waive fees and bear expenses through March 31, 2004 that would
cause the ratio of expenses to average net assets to exceed 2.10% for Class A shares, 2.75% for each of Class B and Class C
shares, and 2.20% for Class K shares.
(10) Certain expenses of Class A shares of Financial Services, Health Sciences, Technology, and Utilities Funds were absorbed
voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time
following consultation with the board of directors. Certain expenses of Class A shares of Gold & Precious Metals Fund were
absorbed by INVESCO pursuant to a contractual agreement between the Fund and INVESCO. After absorption, but excluding any
expense offset arrangements, Financial Services Fund's Class A shares' Other Expenses and Total Annual Fund Operating Expenses
were 0.37% and 1.38%, respectively, of the Fund's average net assets attributable to Class A shares; Health Sciences Fund's
Class A shares' Other Expenses and Total Annual Fund Operating Expenses were 0.42% and 1.41%, respectively, of the Fund's
average net assets attributable to Class A shares; Technology Fund's Class A shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.52% and 1.47%, respectively, of the Fund's average net assets attributable to Class A shares; and
Utilities Fund's Class A shares' Other Expenses and Total Annual Fund Operating Expenses were 0.41% and 1.41%, respectively, of
the Fund's average net assets attributable to Class A shares.
(11) Certain expenses of Investor Class shares of Real Estate Opportunity, Telecommunications, and Utilities Funds were absorbed
voluntarily by INVESCO pursuant to commitments between the Funds and INVESCO. These commitments may be changed at any time
following consultation with the board of directors. After absorption, but excluding any expense offset arrangements, Real
Estate Opportunity Fund's Investor Class shares' Other Expenses and Total Annual Fund Operating Expenses were 0.60% and 1.60%,
respectively, of the Fund's average net assets attributable to Investor Class shares; Telecommunications Fund's Investor Class
shares' Other Expenses and Total Annual Fund Operating Expenses were 0.91% and 1.81%, respectively, of the Fund's average net
assets attributable to Investor Class shares; and Utilities Fund's Investor Class shares' Other Expenses and Total Annual Fund
Operating Expenses were 0.30% and 1.30%, respectively, of the Fund's average net assets attributable to Investor Class shares.
(12 )Effective July 1, 2003, the Distribution and Service (12b-1) Fees have been reduced from 0.35% to 0.25%. Total Annual Fund
Operating Expenses have been restated for the current fiscal year end.
EXPENSE EXAMPLE
The Example is intended to help you compare the cost of investing in the
Investor Class, Class A, Class B, Class C, and, if applicable, Class K shares of
the Funds to the cost of investing in other mutual funds.
The Example assumes that you invested $10,000 in Investor Class, Class A, Class
B, Class C, or Class K shares of a Fund for the time periods indicated. Within
each Example, there is an assumption that you redeem all of your shares at the
end of those periods and that you keep your shares. The Example also assumes
that your investment had a hypothetical 5% return each year, and that a Fund's
Investor Class, Class A, Class B, Class C, and Class K shares' operating
expenses remain the same. Although the actual costs and performance of a Fund's
Investor Class, Class A, Class B, Class C, and Class K shares may be higher or
lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
ENERGY FUND
Investor Class $172 $ 533 $ 918 $1,998
Class A(1) $690 $ 986 $1,304 $2,200
Class B - With Redemption(1) $744 $1,051 $1,485 $2,511(2)
Class B - Without Redemption $244 $ 751 $1,285 $2,511(2)
Class C - With Redemption1 $356 $ 788 $1,345 $2,866
Class C - Without Redemption $256 $ 788 $1,345 $2,866
Class K(3) $223 $1,321 $2,411 $5,103
FINANCIAL SERVICES FUND
Investor Class $143 $ 443 $ 766 $1,680
Class A(1) $695 $1,001 $1,328 $2,252
Class B - With Redemption(1) $743 $1,048 $1,480 $2,515(2)
Class B - Without Redemption $243 $ 748 $1,280 $2,515(2)
Class C - With Redemption(1) $348 $ 764 $1,306 $2,786
Class C - Without Redemption $248 $ 764 $1,306 $2,786
Class K $216 $ 667 $1,144 $2,462
GOLD & PRECIOUS METALS FUND
Investor Class $191 $ 591 $1,016 $2,201
Class A(1),(3) $751 $1,174 $1,621 $2,856
Class B - With Redemption(1) $721 $ 982 $1,369 $2,496(2)
Class B - Without Redemption $221 $ 682 $1,169 $2,496(2)
Class C - With Redemption(1) $368 $ 823 $1,405 $2,983
Class C - Without Redemption $268 $ 823 $1,405 $2,983
HEALTH SCIENCES FUND
Investor Class $147 $ 456 $ 787 $1,724
Class A(1) $730 $1,108 $1,510 $2,630
Class B - With Redemption(1) $754 $1,082 $1,535 $2,691(2)
Class B - Without Redemption $254 $ 782 $1,335 $2,691(2)
Class C - With Redemption(1),(3) $378 $ 958 $1,663 $3,532
Class C - Without Redemption(3) $278 $ 958 $1,663 $3,532
Class K $210 $ 649 $1,114 $2,400
LEISURE FUND
Investor Class $153 $ 474 $ 818 $1,791
Class A(1) $687 $ 975 $1,284 $2,158
Class B - With Redemption(1) $726 $ 997 $1,395 $2,361(2)
Class B - Without Redemption $226 $ 697 $1,195 $2,361(2)
Class C - With Redemption(1) $347 $ 761 $1,301 $2,776
Class C - Without Redemption $247 $ 761 $1,301 $2,776
Class K(3) $223 $ 690 $1,184 $2,543
REAL ESTATE OPPORTUNITY FUND
Investor Class $246 $ 758 $1,296 $2,766
Class A(1) $709 $1,045 $1,403 $2,407
Class B - With Redemption(1),(3) $778 $1,351 $2,043 $3,454(2)
Class B - Without Redemption(3) $278 $1,051 $1,843 $3,454(2)
Class C - With Redemption(1),(3) $378 $1,053 $1,847 $3,921
Class C - Without Redemption(3) $278 $1,053 $1,847 $3,921
TECHNOLOGY FUND
Investor Class $180 $ 557 $ 959 $2,084
Class A(1) $695 $1,001 $1,328 $2,252
Class B - With Redemption(1) $777 $1,150 $1,650 $2,773(2)
Class B - Without Redemption $277 $ 850 $1,450 $2,773(2)
Class C - With Redemption(1),(3) $378 $1,094 $1,928 $4,089
Class C - Without Redemption(3) $278 $1,094 $1,928 $4,089
Class K(3) $223 $ 748 $1,300 $2,804
TELECOMMUNICATIONS FUND
Investor Class $279 $ 856 $1,459 $3,090
Class A(1) $709 $1,045 $1,403 $2,407
Class B - With Redemption(1),(3) $778 $2,888 $4,780 $7,273(2)
Class B - Without Redemption(3) $278 $2,588 $4,580 $7,273(2)
Class C - With Redemption(1),(3) $378 $1,447 $2,598 $5,401
Class C - Without Redemption(3) $278 $1,447 $2,598 $5,401
Class K(3) $223 $ 913 $1,627 $3,520
UTILITIES FUND
Investor Class $193 $ 597 $1,026 $2,222
Class A(1) $708 $1,039 $1,393 $2,387
Class B - With Redemption(1) $772 $1,135 $1,625 $2,768(2)
Class B - Without Redemption $272 $ 835 $1,425 $2,768(2)
Class C - With Redemption(1),(3) $378 $1,045 $1,831 $3,889
Class C - Without Redemption(3) $278 $1,045 $1,831 $3,889
(1) Based on initial sales charge for Class A shares at the beginning of each period shown and CDSC
charges for Class B and C shares based on redemption at the end of each period shown. Please see "How
To Buy Shares."
(2) Assumes conversion of Class B to Class A at the end of the eighth year. Please see "How To Buy
Shares."
(3) Class expenses remain the same for each period (except that the Example reflects the contractual
expense reimbursements by INVESCO for the one-year period and the first year of the three-, five-, and
ten-year periods).
[ARROWS ICON] INVESTMENT RISKS
BEFORE INVESTING IN A FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH WHICH
YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER, INCOME
LEVEL, AND TIME HORIZON.
You should determine the level of risk with which you are comfortable before you
invest. The principal risks of investing in any mutual fund, including these
Funds, are:
NOT INSURED. Mutual funds are not insured by the FDIC or any other government
agency, unlike bank deposits such as CDs or savings accounts.
NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.
POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its performance, nor
assure you that the market value of your investment will increase. You may lose
the money you invest, and the Funds will not reimburse you for any of these
losses.
VOLATILITY. The price of your mutual fund shares will increase or decrease with
changes in the value of a Fund's underlying investments and changes in the
equity markets as a whole.
NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Funds are designed to be only a part
of your personal investment plan.
[ARROWS ICON] PRINCIPAL RISKS ASSOCIATED WITH THE FUNDS
You should consider the special risk factors discussed below associated with the
Funds' policies in determining the appropriateness of investing in a Fund. See
the Statement of Additional Information for a discussion of additional risk
factors.
MARKET RISK
Equity stock prices vary and may fall, thus reducing the value of a Fund's
investments. Certain stocks selected for any Fund's portfolio may decline in
value more than the overall stock market. In general, the securities of small
companies are more volatile than those of mid-size companies or large companies.
FOREIGN SECURITIES RISKS
Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory, and diplomatic risks. Energy, Financial
Services, Health Sciences, Leisure, Real Estate Opportunity, Technology, and
Utilities Funds may invest up to 25% of their respective assets in securities of
non-U.S. issuers. Securities of Canadian issuers and American Depositary
Receipts are not subject to this 25% limitation. Foreign securities risks are
potentially greater for Gold & Precious Metals and Telecommunications Funds,
since those Funds have the ability to invest more than 25% of their respective
assets in the securities of non-U.S. issuers.
CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of a Fund's investment in a security
valued in the foreign currency, or based on that currency value.
POLITICAL RISK. Political actions, events, or instability may result in
unfavorable changes in the value of a security.
REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.
DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.
LIQUIDITY RISK
A Fund's portfolio is liquid if the Fund is able to sell the securities it owns
at a fair price within a reasonable time. Liquidity is generally related to the
market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.
DERIVATIVES RISK
A derivative is a financial instrument whose value is "derived," in some manner,
from the price of another security, index, asset, or rate. Derivatives include
options and futures contracts, among a wide range of other instruments. The
principal risk of investments in derivatives is that the fluctuations in their
values may not correlate perfectly with the overall securities markets. Some
derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk,
described below.
Options and futures are common types of derivatives that a Fund may occasionally
use to hedge its investments. An option is the right to buy and sell a security
or other instrument, index, or commodity at a specific price on or before a
specific date. A future is an agreement to buy or sell a security or other
instrument, index, or commodity at a specific price on a specific date. The use
of options and futures may increase the performance of the Fund, but also may
increase market risk. Other types of derivatives include swaps, caps, floors,
and collars.
COUNTERPARTY RISK
This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with a
Fund.
LACK OF TIMELY INFORMATION RISK
Timely information about a security or its issuer may be unavailable,
incomplete, or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.
PORTFOLIO TURNOVER RISK
A Fund's investments may be bought and sold relatively frequently. A high
turnover rate may affect a Fund's performance because it results in higher
brokerage commissions and may result in taxable gain distributions to a Fund's
shareholders.
----------------------------------------------
Although each Fund generally invests in equity securities of companies in the
economic sector described by its name, the Funds also may invest in other types
of securities and other financial instruments, indicated in the chart below.
Although these investments typically are not part of any Fund's principal
investment strategy, they may constitute a significant portion of a Fund's
portfolio, thereby possibly exposing a Fund and its investors to the following
additional risks.
- --------------------------------------------------------------------------------
INVESTMENT RISKS APPLIES TO THESE FUNDS
- --------------------------------------------------------------------------------
AMERICAN DEPOSITARY RECEIPTS
(ADRs)
These are securities issued Market, Information, All Funds
by U.S. banks that represent Political, Regulatory,
shares of foreign corpora- Diplomatic, Liquidity,
tions held by those banks. and Currency Risks
Although traded in U.S.
securities markets and
valued in U.S. dollars, ADRs
carry most of the risks of
investing directly in
foreign securities
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT RISKS APPLIES TO THESE FUNDS
- --------------------------------------------------------------------------------
FUTURES
A futures contract is an Market, Liquidity, Technology
agreement to buy or sell a and Derivatives Risks Telecommunications
specific amount of a
financial instrument (such
as an index option) at a
stated price on a stated
date. A Fund may use futures
contracts to pro- vide
liquidity and to hedge
portfolio value.
- --------------------------------------------------------------------------------
OPTIONS
The obligation or right to Information, Liquidity, Technology
deliver or receive a and Derivatives Risks Telecommunications
security or other
instrument, index, or
commodity, or cash payment
depending on the price of
the underlying security or
the performance of an index
or other benchmark. Includes
options on specific
securities and stock
indices, and options on
stock index futures. May be
used in a Fund's portfolio
to provide liquidity and
hedge portfolio value.
- --------------------------------------------------------------------------------
OTHER FINANCIAL INSTRUMENTS
These may include forward Counterparty, Currency, Technology
contracts, swaps, caps, Liquidity, Market, and Telecommunications
floors, and collars. They Regulatory Risks
may be used to try to manage
a Fund's foreign currency
exposure and other
investment risks, which can
cause its net asset value to
rise or fall. A Fund may use
these financial instruments,
commonly known as
"derivatives," to increase
or decrease its exposure to
changing securities prices,
interest rates, currency
exchange rates, or other
factors.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A contract under which the Counterparty Risk All Funds
seller of a security agrees
to buy it back at an
agreed-upon price and time
in the future.
- --------------------------------------------------------------------------------
[ARROWS ICON] TEMPORARY DEFENSIVE POSITIONS
When securities markets or economic conditions are unfavorable or unsettled, we
might try to protect the assets of a Fund by investing in securities that are
highly liquid, such as high-quality money market instruments like shortterm U.S.
government obligations, commercial paper, or repurchase agreements, even though
that is not the normal investment strategy of any Fund. We have the right to
invest up to 100% of a Fund's assets in these securities, although we are
unlikely to do so. Even though the securities purchased for defensive purposes
often are considered the equivalent of cash, they also have their own risks.
Investments that are highly liquid or comparatively safe tend to offer lower
returns. Therefore, a Fund's performance could be comparatively lower if it
concentrates in defensive holdings.
[ARROWS ICON] PORTFOLIO TURNOVER
We actively manage and trade the Funds' portfolios. Therefore, some of the Funds
may have a higher portfolio turnover rate compared to many other mutual funds.
The Funds with higher-than-average portfolio turnover rates for the fiscal year
ended March 31, 2003, were:
Energy 144%
Health Sciences 179%
Real Estate Opportunity 248%
Technology 107%(1)
Telecommunications 137%(1)
(1) The increase in the Funds' portfolio turnover rates was greater than
expected during the year due to active trading undertaken in response to
market conditions.
A portfolio turnover rate of 200%, for example, is equivalent to a Fund buying
and selling all of the securities in its portfolio two times in the course of a
year. A comparatively high turnover rate may affect a Fund's performance because
it results in higher brokerage commissions and may result in taxable capital
gain distributions to a Fund's shareholders.
[INVESCO ICON] FUND MANAGEMENT
INVESTMENT ADVISOR
INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT MANAGEMENT
COMPANY THAT MANAGES MORE THAN $318.5 BILLION IN ASSETS WORLDWIDE. AMVESCAP IS
BASED IN LONDON, WITH MONEY M ANAGERS LOCATED IN EUROPE, NORTH AND SOUTH AMEICA,
AND THE FAR EAST.
INVESCO, located at 4350 South Monaco Street, Denver, Colorado, is the
investment advisor of the Funds. INVESCO was founded in 1932 and manages over
$17 billion for 2,848,927 shareholder accounts in 47 INVESCO mutual funds as of
March 31, 2003. INVESCO performs a wide variety of other services for the Funds,
including administrative and transfer agency functions (the processing of
purchases, sales, and exchanges of Fund shares).
ADI is the Funds' distributor and is responsible for the sale of the Funds'
shares.
INVESCO and ADI are subsidiaries of AMVESCAP PLC.
The following table shows the fees the Funds paid to INVESCO for its advisory
services in the fiscal year ended March 31, 2003.
- --------------------------------------------------------------------------------
ADVISORY FEE AS A PERCENTAGE OF
FUND AVERAGE ANNUAL NET ASSETS UNDER MANAGEMENT
- --------------------------------------------------------------------------------
Energy 0.75%
Financial Services 0.66%
Gold & Precious Metals 0.75%
Health Sciences 0.64%
Leisure 0.69%
Real Estate Opportunity 0.75%
Technology 0.60%
Telecommunications 0.65%
Utilities 0.75%
- --------------------------------------------------------------------------------
[INVESCO ICON] PORTFOLIO MANAGERS
The following individuals are primarily responsible for the daytoday management
of their respective Fund's or Funds' portfolio holdings:
FUND PORTFOLIO MANAGER
Energy John S. Segner
Financial Services Joseph W. Skornicka
Gold & Precious Metals John S. Segner
Health Sciences Thomas R. Wald
Andy Summers
Leisure Mark D. Greenberg
Real Estate Opportunity Joe V. Rodriguez, Jr.
Mark Blackburn
James W. Trowbridge
Technology William R. Keithler
Chris Dries
Telecommunications William R. Keithler
Utilities Jeffrey G. Morris
MARK BLACKBURN, Portfolio Manager, has been responsible for INVESCO Real Estate
Opportunity Fund since July 1, 2003. He has been responsible for A I M Real
Estate Fund since 2000 and has been associated with the subadvisor and/or its
affiliates since 1998. From 1995 to 1997, he was Senior Analyst and Associate
Director of Research for Southwest Securities.
CHRIS DRIES is the Assistant Portfolio Manager for the INVESCO Technology Fund.
Chris joined INVESCO in 1993, and was promoted to the investment division in
1995. He previously held the position of manager of investment operations for
the investment division at INVESCO. Chris received his master's degree in
finance from the University of Colorado at Denver and his bachelor's degree in
finance from University of Colorado at Boulder.
MARK D. GREENBERG, a senior vice president of INVESCO, is the portfolio manager
of Leisure Fund. Before joining INVESCO in 1996, Mark was a vice president and
global media and entertainment analyst with Scudder, Stevens & Clark. He is a
CFA charterholder. Mark holds a B.S.B.A. from Marquette University.
WILLIAM R. KEITHLER, Director of Sector Management and a senior vice president
of INVESCO, is the lead portfolio manager of Technology Fund and heads the
Technology Team at INVESCO. Before rejoining INVESCO in 1998, Bill was a
portfolio manager with Berger Associates, Inc. He is a CFA charterholder. Bill
holds an M.S. from the University of Wisconsin--Madison and a B.A. from Webster
College.
JEFFREY G. MORRIS, a vice president of INVESCO, is the portfolio manager of
Utilities Fund. Jeff joined INVESCO in 1991 and is a CFA charterholder. He holds
an M.S. in Finance from the University of Colorado--Denver and a B.S. in
Business Administration from Colorado State University.
JOE V. RODRIGUEZ, JR., (lead manager), Portfolio Manager, has been responsible
for INVESCO Real Estate Opportunity Fund since July 1, 2003. He has been
responsible for A I M Real Estate Fund since 1995 and has been associated with
the subadvisor and/or its affiliates since 1990.
JOHN S. SEGNER, a senior vice president of INVESCO, is the portfolio manager of
Energy and Gold & Precious Metals Funds. Before joining INVESCO in 1997, John
was a managing director and principal with The Mitchell Group, Inc. He holds an
M.B.A. in Finance from the University of Texas-Austin and a B.S. in Civil
Engineering from the University of Alabama.
JOSEPH W. SKORNICKA, a vice president of INVESCO, is the portfolio manager of
Financial Services Fund. Before joining INVESCO in 2001, Joe was a senior equity
analyst and fund manager with Munder Capital Management and an assistant vice
president for Comerica Incorporated. He is a CFA charterholder. Joe holds an
M.B.A. from the University of Michigan and a B.A. from Michigan State
University.
ANDY SUMMERS is an Assistant Portfolio Manager for all INVESCO Health Sciences
portfolios. Andy joined the INVESCO Health Sciences investment team in 1998. He
is a CFA charterholder. Prior to joining INVESCO, Andy worked as an analyst for
Denver Investment Advisors. He received his master's degree in finance from the
University of Wisconsin at Madison in 1998. He received hid bachelor's degree in
finance from the University of Wisconsin at Whitewater in 1996.
JAMES W. TROWBRIDGE, Portfolio Manager, has been responsible for INVESCO Real
Estate Opportunity Fund since July 1, 2003. He has been responsible for A I M
Real Estate Fund since 1995 and has been associated with the subadvisor and/or
its affiliates since 1989.
THOMAS R. WALD, a vice president of INVESCO, is the portfolio manager of Health
Sciences Fund. Before joining INVESCO in 1997, Tom was an analyst with Munder
Capital Management, Duff & Phelps and Prudential Investment Corp. He is a CFA
charterholder. Tom holds an M.B.A. from the Wharton School at the University of
Pennsylvania and a B.A. from Tulane University.
Effective July 1, 2003, Messrs. Blackburn, Rodriguez, and Trowbridge are dual
employees of INVESCO Funds Group, Inc. (the "advisor") and INVESCO Institutional
(N.A.) Inc. (the "subadvisor").
[INVESCO ICON] POTENTIAL REWARDS
NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD YOU
ATTEMPT TO USE THE FUNDS FOR SHORT-TERM TRADING PURPOSES.
The Funds offer shareholders the potential to increase the value of their
capital over time; Real Estate Opportunity, Telecommunications, and Utilities
Funds also offer the opportunity for current income. Like most mutual funds,
each Fund seeks to provide higher returns than the market or its competitors,
but cannot guarantee that performance. While each Fund invests in a single
targeted market sector, each seeks to minimize risk by investing in many
different companies.
SUITABILITY FOR INVESTORS
Only you can determine if an investment in a Fund is right for you based upon
your own economic situation, the risk level with which you are comfortable and
other factors. In general, the Funds are most suitable for investors who:
o are willing to grow their capital over the long-term (at least five years)
o can accept the additional risks and volatility associated with sector
investing
o understand that shares of a Fund can, and likely will, have daily price
fluctuations
o are investing through tax-deferred retirement accounts, such as traditional
and Roth Individual Retirement Accounts ("IRAs"), as well as
employer-sponsored qualified retirement plans, including 401(k)s and
403(b)s, all of which have longer investment horizons.
You probably do not want to invest in the Funds if you are:
o primarily seeking current dividend income (although Real Estate Opportunity,
Telecommunications, and Utilities Funds do seek to provide income in
addition to capital growth)
o unwilling to accept potentially significant changes in the price of Fund
shares
o speculating on short-term fluctuations in the stock markets.
[INVESCO ICON] SHARE PRICE
CURRENT MARKET VALUE OF FUND ASSETS
+ ACCRUED INTEREST AND DIVIDENDS
- - - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- --------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV)
The value of your Fund shares is likely to change daily. This value is known as
the Net Asset Value per share, or NAV. INVESCO determines the market value of
each investment in each Fund's portfolio each day that the New York Stock
Exchange ("NYSE") is open, at the close of the regular trading day on that
exchange (normally 4:00 p.m. Eastern time), except that securities traded
primarily on the Nasdaq Stock Market ("Nasdaq") are normally valued by a Fund at
the Nasdaq Official Closing Price provided by Nasdaq each business day. Shares
of the Funds are not priced on days when the NYSE is closed, which generally is
on weekends, most national holidays in the U.S., and Good Friday.
NAV is calculated by adding together the current market price of all of a Fund's
investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares. Because
their expenses vary, NAV is calculated separately for each class.
All purchases, sales, and exchanges of Fund shares are made by INVESCO at the
NAV next calculated after INVESCO receives proper instructions from you, your
financial intermediary, or your plan or program sponsor. Instructions must be
received by INVESCO no later than the close of the NYSE to effect transactions
at that day's NAV. If INVESCO receives instructions from you, your financial
intermediary, or your plan or program sponsor after that time, the instructions
will be processed at the NAV next calculated after receipt of these
instructions. Financial institutions that process customer transactions through
the National Securities Clearing Corporation's Fund/SERV and Networking
facilities must obtain their customers' permission for each transaction, and
each financial institution retains responsibility to its customers for any
errors or irregularities related to these transactions.
Foreign securities exchanges, which set the prices for foreign securities held
by the Funds, are not always open the same days as the NYSE, and may be open for
business on days the NYSE is not. For example, Thanksgiving Day is a holiday
observed by the NYSE and not by overseas exchanges. In this situation, the Funds
would not calculate NAV on Thanksgiving Day (and INVESCO would not buy, sell, or
exchange shares for you on that day), even though activity on foreign exchanges
could result in changes in the value of investments held by the Funds on that
day.
[INVESCO ICON] HOW TO BUY SHARES
TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE CLOSE
OF THE NYSE, NORMALLY 4:00 P.M. EASTERN TIME.
The Funds offer multiple classes of shares. The chart in this section shows
several convenient ways to invest in the shares of the Funds if you invest
directly through INVESCO. If you invest in a Fund through a financial
intermediary, please consult the financial intermediary, or with respect to
Class K shares, the plan or program sponsor, for more information on how to
purchase shares of a Fund. You may be charged a commission or transaction fee by
the financial intermediary or plan or program sponsor for purchases of Fund
shares.
With the exception of Class A shares, there is no charge to invest directly
through INVESCO. Class A shares are subject to a front-end sales charge. For
more information on this charge, please see the subsection entitled "Sales
Charges." If you buy $1,000,000 or more of Class A shares and redeem the shares
within eighteen months from the date of purchase, you may pay a 1% CDSC at the
time of redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the total original cost of the
shares may be assessed. With respect to redemption of Class C shares held
thirteen months or less, a CDSC of 1% of the total original cost of the shares
may be assessed. With respect to Class K shares, if you are a qualified plan and
elect to receive a dealer concession, you may pay a CDSC of 0.70% on your Class
K shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. In determining whether a CDSC
applies to a redemption from a non-qualified plan, it is assumed that the shares
being redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the shareholder's
account. These charges are not assessed upon Class A, B, C, or K shares acquired
through reinvestment of dividends or other distributions, or Class A, B, C, or K
shares exchanged for the same class of another INVESCO Fund. For more
information on CDSC charges, please see the subsection of the Prospectus
entitled "Choosing A Share Class" and the section of the Statement of Additional
Information entitled "Distributor - Sales Charges and Dealer Concessions."
For all new accounts, please send a completed application form, and specify the
fund or funds and class or classes of shares you wish to purchase. If you do not
specify a fund or funds, your initial investment and any subsequent purchases
will automatically go into INVESCO Cash Reserves Fund - Class A, a series of
INVESCO Money Market Funds, Inc. You will receive a confirmation of this
transaction and may contact INVESCO to exchange into the fund you choose.
A share of each class represents an identical interest in a Fund and has the
same rights, except that each class bears its own distribution and shareholder
servicing charges, and other expenses. The income attributable to each class and
the dividends payable on the shares of each class will be reduced by the amount
of the distribution fee, if applicable, and the other expenses payable by that
class.
INVESCO reserves the right to increase, reduce, or waive each Fund's minimum
investment requirements in its sole discretion, if it determines this action is
in the best interests of that Fund's shareholders. INVESCO also reserves the
right in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.
Please remember that if you pay by check, Automated Clearing House ("ACH"), or
wire and your funds do not clear, you will be responsible for any related loss
to a Fund or INVESCO. If you are already an INVESCO funds shareholder, the Fund
may seek reimbursement for any loss from your existing account(s).
MINIMUM INITIAL INVESTMENT. $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.
MINIMUM SUBSEQUENT INVESTMENT. $50 (Minimums are lower for certain retirement
plans.)
The following chart shows several ways to invest in a Fund if you invest
directly through INVESCO.
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY CHECK $1,000 for regular INVESCO does not
Mail to: accounts; $250 for an accept cash, credit
INVESCO Funds Group, Inc. IRA; $50 for each cards, travelers'
P.O. Box 173706 subsequent investment. cheques, credit card
Denver, CO 80217-3706. checks, instant loan
You may send your check by checks, money orders,
overnight courier to: 4350 or third party checks
South Monaco Street Denver, unless they are from
CO 80237. another financial
institution related to
a retirement plan
transfer.
- --------------------------------------------------------------------------------
BY WIRE $1,000 for regular
You may send your payment by accounts; $250 for an
bank wire (call IRA; $50 for each
1-800-525-8085 for subsequent investment.
instructions).
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $1,000 for regular You must provide your
Call 1-800-525-8085 to accounts; $250 for an bank account
request your purchase. Upon IRA; $50 for each information to INVESCO
your telephone instructions, subsequent investment. prior to using this
INVESCO will move money from option.
your designated bank/ credit
union checking or savings
account in order to purchase
shares.
- --------------------------------------------------------------------------------
BY INTERNET (INVESTOR CLASS - $1,000 for regular You will need a Web
GRANDFATHERED INVESTORS ONLY) accounts; $250 for an browser to use this
Go to the INVESCO Web site IRA; $50 for each service. Internet
at invescofunds.com. subsequent investment. transactions are
limited to a maximum
of $25,000.
- --------------------------------------------------------------------------------
REGULAR INVESTING WITH EASIVEST $50 per month for Like all regular
OR DIRECT PAYROLL PURCHASE EasiVest; $50 per pay investment plans,
You may enroll on your fund period for Direct neither EasiVest nor
application, or call us for Payroll Purchase. You Direct Payroll
a separate form and more may start or stop your Purchase ensures a
details. Investing the same regular investment profit or protects
amount on a monthly basis plan at any time, with against loss in a
allows you to buy more two weeks' notice to falling market.
shares when prices are low INVESCO. Because you'll invest
and fewer shares when prices continually,
are high. This "dollar cost regardless of varying
averaging" may help offset price levels, consider
market fluctuations. Over a your financial ability
period of time, your average to keep buying through
cost per share may be less low price levels. And
than the actual average net remember that you will
asset value per share. lose money if you
redeem your shares
when the market value
of all your shares is
less than their cost.
- --------------------------------------------------------------------------------
BY PERSONAL ACCOUNT LINE $50 for subsequent You must provide your
WITH ACH investments. bank account
Automated transactions by information to INVESCO
telephone are available for prior to using this
subsequent purchases and option. Automated
exchanges 24 hours a day. transactions are
Simply call 1-800-424-8085. limited to a maximum
of $25,000.
- --------------------------------------------------------------------------------
METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000 for regular See "Exchange Policy."
Between the same class of accounts; $250 for an
any two INVESCO funds. Call IRA; $50 for each
1-800-525-8085 for subsequent investment.
prospectuses of other
INVESCO funds. Exchanges may
be made by phone or at our
Web site at
invescofunds.com. You may
also establish an automatic
monthly exchange service
between two INVESCO funds;
call us for further details
and the correct form.
GRANDFATHERED INVESTORS. Investor Class shares of a Fund can be purchased only
by:
o Persons or entities who had established an account in any of the funds
managed and distributed by INVESCO (the "INVESCO Funds") in Investor Class
shares prior to April 1, 2002 and have continuously maintained such account
in Investor Class shares since April 1, 2002;
o Any person or entity listed in the account registration for any INVESCO Funds
account in Investor Class shares that has been established prior to April 1,
2002 and continuously maintained since April 1, 2002, such as joint owners,
trustees, custodians, and designated beneficiaries;
o Customers of certain financial institutions, wrap accounts or other fee-based
advisory programs, or insurance company separate accounts, which have had
relationships with INVESCO and/or any of the INVESCO Funds' Investor Class
shares prior to April 1, 2002 and continuously maintained such relationships
since April 1, 2002;
o Defined benefit, defined contribution, and deferred compensation plans; and
o INVESCO employees, INVESCO Funds directors, AMVESCAP employees, AMVESCAP
directors, and their immediate families.
For more detailed information about eligibility, please call 1-800-525-8085. If
you hold INVESCO Funds Investor Class shares through a broker/dealer or other
financial institution, your eligibility to purchase Investor Class shares may
differ depending on that institution's policies.
EXCHANGE POLICY. You may exchange your shares in any of the Funds for shares of
the same class in another INVESCO fund on the basis of their respective NAVs at
the time of the exchange.
FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR INVESTMENTS, OR
TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.
Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately followed by the purchase of
shares in another. Therefore, any gain or loss realized on the exchange is
recognizable for federal income tax purposes (unless, of course, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.
You will not pay a sales charge when exchanging Class B shares for other Class B
shares, Class C shares for other Class C shares, or Class K shares for other
Class K shares. If you make an exchange involving Class B, Class C, or Class K
shares, the amount of time you held the original shares will be added to the
holding period of the Class B, Class C, or Class K shares, respectively, into
which you exchanged for the purpose of calculating any CDSC that may be assessed
upon a subsequent redemption.
We have the following policies governing exchanges:
o Both fund accounts involved in the exchange must be registered in exactly the
same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of each Fund per twelve-month period.
o Each Fund reserves the right to reject any exchange request, or to modify or
terminate the exchange policy, if it is in the best interests of the Fund.
Notice of all such modifications or terminations that affect all shareholders
of the Fund will be given at least sixty days prior to the effective date of
the change, except in unusual instances, including a suspension of redemption
of the exchanged security under Section 22(e) of the Investment Company Act
of 1940.
In addition, the ability to exchange may be temporarily suspended at any time
that sales of the Fund into which you wish to exchange are temporarily stopped.
CHOOSING A SHARE 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 applicable to the
class, if any, (iii) the eligibility requirements that apply to purchases of a
particular class, and (iv) any services you may receive in making your
investment determination. Your financial intermediary can help you decide among
the various classes. Please contact your financial intermediary for several
convenient ways to invest in a Fund. Class A, B, C, and K shares of the Funds
are available primarily through financial intermediaries.
In addition, you should also consider the factors below:
Investor Class Class A Class B Class C Class K
-------------- ------- ------- ------- -------
Initial Sales Charge None 5.50% None None None
CDSC(1) None 1% on certain 1%-5% for 1% for 0.70% on cer-
purchases held shares held shares held tain purchases
less than 18 months less than 6 less than 13 held less than
years months 12 months
12b-1 Fee 0.25% 0.35% 1.00% 1.00% 0.45%
12b-1 Fee (Utilities Fund only)(3) 0.25% 0.25% 1.00% 1.00% 0.45%
Conversion No No Yes(2) No No
Purchase Order Maximum None None $250,000 $1,000,000 None
(1) Please see the subsection entitled "Sales Charges" below and the section of the Funds' Statement of Additional Information
entitled "Distributor - Sales Charges and Dealer Concessions" for more information regarding CDSC charges and dealer
concessions.
(2) Class B shares, along with the pro rata portion of the shares' reinvested dividends and distributions, automatically convert to
Class A shares at the end of the month which is eight years after the date on which such Class B shares were purchased.
(3) Effective July 1, 2003.
INTERNET TRANSACTIONS (INVESTOR CLASS - GRANDFATHERED INVESTORS ONLY). Investors
may open new accounts and exchange and redeem Investor Class shares of any
INVESCO fund through the INVESCO Web site. To use this service, you will need a
web browser (presently Netscape version 4.0 or higher, Microsoft Internet
Explorer version 4.0 or higher, or AOL version 5.0 or higher) and the ability to
use the INVESCO Web site. INVESCO will accept Internet purchase instructions
only for exchanges or if the purchase price is paid to INVESCO through debiting
your bank account, and any Internet cash redemptions will be paid only to the
same bank account from which the payment to INVESCO originated. INVESCO imposes
a limit of $25,000 on Internet purchase and redemption transactions. Other
minimum transaction amounts are discussed in this Prospectus. You may also
download an application to open an account from the Web site, complete it by
hand, and mail it to INVESCO, along with a check.
INVESCO employs reasonable procedures to confirm that transactions entered into
over the Internet are genuine. These procedures include the use of alphanumeric
passwords, secure socket layering, encryption, and other precautions reasonably
designed to protect the integrity, confidentiality, and security of shareholder
information. In order to enter into a transaction on the INVESCO Web site, you
will need an account number, your Social Security number, and an alphanumeric
password. If INVESCO follows these procedures, neither INVESCO, its affiliates
nor any INVESCO fund will be liable for any loss, liability, cost, or expense
for following instructions communicated via the Internet that are reasonably
believed to be genuine or that follow INVESCO's security procedures. By entering
into the user's agreement with INVESCO to open an account through our Web site,
you lose certain rights if someone gives fraudulent or unauthorized instructions
to INVESCO that result in a loss to you.
SALES CHARGES (CLASS A, B, C, AND K ONLY)
Sales charges on Class A shares of the Funds are detailed below. As used below,
the term "offering price" with respect to Class A shares includes the initial
sales charge.
INITIAL SALES CHARGES. Class A shares of the Funds are subject to the following
initial sales charges:
Investor's Sales Charge
Amount of investment As a % of As a % of
in a 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%
$1,000,000 or more NAV NAV
CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS A AND CLASS K SHARES. You can
purchase $1,000,000 or more of Class A shares at net asset value, and the
distributor may pay a dealer concession and/or a service fee for purchases of
$1,000,000 or more. However, if you purchase shares worth $1,000,000 or more,
they may be subject to a CDSC of 1% if you redeem them prior to eighteen months
after the date of purchase. We will use the "first-in, first-out" method to
determine your holding period. Under this method, the date of redemption will be
compared with the earliest purchase date of shares held in your account. If your
holding period is less than eighteen months, the CDSC may be assessed on the
amount of the total original cost of the shares. For qualified plans investing
in Class A shares, you may pay a CDSC of 1% if the plan is redeemed within
twelve months from initial deposit in the plan's INVESCO account. For qualified
plans investing in Class K shares, you may pay a CDSC of 0.70% if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account.
CDSC 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. If your holding period is less
than six years for Class B shares and thirteen months for Class C shares, the
CDSC may be assessed on the amount of the total original cost of the shares.
Year Since
Purchase Made Class B Class C
First 5% 1%(1)
Second 4% None
Third 3% None
Fourth 3% None
Fifth 2% None
Sixth 1% None
Seventh and following None(2) None
(1) The first year will consist of the first thirteen months.
(2) Class B shares, along with the pro rata portion of the shares' reinvested
dividends and distributions, automatically convert to Class A shares at the
end of the month which is eight years after the date on which such Class B
shares were purchased.
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 intermediary must provide sufficient
information at the time of purchase to verify that your purchase qualifies for
such treatment.
REDUCED SALES CHARGES. You may be eligible to buy Class A shares at reduced
initial sales charge rates under Right of Accumulation or Letter of Intent
under certain circumstances.
RIGHTS OF ACCUMULATION. You may combine your new purchases of Class A
shares with Class A shares that were previously purchased for the
purpose of qualifying for the lower initial sales charge rates that
apply to larger purchases. The applicable initial sales charge for the
new purchase is based on the total of your current purchase and the
current value of all Class A shares you own.
LETTER OF INTENT. Under a Letter of Intent (LOI), you commit to
purchase a specified dollar amount of Class A shares of the Fund
during a thirteen-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 thirteen-month period,
your account will be adjusted to the higher initial sales charge level
for the amount actually invested.
INITIAL SALES CHARGE/CDSC EXCEPTIONS.
You will not pay initial sales charges:
o on shares purchased by reinvesting dividends and distributions;
o when exchanging shares of the same class among certain INVESCO
funds;
o when using the reinstatement privilege;
o when a merger, consolidation, or acquisition of assets of an
INVESCO fund occurs; and
o upon automatic conversion of Class B to Class A.
You will not pay a CDSC:
o if you purchase less than $1,000,000 of Class A shares;
o if you purchase $1,000,000 or more of Class A shares and hold those
shares for more than eighteen months;
o if you redeem Class B shares you held for more than six years;
o if you redeem Class C shares you held for more than thirteen
months;
o if you participate in the periodic withdrawal program and withdraw
up to 10% of the value of your shares that are subject to a CDSC in
any twelve-month period. The value of your shares, and applicable
twelve-month period, will be calculated based upon the value of
your account on, and the date of, the first periodic withdrawal;
o if you redeem shares acquired through reinvestment of dividends and
distributions;
o if you are a qualified plan investing in Class A or Class K shares
and elect to forego any dealer concession;
o on increases in the net asset value of your shares;
o to pay account fees;
o for IRA distributions due to death or disability or periodic
distributions based on life expectancy;
o to return excess contributions (and earnings, if applicable) from
retirement plan accounts; or
o for redemptions following the death of a shareholder or beneficial
owner.
There may be other situations when you may be able to purchase or redeem shares
at reduced or no sales charges. Consult the Funds' Statement of Additional
Information for further details.
DISTRIBUTION EXPENSES. We have adopted a Master Distribution Plan and Agreement
(commonly known as a "12b-1 Plan") for each class of shares of the Funds. The
12b-1 fees paid by each Fund's classes of shares are used to pay distribution
and service fees to ADI for the sale and distribution of the Funds' shares and
to pay for services provided to shareholders. These services include
compensation to financial intermediaries that sell Fund shares and/or service
shareholder accounts. Because each Fund's shares pay these fees out of their
assets on an ongoing basis, these fees increase the cost of your investment.
Under each Plan, payments are limited to an amount computed at each class's
applicable 12b-1 fee. If distribution expenses for a class exceed these computed
amounts, ADI pays the difference. Conversely, if distribution fees are less than
computed amounts, ADI retains the difference.
[INVESCO ICON] YOUR ACCOUNT SERVICES
With the exception of householding, the following information pertains only to
shareholders who hold their shares directly through INVESCO.
SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains your
current Fund holdings. The Funds do not issue share certificates.
INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL, OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.
QUARTERLY INVESTMENT SUMMARIES. Each calendar quarter, you receive a written
statement which consolidates and summarizes account activity and value at the
beginning and end of the period for each of your INVESCO funds.
TRANSACTION CONFIRMATIONS. You receive detailed confirmations of individual
purchases, exchanges, and sales. If you choose certain recurring transaction
plans (for instance, EasiVest), your transactions are confirmed on your
quarterly Investment Summaries.
TELEPHONE TRANSACTIONS. You and your financial intermediary or plan or program
sponsor may buy, exchange, and sell Fund shares by telephone, unless these
privileges are specifically declined when the INVESCO new account Application is
filled out.
YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, INVESCOFUNDS.COM.
Unless you decline the telephone transaction privileges, when you fill out and
sign the new account Application, a Telephone Transaction Authorization Form, or
use your telephone transaction privileges, you lose certain rights if someone
gives fraudulent or unauthorized instructions to INVESCO that result in a loss
to you. In general, if INVESCO has followed reasonable procedures, such as
recording telephone instructions and sending written transaction confirmations,
INVESCO is not liable for following telephone instructions that it believes to
be genuine. Therefore, you have the risk of loss due to unauthorized or
fraudulent instructions.
HOUSEHOLDING. To save money for the Funds, you may receive only one copy of a
prospectus or financial report to each household address. This process, known as
"householding," is used for most required shareholder mailings. It does not
apply to account statements. You may, of course, request an additional copy of a
prospectus or financial report at any time by calling or writing INVESCO. You
may also request that householding be eliminated from all your required
mailings.
IRAS AND OTHER RETIREMENT PLANS. Shares of any INVESCO mutual fund may be
purchased for IRAs and many other types of tax-deferred retirement plans. Please
call INVESCO for information and forms to establish or transfer your existing
retirement plan or account.
[INVESCO ICON] HOW TO SELL SHARES
The chart in this section shows several convenient ways to sell your Fund shares
if you invest directly through INVESCO. If you invest in a Fund through a
financial intermediary, please consult the financial intermediary, or with
respect to Class K shares, the plan or program sponsor, for information on how
to sell shares of a Fund. You may be charged a commission or transaction fee by
your financial intermediary or plan or program sponsor for sales of Fund shares.
Shares of the Funds may be sold at any time at the next NAV calculated after
your request to sell is received by INVESCO in proper form. Depending on Fund
performance, the NAV at the time you sell your shares may be more or less than
the price you paid to purchase your shares.
Various fees may apply to Fund redemptions. You may be charged a CDSC at the
time of redemption depending on how long you have held your shares.If you buy
$1,000,000 or more of Class A shares and redeem the shares within eighteen
months from the date of purchase, you may pay a 1% CDSC at the time of
redemption. If you are a qualified plan and elect to receive a dealer
concession, you may pay a CDSC of 1% on your Class A shares if the plan is
redeemed within twelve months from initial deposit in the plan's INVESCO
account. If you are a qualified plan and elect to forego the dealer concession,
you will not be charged a CDSC. With respect to redemption of Class B shares
held six years or less, a CDSC of 1% - 5% of the total original cost of the
shares may be assessed. With respect to redemption of Class C shares held
thirteen months or less, a CDSC of 1% of the total original cost of the shares
may be assessed. With respect to Class K shares, if you are a qualified plan and
elect to receive a dealer concession, you may pay a CDSC of 0.70% on your Class
K shares if the plan is redeemed within twelve months from initial deposit in
the plan's INVESCO account. If you are a qualified plan and elect to forego the
dealer concession, you will not be charged a CDSC. In determining whether a CDSC
applies to a redemption from a non-qualified plan, it is assumed that the shares
being redeemed first are any shares in the shareholder's Fund account that are
not subject to a CDSC, followed by shares held the longest in the shareholder's
account. These charges are not assessed upon Class A, B, C, or K shares acquired
through reinvestment of dividends or other distributions, or Class A, B, C, or K
shares exchanged for the same class of another INVESCO Fund. For more
information on CDSC charges, please see the subsection of the Prospectus
entitled "Choosing A Share Class" and the section of the Statement of Additional
Information entitled "Distributor - Sales Charges and Dealer Concessions."
TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00 P.M.
EASTERN TIME.
If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell and specify the class of shares. Remember that any sale
or exchange of shares in a non-retirement account will likely result in a
taxable gain or loss.
While INVESCO attempts to process telephone redemptions promptly, there may be
times -- particularly in periods of severe economic or market disruption -- when
you may experience delays in redeeming shares by telephone.
INVESCO usually forwards the proceeds from the sale of fund shares within seven
days after we receive your request to sell in proper form. However, payment may
be postponed under unusual circumstances -- for instance, if normal trading is
not taking place on the NYSE, or during an emergency as defined by the
Securities and Exchange Commission. If your INVESCO fund shares were purchased
by a check which has not yet cleared, payment will be made promptly when your
purchase check does clear; that can take up to twelve business days.
If you participate in EasiVest, the Funds' automatic monthly investment program,
and sell all of the shares in your account, we will not make any additional
EasiVest purchases unless you give us other instructions.
Because of the Funds' expense structures, it costs as much to handle a small
account as it does to handle a large one. If the value of your account in a Fund
falls below $250 as a result of your actions (for example, sale of your Fund
shares), the Fund reserves the right to sell all of your shares, send the
proceeds of the sale to you and close your account. Before this is done, you
will be notified and given sixty days to increase the value of your account to
$250 or more.
REDEMPTION FEES. Except for any applicable CDSC, we will not charge you any fees
to redeem your shares; however, your financial intermediary may charge service
fees for handling these transactions.
REINSTATEMENT PRIVILEGE (CLASS A AND CLASS B ONLY). You may, within ninety days
after you sell Class A or Class B shares, reinvest all or part of your
redemption proceeds in Class A shares of a Fund at net asset value in an
identically registered account. You will not pay any sales charges on the amount
reinvested. You must notify INVESCO in writing at the time you reinstate that
you are exercising your reinstatement privilege. You may exercise this privilege
only once per calendar year.
The following chart shows several ways to sell your shares of the Funds if you
invest directly through INVESCO.
METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY TELEPHONE Any amount. You must provide an IRA
Call us toll-free at: redemption form to
1-800-525-8085. INVESCO prior to making
an IRA redemption by
telephone. INVESCO's
telephone redemption
privileges may be
modified or terminated in
the future at INVESCO's
discretion. The maximum
amount which may be
redeemed by telephone is
generally $25,000.
- --------------------------------------------------------------------------------
IN WRITING Any amount. The redemption request
Mail your request to: must be signed by all
INVESCO Funds Group, Inc. registered account
P.O. Box 173706 owners. Payment will be
Denver, CO 80217-3706. mailed to your address as
You may also send your it appears on INVESCO's
request by overnight records, or to a bank
courier to: designated by you in
4350 South Monaco Street writing.
Denver, CO 80237.
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH Any amount. You must provide your
Call 1-800-525-8085 to bank account information
request your redemption. or IRA redemption form to
INVESCO prior to using
this option. INVESCO will
automatically pay the
proceeds into your
designated bank account.
- --------------------------------------------------------------------------------
BY INTERNET (INVESTOR Any amount. IRA You will need a Web
CLASS - GRANDFATHERED redemptions are not browser to use this
INVESTORS ONLY) permitted via the service. Internet
Go to the INVESCO Web site internet. transactions are limited
at invescofunds.com. to a maximum of $25,000.
INVESCO will
automatically pay the
proceeds into your
designated bank account.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BY PERSONAL ACCOUNT LINE $50. Be sure to write down the
WITH ACH (INVESTOR CLASS - confirmation number
GRANDFATHERED INVESTORS provided to you. You must
ONLY) provide your bank account
Automated transactions by information to INVESCO
telephone are available prior to using this
for redemptions and option.
exchanges 24 hours a day.
Simply call 1-800-424-8085.
- --------------------------------------------------------------------------------
PERIODIC WITHDRAWAL PLAN $100 per payment on a You must have at least
You may call us to request monthly or quarterly $10,000 total invested
the appropriate form and basis. The redemption with the INVESCO funds
more information at check may be made with at least $5,000 of
1-800-525-8085. payable to any party that total invested in
you designate. the fund from which
withdrawals will be made.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD PARTY Any amount. All registered account
Mail your request to: owners must sign the
INVESCO Funds Group, Inc. request, with signature
P.O. Box 173706 guarantees from an
Denver, CO 80217-3706. eligible guarantor
financial institution,
such as a commercial bank
or a recognized national
or regional securities
firm.
[GRAPH ICON] TAXES
Everyone's tax status is unique. We manage the Funds in an effort to provide
maximum total returns to all shareholders of the Funds. INVESCO generally
focuses on pre-tax results and ordinarily does not manage a Fund to minimize
taxes. We may, nevertheless, take advantage of opportunities to mitigate taxes
through management of capital gains and losses. We encourage you to consult your
own tax adviser on the tax impact to you of investing directly or indirectly in
the Funds.
TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.
Each Fund customarily distributes to its shareholders substantially all of its
net investment income, net capital gains and net gains from foreign currency
transactions, if any. You receive a proportionate part of these distributions,
depending on the percentage of a Fund's shares that you own. These distributions
are required under federal tax laws governing mutual funds. It is the policy of
each Fund to distribute all investment company taxable income and net capital
gains. As a result of this policy and each Fund's qualification as a regulated
investment company, it is anticipated that none of the Funds will pay any
federal income or excise taxes. Instead, each Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.
However, unless you are (or your account is) exempt from income taxes, you must
include all dividends and capital gain distributions paid to you by a Fund in
your taxable income for federal, state, and local income tax purposes. You also
may realize capital gains or losses when you sell shares of a Fund at more or
less than the price you originally paid. An exchange is treated as a sale, and
is a taxable event. Dividends and other distributions usually are taxable
whether you receive them in cash or automatically reinvest them in shares of the
distributing Fund(s) or other INVESCO funds.
If you have not provided INVESCO with complete, correct tax information, the
Funds are required by law to withhold from your distributions, and any money
that you receive from the sale of shares of the Funds, a backup withholding tax
at the rate in effect on the date of the transaction.
Unless your account is held through a financial intermediary, we will provide
you with detailed information every year about your dividends and capital gain
distributions. Depending on the activity in your individual account, we may also
be able to assist with cost basis figures for shares you sell.
[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Funds earn ordinary or investment income from dividends and interest on
their investments. Energy, Financial Services, Gold & Precious Metals, Health
Sciences, Leisure, Technology, and Telecommunications Funds expect to distribute
their respective investment income, less Fund expenses, to shareholders
annually. Real Estate Opportunity and Utilities Funds expect to make such
distributions quarterly. All Funds can make distributions at other times, if
they choose to do so. Please note that classes with higher expenses are expected
to have lower dividends.
NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN
ADDITIONAL SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT OR TAX-DEFERRED
ACCOUNTS).
Each Fund also realizes capital gains or losses when it sells securities in its
portfolio for more or less than it had paid for them. If total gains on sales
exceed total losses (including losses carried forward from previous years), a
Fund has a net realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually, usually in November or December.
Dividends and capital gain distributions are paid to you if you hold shares on
the record date of the distribution regardless of how long you have held your
shares.
Under present federal income tax laws, capital gains may be taxable at different
rates, depending on how long a Fund has held the underlying investment.
Short-term capital gains, which are derived from the sale of assets held one
year or less, are taxed as ordinary income. Long-term capital gains, which are
derived from the sale of assets held for more than one year, are taxed at up to
the maximum capital gains rate, currently 20% for individuals.
A Fund's daily NAV reflects all realized capital gains that have not yet been
distributed to shareholders. Therefore, a Fund's NAV will drop by the amount of
a distribution, net of market fluctuations, on the day the distribution is
declared. If you buy shares of a Fund just before a distribution is declared,
you may wind up "buying a distribution." This means that if the Fund declares a
dividend or capital gain distribution shortly after you buy, you will receive
some of your investment back as a taxable distribution. Although purchasing your
shares at the resulting higher NAV may mean a smaller capital gain or greater
loss upon sale of the shares, most shareholders want to avoid the purchase of
shares immediately before the distribution record date. However, keep in mind
that your basis in the Fund will be increased to the extent such distributions
are reinvested in the Fund. If you sell your shares of a Fund at a loss for tax
purposes and then replace those shares with a substantially identical investment
either thirty days before or after that sale, the transaction is usually
considered a "wash sale" and you will not be able to claim a tax loss.
Dividends and capital gain distributions paid by each Fund are automatically
reinvested in additional Fund shares at the NAV on the ex-distribution date,
unless you choose to have them automatically reinvested in another INVESCO fund
or paid to you by check or electronic funds transfer. If you choose to be paid
by check, the minimum amount of the check must be at least $10; amounts less
than that will be automatically reinvested. Dividends and other distributions,
whether received in cash or reinvested in additional Fund shares, are generally
subject to federal income tax.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the various classes of each Fund for the past five years (or, if
shorter, the period of the class's operations). Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the annual percentages that an investor would have earned (or lost) on
an investment in a Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the financial statements, is
included in INVESCO Sector Funds, Inc.'s 2003 Annual Report to Shareholders,
which is incorporated by reference into the Statement of Additional Information.
This Report is available without charge by contacting ADI at the address or
telephone number on the back cover of this Prospectus.
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
ENERGY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30 $ 19.38
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.10) (0.07) (0.08) (0.00) (0.00) 0.00
Net Investment Income(Loss)(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.35) (0.40) 3.84 3.72 2.39 (5.04)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.45) (0.47) 3.76 3.72 2.39 (5.04)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00 0.01 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.81 $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30
====================================================================================================================================
TOTAL RETURN (12.72%) (2.38%) 23.09% 27.19%(d) 21.19% (28.51%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 231,023 $ 358,439 $ 445,845 $ 221,432 $ 196,136 $ 137,455
Ratio of Expenses to Average Net Assets(e) 1.69% 1.53% 1.41% 1.60%(f) 1.68% 1.58%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.57%) (0.34%) (0.35%) (0.26%)(f) (0.05%) 0.01%
Portfolio Turnover Rate 144% 144% 166% 109%(d) 279% 192%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001.
(c) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis for the period ended March 31, 2000 and the years
ended October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 19.26 $ 19.26
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.05) (0.17)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (2.36) (2.38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.41) (2.55)
====================================================================================================================================
Net Asset Value--End of Period $ 16.85 $ 16.71
====================================================================================================================================
TOTAL RETURN(c)
RATIOS (12.51%) (13.24%)
Net Assets--End of Period ($000 Omitted) $ 9,131 $ 1,502
Ratio of Expenses to Average Net Assets(d)(e) 1.46% 2.33%
Ratio of Net Investment Loss to Average Net Assets(e) (0.33%) (1.16%)
Portfolio Turnover Rate 144% 144%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charge for Class A or CDSC for Class B is not included in the Total Return Calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 2.41% and ratio of net investment
loss to average net assets would have been (1.24%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------------
2003 2002 2001 2000(a)
ENERGY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 18.98 $ 19.58 $ 17.39 $ 14.35
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.11) (0.07) (0.05) (0.01)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (2.42) (0.53) 3.67 3.05
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.53) (0.60) 3.62 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.45 $ 18.98 $ 19.58 $ 17.39
====================================================================================================================================
TOTAL RETURN(c) (13.33%) (3.06%) 22.35% 21.11%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 9,566 $ 12,324 $ 8,704 $ 16
Ratio of Expenses to Average Net Assets(e)(f) 2.33% 2.27% 2.05% 2.05%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.22%) (1.08%) (1.10%) (1.11%)(g)
Portfolio Turnover Rate 144% 144% 166% 109%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.53% and ratio of net investment loss to
average net assets would have been (1.42%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
--------------------------------------------------------
2003 2002 2001(a)
ENERGY FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 17.98 $ 19.62 $ 16.76
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.14) (0.05) (0.15)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (2.29) (1.59) 3.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.43) (1.64) 2.86
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 15.55 $ 17.98 $ 19.62
====================================================================================================================================
TOTAL RETURN (13.52%) (8.36%) 17.06%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 289 $ 37 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 2.07% 11.62% 3.11%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.90%) (10.45%) (2.34%)(f)
Portfolio Turnover Rate 144% 144% 166%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2003.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 5.36% and ratio of net investment loss to
average net assets would have been (4.19%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-----------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
FINANCIAL SERVICES FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45 $ 29.14
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.10 0.07 0.10 0.03 0.08 0.25
Net Investment Income
Net Gains or (Losses) on Securities (Both
Realized and Unrealized) (6.42) 0.94 2.97 0.05 3.52 3.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.32) 1.01 3.07 0.08 3.60 3.26
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.13 1.67 1.32 2.68 2.32 3.95
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.77 $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45
====================================================================================================================================
TOTAL RETURN (22.39%) 3.82% 11.25% 0.60%(b) 13.52% 11.76%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 734,440 $ 1,234,230 $ 1,368,583 $ 1,133,350 $ 1,242,555 $ 1,417,655
Ratio of Expenses to Average Net Assets(c) 1.40% 1.27% 1.25% 1.29%(d) 1.26% 1.05%
Ratio of Net Investment Income to
Average Net Assets 0.38% 0.24% 0.36% 0.25%(d) 0.25% 0.85%
Portfolio Turnover Rate 60% 81% 99% 38%(b) 83% 52%
(a) From November 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(d) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 28.22 $ 28.22
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.06 (0.03)
Net Investment Income (Loss)
Net Losses on Securities (Both Realized and Unrealized) (6.37) (6.30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.31) (6.33)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.23 0.15
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.68 $ 21.74
====================================================================================================================================
TOTAL RETURN(b) (22.36%) (22.48%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,311 $ 990
Ratio of Expenses to Average Net Assets(c)(d) 1.38% 2.09%
Ratio of Net Investment Income (Loss) to Average Net Assets(d) 0.49% (0.20%)
Portfolio Turnover Rate 60% 60%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of each Class were absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been 1.51% for Class A and 2.40% for Class B and ratio
of net investment income (loss) to average net assets would have been 0.36% for Class A and (0.51%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------
2003 2002 2001 2000(a)
FINANCIAL SERVICES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 27.89 $ 28.72 $ 27.06 $ 23.66
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.25) (0.10) (0.09) 0.00
Net Investment Income (Loss)(c)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.22) 0.87 3.05 3.48
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.47) 0.77 2.96 3.48
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.04 1.60 1.30 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.38 $ 27.89 $ 28.72 $ 27.06
====================================================================================================================================
TOTAL RETURN(d) (23.22%) 2.98% 10.87% 14.72%(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 10,026 $ 16,880 $ 12,221 $ 138
Ratio of Expenses to Average Net Assets(f) 2.45% 2.07% 1.85% 1.63%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.68%) (0.57%) (0.31%) 0.39%(g)
Portfolio Turnover Rate 60% 81% 99% 38%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Income aggregated less than $0.01 on a per share basis for the period ended March 31, 2000.
(d) The applicable CDSC is not included in the Total Return Calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------
2003 2002 2001(a)
FINANCIAL SERVICES FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 27.69 $ 28.67 $ 29.35
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) 0.15 (0.03) (0.17)
Net Investment Income (Loss)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.14) 0.90 (0.38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.26) 0.87 (0.55)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.16 1.85 0.13
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 21.27 $ 27.69 $ 28.67
====================================================================================================================================
TOTAL RETURN (22.62%) 3.38% (1.97%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,348 $ 1,033 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.78% 1.63% 3.35%(f)
Ratio of Net Investment Loss to Average Net Assets(e) 0.18% (0.12%) (1.80%)(f)
Portfolio Turnover Rate 60% 81% 99%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.13% and ratio of net investment loss to
average net assets would have been (0.17%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
GOLD & PRECIOUS METALS
FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90 $ 3.21
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.02) (0.01) (0.01) (0.01) (0.03) 0.01
OPERATIONS(b)
Net Investment Income (Loss)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.13) 0.87 (0.12) (0.22) (0.04) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.11 0.86 (0.13) (0.23) (0.07) (1.28)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00 0.00 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.40 $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90
====================================================================================================================================
TOTAL RETURN 4.80% 60.14% (8.38%) (12.58%)(c) (3.68%) (39.98%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 98,388 $ 104,831 $ 64,429 $ 81,470 $ 99,753 $ 107,249
Ratio of Expenses to Average Net Assets(d) 1.88% 2.10% 2.34% 2.08%(e) 2.20% 1.90%
Ratio of Net Investment
Loss to Average Net Assets (0.79%) (0.80%) (0.99%) (0.76%)(e) (1.60%) (0.93%)
Portfolio Turnover Rate 84% 46% 90% 37%(c) 141% 133%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003 and 2001 and October 31, 1999.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(e) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
--------------------------------------------------
GOLD & PRECIOUS METALS FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.29 $ 2.29
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.02) (0.02)
Net Investment Loss
Net Gains on Securities (Both Realized and Unrealized) 0.12 0.12
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.39 $ 2.39
====================================================================================================================================
TOTAL RETURN(c) 4.37% 4.37%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,514 $ 2,315
Ratio of Expenses to Average Net Assets(d)(e) 2.09% 2.18%
Ratio of Net Investment Loss to Average Net Assets(e) (1.09%) (1.12%)
Portfolio Turnover Rate 84% 84%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of Class A were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class A, ratio of expenses to average net assets would have been 2.11% and ratio of net investment
loss to average net assets would have been (1.11%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------
2003 2002 2001 2000(a)
GOLD & PRECIOUS METALS FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 2.42 $ 1.53 $ 1.60 $ 1.75
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.00) (0.07) (0.01) (0.00)
Net Investment Loss(c)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.10) 0.96 (0.02) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.89 (0.03) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 2.52 $ 2.42 $ 1.53 $ 1.60
====================================================================================================================================
TOTAL RETURN(d) 4.13% 58.17% (1.95%) ( 8.57%)(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,459 $ 515 $ 57 $ 1
Ratio of Expenses to Average Net Assets(f) 2.65% 3.33% 3.38% 3.54%(g)
Ratio of Net Investment Loss to Average Net Assets (1.60%) (1.67%) (1.41%) (0.82%)(g)
Portfolio Turnover Rate 84% 46% 90% 37%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2003 and the period ended March
31, 2000.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
----------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
HEALTH SCIENCES FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12 $ 57.50
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS(b)
Net Investment Income (Loss) (0.28) (0.38) (0.12) (0.06) 0.14 0.13
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (8.75) 2.18 (0.51) 3.53 5.02 13.55
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.03) 1.80 (0.63) 3.47 5.16 13.68
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 9.11 6.34 8.89 9.06
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 38.53 $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12
====================================================================================================================================
TOTAL RETURN (18.99%) 3.95% (4.12%) 6.30%(d) 8.44% 28.58%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 954,765 $ 1,475,313 $ 1,580,378 $ 1,622,624 $ 1,574,020 $ 1,328,196
Ratio of Expenses to Average Net Assets(e) 1.44% 1.31% 1.23% 1.18%(f) 1.22% 1.12%
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.68%) (0.75%) (0.20%) (0.22%)(f) 0.07% 0.25%
Portfolio Turnover Rate 179% 160% 177% 107%(d) 127% 92%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 47.56 $ 47.56
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.22) (0.44)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (8.78) (8.78)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.00) (9.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 38.56 $ 38.34
====================================================================================================================================
TOTAL RETURN(c) (18.92%) (19.39)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 3,731 $ 621
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.06%
Ratio of Net Investment Loss to Average Net Assets(e) (0.69%) (1.22%)
Portfolio Turnover Rate 179% 179%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.88% for Class A and 2.51% for Class B and
ratio of net investment loss to average net assets would have been (1.16%) for Class A and (1.67%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------------
2003 2002 2001 2000(a)
HEALTH SCIENCES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 46.68 $ 45.40 $ 55.50 $ 62.05
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (1.20) (0.35) (0.05) (0.03)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.21) 1.65 (0.94) (6.52)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.41) 1.30 (0.99) (6.55)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS (0.00) 0.02(c) 9.11 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 37.27 $ 46.68 $ 45.40 $ 55.50
====================================================================================================================================
TOTAL RETURN(d) (20.16%) 2.85% (4.79%) (10.56%)(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,846 $ 15,892 $ 10,767 $ 470
Ratio of Expenses to Average Net Assets(f)(g) 2.81% 2.26% 2.03% 1.65%(h)
Ratio of Net Investment Loss to Average Net Assets(g) (2.04%) (1.70%) (1.08%) (0.54%)(h)
Portfolio Turnover Rate 179% 160% 177% 107%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 3.27% and ratio of net investment loss to
average net assets would have been (2.50%).
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-----------------------------------------------------------
2003 2002 2001(a)
HEALTH SCIENCES FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 46.98 $ 45.43 $ 55.84
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.23) (0.48) (0.22)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.94) 2.05 (10.19)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (9.17) 1.57 (10.41)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 37.81 $ 46.98 $ 45.43
====================================================================================================================================
TOTAL RETURN (19.50%) 3.42% (18.64%)(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 1,990 $ 2,405 $ 1
Ratio of Expenses to Average Net Assets(e) 2.07% 1.71% 3.62%(f)
Ratio of Net Investment Loss to Average Net Assets (1.29%) (1.09%) (2.75%)(f)
Portfolio Turnover Rate 179% 160% 177%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
LEISURE FUND--INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92 $ 27.21
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.23) (0.03) (0.00) (0.13) (0.00) (0.00)
OPERATIONS(b)
Net Investment Loss(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (7.89) 2.21 (3.05) 7.27 17.20 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.12) 2.18 (3.05) 7.14 17.20 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 3.23 1.91 2.98
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.83 $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92
====================================================================================================================================
TOTAL RETURN (20.87%) 6.01% (5.50%) 17.34%(d) 65.13% 15.16%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 536,108 $ 799,465 $ 607,428 $ 549,523 $ 443,348 $ 228,681
Ratio of Expenses to Average Net Assets(e) 1.50% 1.40% 1.36% 1.28%(f) 1.44% 1.41%
Ratio of Net Investment Loss
to Average Net Assets (0.69%) (0.64%) (0.51%) (0.65%)(f) (0.68%) (0.09%)
Portfolio Turnover Rate 20% 27% 28% 23%(d) 35% 31%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2003 and the period ended March 31,
2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001 and the years ended
October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
LEISURE FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.96 $ 38.96
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.17) (0.38)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (7.91) (7.93)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.08) (8.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.88 $ 30.65
====================================================================================================================================
TOTAL RETURN(c) (20.74%) (21.33%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 27,175 $ 8,268
Ratio of Expenses to Average Net Assets(d)(e) 1.42% 2.14%
Ratio of Net Investment Loss to Average Net Assets(e) (0.56%) (1.29%)
Portfolio Turnover Rate 20% 20%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return Calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expenses
offset arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 2.23% and ratio of net investment
loss to average net assets would have been (1.38%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------
2003 2002 2001 2000(a)
LEISURE FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.29 $ 36.80 $ 47.09 $ 45.51
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.18) (0.17) (0.13) (0.02)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.11) 2.02 (3.22) 1.60
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.29) 1.85 (3.35) 1.58
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.00 $ 38.29 $ 36.80 $ 47.09
====================================================================================================================================
TOTAL RETURN(c) (21.65%) 5.10% (6.18%) 3.47%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 17,768 $ 16,307 $ 5,388 $ 84
Ratio of Expenses to Average Net Assets(e) 2.44% 2.26% 2.08% 1.71%(f)
Ratio of Net Investment Loss to Average Net Assets (1.62%) (1.48%) (1.08%) (0.42%)(f)
Portfolio Turnover Rate 20% 27% 28% 23%(g)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED PERIOD ENDED
MARCH 31 MARCH 31
---------------------------------------------
2003 2002(a)
LEISURE FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 38.98 $ 36.11
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.06) (0.09)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (8.18) 2.96
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (8.24) 2.87
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 30.74 $ 38.98
====================================================================================================================================
TOTAL RETURN (21.14%) 7.95%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 67,465 $ 62,226
Ratio of Expenses to Average Net Assets(d)(e) 1.87% 1.23%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.05%) (0.48%)(f)
Portfolio Turnover Rate 20% 27%(g)
(a) From December 17, 2001, inception of Class, to March 31, 2002.
(b) The per share information was computed based on average shares for the period ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.21% and ratio of net investment loss to
average net assets would have been (1.39%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2002.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
----------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
REAL ESTATE OPPORTUNITY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15 $ 10.99
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.24 0.26 0.27 0.33 0.38
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.37) 0.78 0.48 (0.28) (1.56) (0.96)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.09) 1.02 0.74 (0.01) (1.23) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.27 0.25 0.25 0.26 1.02 1.26
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.53 $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15
====================================================================================================================================
TOTAL RETURN (1.12%) 14.67% 11.05% (0.03%)(b) (13.29%) (6.49%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 20,313 $ 20,345 $ 28,546 $ 20,046 $ 17,406 $ 23,548
Ratio of Expenses to Average Net Assets(c)(d) 1.60% 1.61% 1.60% 1.34%(e) 1.34% 1.22%
Ratio of Net Investment Income to Average Net Assets(d) 3.92% 3.58% 3.52% 5.54%(e) 4.23% 3.53%
Portfolio Turnover Rate 248% 196% 338%(f) 272%(b)(f) 697%(f) 258%
(a) From August 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001, the
period ended March 31, 2000 and the years ended July 31, 1999 and 1998. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.43%, 2.25%, 2.03%, 2.73% (annualized), 2.76%, and 1.97%, respectively,
and ratio of net investment income to average net assets would have been 3.09%, 2.94%, 3.09%, 4.15% (annualized), 2.81%, and
2.78%, respectively.
(e) Annualized
(f) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.89 $ 7.89
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.28 0.21
Net Investment Income
Net Losses on Securities (Both Realized and Unrealized) (0.39) (0.36)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.11) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.34 0.32
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.44 $ 7.42
====================================================================================================================================
TOTAL RETURN(b) (1.45%) (1.94%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,409 $ 133
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.36%
Ratio of Net Investment Income to Average Net Assets(d) 4.57% 3.49%
Portfolio Turnover Rate 248% 248%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expense had not been
voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 3.73% and ratio of net investment
income to average net assets would have been 2.12%.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
---------------------------------------------------------
2003 2002 2001 2000(a)
REAL ESTATE OPPORTUNITY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 7.95 $ 7.10 $ 6.62 $ 6.58
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.14 0.14 0.20 0.08
Net Investment Income
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.28) 0.82 0.48 0.06
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.14) 0.96 0.68 0.14
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.08 0.11 0.20 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.73 $ 7.95 $ 7.10 $ 6.62
====================================================================================================================================
TOTAL RETURN(b) (1.81%) 13.69% 10.20% 2.10%(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 838 $ 484 $ 1,336 $ 143
Ratio of Expenses to Average Net Assets(d)(e) 2.35% 2.37% 2.26% 1.77%(f)
Ratio of Net Investment Income to Average Net Assets(e) 3.25% 2.72% 2.90% 19.13%(f)
Portfolio Turnover Rate 248% 196% 338%(g) 272%(g)(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The applicable CDSC is not included in the Total Return Calculation.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 3.74%, 2.72%, 2.26%, and 2.04% (annualized), respectively, and ratio of net investment income to average net assets
would have been 1.86%, 2.37%, 2.90%, and 18.86% (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
---------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
TECHNOLOGY FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07 $ 35.97
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT (0.41) (0.08) (0.10) (0.03) (0.07) (0.00)
OPERATIONS
Net Investment Loss(b)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (13.37) (5.11) (63.58) 47.69 30.17 (1.45)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.51) (5.19) (63.68) 47.66 30.10 (1.45)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 3.91 0.00 6.45
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.90 $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07
====================================================================================================================================
TOTAL RETURN (44.43% (14.58%) (63.54%) 85.87%(c) 107.23% (2.47%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 853,530 $ 1,865,251 $ 2,181,879 $ 5,034,087 $ 2,081,613 $ 1,008,771
Ratio of Expenses to Average Net Assets(d) 1.77% 1.37% 0.98% 0.88%(e) 1.20% 1.17%
Ratio of Net Investment Loss
to Average Net Assets (1.46% (1.08%) (0.47%) (0.48%)(e) (0.79%) (0.49%)
Portfolio Turnover Rate 107% 79% 85% 28%(c) 143% 178%
(a) From November 1, 1999 to March 31, 2000.
(b) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended October 31, 1998.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution, and transfer agent fees).
(e) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.41 $ 30.41
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.20) (0.27)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (13.23) (13.30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.43) (13.57)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.98 $ 16.84
====================================================================================================================================
TOTAL RETURN(c) (44.16%) (44.62%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 4,460 $ 532
Ratio of Expenses to Average Net Assets(d)(e) 1.47% 2.15%
Ratio of Net Investment Loss to Average Net Assets(e) (1.12%) (1.71%)
Portfolio Turnover Rate 107% 107%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of each Class, less Expenses absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.51% for Class A and 2.74% for Class B and
ratio of net investment loss to average net assets would have been (1.16%) for Class A and (2.30%) for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-------------------------------------------------------------------
2003 2002 2001 2000(a)
TECHNOLOGY FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 29.73 $ 35.22 $ 101.85 $ 95.51
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.62) (0.22) (0.18) (0.15)
Net Investment Loss
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (12.72) (5.27) (63.81) 6.49
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.34) (5.49) (63.99) 6.34
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.39 $ 29.73 $ 35.22$ 101.85
====================================================================================================================================
TOTAL RETURN(c) (44.87%) (15.59%) (63.89%) 6.63%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 5,759 $ 18,910 $ 15,919 $ 2,970
Ratio of Expenses to Average Net Assets(e)(f) 2.69% 2.54% 1.86% 1.45%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (2.39%) (2.26%) (1.30%) (1.03%)(g)
Portfolio Turnover Rate 107% 79% 85% 28%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 3.95%, and ratio of net investment loss to
average net assets would have been (3.65%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
----------------------------------------------------------
2003 2002 2001(a)
TECHNOLOGY FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 30.22 $ 35.09 $ 60.01
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) (0.07) (0.27) (0.82)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (13.37) (4.60) (24.10)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (13.44) (4.87) (24.92)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 16.78 $ 30.22 $ 35.09
====================================================================================================================================
TOTAL RETURN (44.47%) (13.85%) (41.54%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 22,156 $ 27,147 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.88% 1.28% 5.18%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.55%) (1.15%) (4.67%)(f)
Portfolio Turnover Rate 107% 79% 85%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO , if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.49%, and ratio of net investment loss to
average net assets would have been (2.16%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
--------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
TELECOMMUNICATIONS FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60 $ 15.31
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS(b)
Net Investment Income (Loss)(c) (0.04) (0.11) (0.16) (0.10) (0.00) 0.01
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (4.36) (11.42) (38.91) 32.87 12.57 5.32
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.53) (39.07) 32.77 12.57 5.33
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.15 0.37 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.96 $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60
====================================================================================================================================
TOTAL RETURN (35.60%) (48.26%) (61.42%) 103.25%(d) 65.52% 36.79%
RATIOS
Net Assets--End of Period ($000 Omitted) $ 274,947 $ 573,969 $ 1,486,660 $ 4,125,890 $ 1,029,256 $ 276,577
Ratio of Expenses to Average Net Assets(e)(f) 1.81% 1.70% 1.10% 0.99%(g) 1.24% 1.32%
Ratio of Net Investment Loss to Average
Net Assets(f) (0.49%) (0.57%) (0.32%) (0.32%)(g) (0.49%) (0.16%)
Portfolio Turnover Rate 137% 91% 61% 24%(d) 62% 55%
(a) From August 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended July 31, 1999.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian, distribution, and transfer agent fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 2.76%, and ratio of net investment loss to
average net assets would have been (1.44%).
(g) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.36 $ 12.36
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS (0.08) (0.03)
Net Investment Loss
Net Losses on Securities (Both Realized and Unrealized) (4.36) (4.44)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.44) (4.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.92 $ 7.89
====================================================================================================================================
TOTAL RETURN(b) (35.92%) (36.17%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 326 $ 16
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.57%
Ratio of Net Investment Loss to Average Net Assets(d) (0.65%) (1.44%)
Portfolio Turnover Rate 137% 137%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed for Class B, ratio of expenses to average net assets would have been 12.15% and ratio of net
investment loss to average net assets would have been (11.02%).
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------
2003 2002 2001 2000(a)
TELECOMMUNICATIONS FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.10 $ 23.70 $ 64.37 $ 59.28
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.34) (0.04) (0.13) (0.06)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (4.04) (11.56) (39.08) 5.15
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.38) (11.60) (39.21) 5.09
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.72 $ 12.10 $ 23.70 $ 64.37
====================================================================================================================================
TOTAL RETURN(c) (36.20%) (48.95%) (61.69%) 8.59%(d)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 2,188 $ 10,392 $ 11,980 $ 2,530
Ratio of Expenses to Average Net Assets(e)(f) 2.63% 2.60% 1.99% 1.49%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.18%) (1.52%) (1.18%) (0.86%)(g)
Portfolio Turnover Rate 137% 91% 61% 24%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, if applicable, which is before any expense
offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003. If such expenses had not
been voluntarily absorbed , ratio of expenses to average net assets would have been 5.76% and ratio of net investment loss to
average net assets would have been (4.31%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
-----------------------------------------------------
2003 2002 2001(a)
TELECOMMUNICATIONS FUND--CLASS K
PER SHARE DATA
Net Asset Value--Beginning of Period $ 12.30 $ 23.80 $ 36.43
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.02) (0.15) (0.19)
Net Losses on Securities (Both Realized and Unrealized) (4.38) (11.35) (12.44)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.50) (12.63)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 7.90 $ 12.30 $ 23.80
====================================================================================================================================
TOTAL RETURN (35.77%) (48.32%) (34.67%)(c)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 666 $ 864 $ 1
Ratio of Expenses to Average Net Assets(d)(e) $ 2.06% 2.21% 2.30%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.77%) (1.32%) (1.52%)(f)
Portfolio Turnover Rate 137% 91% 61%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the year ended March 31, 2003 and 2002 and the period
ended March 31, 2001. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have
been 3.30%, 2.42% and 3.38% (annualized), respectively, and ratio of net investment loss to average net assets would have been
(2.01%), (1.53%) and (2.60%) (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
-----------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
UTILITIES FUND--
INVESTOR CLASS
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73 $ 12.42
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT 0.23 0.15 0.13 0.04 0.17 0.30
OPERATIONS
Net Investment Income
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.46) (5.54) (3.22) 3.95 3.20 2.56
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.23) (5.39) (3.09) 3.99 3.37 2.86
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.24(b) 0.15 1.13 1.25 0.42 0.55
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.19 $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73
====================================================================================================================================
TOTAL RETURN (20.99%) (33.34%) (15.18%) 23.99%(c) 23.22% 23.44%
RATIOS
Net Assets--End of Period ($000
Omitted) $ 72,749 $ 124,578 $ 232,877 $ 260,554 $ 223,334 $ 177,309
Ratio of Expenses to Average Net Assets(d)(e) 1.30% 1.30% 1.30% 1.24%(f) 1.26% 1.29%
Ratio of Net Investment Income to
Average Net Assets(e) 2.63% 1.09% 0.74% 0.50%(f) 1.02% 1.82%
Portfolio Turnover Rate 64% 56% 49% 18%(c) 32% 47%
(a) From November 1, 1999 to March 31, 2000.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian, distribution, and transfer agent fees).
(e) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002 and 2001, the period
ended March 31, 2000 and the years ended October 31, 1999, and 1998. If such expenses had not been voluntarily absorbed, ratio
of expenses to average net assets would have been 1.90%, 1.57%, 1.40%, 1.33% (annualized), 1.43% and 1.36%, respectively, and
ratio of net investment income to average net assets would have been 2.03%, 0.82%, 0.64%, 0.41% (annualized), 0.85% and 1.75%,
respectively.
(f) Annualized
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A CLASS B
YEAR ENDED YEAR ENDED
MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES FUND--CLASS A & CLASS B 2003(a) 2003(a)
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.66 $ 10.66
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS 0.16 0.13
Net Investment Income
Net Losses on Securities (Both Realized and Unrealized) (2.40) (2.43)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.24) (2.30)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENTS AND DISTRIBUTIONS 0.29(b) 0.21(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.13 $ 8.15
====================================================================================================================================
TOTAL RETURN(c) (21.05%) (21.67%)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 450 $ 193
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.14%
Ratio of Net Investment Income to Average Net Assets(e) 2.79% 1.84%
Portfolio Turnover Rate 64% 64%
(a) Class commenced operations on April 1, 2002.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) The applicable sales charges for Class A or CDSC for Class B is not included in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by INVESCO, which is before any expenses offset
arrangements (which may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would have been 1.74% for Class A and 2.69% for Class B and
ratio of net investment income to average net assets would have been 2.46% for Class A and 1.29% for Class B.
FINANCIAL HIGHLIGHTS (CONTINUED)
PERIOD ENDED
YEAR ENDED MARCH 31 MARCH 31
------------------------------------------------------------
2003 2002 2001 2000(a)
UTILITIES FUND--CLASS C
PER SHARE DATA
Net Asset Value--Beginning of Period $ 10.63 $ 16.08 $ 20.40 $ 19.91
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(b) 0.15 0.03 (0.00) (0.01)
Net Investment Income (Loss)(c)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.47) (5.48) (3.22) 0.52
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.32) (5.45) (3.22) 0.51
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS 0.09 0.00 1.10 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value--End of Period $ 8.22 $ 10.63 $ 16.08 $ 20.40
====================================================================================================================================
TOTAL RETURN(d) (21.85%) (33.87%) (15.83%) 2.58%(e)
RATIOS
Net Assets--End of Period ($000 Omitted) $ 667 $ 1,799 $ 3,579 $ 248
Ratio of Expenses to Average Net Assets(f)(g) 2.05% 2.04% 2.07% 1.83%(h)
Ratio of Net Investment Income (Loss) to Average Net Assets(g) 1.75% 0.32% (0.02%) (0.32%)(h)
Portfolio Turnover Rate 64% 56% 49% 18%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001.
(d) The applicable CDSC is included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by INVESCO, which is before any expense offset
arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by INVESCO for the years ended March 31, 2003, 2002, and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 3.70%, 2.45%, 2.11% and 1.83% (annualized), respectively, and ratio of net investment income (loss) to average net
assets would have been 0.10% (0.09%), (0.06%) and (0.32%) (annualized), respectively.
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
JULY 31, 2003
INVESCO SECTOR FUNDS, INC.
INVESCO ENERGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO FINANCIAL SERVICES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO GOLD & PRECIOUS METALS FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO HEALTH SCIENCES FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO LEISURE FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO REAL ESTATE OPPORTUNITY FUND--INVESTOR CLASS, CLASS A, B, AND C
INVESCO TECHNOLOGY FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO TELECOMMUNICATIONS FUND--INVESTOR CLASS, CLASS A, B, C, AND K
INVESCO UTILITIES FUND--INVESTOR CLASS, CLASS A, B, AND C
You may obtain additional information about the Funds from several sources:
FINANCIAL REPORTS. Although this Prospectus describes the Funds' anticipated
investments and operations, the Funds also prepare annual and semiannual reports
that detail the Funds' actual investments at the report date. These reports
include discussion of each Fund's recent performance, as well as the effect of
market and general economic trends and a Fund's investment strategy on each
Fund's performance. The annual report also includes the report of the Funds'
independent accountants.
STATEMENT OF ADDITIONAL INFORMATION. The SAI dated July 31, 2003 is a supplement
to this Prospectus and has detailed information about the Funds and their
investment policies and practices. A current SAI for the Funds is on file with
the Securities and Exchange Commission and is incorporated into this Prospectus
by reference; in other words, the SAI is legally a part of this Prospectus, and
you are considered to be aware of the contents of the SAI.
INTERNET. The current Prospectuses of the Funds may be accessed through the
INVESCO Web site at invescofunds.com. In addition, the Prospectuses, SAI, annual
report, and semiannual report of the Funds are available on the SEC Web site at
www.sec.gov.
To obtain a free copy of the current Prospectuses, SAI, annual report, or
semiannual report, write to A I M Fund Services, Inc., P.O. Box 4739, Houston,
Texas 77210-4739; or call 1-800-347-4246. Copies of these materials are also
available (with a copying charge) from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549-0102. You can obtain information on
the operation of the Public Reference Room, including information about
duplicating fee charges, by calling 1-202-942-8090. This information can be
obtained by electronic request at the following E-mail address:
publicinfo@sec.gov. The SEC file numbers for the Funds are 811-3826 and
002-85905.
811-3826
APPENDIX III
YOUR FUND'S REPORT
UTILITIES FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
The bear market in stocks persisted during the fund's fiscal year, as investors
were faced with a number of unnerving developments. The summer saw several
corporate accounting scandals and persistent economic weakness that kept
investors on their heels. The second half of the period was dominated by rising
tensions between the U.S. and Iraq. Together, these developments translated into
another poor year for equities.
- --------------------------------------------------------------------------------
UTILITIES FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Entergy Corp..............................4.79%
Dominion Resources........................4.78%
FPL Group.................................4.77%
CenturyTel Inc............................4.76%
PPL Corp..................................4.74%
Cinergy Corp..............................4.71%
Exelon Corp...............................4.61%
Kinder Morgan Management LLC..............4.58%
Verizon Communications....................4.48%
Bell South................................4.34%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
NEGATIVE HEADLINES PRESSURED UTILITIES
Utilities stocks did not fare much better, as sector-specific developments had
investors rotating away from the group. Without a doubt, the event that cast the
darkest cloud over this sector was the meltdown at Enron Corp (not a fund
holding). During the summer, the Federal Energy Regulatory Commission (FERC)
discovered that the bankrupt energy trader had used a variety of questionable
tactics to manipulate energy prices in California. In response, FERC ordered all
of the companies that supplied power to California to preserve their records,
leading many investors to wonder whether other energy trading companies would
meet the same fate as Enron. Consequently, many gas utilities declined sharply,
as the market grew increasingly leery of any company with trading operations.
LINE GRAPH: INVESCO UTILITIES FUND - INVESTOR CLASS GROWTH OF $10,000(17)
This line graph compares the value of a $10,000 investment in INVESCO Utilities
Fund - Investor Class to the value of a $10,000 investment in the S&P 500
Index(R)(18), and to the value of a $10,000 investment in the S&P Utilities
Index(R)(18), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO UTILITIES
FUND - INVESTOR CLASS S&P 500 INDEX(R)(18) S&P UTILITIES INDEX(R)(18)
3/93 $10,000 $10,000 $10,000
3/94 $10,571 $10,146 $ 9,057
3/95 $10,489 $11,723 $ 9,485
3/96 $13,043 $15,482 $11,702
3/97 $13,820 $18,551 $12,182
3/98 $20,137 $27,448 $16,611
3/99 $22,301 $32,523 $16,345
3/00 $30,300 $38,354 $17,624
3/01 $25,700 $30,043 $23,954
3/02 $17,133 $30,115 $18,536
3/03 $13,537 $22,661 $12,158
Compared to the first half of the period, the past six months were relatively
quiet. Aside from liquidity problems faced by three utilities in February, the
sector largely faded from the headlines, and performance stabilized
dramatically.
AN INHOSPITABLE REGULATORY ENVIRONMENT HURT TELECOM
Accounting irregularities also affected the telecommunications utilities. With
investors already anxious that the prevailing economic softness had dampened the
group's financial prospects, the telecom sector took another blow when
accounting fraud surfaced at WorldCom (not a fund holding) in June.
Unfortunately, that was not the end of the bad news for the telecom service
providers. In February, the Federal Communications Commission (FCC) maintained a
regulation that forces the regional Bell operating companies (RBOCs) to offer
competitors access to their networks at wholesale rates. This decision surprised
many investors, and the RBOCs declined sharply in response.
For the year ended March 31, 2003, the value of Utilities Fund-Investor Class
shares declined 20.99%, which outperformed the 24.75% decline posted by the S&P
500 Index.(R) (Of course, past performance is not a guarantee of future
results.)(17),(18) For performance of other share classes, please see page 2.
The fund's emphasis on electric utilities, such as Southern Co, worked well for
the portfolio, as the electrics have handily outperformed their gas
counterparts. The fact that we have, for the most part, avoided or had minimal
exposure to some of the sector's high-profile blow-ups has also supported
relative performance. The fund's lone water utility, Philadelphia Suburban,
enjoyed strong results as well. Additionally, the fund's small bond holdings
contributed to its relative performance.
The fund had its share of laggards. Although we emphasized more conservative
electric utilities at the expense of gas utilities pipeline companies that have
extensive trading operations, even our minimal exposure to the group hindered
our annual showing. Also undermining performance were the fund's RBOCs, which,
as stated previously, endured a rough period.
Going forward, we remain cautiously optimistic about the utilities sector. The
headline risk that plagued the group throughout 2002 is likely behind us. And we
continue to believe valuations within the group remain reasonable. Furthermore,
the legislative and regulatory environment also appears favorable, as the
proposed changes to the tax treatment of dividends could increase investors'
appetite for dividend-paying stocks.
Fundamentally, there are reasons to be optimistic about the utilities sector in
the near term. For example, the past winter was colder than normal, which
increases demand for power. Furthermore, although natural gas prices have
declined since their recent highs, they remain high by historical standards.
Even then, higher gas prices support higher electricity prices, which could
provide a fundamental cushion for companies that are well hedged.
As for the portfolio, our strategy has not changed. We continue to look for
opportunities to increase the fund's diversification within the sector. Our
focus remains on finding and investing in companies with strong balance sheets,
liquidity, and attractive prospects for delivering a competitive total return.
As such, we do not anticipate making any significant changes. We are currently
searching the sector for cheaper firms that might have faced issues in the past,
but that have now rectified them and could see their stocks revalued higher as a
result
LINE GRAPH: INVESCO UTILITIES FUND - CLASS A & B GROWTH OF $10,000(17)
This line graph compares the value of a $10,000 investment in INVESCO Utilities
Fund - Class A and the value of a $10,000 investment in INVESCO Utilities Fund -
Class B to the value of a $10,000 investment in the S&P 500 Index(R)(18), and to
the value of a $10,000 investment in the S&P 500 Utilities Index(R)(18),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the cases of INVESCO Utilities Fund - Class A and Class B,
inclusion of front-end sales charge and contingent deferred sales charge,
respectively, for the period since inception (4/02) through 3/31/03.
INVESCO UTILITIES INVESCO UTILITIES S&P 500 S&P 500 UTILITIES
FUND - CLASS A FUND - CLASS B INDEX(R)(18) INDEX(R)(18)
4/02 $10,000 $10,000 $10,000 $10,000
3/03 $ 7,461 $ 7,333 $ 7,525 $ 6,559
LINE GRAPH: INVESCO UTILITIES FUND - CLASS C GROWTH OF $10,000(17)
This line graph compares the value of a $10,000 investment in INVESCO Utilities
Fund - Class C to the value of a $10,000 investment in the S&P 500 Index(R)(18),
and to the value of a $10,000 investment in the S&P Utilities Index(R)(18),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the case of INVESCO Utilities Fund - Class C, inclusion of
contingent deferred sales charge, for the period since inception (2/00) through
3/31/03.
INVESCO UTILITIES
FUND - CLASS C S&P 500 INDEX(R)(18) S&P UTILITIES INDEX(R)(18)
2/00 $10,000 $10,000 $10,000
3/00 $10,258 $10,978 $10,333
3/01 $ 8,633 $ 8,599 $14,045
3/02 $ 5,709 $ 8,620 $10,868
3/03 $ 4,462 $ 6,486 $ 7,128
(17)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FUND INCLUDING FRONT-END SALES CHARGES AND
CDSC. THE CHARTS AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S
OPERATING EXPENSES, BUT THE INDEXES DO NOT HAVE EXPENSES, WHICH WOULD HAVE
LOWERED THEIR PERFORMANCE.
(18)THE S&P 500 Index(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE S&P 500 UTILITIES INDEX IS
CONSIDERED REPRESENTATIVE OF EQUITIES IN THE UTILITY SECTOR. THE INDEXES ARE NOT
MANAGED; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER
EXPENSES ASSOCIATED WITH THE FUND INCLUDING FUND INCLUDING FRONT-END SALES
CHARGES AND CDSC. INVESTORS CANNOT INVEST DIRECTLY IN ANY MARKET INDEX.
PIE CHART: UTILITIES FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Electric Utilities............69.11%
Integrated Telecommunication
Services......................17.53%
Natural Gas Pipelines..........5.78%
Gas Utilities..................2.23%
Water Utilities................2.17%
Net Cash & Cash Equivalents....3.18%
FUND MANAGEMENT
JEFFREY G. MORRIS, CFA
JEFF MORRIS IS A VICE PRESIDENT OF INVESCO FUNDS GROUP. HE RECEIVED A BS FROM
COLORADO STATE UNIVERSITY AND AN MS FROM UNIVERSITY OF COLORADO-DENVER. JEFF IS
A CHARTERED FINANCIAL ANALYST CHARTERHOLDER AND BEGAN HIS INVESTMENT CAREER IN
1991.
INVESCO ENERGY FUND,
INVESCO FINANCIAL SERVICES FUND,
INVESCO TECHNOLOGY FUND AND
INVESCO UTILITIES FUND,
EACH A PORTFOLIO OF INVESCO SECTOR FUNDS, INC.
4350 South Monaco Street
Denver, Colorado 80237
Toll Free: (800) 525-8085
<Table>
AIM NEW TECHNOLOGY FUND AND AIM GLOBAL SCIENCE & TECHNOLOGY FUND, INVESCO TELECOMMUNICATIONS FUND,
AIM GLOBAL UTILITIES FUND, AIM GLOBAL FINANCIAL SERVICES FUND AND A PORTFOLIO OF INVESCO SECTOR FUNDS,
EACH A PORTFOLIO OF AIM FUNDS AIM GLOBAL ENERGY FUND, INC.
GROUP EACH A PORTFOLIO OF AIM INVESTMENT FUNDS 4350 South Monaco Street
11 Greenway Plaza, Suite 100 11 Greenway Plaza, Suite 100 Denver, Colorado 80237
Houston, Texas 77046-1173 Houston, Texas 77046-1173 Toll Free: (800) 525-8085
Toll Free: (800) 347-4246 Toll Free: (800) 347-4246
</Table>
STATEMENT OF ADDITIONAL INFORMATION
(October 21, 2003 Special Meetings of Shareholders of AIM New Technology
Fund, AIM Global Utilities Fund, AIM Global Science & Technology Fund,
AIM Global Financial Services Fund, AIM Global Energy Fund and
INVESCO Telecommunications Fund)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement and Prospectus dated
August 25, 2003 of each of INVESCO Energy Fund, INVESCO Financial Services Fund,
INVESCO Technology Fund and INVESCO Utilities Fund for use in connection with
the Special Meetings of Shareholders of AIM New Technology Fund, AIM Global
Utilities Fund, AIM Global Science & Technology Fund, AIM Global Financial
Services Fund, AIM Global Energy Fund and INVESCO Telecommunications Fund to be
held on October 21, 2003. Copies of the Combined Proxy Statement and Prospectus
may be obtained at no charge by writing A I M Fund Services, Inc., P.O. Box
4739, Houston, Texas 77210-4739 or by calling (800) 347-4246. Unless otherwise
indicated, capitalized terms used herein and not otherwise defined have the same
meanings as are given to them in the Combined Proxy Statement and Prospectus.
A Statement of Additional Information for INVESCO Sector Funds, Inc.
dated July 31, 2003, as supplemented August 14, 2003, has been filed with the
Securities and Exchange Commission and is attached hereto as Appendix I which is
incorporated herein by this reference.
The date of this Statement of Additional Information is August 15,
2003.
TABLE OF CONTENTS
<Table>
<Caption>
THE COMPANY.......................................................................................................S-4
DESCRIPTION OF PERMITTED INVESTMENTS..............................................................................S-4
DIRECTORS AND OFFICERS OF THE COMPANY.............................................................................S-4
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...............................................................S-4
ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION.....................................S-4
PORTFOLIO TRANSACTIONS............................................................................................S-4
DESCRIPTION OF SHARES.............................................................................................S-5
DETERMINATION OF NET ASSET VALUE..................................................................................S-5
TAXES.............................................................................................................S-5
PERFORMANCE DATA..................................................................................................S-5
CODE OF ETHICS....................................................................................................S-5
FINANCIAL INFORMATION.............................................................................................S-5
</Table>
<Table>
Appendix I - Statement of Additional Information of the Company
Appendix II - Audited Financial Statements of AIM New Technology Fund
(12/31/02)
Appendix III - Audited Financial Statements of AIM Global Utilities Fund
(12/31/02)
Appendix IV - Audited Financial Statements of AIM Global Science & Technology Fund (10/31/02)
Appendix V - Unaudited Financial Statements of AIM Global Science & Technology Fund (4/30/03)
Appendix VI - Audited Financial Statements of AIM Global Financial Services Fund (10/31/02)
Appendix VII - Unaudited Financial Statements of AIM Global Financial Services Fund (4/30/03)
</Table>
S-2
<Table>
Appendix VIII - Audited Financial Statements of AIM Global Energy Fund (10/31/02)
Appendix IX - Unaudited Financial Statements of AIM Global Energy Fund (4/30/03)
Appendix X - Audited Financial Statements of INVESCO Telecommunications Fund (3/31/03)
Appendix XI - Pro forma Financial Statements for INVESCO Energy Fund
Appendix XII - Pro forma Financial Statements for INVESCO Financial Services Fund
Appendix XIII - Pro forma Financial Statements for INVESCO Technology Fund
Appendix XIV - Pro forma Financial Statements for INVESCO Utilities Fund
</Table>
S-3
THE COMPANY
This Statement of Additional Information relates to INVESCO Sector Funds, Inc.
(the "Company") and its investment portfolios, INVESCO Energy Fund, INVESCO
Financial Services Fund, INVESCO Technology Fund and INVESCO Utilities Fund (the
"Funds"). The Company is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Funds
are a separate series of shares of common stock of the Company. For additional
information about the Company, see heading "The Company" in the Company's
Statement of Additional Information attached hereto as Appendix I.
DESCRIPTION OF PERMITTED INVESTMENTS
For a discussion of the fundamental and nonfundamental investment policies of
the Funds adopted by the Company's Board of Directors, see headings
"Investments, Policies and Risks" and "Investment Restrictions" in the Company's
Statement of Additional Information attached hereto as Appendix I.
DIRECTORS AND OFFICERS OF THE COMPANY
For a disclosure of the names and a brief occupational biography of each of the
Company's directors and executive officers identifying those who are interested
persons of the Company as well as stating their aggregate remuneration, see
heading "Management of the Funds" in the Company's Statement of Additional
Information attached hereto as Appendix I.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For a disclosure of the control persons of the Funds, the principal holders of
shares of the Funds and the ownership by officers and directors of the Funds,
see heading "Management of the Funds - Control Persons and Principal
Shareholders" in the Company's Statement of Additional Information attached
hereto as Appendix I.
ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION
For a discussion of the Company's advisory and management-related services
agreements and plans of distribution, see headings "Management of the Funds" and
"Other Service Providers" in the Company's Statement of Additional Information
attached hereto as Appendix I.
PORTFOLIO TRANSACTIONS
For a discussion of the Company's brokerage policy, see heading "Brokerage
Allocation and Other Practices" in the Company's Statement of Additional
Information attached hereto as Appendix I.
S-4
DESCRIPTION OF SHARES
For a discussion of the Company's authorized securities and the characteristics
of the Company's shares of common stock, see heading "Capital Stock" in the
Company's Statement of Additional Information attached hereto as Appendix I.
DETERMINATION OF NET ASSET VALUE
For a discussion of the Company's valuation and pricing procedures and a
description of its purchase and redemption procedures, see heading "Management
of the Funds" in the Company's Statement of Additional Information attached
hereto as Appendix I.
TAXES
For a discussion of any tax information relating to ownership of the Company's
shares, see heading "Tax Consequences of Owning Shares of a Fund" in the
Company's Statement of Additional information attached hereto as Appendix I.
PERFORMANCE DATA
For a description and quotation of certain performance data used by the Company,
see heading "Performance" in the Company's Statement of Additional Information
attached hereto as Appendix I.
CODE OF ETHICS
For a description of the Code of Ethics applicable to INVESCO Funds Group, Inc.,
the investment advisor to the Funds, see heading "Code of Ethics" in the
Company's Statement of Additional Information attached hereto as Appendix I.
FINANCIAL INFORMATION
The audited financial statements of INVESCO Energy Fund, and the report thereon
by PricewaterhouseCoopers LLP, are set forth under the heading "Financial
Statements" in the Company's Statement of Additional Information attached hereto
as Appendix I.
The audited financial statements of INVESCO Financial Services Fund, and the
report thereon by PricewaterhouseCoopers LLP, are set forth under the heading
"Financial Statements" in the Company's Statement of Additional Information
attached hereto as Appendix I.
The audited financial statements of INVESCO Technology Fund, and the report
thereon by PricewaterhouseCoopers LLP, are set forth under the heading
"Financial Statements" in the Company's Statement of Additional Information
attached hereto as Appendix I.
The audited financial statements of INVESCO Utilities Fund, and the report
thereon by PricewaterhouseCoopers LLP, are set forth under the heading
"Financial Statements" in the Company's Statement of Additional Information
attached hereto as Appendix I.
S-5
The audited financial statements of AIM New Technology Fund, and the report
thereon by PricewaterhouseCoopers LLP, are set forth in the Annual Report of AIM
New Technology Fund, dated December 31, 2002, which is incorporated herein by
reference and attached hereto as Appendix II.
The audited financial statements of AIM Global Utilities Fund, and the report
thereon by PricewaterhouseCoopers LLP, are set forth in the Annual Report of AIM
Global Utilities Fund, dated December 31, 2002, which is incorporated herein by
reference and attached hereto as Appendix III.
The audited financial statements of AIM Global Science & Technology Fund, and
the report thereon by PricewaterhouseCoopers LLP, are set forth in the Annual
Report of AIM Global Science & Technology Fund, dated October 31, 2002, which is
incorporated herein by reference and attached hereto as Appendix IV.
The unaudited financial statements of AIM Global Science & Technology Fund, and
the report thereon by PricewaterhouseCoopers LLP, are set forth in the
Semi-Annual Report of AIM Global Science & Technology Fund dated April 30, 2003,
which is incorporated herein by reference and attached hereto as Appendix V.
The audited financial statements of AIM Global Financial Services Fund, and the
report thereon by PricewaterhouseCoopers LLP, are set forth in the Annual Report
of AIM Global Financial Services Fund, dated October 31, 2002, which is
incorporated herein by reference and attached hereto as Appendix VI.
The unaudited financial statements of AIM Global Financial Services Fund, and
the report thereon by PricewaterhouseCoopers LLP, are set forth in the
Semi-Annual Report of AIM Global Financial Services Fund dated April 30, 2003,
which is incorporated herein by reference and attached hereto as Appendix VII.
The audited financial statements of AIM Global Energy Fund, and the report
thereon by PricewaterhouseCoopers LLP, are set forth in the Annual Report of AIM
Global Energy Fund, dated October 31, 2002, which is incorporated herein by
reference and attached hereto as Appendix VIII.
The unaudited financial statements of AIM Global Energy Fund, and the report
thereon by PricewaterhouseCoopers LLP, are set forth in the Semi-Annual Report
of AIM Global Energy Fund dated April 30, 2003, which is incorporated herein by
reference and attached hereto as Appendix IX.
The audited financial statements of INVESCO Telecommunications Fund, and the
report thereon by PricewaterhouseCoopers LLP, are set forth in the Annual Report
of INVESCO Telecommunications Fund, dated March 31, 2003, which is incorporated
herein by reference and attached hereto as Appendix X.
Pro forma financial statements for INVESCO Energy Fund, giving effect to the
reorganization of AIM Global Energy Fund into INVESCO Energy Fund, are attached
hereto as Appendix XI.
S-6
Pro forma financial statements for INVESCO Financial Services Fund, giving
effect to the reorganization of AIM Global Financial Services Fund into INVESCO
Financial Services Fund, are attached hereto as Appendix XII.
Pro forma financial statements for INVESCO Technology Fund, giving effect to the
reorganization of AIM New Technology Fund, AIM Global Science & Technology and
INVESCO Telecommunications Fund into INVESCO Technology Fund, are attached
hereto as Appendix XIII.
Pro forma financial statements for INVESCO Utilities Fund, giving effect to the
reorganization of AIM Global Utilities Fund into INVESCO Utilities Fund, are
attached hereto as Appendix XIV.
S-7
APPENDIX I
STATEMENT OF ADDITIONAL INFORMATION
INVESCO SECTOR FUNDS, INC.
INVESCO Energy Fund - Investor Class, Class A, B, C, and K
INVESCO Financial Services Fund - Investor Class, Class A, B, C, and K
INVESCO Gold & Precious Metals Fund - Investor Class and Class A, B, and C
INVESCO Health Sciences Fund - Investor Class, Class A, B, C, and K
INVESCO Leisure Fund - Investor Class, Class A, B, C, and K
INVESCO Real Estate Opportunity Fund - Investor Class, Class A, B, and C
INVESCO Technology Fund - Investor Class, Institutional Class,
Class A, B, C, and K
INVESCO Telecommunications Fund - Investor Class, Class A, B, C, and K
INVESCO Utilities Fund - Investor Class, Class A, B, and C
Address: Mailing Address:
4350 South Monaco Street, P.O. Box 173706,
Denver, CO 80237 Denver, CO 80217-3706
Telephone:
In continental U.S., call:
1-800-347-4246
August 1, 2003
________________________________________________________________________________
A Prospectus for the Investor Class, Class A, B, C, and, if applicable, Class K
shares of INVESCO Energy, INVESCO Financial Services, INVESCO Gold & Precious
Metals, INVESCO Health Sciences, INVESCO Leisure, INVESCO Real Estate
Opportunity, INVESCO Technology, INVESCO Telecommunications, and INVESCO
Utilities Funds and a Prospectus for the Institutional Class shares of INVESCO
Technology Fund, each dated August 1, 2003, provide the basic information you
should know before investing in a Fund. This Statement of Additional Information
("SAI") is incorporated by reference into the Funds' Prospectuses; in other
words, this SAI is legally part of the Funds' Prospectuses. Although this SAI is
not a prospectus, it contains information in addition to that set forth in the
Prospectuses. It is intended to provide additional information regarding the
activities and operations of the Funds and should be read in conjunction with
the Prospectuses. The financial statements for the Funds for the fiscal year
ended March 31, 2003 are incorporated herein by reference from INVESCO Sector
Funds, Inc.'s Annual Report to Shareholders dated March 31, 2003.
You may obtain, without charge, the current Prospectuses, SAI, and annual and
semiannual reports of the Funds by writing to A I M Fund Services, Inc., P.O.
Box 4739, Houston, Texas 77210-4739, or by calling 1-800-347-4246. The
Prospectus of the Investor Class, Class A, B, C, and K shares of the Funds is
also available through the INVESCO Web site at invescofunds.com.
TABLE OF CONTENTS
The Company ........................................................... 77
Investments, Policies, and Risks ...................................... 77
Investment Restrictions ...............................................102
Management of the Funds ...............................................105
Other Service Providers ...............................................170
Brokerage Allocation and Other Practices ..............................170
Capital Stock .........................................................174
Tax Consequences of Owning Shares of a Fund ...........................175
Performance ...........................................................178
Proxy Voting ..........................................................190
Code of Ethics ........................................................193
Financial Statements ..................................................193
Appendix A ............................................................194
THE COMPANY
INVESCO Sector Funds, Inc. (the "Company") was incorporated under the laws of
Maryland as INVESCO Strategic Portfolios, Inc. on August 10, 1983. On October
29, 1998, the name of the Company was changed to INVESCO Sector Funds, Inc. On
October 31, 1999, the Company changed its fiscal year end to March 31. On
February 14, 2000, the Company assumed all of the assets and liabilities of
INVESCO Real Estate Opportunity Fund and INVESCO Telecommunications Fund, each a
series of INVESCO Specialty Funds, Inc.
The Company is an open-end, diversified, management investment company currently
consisting of nine portfolios of investments: INVESCO Energy Fund - Investor
Class, Class A, B, C, and K; INVESCO Financial Services Fund - Investor Class,
Class A, B, C, and K; INVESCO Gold & Precious Metals Fund - Investor Class,
Class A, B, and C; INVESCO Health Sciences Fund - Investor Class, Class A, B, C,
and K; INVESCO Leisure Fund - Investor Class, Class A, B, C, and K; INVESCO Real
Estate Opportunity Fund - Investor Class, Class A, B, and C; INVESCO Technology
Fund - Investor Class, Institutional Class, Class A, B, C, and K; INVESCO
Telecommunications Fund - Investor Class, Class A, B, C, and K; and INVESCO
Utilities Fund - Investor Class, Class A, B, and C (each a "Fund" and
collectively, the "Funds"). Additional funds and classes may be offered in the
future.
"Open-end" means that each Fund issues an indefinite number of shares which it
continuously offers to redeem at net asset value per share ("NAV"). A
"management" investment company actively buys and sells securities for the
portfolio of each Fund at the direction of a professional manager. Open-end
management investment companies (or one or more series of such companies, such
as the Funds) are commonly referred to as mutual funds.
INVESTMENTS, POLICIES, AND RISKS
The principal investments and policies of the Funds are discussed in the
Prospectuses of the Funds. The Funds also may invest in the following securities
and engage in the following practices.
ADRs and EDRs -- American Depositary Receipts, or ADRs, are receipts typically
issued by U.S. banks. ADRs are receipts for the shares of foreign corporations
that are held by the bank issuing the receipt. An ADR entitles its holder to all
dividends and capital gains on the underlying foreign securities, less any fees
paid to the bank. Purchasing ADRs gives a Fund the ability to purchase the
functional equivalent of foreign securities without going to the foreign
securities markets to do so. ADRs are bought and sold in U.S. dollars, not
foreign currencies. An ADR that is "sponsored" means that the foreign
corporation whose shares are represented by the ADR is actively involved in the
issuance of the ADR, and generally provides material information about the
corporation to the U.S. market. An "unsponsored" ADR program means that the
foreign corporation whose shares are held by the bank is not obligated to
disclose material information in the United States, and, therefore, the market
value of the ADR may not reflect important facts known only to the foreign
company. Since they mirror their underlying foreign securities, ADRs generally
have the same risks as investing directly in the underlying foreign securities.
European Depositary Receipts, or EDRs, are similar to ADRs, except that they are
typically issued by European banks or trust companies.
CERTIFICATES OF DEPOSIT IN FOREIGN BANKS AND U.S. BRANCHES OF FOREIGN BANKS --
The Funds may maintain time deposits in and invest in U.S. dollar denominated
certificates of deposit ("CDs") issued by foreign banks and U.S. branches of
foreign banks. The Funds limit investments in foreign bank obligations to U.S.
dollar denominated obligations of foreign banks which have more than $10 billion
in assets, have branches or agencies in the U.S., and meet other criteria
established by the board of directors. Investments in foreign securities involve
special considerations. There is generally less publicly available information
about foreign issuers since many foreign countries do not have the same
disclosure and reporting requirements as are imposed by the U.S. securities
laws. Moreover, foreign issuers are generally not bound by uniform accounting
and auditing and financial reporting requirements and standards of practice
comparable to those applicable to domestic issuers. Such investments may also
entail the risks of possible imposition of dividend withholding or confiscatory
taxes, possible currency blockage or transfer restrictions, expropriation,
nationalization or other adverse political or economic developments, and the
difficulty of enforcing obligations in other countries.
The Funds may also invest in bankers' acceptances, time deposits, and
certificates of deposit of U.S. branches of foreign banks and foreign branches
of U.S. banks. Investments in instruments of U.S. branches of foreign banks will
be made only with branches that are subject to the same regulations as U.S.
banks. Investments in instruments issued by a foreign branch of a U.S. bank will
be made only if the investment risk associated with such investment is the same
as that involving an investment in instruments issued by the U.S. parent, with
the U.S. parent unconditionally liable in the event that the foreign branch
fails to pay on the investment for any reason.
COMMERCIAL PAPER -- Commercial paper is the term for short-term promissory notes
issued by domestic corporations to meet current working capital needs.
Commercial paper may be unsecured by the corporation's assets but may be backed
by a letter of credit from a bank or other financial institution. The letter of
credit enhances the commercial paper's creditworthiness. The issuer is directly
responsible for payment but the bank "guarantees" that if the note is not paid
at maturity by the issuer, the bank will pay the principal and interest to the
buyer. INVESCO Funds Group, Inc. ("INVESCO"), the Funds' investment advisor,
will consider the creditworthiness of the institution issuing the letter of
credit, as well as the creditworthiness of the issuer of the commercial paper,
when purchasing paper enhanced by a letter of credit. Commercial paper is sold
either as interest-bearing or on a discounted basis, with maturities not
exceeding 270 days.
DEBT SECURITIES -- Debt securities include bonds, notes, and other securities
that give the holder the right to receive fixed amounts of principal, interest,
or both on a date in the future or on demand. Debt securities also are often
referred to as fixed-income securities, even if the rate of interest varies over
the life of the security.
Debt securities are generally subject to credit risk and market risk. Credit
risk is the risk that the issuer of the security may be unable to meet interest
or principal payments or both as they come due. Market risk is the risk that the
market value of the security may decline for a variety of reasons, including
changes in interest rates. An increase in interest rates tends to reduce the
market values of debt securities in which a Fund has invested. A decline in
interest rates tends to increase the market values of debt securities in which a
Fund has invested.
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's ("S&P")
ratings provide a useful guide to the credit risk of many debt securities. The
lower the rating of a debt security, the greater the credit risk the rating
service assigns to the security. To compensate investors for accepting that
greater risk, lower-rated debt securities tend to offer higher interest rates.
Lower- rated debt securities are often referred to as "junk bonds." Increasing
the amount of Fund assets invested in unrated or lower-grade straight debt
securities may increase the yield produced by a Fund's debt securities but will
also increase the credit risk of those securities. A debt security is considered
lower-grade if it is rated Ba or less by Moody's, BB or less by S&P at the time
of purchase. Lower-rated and non-rated debt securities of comparable quality are
subject to wider fluctuations in yields and market values than higher-rated debt
securities and may be considered speculative. Although a Fund may invest in debt
securities assigned lower grade ratings by S&P or Moody's at the time of
purchase, the Funds' investments have generally been limited to debt securities
rated B or higher by either S&P or Moody's. Debt securities rated lower than B
by either S&P or Moody's are usually considered to be speculative. At the time
of purchase, INVESCO will limit Fund investments to debt securities which
INVESCO believes are not highly speculative and which are rated at least CCC by
S&P or Caa by Moody's.
A significant economic downturn or increase in interest rates may cause issuers
of debt securities to experience increased financial problems which could
adversely affect their ability to pay principal and interest obligations, to
meet projected business goals, and to obtain additional financing. These
conditions more severely impact issuers of lower-rated debt securities. The
market for lower-rated straight debt securities may not be as liquid as the
market for higher-rated straight debt securities. Therefore, INVESCO attempts to
limit purchases of lower-rated securities to securities having an established
secondary market.
Debt securities rated Caa by Moody's may be in default or may present risks of
non-payment of principal or interest. Lower-rated securities by S&P (categories
BB, B, or CCC) include those which are predominantly speculative because of the
issuer's perceived capacity to pay interest and repay principal in accordance
with their terms; BB indicates the lowest degree of speculation and CCC a high
degree of speculation.While such bonds will likely have some quality and
protective characteristics, these are usually outweighed by large uncertainties
or major risk exposures to adverse conditions.
Although bonds in the lowest investment grade debt category (those rated BBB by
S&P, Baa by Moody's, or the equivalent) are regarded as having adequate
capability to pay principal and interest, they have speculative characteristics.
Adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case for
higher-rated bonds. Lower-rated bonds by Moody's (categories Ba, B, or Caa) are
of poorer quality and also have speculative characteristics. Bonds rated Caa may
be in default or there may be present elements of danger with respect to
principal or interest. Lower-rated bonds by S&P (categories BB, B, or CCC)
include those that are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with their terms; BB indicates the lowest degree of speculation and
CCC a high degree of speculation. While such bonds likely will have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions. Bonds having equivalent ratings from
other rating services will have characteristics similar to those of the
corresponding S&P and Moody's ratings. For a specific description of S&P and
Moody's corporate bond rating categories, please refer to Appendix A.
The Funds may invest in zero coupon bonds, step-up bonds, mortgage-backed
securities, and asset-backed securities. Zero coupon bonds do not make regular
interest payments. Zero coupon bonds are sold at a discount from face value.
Principal and accrued discount (representing interest earned but not paid) are
paid at maturity in the amount of the face value. Step-up bonds initially make
no (or low) cash interest payments but begin paying interest (or a higher rate
of interest) at a fixed time after issuance of the bond. The market values of
zero coupon and step-up bonds generally fluctuate more in response to changes in
interest rates than interest-paying securities of comparable term and quality. A
Fund may be required to distribute income recognized on these bonds, even though
no cash may be paid to the Fund until the maturity or call date of a bond, in
order for the Fund to maintain its qualification as a regulated investment
company. These required distributions could reduce the amount of cash available
for investment by a Fund. Mortgage-backed securities represent interests in
pools of mortgages while asset-backed securities generally represent interests
in pools of consumer loans. Both of these are usually set up as pass-through
securities. Interest and principal payments ultimately depend on payment of the
underlying loans, although the securities may be supported, at least in part, by
letters of credit or other credit enhancements or, in the case of
mortgage-backed securities, guarantees by the U.S. government, its agencies or
instrumentalities. The underlying loans are subject to prepayments that may
shorten the securities' weighted average lives and may lower their returns.
DOMESTIC BANK OBLIGATIONS -- U.S. banks (including their foreign branches) issue
CDs and bankers' acceptances which may be purchased by the Funds if an issuing
bank has total assets in excess of $5 billion and the bank otherwise meets the
Funds' credit rating requirements. CDs are issued against deposits in a
commercial bank for a specified period and rate and are normally negotiable.
Eurodollar CDs are certificates issued by a foreign branch (usually London) of a
U.S. domestic bank, and, as such, the credit is deemed to be that of the
domestic bank. Bankers' acceptances are short-term credit instruments evidencing
the promise of the bank (by virtue of the bank's "acceptance") to pay at
maturity a draft which has been drawn on it by a customer (the "drawer").
Bankers' acceptances are used to finance the import, export, transfer, or
storage of goods and reflect the obligation of both the bank and the drawer to
pay the face amount. Both types of securities are subject to the ability of the
issuing bank to meet its obligations, and are subject to risks common to all
debt securities. In addition, banker's acceptances may be subject to foreign
currency risk and certain other risks of investment in foreign securities.
EQUITY SECURITIES -- The Funds may invest in common, preferred, and convertible
preferred stocks, and securities whose values are tied to the price of stocks,
such as rights, warrants, and convertible debt securities. Common stocks and
preferred stocks represent equity ownership in a corporation. Owners of stock,
such as the Funds, share in a corporation's earnings through dividends which may
be declared by the corporation, although the receipt of dividends is not the
principal benefit that the Funds seek when they invest in stocks and similar
instruments.
Instead, the Funds seek to invest in stocks that will increase in market value
and may be sold for more than a Fund paid to buy them. Market value is based
upon constantly changing investor perceptions of what the company is worth
compared to other companies. Although dividends are a factor in the changing
market value of stocks, many companies do not pay dividends, or pay
comparatively small dividends. The principal risk of investing in equity
securities is that their market values fluctuate constantly, often due to
factors entirely outside the control of the Funds or the company issuing the
stock. At any given time, the market value of an equity security may be
significantly higher or lower than the amount paid by a Fund to acquire it.
Owners of preferred stocks are entitled to dividends payable from the
corporation's earnings, which in some cases may be "cumulative" if prior
dividends on the preferred stock have not been paid. Dividends payable on
preferred stock have priority over distributions to holders of common stock, and
preferred stocks generally have a priority on the distribution of assets in the
event of the corporation's liquidation. Preferred stocks may be "participating,"
which means that they may be entitled to dividends in excess of the stated
dividend in certain cases. The holders of a company's debt securities generally
are entitled to be paid by the company before it pays anything to its
stockholders.
Rights and warrants are securities which entitle the holder to purchase the
securities of a company (usually, its common stock) at a specified price during
a specified time period. The value of a right or warrant is affected by many of
the same factors that determine the prices of common stocks. Rights and warrants
may be purchased directly or acquired in connection with a corporate
reorganization or exchange offer.
The Funds also may purchase convertible securities including convertible debt
obligations and convertible preferred stock. A convertible security entitles the
holder to exchange it for a fixed number of shares of common stock (or other
equity security), usually at a fixed price within a specified period of time.
Until conversion, the owner of convertible securities usually receives the
interest paid on a convertible bond or the dividend preference of a preferred
stock.
A convertible security has an "investment value" which is a theoretical value
determined by the yield it provides in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. It also has a "conversion value,"
which is the market value the convertible security would have if it were
exchanged for the underlying equity security. Convertible securities may be
purchased at varying price levels above or below their investment values or
conversion values.
Conversion value is a simple mathematical calculation that fluctuates directly
with the price of the underlying security. However, if the conversion value is
substantially below the investment value, the market value of the convertible
security is governed principally by its investment value. If the conversion
value is near or above the investment value, the market value of the convertible
security generally will rise above the investment value. In such cases, the
market value of the convertible security may be higher than its conversion
value, due to the combination of the convertible security's right to interest
(or dividend preference) and the possibility of capital appreciation from the
conversion feature. However, there is no assurance that any premium above
investment value or conversion value will be recovered because prices change
and, as a result, the ability to achieve capital appreciation through conversion
may be eliminated.
EUROBONDS AND YANKEE BONDS -- Bonds issued by foreign branches of U.S. banks
("Eurobonds") and bonds issued by a U.S. branch of a foreign bank and sold in
the United States ("Yankee bonds"). These bonds are bought and sold in U.S.
dollars, but generally carry with them the same risks as investing in foreign
securities.
FOREIGN SECURITIES -- Investments in the securities of foreign companies, or
companies that have their principal business activities outside the United
States, involve certain risks not associated with investments in U.S. companies.
Non-U.S. companies generally are not subject to the same uniform accounting,
auditing, and financial reporting standards that apply to U.S. companies.
Therefore, financial information about foreign companies may be incomplete, or
may not be comparable to the information available on U.S. companies. There may
also be less publicly available information about a foreign company.
Although the volume of trading in foreign securities markets is growing,
securities of many non- U.S. companies may be less liquid and have greater
swings in price than securities of comparable U.S. companies. The costs of
buying and selling securities on foreign securities exchanges are generally
significantly higher than similar costs in the United States. There is generally
less government supervision and regulation of exchanges, brokers, and issuers in
foreign countries than there is in the United States. Investments in non-U.S.
securities may also be subject to other risks different from those affecting
U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, confiscatory taxation, and
imposition of withholding taxes on dividends or interest payments. If it becomes
necessary, it may be more difficult for a Fund to obtain or to enforce a
judgment against a foreign issuer than against a domestic issuer.
Securities traded on foreign markets are usually bought and sold in local
currencies, not in U.S. dollars. Therefore, the market value of foreign
securities acquired by a Fund can be affected -- favorably or unfavorably -- by
changes in currency rates and exchange control regulations. Costs are incurred
in converting money from one currency to another. Foreign currency exchange
rates are determined by supply and demand on the foreign exchange markets.
Foreign exchange markets are affected by the international balance of payments
and other economic and financial conditions, government intervention,
speculation and other factors, all of which are outside the control of each
Fund. Generally, the Funds' foreign currency exchange transactions will be
conducted on a cash or "spot" basis at the spot rate for purchasing or selling
currency in the foreign currency exchange markets.
FUTURES, OPTIONS, AND OTHER FINANCIAL INSTRUMENTS
GENERAL. The advisor may use various types of financial instruments, some of
which are derivatives, to attempt to manage the risk of a Fund's investments or,
in certain circumstances, for investment (e.g., as a substitute for investing in
securities). These financial instruments include options, futures contracts
(sometimes referred to as "futures"), forward contracts, swaps, caps, floors,
and collars (collectively, "Financial Instruments"). The policies in this
section do not apply to other types of instruments sometimes referred to as
derivatives, such as indexed securities, mortgage-backed and other asset-backed
securities, and stripped interest and principal of debt.
Hedging strategies can be broadly categorized as "short" hedges and "long" or
"anticipatory" hedges. A short hedge involves the use of a Financial Instrument
in order to partially or fully offset potential variations in the value of one
or more investments held in a Fund's portfolio. A long or anticipatory hedge
involves the use of a Financial Instrument in order to partially or fully offset
potential increases in the acquisition cost of one or more investments that the
Fund intends to acquire. In an anticipatory hedge transaction, the Fund does not
already own a corresponding security. Rather, the hedge relates to a security or
type of security that the Fund intends to acquire. If the Fund does not
eliminate the hedge by purchasing the security as anticipated, the effect on the
Fund's portfolio is the same as if a long position were entered into. Financial
Instruments may also be used, in certain circumstances, for investment (e.g., as
a substitute for investing in securities).
Financial Instruments on individual securities generally are used to attempt to
hedge against price movements in one or more particular securities positions
that a Fund already owns or intends to acquire. Financial Instruments on
indexes, in contrast, generally are used to attempt to hedge all or a portion of
a portfolio against price movements of the securities within a market sector in
which the Fund has invested or expects to invest.
The use of Financial Instruments is subject to applicable regulations of the
Securities and Exchange Commission ("SEC"), the several exchanges upon which
they are traded, and the Commodity Futures Trading Commission ("CFTC"). In
addition, the Funds' ability to use Financial Instruments will be limited by tax
considerations. See "Tax Consequences of Owning Shares of a Fund."
In addition to the instruments and strategies described below, the advisor may
use other similar or related techniques to the extent that they are consistent
with a Fund's investment objective and permitted by its investment limitations
and applicable regulatory authorities. The Funds' Prospectuses or SAI will be
supplemented to the extent that new products or techniques become employed
involving materially different risks than those described below or in the
Prospectuses.
SPECIAL RISKS. Financial Instruments and their use involve special
considerations and risks, certain of which are described below.
(1) Financial Instruments may increase the volatility of a Fund. If the advisor
employs a Financial Instrument that correlates imperfectly with a Fund's
investments, a loss could result, regardless of whether or not the intent was to
manage risk. In addition, these techniques could result in a loss if there is
not a liquid market to close out a position that a Fund has entered.
(2) There might be imperfect correlation between price movements of a Financial
Instrument and price movement of the investment(s) being hedged. For example, if
the value of a Financial Instrument used in a short hedge increased by less than
the decline in value of the hedged investment(s), the hedge would not be fully
successful. This might be caused by certain kinds of trading activity that
distorts the normal price relationship between the security being hedged and the
Financial Instrument. Similarly, the effectiveness of hedges using Financial
Instruments on indexes will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.
The Funds are authorized to use options and futures contracts related to
securities with issuers, maturities or other characteristics different from the
securities in which it typically invests. This involves a risk that the options
or futures position will not track the performance of a Fund's portfolio
investments.
The direction of options and futures price movements can also diverge from the
direction of the movements of the prices of their underlying instruments, even
if the underlying instruments match a Fund's investments well. Options and
futures prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the underlying instrument,
and the time remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result from
differing levels of demand in the options and futures markets and the securities
markets, from structural differences in how options and futures and securities
are traded, or from imposition of daily price fluctuation limits or trading
halts. A Fund may take positions in options and futures contracts with a greater
or lesser face value than the securities it wishes to hedge or intends to
purchase in order to attempt to compensate for differences in volatility between
the contract and the securities, although this may not be successful in all
cases.
(3) If successful, the above-discussed hedging strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements of portfolio securities. However, such strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements. For example, if a Fund entered into a short hedge because the advisor
projected a decline in the price of a security in the Fund's portfolio, and the
price of that security increased instead, the gain from that increase would
likely be wholly or partially offset by a decline in the value of the short
position in the Financial Instrument. Moreover, if the price of the Financial
Instrument declined by more than the increase in the price of the security, the
Fund could suffer a loss.
(4) A Fund's ability to close out a position in a Financial Instrument prior to
expiration or maturity depends on the degree of liquidity of the market or, in
the absence of such a market, the ability and willingness of the other party to
the transaction (the "counterparty") to enter into a transaction closing out the
position. Therefore, there is no assurance that any position can be closed out
at a time and price that is favorable to a Fund.
(5) As described below, the Funds are required to maintain assets as "cover,"
maintain segregated accounts or make margin payments when they take positions in
Financial Instruments involving obligations to third parties (i.e., Financial
Instruments other than purchased options). If a Fund is unable to close out its
positions in such Financial Instruments, it might be required to continue to
maintain such assets or segregated accounts or make such payments until the
position expired. These 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.
COVER. Positions in Financial Instruments, other than purchased options, expose
the Funds to an obligation to another party. A Fund will not enter into any such
transaction unless it owns (1) an offsetting ("covered") position in securities,
currencies or other options, futures contracts or forward contracts, or (2) cash
and liquid assets with a value, marked-to-market daily, sufficient to cover its
obligations to the extent not covered as provided in (1) above. The Funds will
comply with SEC guidelines regarding cover for these instruments and will, if
the guidelines so require, designate cash or liquid assets as segregated in the
prescribed amount as determined daily.
Assets used as cover or held as segregated cannot be sold while the position in
the corresponding Financial Instrument is open unless they are replaced with
other appropriate assets. As a result, the commitment of a large portion of a
Fund's assets to cover or to hold as segregated could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
OPTIONS. Each Fund may engage in certain strategies involving options to attempt
to manage the risk of its investments or, in certain circumstances, for
investment (e.g., as a substitute for investing in securities). A call option
gives the purchaser the right to buy, and obligates the writer to sell the
underlying investment at the agreed-upon exercise price during the option
period. A put option gives the purchaser the right to sell, and obligates the
writer to buy the underlying investment at the agreed-upon exercise price during
the option period. Purchasers of options pay an amount, known as a premium, to
the option writer in exchange for the right under the option contract. See
"Options on Indexes" below with regard to cash settlement of option contracts on
index values.
The purchase of call options can serve as a hedge against a price rise of the
underlier and the purchase of put options can serve as a hedge against a price
decline of the underlier. Writing call options can serve as a limited short
hedge because declines in the value of the hedged investment would be offset to
the extent of the premium received for writing the option. However, if the
security or currency appreciates to a price higher than the exercise price of
the call option, it can be expected that the option will be exercised and a Fund
will be obligated to sell the security or currency at less than its market
value.
Writing put options can serve as a limited long or anticipatory hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security or
currency depreciates to a price lower than the exercise price of the put option,
it can be expected that the put option will be exercised and a Fund will be
obligated to purchase the security or currency at more than its market value.
The value of an option position will reflect, among other things, the current
market value of the underlying investment, the time remaining until expiration,
the relationship of the exercise price to the market price of the underlying
investment, the price volatility of the underlying investment and general market
and interest rate conditions. Options that expire unexercised have no value.
A Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option, which is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option, which is known as a
closing sale transaction. Closing transactions permit a Fund to realize profits
or limit losses on an option position prior to its exercise or expiration.
RISKS OF OPTIONS ON SECURITIES. Options embody the possibility of large amounts
of exposure, which will result in a Fund's net asset value being more sensitive
to changes in the value of the related investment. A Fund may purchase or write
both exchange-traded and OTC options. Exchange-traded options in the United
States are issued by a clearing organization affiliated with the exchange on
which the option is listed that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between a Fund and its counterparty (usually a securities dealer or a bank) with
no clearing organization guarantee. Thus, when a Fund purchases an OTC option,
it relies on the counterparty from whom it purchased the option to make or take
delivery of the underlying investment upon exercise of the option. Failure by
the counterparty to do so would result in the loss of any premium paid by a Fund
as well as the loss of any expected benefit from the transaction.
The Funds' ability to establish and close out positions in options depends on
the existence of a liquid market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. There can be no
assurance that a 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
counterparty, a Fund might be unable to close out an OTC option position at any
time prior to the option's expiration. If a Fund is not able to enter into an
offsetting closing transaction on an option it has written, it will be required
to maintain the securities subject to the call or the liquid assets underlying
the put until a closing purchase transaction can be entered into or the option
expires. However, there can be no assurance that such a market will exist at any
particular time.
If a Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by a Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.
OPTIONS ON INDEXES. Puts and calls on indexes are similar to puts and calls on
securities or futures contracts except that all settlements are in cash and
changes in value depend on changes in the index in question. When a Fund writes
a call on an index, it receives a premium and agrees that, prior to the
expiration date, upon exercise of the call, the purchaser will receive from the
Fund an amount of cash equal to the positive difference between the closing
price of the index and the exercise price of the call times a specified multiple
("multiplier"), which determines the total dollar value for each point of such
difference. When a Fund buys a call on an index, it pays a premium and has the
same rights as to such call as are indicated above. When a Fund buys a put on an
index, it pays a premium and has the right, prior to the expiration date, to
require the seller of the put to deliver to the Fund an amount of cash equal to
the positive difference between the exercise price of the put and the closing
price of the index times the multiplier. When a Fund writes a put on an index,
it receives a premium and the purchaser of the put has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the positive difference between the exercise price of the put and the closing
level of the index times the multiplier.
The risks of purchasing and selling options on indexes 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 fulfill its potential settlement obligations
by delivering the underlying securities. A Fund can offset some of the risk of
writing a call index option by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, a 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 vary from the value of the index.
Even if a Fund could assemble a portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level. As with other kinds of options, a Fund as the call
writer will not learn what it has been assigned until the next business day. The
time lag between exercise and notice of assignment poses no risk for the writer
of a covered call on a specific underlying security, such as common stock,
because in that case the writer's obligation is to deliver the underlying
security, not to pay its value as of a moment in the past. In contrast, the
writer of an index call will be required to pay cash in an amount based on the
difference between the closing index value on the exercise date and the exercise
price. By the time a Fund learns what it has been assigned, the index may have
declined. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure.
If a Fund has purchased an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund nevertheless will be required to pay
the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of OTC options (options not traded on exchanges) generally are
established through negotiation with the other party to the option contract.
While this type of arrangement allows a Fund great flexibility to tailor the
option to its needs, OTC options generally involve greater risk than
exchange-traded options, which are guaranteed by the clearing organization of
the exchange where they are traded.
Generally, OTC foreign currency options used by a Fund are European-style
options. This means that the option is only exercisable immediately prior to its
expiration. This is in contrast to American-style options, which are exercisable
at any time prior to the expiration date of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. When a Fund purchases or
sells a futures contract, it incurs an obligation respectively to take or make
delivery of a specified amount of the obligation underlying the contract at a
specified time and price. When a Fund writes an option on a futures contract, it
becomes obligated to assume a position in the futures contract at a specified
exercise price at any time during the term of the option. If a Fund writes a
call, on exercise it assumes a short futures position. If it writes a put, on
exercise it assumes a long futures position.
The purchase of futures or call options on futures can serve as a long or an
anticipatory hedge, and the sale of futures or the purchase of put options on
futures can serve as a short hedge. Writing call options on futures contracts
can serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indexes. Similarly, writing put options on
futures contracts can serve as a limited long or anticipatory hedge.
In addition, futures strategies can be used to manage the "duration" (a measure
of anticipated sensitivity to changes in interest rates, which is sometimes
related to the weighted average maturity of a portfolio) and associated interest
rate risk of a Fund's fixed-income portfolio. If the advisor wishes to shorten
the duration of a Fund's fixed-income portfolio (i.e., reduce anticipated
sensitivity), the Fund may sell an appropriate debt futures contract or a call
option thereon, or purchase a put option on that futures contract. If the
advisor wishes to lengthen the duration of a Fund's fixed-income portfolio
(i.e., increase anticipated sensitivity), the Fund may buy an appropriate debt
futures contract or a call option thereon, or sell a put option thereon.
At the inception of a futures contract, a Fund is required to deposit "initial
margin" in an amount generally equal to 10% or less of the contract value.
Initial margin must also be deposited when writing a call or put option on a
futures contract, in accordance with applicable exchange rules. Subsequent
"variation margin" payments are made to and from the futures broker daily as the
value of the futures or written option position varies, a process known as
"marking-to-market." Unlike margin in securities transactions, initial margin on
futures contracts and written options on futures contracts does not represent a
borrowing on margin, but rather is in the nature of a performance bond or
good-faith deposit that is returned to the Fund at the termination of the
transaction if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, a Fund may be required to
increase the level of initial margin deposits. If the Fund has insufficient cash
to meet daily variation margin requirements, it might need to sell securities in
order to do so at a time when such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. However, there can be no assurance that a liquid
market will exist for a particular contract at a particular time. In such event,
it may not be possible to close a futures contract or options position.
Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a futures contract or an option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.
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 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 continue to maintain the
position being hedged by the futures contract or option or to continue to
maintain cash or securities in a segregated account.
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 that is not for bona fide hedging purposes (as defined by the
CFTC), the aggregate initial margin and premiums required to establish these
positions (excluding the amount by which options are "in-the-money" at the time
of purchase) may not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into. This policy does not limit to 5% the
percentage of the Fund's assets that are at risk in futures contracts, options
on futures contracts and currency options.
RISKS OF FUTURES CONTRACTS AND OPTIONS THEREON. The ordinary spreads at a given
time between prices in the cash and futures markets (including the options on
futures markets), due to differences in the natures of those markets, are
subject to the following factors. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions, which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Due to the possibility of distortion, a hedge may not be successful.
Although stock index futures contracts do not require physical delivery, under
extraordinary market conditions, liquidity of such futures contracts also could
be reduced. Additionally, the advisor may be incorrect in its expectations as to
the extent of various interest rates, currency exchange rates or stock market
movements or the time span within which the movements take place.
INDEX FUTURES. The risk of imperfect correlation between movements in the price
of index futures and movements in the price of the securities that are the
subject of a hedge increases as the composition of a Fund's portfolio diverges
from the index. The price of the index futures may move proportionately more
than or less than the price of the securities being hedged. If the price of the
index futures moves proportionately less than the price of the securities that
are the subject of the hedge, the hedge will not be fully effective. Assuming
the price of the securities being hedged has moved in an unfavorable direction,
as anticipated when the hedge was put into place, the Fund would be in a better
position than if it had not hedged at all, but not as good as if the price of
the index futures moved in full proportion to that of the hedged securities.
However, if the price of the securities being hedged has moved in a favorable
direction, this advantage will be partially offset by movement of the price of
the futures contract. If the price of the futures contract moves more than the
price of the securities, the Fund will experience either a loss or a gain on the
futures contract that will not be completely offset by movements in the price of
the securities that are the subject of the hedge.
Where index futures are purchased in an anticipatory hedge, it is possible that
the market may decline instead. If a Fund then decides not to invest in the
securities at that time because of concern as to possible further market decline
or for other reasons, it will realize a loss on the futures contract that is not
offset by a reduction in the price of the securities it had anticipated
purchasing.
FOREIGN CURRENCY HEDGING STRATEGIES--SPECIAL CONSIDERATIONS. A Fund may use
options and futures contracts on foreign currencies, as mentioned previously,
and forward currency contracts, as described below, to attempt to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated or, in certain circumstances, for investment (e.g., as a
substitute for investing in securities denominated in foreign currency).
Currency hedges can protect against price movements in a security that a Fund
owns or intends to acquire that are attributable to changes in the value of the
currency in which it is denominated.
A Fund might seek to hedge against changes in the value of a particular currency
when no Financial Instruments on that currency are available or such Financial
Instruments are more expensive than certain other Financial Instruments. In such
cases, a Fund may seek to hedge against price movements in that currency by
entering into transactions using Financial Instruments on another currency or a
basket of currencies, the value of which the advisor believes will have a high
degree of positive correlation to the value of the currency being hedged. The
risk that movements in the price of the Financial Instrument will not correlate
perfectly with movements in the price of the currency subject to the hedging
transaction may be increased when this strategy is used.
The value of Financial Instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such Financial Instruments, a
Fund could be disadvantaged by having to deal in the odd-lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Financial Instruments until they reopen.
Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
a Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes, and charges associated with such delivery
assessed in the issuing country.
FORWARD CURRENCY CONTRACTS AND FOREIGN CURRENCY DEPOSITS. The Funds may enter
into forward currency contracts to purchase or sell foreign currencies for a
fixed amount of U.S. dollars or another foreign currency. A forward currency
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (term) from the date of the
forward currency contract agreed upon by the parties, at a price set at the time
the forward currency contract is entered. Forward currency contracts are
negotiated directly between currency traders (usually large commercial banks)
and their customers.
Such transactions may serve as long or anticipatory hedges. For example, a Fund
may purchase a forward currency contract to lock in the U.S. dollar price of a
security denominated in a foreign currency that the Fund intends to acquire.
Forward currency contracts may also serve as short hedges. For example, a Fund
may sell a forward currency contract to lock in the U.S. dollar equivalent of
the proceeds from the anticipated sale of a security or a dividend or interest
payment denominated in a foreign currency.
The Funds may also use forward currency contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. Such a hedge
would tend to offset both positive and negative currency fluctuations, but would
not offset changes in security values caused by other factors. A Fund could also
hedge the position by entering into a forward currency contract to sell another
currency expected to perform similarly to the currency in which the Fund's
existing investments are denominated. This type of hedge could offer advantages
in terms of cost, yield or efficiency, but may not hedge currency exposure as
effectively as a simple hedge against U.S. dollars. This type of hedge may
result in losses if the currency used to hedge does not perform similarly to the
currency in which the hedged securities are denominated.
The Funds may also use forward currency contracts in one currency or a basket of
currencies to attempt to hedge against fluctuations in the value of securities
denominated in a different currency if the advisor anticipates that there will
be a positive correlation between the two currencies.
The cost to a Fund of engaging in forward currency contracts varies with factors
such as the currency 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. When a
Fund enters into a forward currency contract, it relies on the counterparty to
make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of some
or all of any expected benefit of the transaction.
As is the case with futures contracts, purchasers, and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures contracts, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can be
no assurance that a Fund will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the counterparty, the Fund might be unable to close out a forward
currency contract. In either event, the Fund would continue to be subject to
market risk with respect to the position, and would continue to be required to
maintain a position in securities denominated in the foreign currency or to
segregate cash or liquid assets.
The precise matching of forward currency contract amounts and the value of the
securities, dividends, or interest payments involved generally will not be
possible because the value of such securities, dividends, or interest payments,
measured in the foreign currency, will change after the forward currency
contract has been established. Thus, a Fund might need to purchase or sell
foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward currency contracts. The projection of
short-term currency market movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.
Forward currency contracts may substantially change a Fund's investment exposure
to changes in currency exchange rates and could result in losses to the Fund if
currencies do not perform as the advisor anticipates. There is no assurance that
the advisor's use of forward currency contracts will be advantageous to a Fund
or that it will hedge at an appropriate time.
The Funds may also purchase and sell foreign currency and invest in foreign
currency deposits. Currency conversion involves dealer spreads and other costs,
although commissions usually are not charged.
COMBINED POSITIONS. A Fund may purchase and write options or futures in
combination with each other, or in combination with futures or forward currency
contracts, to manage the risk and return characteristics of its overall
position. For example, a Fund may purchase a put option and write a call option
on the same underlying instrument, in order to construct a combined position
whose risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, in order to reduce the
risk of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs.
TURNOVER. The Funds' options and futures activities may affect their turnover
rates and brokerage commission payments. The exercise of calls or puts written
by a Fund, and the sale or purchase of futures contracts, may cause it to sell
or purchase related investments, thus increasing its turnover rate. Once a Fund
has received an exercise notice on an option it has written, it cannot effect a
closing transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price. The
exercise of puts purchased by a Fund may also cause the sale of related
investments, increasing turnover. Although such exercise is within the Fund's
control, holding a protective put might cause it to sell the related investments
for reasons that would not exist in the absence of the put. A Fund will pay a
brokerage commission each time it buys or sells a put or call or purchases or
sells a futures contract. Such commissions may be higher than those that would
apply to direct purchases or sales.
SWAPS, CAPS, FLOORS, AND COLLARS. The Funds are authorized to enter into swaps,
caps, floors, and collars. Swaps involve the exchange by one party with another
party of their respective commitments to pay or receive cash flows, e.g., an
exchange of floating rate payments for fixed rate payments. The purchase of a
cap or a floor entitles the purchaser, to the extent that a specified index
exceeds in the case of a cap, or falls below in the case of a floor, a
predetermined value, to receive payments on a notional principal amount from the
party selling such instrument. A collar combines elements of buying a cap and
selling a floor.
GOLD BULLION -- The Gold & Precious Metals Fund may invest up to 10% at the time
of purchase of its total assets directly in gold bullion. The two largest
national producers of gold bullion are the Republic of South Africa and the
former states of the Soviet Union. Changes in political and economic conditions
affecting either country may have a direct impact on its sales of gold bullion.
The Gold & Precious Metals Fund will purchase gold bullion from, and sell gold
bullion to, banks (both U.S. and foreign) and dealers who are members of, or
affiliated with members of, a regulated U.S. commodities exchange, in accordance
with applicable investment laws. Values of gold bullion held by the Gold &
Precious Metals Fund are based upon daily quotes provided by banks or brokers
dealing in such commodities.
HOLDRs -- Holding Company Depositary Receipts, or HOLDRs, are trust-issued
receipts that represent a Fund's beneficial ownership of a specific group of
stocks. HOLDRs involve risks similar to the risks of investing in common stock.
For example, a Fund's investment will decline in value if the underlying stocks
decline in value. Because HOLDRs are not subject to concentration limits, the
relative weight of an individual stock may increase substantially, causing the
HOLDRs to be less diverse and creating more risk.
ILLIQUID SECURITIES -- Securities which do not trade on stock exchanges or in
the over-the-counter market, or have restrictions on when and how they may be
sold, are generally considered to be "illiquid." An illiquid security is one
that a Fund may have difficulty -- or may even be legally precluded from --
selling at any particular time. A Fund may invest in illiquid securities,
including restricted securities and other investments which are not readily
marketable. A Fund will not purchase any such security if the purchase would
cause the Fund to invest more than 15% of its net assets, measured at the time
of purchase, in illiquid securities. Repurchase agreements maturing in more than
seven days are considered illiquid for purposes of this restriction.
The principal risk of investing in illiquid securities is that a Fund may be
unable to dispose of them at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, a Fund might have to bear
the expense and incur the delays associated with registering the security with
the SEC, and otherwise obtaining listing on a securities exchange or in the
over-thecounter market.
INITIAL PUBLIC OFFERINGS ("IPOs") -- The Funds may invest a portion of their
assets in securities of companies offering shares in IPOs. IPOs may have a
magnified performance impact on a Fund for as long as it has a small asset base.
The impact of IPOs on a Fund's performance likely will decrease as the Fund's
asset size increases, which could reduce the Fund's total returns. IPOs may not
be consistently available to a Fund for investment, particularly as the Fund's
asset base grows. Because IPO shares frequently are volatile in price, a Fund
may hold IPO shares for a very short period of time. This may increase the
turnover of a Fund's portfolio and may lead to increased expenses for the Fund,
such as commissions and transaction costs. By selling shares, the Funds may
realize taxable gains they will subsequently distribute to shareholders. In
addition, the market for IPO shares can be speculative and/or inactive for
extended periods of time. The limited number of shares available for trading in
some IPOs may make it more difficult for a Fund to buy or sell significant
amounts of shares without an unfavorable impact on prevailing prices.
Shareholders in IPO shares can be affected by substantial dilution in the value
of their shares, by sales of additional shares and by concentration of control
in existing management and principal shareholders.
A Fund's investment in IPO shares may include the securities of unseasoned
companies (companies with less than three years of continuous operations), which
present risks considerably greater than common stocks of more established
companies. These companies may have limited operating histories and their
prospects for profitability may be uncertain. These companies may be involved in
new and evolving businesses and may be vulnerable to competition and changes in
technology, markets and economic conditions. They may be more dependent on key
managers and third parties and may have limited product lines.
INTERFUND BORROWING AND LENDING PROGRAM -- Pursuant to an exemptive order issued
by the SEC dated December 21, 1999, a Fund may lend money to, and borrow money
for temporary purposes from, other funds advised by INVESCO or its affiliates. A
Fund will borrow through the program only when the costs are equal to or lower
than the cost of bank loans. Interfund borrowings normally extend overnight, but
can have a maximum duration of seven days. Loans may be called on one day's
notice. A Fund may have to borrow from a bank at a higher interest rate if an
interfund loan is unavailable, called or not renewed.
INVESTMENT COMPANY SECURITIES -- To manage their daily cash positions, the Funds
may invest in securities issued by other investment companies, including
investment companies advised by INVESCO and its affiliates (pursuant to an
exemptive order dated May 12, 1999) that invest in short-term debt securities
and seek to maintain a net asset value of $1.00 per share ("money market
funds"). The Funds also may invest in Exchange-Traded Funds ("ETFs"). ETFs are
investment companies that are registered under the Investment Company Act of
1940 (the "1940 Act") as open-end funds or Unit Investment Trusts ("UITs"). ETFs
are based on specific domestic and foreign indices. ETF shares are sold and
redeemed at net asset value only in large blocks. In addition, national
securities exchanges list ETF shares for trading, which allows investors to
purchase and sell individual ETF shares among themselves at market prices
throughout the day. The 1940 Act limits investments in securities of other
investment companies. These limitations include, among others, that, subject to
certain exceptions, no more than 10% of a Fund's total assets may be invested in
securities of other investment companies, no more than 5% of its total assets
may be invested in the securities of any one investment company, and a Fund may
not own more than 3% of the outstanding shares of any investment company. As a
shareholder of another investment company, a Fund would bear its pro rata
portion of the other investment company's expenses, including advisory fees, in
addition to the expenses the Fund bears directly in connection with its own
operations.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are interests in pools
of mortgage loans that various governmental, government-related and private
organizations assemble as securities for sale to investors. Unlike most debt
securities, which pay interest periodically and repay principal at maturity or
on specified call dates, mortgage-backed securities make monthly payments that
consist of both interest and principal payments. In effect, these payments are a
"pass- through" of the monthly payments made by the individual borrowers on
their mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Since homeowners usually have the option of paying either part or
all of the loan balance before maturity, the effective maturity of a
mortgage-backed security is often shorter than is stated.
Governmental entities, private insurers, and the mortgage poolers may insure or
guarantee the timely payment of interest and principal of these pools through
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance and letters of credit. The advisor will consider such
insurance and guarantees and the creditworthiness of the issuers thereof in
determining whether a mortgage-related security meets its investment quality
standards. It is possible that the private insurers or guarantors will not meet
their obligations under the insurance policies or guarantee arrangements.
Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily
marketable.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA). GNMA is the principal
governmental guarantor of mortgage-related securities. GNMA is a wholly-owned
corporation of the U.S. government and it falls within the Department of Housing
and Urban Development. Securities issued by GNMA are considered the equivalent
of treasury securities and are backed by the full faith and credit of the U.S.
government. GNMA guarantees the timely payment of principal and interest on
securities issued by institutions approved by GNMA and backed by pools of
FHA-insured or VA- guaranteed mortgages. GNMA does not guarantee the market
value or yield of mortgage-backed securities or the value of the Fund's shares.
To buy GNMA securities, the Fund may have to pay a premium over the maturity
value of the underlying mortgages, which the Fund may lose if prepayment occurs.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA). FNMA is a government-sponsored
corporation owned entirely by private stockholders. FNMA is regulated by the
Secretary of Housing and Urban Development. FNMA purchases conventional
mortgages from a list of approved sellers and service providers, including state
and federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions, and mortgage bankers. Securities issued by
FNMA are agency securities, which means FNMA, but not the U.S. government,
guarantees their timely payment of principal and interest.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC). FHLMC is a stockholder owned
corporation chartered by Congress in 1970 to increase the supply of funds that
mortgage lenders, such as commercial banks, mortgage bankers, savings
institutions and credit unions, can make available to homebuyers and multifamily
investors. FHLMC issues Participation Certificates (PCs) which represent
interests in conventional mortgages. FHLMC guarantees the timely payment of
interest and ultimate collection of principal, but PCs are not backed by the
full faith and credit of the U.S. government.
COMMERCIAL BANKS, SAVINGS AND LOAN INSTITUTIONS, PRIVATE MORTGAGE INSURANCE
COMPANIES, MORTGAGE BANKERS, AND OTHER SECONDARY MARKET ISSUERS. Commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers, and other secondary market issuers also create pass-through
pools of conventional mortgage loans. In addition to guaranteeing the
mortgage-related security, such issuers may service and/or have originated the
underlying mortgage loans. Pools created by these issuers generally offer a
higher rate of interest than pools created by GNMA, FNMA & FHLMC because they
are not guaranteed by a government agency.
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed securities are
derivative multiple-class mortgage-backed securities. Stripped mortgage-backed
securities usually have two classes that receive different proportions of
interest and principal distributions on a pool of mortgage assets. Typically,
one class will receive some of the interest and most of the principal, while the
other class will receive most of the interest and the remaining principal. In
extreme cases, one class will receive all of the interest ("interest only" or
"IO" class) while the other class will receive the entire principal ("principal
only" or "PO class"). The cash flow and yields on IOs and POs are extremely
sensitive to the rate of principal payments (including prepayments) on the
underlying mortgage loans or mortgage-backed securities. A rapid rate of
principal payments may adversely affect the yield to maturity of IOs. Slower
than anticipated prepayments of principal may adversely affect the yield to
maturity of a PO. The yields and market risk of interest only and principal only
stripped mortgage-backed securities, respectively, may be more volatile than
those of other fixed income securities, including traditional mortgage-backed
securities.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs). CMOs are hybrids between
mortgage-backed bonds and mortgage pass-through securities. Similar to a bond,
CMOs usually pay interest monthly and have a more focused range of principal
payment dates than pass-through securities. While whole mortgage loans may
collateralize CMOs, mortgage-backed securities guaranteed by GNMA, FHLMC, or
FNMA and their income streams more typically collateralize them.
A Real Estate Mortgage Investment Conduit ("REMIC") is a CMO that qualifies for
special tax treatment under the Internal Revenue Code of 1986, as amended and is
an investment in certain mortgages primarily secured by interests in real
property and other permitted investments.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Each class of CMO or REMIC certificate, often referred to as a
"tranche," is issued at a specific interest rate and must be fully retired by
its final distribution date. Generally, all classes of CMOs or REMIC
certificates pay or accrue interest monthly. Investing in the lowest tranche of
CMOs and REMIC certificates involves risks similar to those associated with
investing in equity securities.
RISKS OF MORTGAGE-BACKED SECURITIES. Yield characteristics of mortgage-backed
securities differ from those of traditional debt securities in a variety of
ways. For example, payments of interest and principal are more frequent (usually
monthly) and their interest rates are sometimes adjustable. In addition, a
variety of economic, geographic, social, and other factors, such as the sale of
the underlying property, refinancing, or foreclosure, can cause investors to
repay the loans underlying a mortgage-backed security sooner than expected. If
the prepayment rates increase, a Fund may have to reinvest its principal at a
rate of interest that is lower than the rate on existing mortgage-backed
securities.
ASSET-BACKED SECURITIES. These securities are interests in pools of a broad
range of assets other than mortgages, such as automobile loans, computer leases,
and credit card receivables. Like mortgage-backed securities, these securities
are pass-through. In general, the collateral supporting these securities is of
shorter maturity than mortgage loans and is less likely to experience
substantial prepayments with interest rate fluctuations.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the benefit
of any security interest in the related assets, which raises the possibility
that recoveries on repossessed collateral may not be available to support
payments on these securities. For example, credit card receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, many of which allow debtors to reduce their
balances by offsetting certain amounts owed on the credit cards. Most issuers of
asset-backed securities backed by automobile receivables permit the servicers of
such receivables to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related asset-backed securities. Due to the quantity of vehicles involved and
requirements under state laws, asset-backed securities backed by automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables.
To lessen the effect of failures by obligors on underlying assets to make
payments, the entity administering the pool of assets may agree to ensure the
receipt of payments on the underlying pool in a timely fashion ("liquidity
protection"). In addition, asset-backed securities may include insurance, such
as guarantees, policies, or letters of credit obtained by the issuer or sponsor
from third parties, for some or all of the assets in the pool ("credit
support"). Delinquency or loss more than that anticipated or failure of the
credit support could adversely affect the return on an investment in such a
security.
The Funds may also invest in residual interests in asset-backed securities,
which is the excess cash flow remaining after making required payments on the
securities and paying related administrative expenses. The amount of residual
cash flow resulting from a particular issue of asset-backed securities depends
in part on the characteristics of the underlying assets, the coupon rates on the
securities, prevailing interest rates, the amount of administrative expenses and
the actual prepayment experience on the underlying assets.
REAL ESTATE INVESTMENT TRUSTS - To the extent consistent with their investment
objectives and policies, the Funds may invest in securities issued by real
estate investment trusts ("REITs").
REITs are trusts which sell equity or debt securities to investors and use the
proceeds to invest in real estate or interests therein. A REIT may focus on
particular projects, such as apartment complexes, or geographic regions, such as
the Southeastern United States, or both.
To the extent that the Funds have the ability to invest in REITs, a Fund could
conceivably own real estate directly as a result of a default on the securities
it owns. The Funds, 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, REITs may be affected by any changes
in the value of the underlying property in their portfolios. 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. REITs 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 a Fund, but also, indirectly,
similar expenses of the REITs.
REPURCHASE AGREEMENTS -- A Fund may enter into repurchase agreements ("REPOs")
on debt securities that the Fund is allowed to hold in its portfolio. This is a
way to invest money for short periods. A REPO is an agreement under which the
Fund acquires a debt security and then resells it to the seller at an
agreed-upon price and date (normally, the next business day). The repurchase
price represents an interest rate effective for the short period the debt
security is held by the Fund, and is unrelated to the interest rate on the
underlying debt security. A repurchase agreement is often considered as a loan
collateralized by securities. The collateral securities acquired by the Fund
(including accrued interest earned thereon) must have a total value in excess of
the value of the repurchase agreement. The collateral securities are held by the
Fund's custodian bank until the repurchase agreement is completed.
The Funds may enter into repurchase agreements with financial institutions that
are creditworthy under standards established by the Company's advisor. INVESCO
must use these standards to review the creditworthiness of any financial
institution that is a party to a REPO. REPOs maturing in more than seven days
are considered illiquid securities. A Fund will not enter into repurchase
agreements maturing in more than seven days if as a result more than 15% of the
Fund's net assets would be invested in these repurchase agreements and other
illiquid securities.
As noted above, the Funds use REPOs as a means of investing cash for short
periods of time. Although REPOs are considered to be highly liquid and
comparatively low-risk, the use of REPOs does involve some risks. For example,
if the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss on the sale of the collateral security. If the other party
to the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may
automatically be stayed. Finally, it is possible that the Fund may not be able
to substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement.
RULE 144A SECURITIES -- A Fund also may invest in securities that can be resold
to institutional investors pursuant to Rule 144A under the Securities Act of
1933, as amended (the "1933 Act"). In recent years, a large institutional market
has developed for many Rule 144A Securities. Institutional investors generally
cannot sell these securities to the general public but instead will often depend
on an efficient institutional market in which Rule 144A Securities can readily
be resold to other institutional investors, or on an issuer's ability to honor a
demand for repayment. Therefore, the fact that there are contractual or legal
restrictions on resale to the general public or certain institutions does not
necessarily mean that a Rule 144A Security is illiquid. Institutional markets
for Rule 144A Securities may provide both reliable market values for Rule 144A
Securities and enable a Fund to sell a Rule 144A investment when appropriate.
For this reason, the Company's board of directors has concluded that if a
sufficient institutional trading market exists for a given Rule 144A security,
it may be considered "liquid," and not subject to a Fund's limitations on
investment in restricted securities. The Company's board of directors has given
INVESCO the day-to-day authority to determine the liquidity of Rule 144A
Securities, according to guidelines approved by the board. The principal risk of
investing in Rule 144A Securities is that there may be an insufficient number of
qualified institutional buyers interested in purchasing a Rule 144A Security
held by a Fund, and the Fund might be unable to dispose of such security
promptly or at reasonable prices.
SECURITIES LENDING -- Each Fund may from time to time loan securities from its
portfolio to brokers, dealers, and financial institutions to earn income or
generate cash for liquidity. When the Fund lends securities it will receive
collateral in cash or U.S. Treasury obligations which will be maintained, and
with regard to cash, invested, at all times in an amount equal to at least 100%
of the current market value of the loaned securities. All such loans will be
made according to the guidelines of the SEC and the Company's board of
directors. A Fund may at any time call such loans to obtain the securities
loaned. If the borrower of the securities should default on its obligation to
return the securities borrowed, the value of the collateral may be insufficient
to permit the Fund to reestablish its position by making a comparable investment
due to changes in market conditions or the Fund may be unable to exercise
certain ownership rights. A Fund will be entitled to earn interest paid upon
investment of the cash collateral or to the payment of a premium or fee for the
loan. A Fund may pay reasonable fees in connection with such loans, including
payments to the borrower and to one or more securities lending agents (each an
"Agent").
INVESCO provides the following services in connection with the securities
lending activities of each Fund: (a) oversees participation in the securities
lending program to ensure compliance with all applicable regulatory and
investment guidelines; (b) assists the Agent in determining which specific
securities are available for loan; (c) monitors the Agent's loan activities to
ensure that securities loans are effected in accordance with INVESCO's
instructions and with procedures adopted by the board of directors; (d) prepares
appropriate periodic reports for, and seeks appropriate approvals from, the
board of directors with respect to securities lending activities; (e) responds
to Agent inquiries; and (f) performs such other duties as necessary. INVESCO
intends to seek necessary approvals to enable it to earn compensation for
providing such services.
The Funds have obtained an exemptive order from the SEC allowing them to invest
uninvested cash balances and cash collateral received in connection with
securities lending in money market funds that have INVESCO or an affiliate of
INVESCO as an investment advisor.
SOVEREIGN DEBT -- In certain emerging countries, the central government and its
agencies are the largest debtors to local and foreign banks and others.
Sovereign debt involves the risk that the government, as a result of political
considerations or cash flow difficulties, may fail to make scheduled payments of
interest or principal and may require holders to participate in rescheduling of
payments or even to make additional loans. If an emerging country government
defaults on its sovereign debt, there is likely to be no legal proceeding under
which the debt may be ordered repaid, in whole or in part. The ability or
willingness of a foreign sovereign debtor to make payments of principal and
interest in a timely manner may be influenced by, among other factors, its cash
flow, the magnitude of its foreign reserves, the availability of foreign
exchanges on the payment date, the debt service burden to the economy as a
whole, the debtor's then current relationship with the International Monetary
Fund, and its then current political constraints. Some of the emerging countries
issuing such instruments have experienced high rates of inflation in recent
years and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance government
programs, and may have other adverse social, political, and economic
consequences, including effects on the willingness of such countries to service
their sovereign debt. An emerging country government's willingness and ability
to make timely payments on its sovereign debt also are likely to be heavily
affected by the country's balance of trade and its access to trade and other
international credits. If a country's exports are concentrated in a few
commodities, such country would be more significantly exposed to a decline in
the international prices of one or more of such commodities. A rise in
protectionism on the part of its trading partners, or unwillingness by such
partners to make payment for goods in hard currency, could also adversely affect
the country's ability to export its products and repay its debts. Sovereign
debtors may also be dependent on expected receipts from such agencies and others
abroad to reduce principal and interest arrearages on their debt. However,
failure by the sovereign debtor or other entity to implement economic reforms
negotiated with multilateral agencies or others, to achieve specified levels of
economic performance, or to make other debt payments when due, may cause third
parties to terminate their commitments to provide funds to the sovereign debtor,
which may further impair such debtor's willingness or ability to service its
debts.
The Funds may invest in debt securities issued under the "Brady Plan" in
connection with restructurings in emerging country debt markets or earlier
loans. These securities, often referred to as "Brady Bonds," are, in some cases,
denominated in U.S. dollars and collateralized as to principal by U.S. Treasury
zero coupon bonds having the same maturity. At least one year's interest
payments, on a rolling basis, are collateralized by cash or other investments.
Brady Bonds are actively traded on an over-the-counter basis in the secondary
market for emerging country debt securities. Brady Bonds are lower-rated bonds
and highly volatile.
UNSEASONED ISSUERS -- The Funds may purchase securities in unseasoned issuers.
Securities in such issuers may provide opportunities for long term capital
growth. Greater risks are associated with investments in securities of
unseasoned issuers than 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.
U.S. GOVERNMENT SECURITIES -- Each Fund may, from time to time, purchase debt
securities issued by the U.S. government. These securities include Treasury
bills, notes, and bonds. Treasury bills have a maturity of one year or less,
Treasury notes generally have a maturity of one to ten years, and Treasury bonds
generally have maturities of more than ten years.
U.S. government debt securities also include securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some obligations of U.S.
government agencies, which are established under the authority of an act of
Congress, such as Government National Mortgage Association ("GNMA")
Participation Certificates, are supported by the full faith and credit of the
U.S. Treasury. GNMA Certificates are mortgage-backed securities representing
part ownership of a pool of mortgage loans. These loans -- issued by lenders
such as mortgage bankers, commercial banks, and savings and loan associations --
are either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. A "pool" or group of such mortgages is assembled and,
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and principal on
each mortgage is guaranteed by GNMA and backed by the full faith and credit of
the U.S. government. The market value of GNMA Certificates is not guaranteed.
GNMA Certificates are different from bonds because principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity, as is the case with a bond. GNMA Certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the GNMA
Certificate.
Other United States government debt securities, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury. Others, such as bonds issued by Fannie Mae, a federally chartered
private corporation, are supported only by the credit of the corporation. In the
case of securities not backed by the full faith and credit of the United States,
a Fund must look principally to the agency issuing or guaranteeing the
obligation in the event the agency or instrumentality does not meet its
commitments. 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. A Fund will invest in securities of such instrumentalities
only when INVESCO is satisfied that the credit risk with respect to any such
instrumentality is comparatively minimal.
WHEN-ISSUED/DELAYED DELIVERY -- The Funds normally buy and sell securities on an
ordinary settlement basis. That means that the buy or sell order is sent, and a
Fund actually takes delivery or gives up physical possession of the security on
the "settlement date," which is three business days later. However, the Funds
also may purchase and sell securities on a when-issued or delayed delivery
basis.
When-issued or delayed delivery transactions occur when securities are purchased
or sold by a Fund and payment and delivery take place at an agreed-upon time in
the future. The Funds may engage in this practice in an effort to secure an
advantageous price and yield. However, the yield on a comparable security
available when delivery actually takes place may vary from the yield on the
security at the time the when-issued or delayed delivery transaction was entered
into. When a Fund engages in when-issued and delayed delivery transactions, it
relies on the seller or buyer to consummate the sale at the future date. If the
seller or buyer fails to act as promised, that failure may result in the Fund
missing the opportunity of obtaining a price or yield considered to be
advantageous. No payment or delivery is made by a Fund until it receives
delivery or payment from the other party to the transaction. However,
fluctuation in the value of the security from the time of commitment until
delivery could adversely affect a Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below have been adopted by each respective
Fund and, unless identified as non-fundamental policies, may not be changed
without the affirmative vote of a majority of the outstanding voting securities
of that Fund. As provided in the 1940 Act, a "vote of a majority of the
outstanding voting securities of the Fund" means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or
more of the shares present at a meeting, if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy. Except with respect
to borrowing, changes in values of a particular Fund's assets will not cause a
violation of the following investment restrictions so long as percentage
restrictions are observed by such Fund at the time it purchases any security.
Each Fund may not:
1. with respect to 75% of the Fund's 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, or
securities of other investment companies) 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;
2. underwrite securities of other issuers, except insofar as it may be
deemed to be an underwriter under the 1933 Act in connection with the
disposition of the Fund's portfolio securities;
3. borrow money, except that 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);
4. issue senior securities, except as permitted under the 1940 Act;
5. lend any security or make any loan if, as a result, more than 33 1/3%
of its total assets would be lent to other parties, but this limitation
does not apply to the purchase of debt securities or to repurchase
agreements;
6. purchase or sell physical commodities; however, this policy shall not
prevent the Fund from purchasing and selling foreign currency, futures
contracts, options, forward contracts, swaps, caps, floors, collars, and
other financial instruments. This restriction shall not prevent Gold &
Precious Metals Fund from investing in gold bullion; or
7. purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real estate
or securities of companies engaged in the real estate business).
8. purchase any securities of an issuer in a particular industry if as a
result 25% or more of its total assets (taken at market value at the
time of purchase) would be invested in securities of issuers whose
principal business activities are in the same industry; provided
however, that (i) Energy Fund will invest 25% or more of its assets in
one or more energy- related industries; (ii) Financial Services Fund
will invest 25% or more of its assets in one or more financial
services-related industries; (iii) Gold & Precious Metals Fund will
invest 25% or more of its assets in one or more gold and precious
metals-related industries; (iv) Health Sciences Fund will invest 25% or
more of its assets in one or more health care- related industries; (v)
Leisure Fund will invest 25% or more of its assets in one or more
leisure-related industries; (vi) Real Estate Opportunity Fund will
invest 25% or more of its assets in one or more real estate-related
industries; (vii) Technology Fund will invest 25% or more of its assets
in one or more technology-related industries; (viii) Telecommunications
Fund will invest 25% or more of its assets in one or more
telecommunications- related industries; and (ix) Utilities Fund will
invest 25% or more of its assets in one or more utilities-related
industries;
9. Each 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 managed by INVESCO or an
affiliate or a successor thereof, with substantially the same
fundamental investment objective, policies, and limitations as the Fund.
In addition, each Fund has the following non-fundamental policies, which may be
changed without shareholder approval:
A. The Fund may not sell securities short (unless it owns or has the
right to obtain securities equivalent in kind and amount to the
securities sold short) or purchase securities on margin, except that (i)
this policy does not prevent the Fund from entering into short positions
in foreign currency, futures contracts, options, forward contracts,
swaps, caps, floors, collars, and other financial instruments, (ii) the
Fund may obtain such short-term credits as are necessary for the
clearance of transactions, and (iii) the Fund may make margin payments
in connection with futures contracts, options, forward contracts, swaps,
caps, floors, collars, and other financial instruments.
B. The Fund may borrow money only from a bank or from an open-end
management investment company managed by INVESCO or an affiliate or a
successor thereof for temporary or emergency purposes (not for
leveraging or investing) or by engaging in reverse repurchase agreements
with any party (reverse repurchase agreements will be treated as
borrowings for purposes of fundamental limitation (3)).
C. The Fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the
prices at which they are valued.
D. The Fund may invest in securities issued by other investment
companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940
Act.
E. The Gold & Precious Metals Fund may invest up to 10% at the time of
purchase of its total assets in gold bullion.
F. With respect to fundamental restriction (8) above, (i) energy-related
industries include, but are not limited to, oil companies, oil and gas
exploration companies, natural gas pipeline companies, refinery
companies, energy conservation companies, coal companies, alternative
energy companies, and innovative energy technology companies; (ii)
financial services- related industries include, but are not limited to,
banks (regional and money-centers), insurance companies (life, property
and casualty, and multiline), investment and miscellaneous industries
(asset managers, brokerage firms, and government-sponsored agencies),
and suppliers to financial services companies; (iii) gold and precious
metals-related industries include, but are not limited to, those
involved in exploring for, mining, processing, or dealing and investing
in gold, gold bullion, silver, platinum, palladium, and diamonds; (iv)
health sciences-related industries include, but are not limited to,
medical equipment or supplies, pharmaceuticals, biotechnology, and
health care providers and services companies; (v) leisure-related
industries include, but are not limited to, hotels/gaming, publishing,
advertising, beverages, audio/video, broadcasting-radio/ TV, cable &
satellite operators, cable & satellite programmers, motion pictures &
TV, recreation services/entertainment, retail, and toys; (vi) real
estate-related industries include, but are not limited to, real estate
brokers, home builders or real estate developers, companies with
substantial real estate holdings, and companies with significant
involvement in the real estate industry; (vii) technology-related
industries include, but are not limited to, various applied
technologies, hardware, software, semiconductors, telecommunications
equipment and services, and service-related companies in information
technology; (viii) telecommunications-related industries include, but
are not limited to, companies that offer telephone services, wireless
communications, satellite communications, television and movie
programming, broadcasting, and Internet access; and (ix)
utilities-related industries include, but are not limited to,companies
that produce, generate, transmit, or distribute natural gas or
electricity, as well as companies that provide telecommunications
services, including local, long distance and wireless.
In addition, with respect to a Fund that may invest in municipal obligations,
the following non- fundamental policy applies, which may be changed without
shareholder approval:
Each state (including the District of Columbia and Puerto Rico),
territory and possession of the United States, each political
subdivision, agency, instrumentality, and authority thereof, and each
multi-state agency of which a state is a member is a separate "issuer."
When the assets and revenues of an agency, authority, instrumentality,
or other political subdivision are separate from the government creating
the subdivision and the security is backed only by assets and revenues
of the subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case of an Industrial Development Bond or
Private Activity bond, if that bond is backed only by the assets and
revenues of the non-governmental user, then that non-governmental user
would be deemed to be the sole issuer. However, if the creating
government or another entity guarantees a security, then to the extent
that the value of all securities issued or guaranteed by that government
or entity and owned by a Fund exceeds 10% of the Fund's total assets,
the guarantee would be considered a separate security and would be
treated as issued by that government or entity. With respect to a Fund
that is not a money market fund, securities issued or guaranteed by a
bank or subject to financial guaranty insurance are not subject to the
limitations set forth in the preceding sentence.
MANAGEMENT OF THE FUNDS
THE INVESTMENT ADVISOR
INVESCO, located at 4350 South Monaco Street, Denver, Colorado, is the Company's
investment advisor. INVESCO was founded in 1932 and serves as an investment
advisor to:
INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO Counselor Series Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Manager Series Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Treasurer's Series Funds, Inc.
INVESCO Variable Investment Funds, Inc.
As of March 31, 2003, INVESCO managed 47 mutual funds having combined assets of
$17 billion, on behalf of 2,848,927 shareholder accounts.
INVESCO is an indirect wholly owned subsidiary of AMVESCAP PLC, a publicly
traded holding company. Through its subsidiaries, AMVESCAP PLC engages in the
business of investment management on an international basis. AMVESCAP PLC is one
of the largest independent investment management businesses in the world, with
approximately $318.5 billion in assets under management as of March 31, 2003.
AMVESCAP PLC's North American subsidiaries include:
AMVESCAP Retirement, Inc. ("ARI"), Atlanta, Georgia, develops and provides
domestic and international defined contribution retirement plan services to
plan sponsors, institutional retirement plan sponsors and institutional plan
providers.
AMVESCAP National Trust Company (formerly known as Institutional Trust
Company doing business as INVESCO Trust Company) ("ANTC"), a wholly-owned
subsidiary of ARI, maintains an institutional retirement trust containing 34
collective trust funds designed specifically for qualified plans. ANTC
provides retirement account custodian and/or trust services for individual
retirement accounts ("IRAs") and other retirement plan accounts. ANTC acts
as a directed, non-discretionary trustee or custodian for such plans.
INVESCO Institutional (N.A.), Inc., Atlanta, Georgia, manages
individualized investment portfolios of equity, fixed-income, and real
estate securities for institutional clients, including mutual funds and
collective investment entities. INVESCO Institutional (N.A.), Inc.
includes the following Groups and Divisions:
INVESCO Capital Management Group, Atlanta, Georgia, manages
institutional investment portfolios, consisting primarily of
discretionary employee benefit plans for corporations and state and
local governments, and endowment funds.
INVESCO National Asset Management Group, Atlanta, Georgia, provides
investment advisory services to employee pension and profit sharing
plans, endowments and foundations, public plans, unions
(Taft-Hartley), mutual funds and individuals.
INVESCO Fixed Income/Stable Value Division, Louisville, Kentucky,
provides customized low volatility fixed income solutions to 401(k),
457, and other tax qualified retirement plans.
INVESCO Financial Institutions Group, Atlanta, Georgia, provides
investment management services through separately managed account
programs offered by brokerage firms.
INVESCO Structured Products Group, New York, New York, is
responsible for tactical asset allocation and managed futures
products, and quantitative stock selection products. This group
develops forecasting models for domestic stock and bond markets and
manages money for clients in products based on these forecasting
models.
INVESCO Realty Advisors Division, Dallas, Texas, is responsible for
providing advisory services to discretionary and non-discretionary
accounts with respect to investments in real estate, mortgages,
private real estate partnership interests, REITs, and publicly
traded stocks of companies deriving substantial revenues from real
estate industry activities.
INVESCO Multiple Asset Strategies Group, Atlanta, Georgia, maintains
a complex set of fundamentally based quantitative models used as a
primary basis for asset allocation decisions. The group's main
product is global asset allocation.
A I M Advisors, Inc., Houston, Texas, provides investment advisory and
administrative services for retail and institutional mutual funds.
A I M Capital Management, Inc., Houston, Texas, provides investment
advisory services to individuals, corporations, pension plans and other
private investment advisory accounts, and also serves as a sub-advisor
to certain retail and institutional mutual funds, one Canadian mutual
fund, and one portfolio of an open-end registered investment company
that is offered to separate accounts of insurance companies.
A I M Distributors, Inc. and Fund Management Company, Houston, Texas,
are registered broker-dealers that act as the principal underwriters for
retail and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 30 Finsbury Square,
London, EC2A 1AG, England.
THE INVESTMENT ADVISORY AGREEMENT
INVESCO serves as investment advisor to the Funds under an Investment Advisory
Agreement dated February 28, 1997, as amended February 14, 2000 (the
"Agreement") with the Company.
The Agreement requires that INVESCO manage the investment portfolio of each Fund
in a way that conforms with the Fund's investment policies. INVESCO may directly
manage a Fund itself, or may hire a sub-advisor, which may be an affiliate of
INVESCO, to do so. Specifically, INVESCO is responsible for:
o managing the investment and reinvestment of all the assets of the Funds,
and executing all purchases and sales of portfolio securities;
o maintaining a continuous investment program for the Funds, consistent
with (i) each Fund's investment policies as set forth in the Company's
Articles of Incorporation, Bylaws and Registration Statement, as from time
to time amended, under the 1940 Act, and in any prospectus and/or statement
of additional information of the Funds, as from time to time amended and in
use under the 1933 Act, and (ii) the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended;
o determining what securities are to be purchased or sold for the Funds,
unless otherwise directed by the directors of the Company, and executing
transactions accordingly;
o providing the Funds the benefit of investment analysis and research, the
reviews of current economic conditions and trends, and the consideration of
a long-range investment policy now or hereafter generally available to the
investment advisory customers of the advisor or any sub-advisor;
o determining what portion of each Fund's assets should be invested in the
various types of securities authorized for purchase by the Fund; and
o making recommendations as to the manner in which voting rights, rights to
consent to Fund action and any other rights pertaining to a Fund's
portfolio securities shall be exercised.
INVESCO also performs all of the following services for the Funds:
o administrative;
o internal accounting (including computation of net asset value);
o clerical and statistical;
o secretarial;
o all other services necessary or incidental to the administration of the
affairs of the Funds;
o supplying the Company with officers, clerical staff, and other employees;
o furnishing office space, facilities, equipment, and supplies; providing
personnel and facilities required to respond to inquiries related to
shareholder accounts;
o conducting periodic compliance reviews of the Funds' operations;
preparation and review of required documents, reports and filings by
INVESCO's in-house legal and accounting staff or in conjunction with
independent attorneys and accountants (including prospectuses, statements
of additional information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Funds);
o supplying basic telephone service and other utilities; and
o preparing and maintaining certain of the books and records required to be
prepared and maintained by the Funds under the 1940 Act.
Expenses not assumed by INVESCO are borne by the Funds. As full compensation for
its advisory services to the Company, INVESCO receives a monthly fee from each
Fund. The fee is calculated at the annual rate of:
Energy, Financial Services, Gold & Precious Metals, Health Sciences, Leisure,
Technology, and Utilities Funds
o 0.75% on the first $350 million of each Fund's average net assets;
o 0.65% on the next $350 million of each Fund's average net assets;
o 0.55% of each Fund's average net assets from $700 million;
o 0.45% of each Fund's average net assets from $2 billion;
o 0.40% of each Fund's average net assets from $4 billion;
o 0.375% of each Fund's average net assets from $6 billion; and
o 0.35% of each Fund's average net assets from $8 billion.
Real Estate Opportunity Fund
o 0.75% on the first $500 million of the Fund's average net assets;
o 0.65% on the next $500 million of the Fund's average net assets;
o 0.55% of the Fund's average net assets from $1 billion;
o 0.45% of the Fund's average net assets from $2 billion;
o 0.40% of the Fund's average net assets from $4 billion;
o 0.375% of the Fund's average net assets from $6 billion; and
o 0.35% of the Fund's average net assets from $8 billion.
Telecommunications Fund
o 0.65% on the first $500 million of the Fund's average net assets;
o 0.55% on the next $500 million of the Fund's average net assets;
o 0.45% of the Fund's average net assets from $1 billion;
o 0.40% of the Fund's average net assets from $4 billion;
o 0.375% of the Fund's average net assets from $6 billion; and
o 0.35% of the Fund's average net assets from $8 billion.
During the periods outlined in the table below, the Funds paid INVESCO advisory
fees in the dollar amounts shown. If applicable, the advisory fees were offset
by credits in the amounts shown, so that the Funds' fees were not in excess of
the expense limitations shown, which have been voluntarily agreed to by the
Company and INVESCO. The fee is allocated daily to each class based on the
relative proportion of net assets represented by such class.
Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations
----------- -------------- -----------
INVESTOR CLASS
- --------------
ENERGY FUND
Year Ended March 31, 2003 $ 2,050,307 N/A N/A
Year Ended March 31, 2002 2,929,700 N/A N/A
Year Ended March 31, 2001 2,879,451 N/A N/A
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 6,122,659 N/A N/A
Year Ended March 31, 2002 8,297,002 N/A N/A
Year Ended March 31, 2001 8,371,286 N/A N/A
GOLD & PRECIOUS METALS FUND
Year Ended March 31, 2003 $ 835,712 N/A N/A
Year Ended March 31, 2002 579,576 N/A N/A
Year Ended March 31, 2001 540,427 N/A N/A
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 7,222,357 N/A N/A
Year Ended March 31, 2002 10,066,179 N/A N/A
Year Ended March 31, 2001 11,327,342 N/A N/A
LEISURE FUND
Year Ended March 31, 2003 $ 4,325,688 N/A N/A
Year Ended March 31, 2002 4,812,282 N/A N/A
Year Ended March 31, 2001 4,052,866 N/A N/A
REAL ESTATE OPPORTUNITY FUND
Year Ended March 31, 2003 $ 177,365 $ 195,593 1.60%
Year Ended March 31, 2002 195,437 166,722 1.60%
Year Ended March 31, 2001 254,331 146,760 1.60%(1)
Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations
----------- -------------- -----------
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 6,450,728 N/A N/A
Year Ended March 31, 2002 11,221,569 N/A N/A
Year Ended March 31, 2001 19,905,436 N/A N/A
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 2,278,312 $3,343,479 1.75%(2)
Year Ended March 31, 2002 6,059,211 0 2.00%
Year Ended March 31, 2001 15,411,959 0 2.00%
UTILITIES FUND
Year Ended March 31, 2003 $ 655,934 $ 526,139 1.30%
Year Ended March 31, 2002 1,271,828 456,409 1.30%
Year Ended March 31, 2001 1,866,797 244,669 1.30%(3)
INSTITUTIONAL CLASS
- -------------------
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 5,032,432 $ 0 1.15%(4)
Year Ended March 31, 2002 7,741,523 0 0.95%
Year Ended March 31, 2001 14,662,130 0 0.95%
CLASS A
- -------
ENERGY FUND
Year Ended March 31, 2003 $ 47,926 $ 0 1.65%(5)
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 20,833 $ 3,917 1.40%(6)
GOLD & PRECIOUS METALS FUND
Year Ended March 31, 2003 $ 11,649 $ 431 2.10%(7)
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 9,687 $ 6,829 1.40%(6)
LEISURE FUND
Year Ended March 31, 2003 $ 119,744 $ 0 1.50%(8)
REAL ESTATE OPPORTUNITY FUND
Year Ended March 31, 2003 $ 8,600 $ 0 1.70%(9)
Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations
----------- -------------- -----------
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 12,982 $ 818 1.50%(8)
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 5,271 $ 0 1.85%(10)
UTILITIES FUND
Year Ended March 31, 2003 $ 2,533 $ 1,095 1.40%(11)
CLASS B
- -------
ENERGY FUND
Year Ended March 31, 2003 $ 5,555 $ 582 2.30%(12)
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 4,450 $ 2,056 2.05%(13)
GOLD & PRECIOUS METALS FUND
Year Ended March 31, 2003 $ 6,563 $ 0 2.75%(14)
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 2,401 $ 1,648 2.05%(15)
LEISURE FUND
Year Ended March 31, 2003 $ 36,036 $ 4,408 2.15%(16)
REAL ESTATE OPPORTUNITY FUND
Year Ended March 31, 2003 $ 516 $ 936 2.35%(17)
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 1,084 $ 1,027 2.15%(18)
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 73 $ 1,069 2.50%(19)
UTILITIES FUND
Year Ended March 31, 2003 $ 1,296 $ 943 2.05%(15)
Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations
----------- -------------- -----------
CLASS C
- -------
ENERGY FUND
Year Ended March 31, 2003 $ 75,869 $ 20,103 2.30%(20)
Year Ended March 31, 2002 71,360 N/A N/A
Year Ended March 31, 2001 28,834 N/A N/A
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 85,164 $ 0 2.75%(20)
Year Ended March 31, 2002 89,895 N/A N/A
Year Ended March 31, 2001 40,178 N/A N/A
GOLD & PRECIOUS METALS FUND
Year Ended March 31, 2003 $ 18,502 $ 0 2.75%(20)
Year Ended March 31, 2002 1,690 N/A N/A
Year Ended March 31, 2001 56 N/A N/A
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 53,017 $ 37,750 2.75%(20)
Year Ended March 31, 2002 92,387 N/A N/A
Year Ended March 31, 2001 30,819 N/A N/A
LEISURE FUND
Year Ended March 31, 2003 $ 123,328 $ 0 2.75%(20)
Year Ended March 31, 2002 66,957 N/A N/A
Year Ended March 31, 2001 13,858 N/A N/A
REAL ESTATE OPPORTUNITY FUND
Year Ended March 31, 2003 $ 6,162 11,360 2.35%
Year Ended March 31, 2002 7,330 3,376 2.35%
Year Ended March 31, 2001 8,340 7 2.35%(21)
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 47,458 $ 100,306 2.15%(20)
Year Ended March 31, 2002 82,082 N/A N/A
Year Ended March 31, 2001 58,968 N/A N/A
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 21,116 $ 100,846 2.50%(19)
Year Ended March 31, 2002 67,072 0 2.75%
Year Ended March 31, 2001 52,776 0 2.75%
Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations
----------- -------------- -----------
UTILITIES FUND
Year Ended March 31, 2003 $ 7,076 $ 15,628 2.05%
Year Ended March 31, 2002 16,021 8,769 2.05%
Year Ended March 31, 2001 8,377 446 2.05%(22)
CLASS K
- -------
ENERGY FUND
Year Ended March 31, 2003 $ 1,034 $ 4,502 1.75%(20)
Year Ended March 31, 2002 40 N/A N/A
Period Ended March 31, 2001(23) 3 N/A N/A
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 7,688 $ 3,997 1.50%(20)
Year Ended March 31, 2002 2,642 N/A N/A
Period Ended March 31, 2001(23) 2 N/A N/A
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 13,857 $ 0 2.20%(20)
Year Ended March 31, 2002 7,002 N/A N/A
Period Ended March 31, 2001(23) 2 N/A N/A
LEISURE FUND
Year Ended March 31, 2003 $ 428,717 $ 209,552 2.20%(20)
Period Ended March 31, 2002(24) 101,257 N/A N/A
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 128,789 $ 130,850 2.20%(20)
Year Ended March 31, 2002 57,321 N/A N/A
Period Ended March 31, 2001(23) 1 N/A N/A
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 4,377 $ 8,365 1.95%(25)
Year Ended March 31, 2002 2,436 857 2.20%
Period Ended March 31, 2001(23) 2 3 2.20%
(1) 1.60% as of June 1, 2000. 1.30% prior to June 1, 2000.
(2) 1.75% as of May 13, 2002. 2.00% prior to May 13, 2002.
(3) 1.30% as of June 1, 2000. 1.25% prior to June 1, 2000.
(4) 1.15% as of August 1, 2002. 0.95% prior to August 1, 2002.
(5) 1.65% as of August 1, 2002. 2.00% prior to August 1, 2002.
(6) 1.40% as of August 1, 2002. 2.00% prior to August 1, 2002.
(7) 2.10% as of August 1, 2002. 2.65% prior to August 1, 2002.
(8) 1.50% as of August 1, 2002. 2.25% prior to August 1, 2002.
(9) 1.70% as of August 1, 2002. 1.95% prior to August 1, 2002.
(10) 1.85% as of August 1, 2002. 2.25% prior to August 1, 2002.
(11) 1.40% as of August 1, 2002. 1.70% prior to August 1, 2002.
(12) 2.30% as of August 1, 2002. 2.60% prior to August 1, 2002.
(13) 2.05% as of August 1, 2002. 2.40% prior to August 1, 2002.
(14) 2.75% as of August 1, 2002. 3.00% prior to August 1, 2002.
(15) 2.05% as of August 1, 2002. 2.50% prior to August 1, 2002.
(16) 2.15% as of August 1, 2002. 3.00% prior to August 1, 2002.
(17) 2.35% as of August 1, 2002. 2.65% prior to August 1, 2002.
(18) 2.15% as of August 1, 2002. 2.70% prior to August 1, 2002.
(19) 2.50% as of August 1, 2002. 2.75% prior to August 1, 2002.
(20) Effective August 1, 2002.
(21) 2.35% as of June 1, 2000. 2.05% prior to June 1, 2000.
(22) 2.05% as of June 1, 2000. 2.00% prior to June 1, 2000.
(23) For the period December 1, 2000, commencement of operations, through
March 31, 2001.
(24) For the period December 17, 2001, commencement of operations, through
March 31, 2002.
(25) 1.95% as of August 1, 2002. 2.20% prior to August 1, 2002.
BOARD RENEWAL OF ADVISORY AGREEMENT
In renewing the Advisory Agreement, the board primarily considered, with respect
to each Fund, the nature, quality, and extent of the services provided under the
Agreement and the overall fairness of the Agreement. The board requested and
evaluated information from INVESCO that addressed specific factors designed to
assist in the board's consideration of these issues.
With respect to the nature and quality of the services provided, the board
reviewed, among other things (1) the overall performance results of the Funds in
comparison to relevant indices, (2) a summary for each Fund of the performance
of a peer group of investment companies pursuing broadly similar strategies
prepared by an independent data service, and (3) the degree of risk undertaken
by INVESCO as reflected by a risk/return summary, also prepared by the
independent data service. The board considered INVESCO's resources and
responsiveness with respect to Funds that have experienced performance
difficulties and discussed the efforts being made to improve the performance
records of such Funds. The board also considered the advantages to each Fund of
having an advisor that is associated with a global investment management
organization. In connection with its review of the quality of the execution of
the Funds' trades, the board considered INVESCO's use in fund transactions of
brokers or dealers that provided research and other services to INVESCO or its
affiliates, and the benefits derived from such services to the Funds and to
INVESCO. The board also considered the quality of the shareholder and
administrative services provided by INVESCO, as well as the firm's positive
compliance history.
With respect to the overall fairness of the Agreement, the board primarily
considered the fairness of fee arrangements and the profitability and any
fall-out benefits to INVESCO and its affiliates from their association with the
Funds. The board reviewed information from an independent data service about the
rates of compensation paid to investment advisors and overall expense ratios,
for funds comparable in size, character, and investment strategy to the Funds.
In concluding that the benefits accruing to INVESCO and its affiliates by virtue
of their relationships with the Funds were reasonable in comparison with the
costs of providing investment advisory services and the benefits accruing to
each Fund, the board reviewed specific data as to INVESCO's profit or loss on
each Fund, and carefully examined INVESCO's cost allocation methodology. In this
connection, the board requested that the Funds' independent auditors review
INVESCO's methodology for appropriateness. The board concluded that renewal of
the Agreement was in the best interest of the Funds' shareholders. These matters
were considered by the directors who are not affiliated with INVESCO (the
"Independent Directors") working with experienced 1940 Act counsel that is
independent of INVESCO.
ADMINISTRATIVE SERVICES AGREEMENT
INVESCO, either directly or through affiliated companies, provides certain
administrative, sub- accounting, and recordkeeping services to the Funds
pursuant to an Administrative Services Agreement dated June 1, 2000, as amended
February 10, 2003 with the Company.
The Administrative Service Agreement requires INVESCO to provide the following
services to the Funds:
o such sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Funds; and
o such sub-accounting, recordkeeping, and administrative services and
functions, which may be provided by affiliates of INVESCO, as are
reasonably necessary for the operation of Fund shareholder accounts
maintained by certain retirement plans and employee benefit plans for
the benefit of participants in such plans.
As full compensation for services provided under the Administrative Services
Agreement, each Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.045% of the average net assets of each Fund.
TRANSFER AGENCY AGREEMENT
INVESCO also performs transfer agent, dividend disbursing agent, and registrar
services for the Funds pursuant to a Transfer Agency Agreement dated June 1,
2000, as amended February 10, 2003 with the Company.
The Transfer Agency Agreement provides that each Fund pays INVESCO an annual fee
of $22.50 per shareholder account, or, where applicable, per participant in an
omnibus account. This fee is paid monthly at the rate of 1/12 of the annual fee
and is based upon the actual number of shareholder accounts and omnibus account
participants in each Fund at any time during each month.
FEES PAID TO INVESCO
During the periods outlined in the table below, the Funds paid the following
fees to INVESCO (if applicable, prior to the voluntary absorption of certain
Fund expenses by INVESCO). The fees are allocated daily to each class based on
the relative proportion of net assets represented by such class. To limit
expenses, INVESCO has contractually obligated itself to waive fees and bear
expenses through March 31, 2004 that would cause the ratio of expenses to
average net assets to exceed 2.10% for Class A shares, 2.75% for each of Class B
and Class C shares, and 2.20% for Class K shares. INVESCO is entitled to
reimbursement by a class of any fees waived pursuant to this arrangement if such
reimbursement does not cause the class to exceed the current expense limitations
and the reimbursement is made within three years after INVESCO incurred the
expense.
Administrative Transfer
Advisory Services Agency
-------- -------- ------
INVESTOR CLASS
- --------------
ENERGY FUND
Year Ended March 31, 2003 $ 2,050,307 $ 132,659 $ 1,351,371
Year Ended March 31, 2002 2,929,700 189,667 1,545,053
Year Ended March 31, 2001 2,879,451 186,653 1,075,177
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 6,122,659 $ 426,493 $ 3,201,855
Year Ended March 31, 2002 8,297,002 603,780 3,653,571
Year Ended March 31, 2001 8,371,286 609,355 3,592,106
GOLD & PRECIOUS METALS FUND
Year Ended March 31, 2003 $ 835,712 $ 59,722 $ 640,022
Year Ended March 31, 2002 579,576 44,747 591,845
Year Ended March 31, 2001 540,427 42,425 675,307
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 7,222,357 $ 515,834 $ 4,374,452
Year Ended March 31, 2002 10,066,179 748,431 4,995,833
Year Ended March 31, 2001 11,327,342 854,080 4,932,280
Administrative Transfer
Advisory Services Agency
-------- -------- ------
LEISURE FUND
Year Ended March 31, 2003 $ 4,325,688 $ 289,940 $ 2,455,246
Year Ended March 31, 2002 4,812,282 322,191 2,223,893
Year Ended March 31, 2001 4,052,866 266,399 1,546,588
REAL ESTATE OPPORTUNITY FUND
Year Ended March 31, 2003 $ 177,365 $ 19,838 $ 202,193
Year Ended March 31, 2002 195,437 21,375 184,349
Year Ended March 31, 2001 254,331 24,944 181,945
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 6,450,728 $ 493,538 $ 7,981,678
Year Ended March 31, 2002 11,221,569 952,220 9,473,575
Year Ended March 31, 2001 19,905,436 1,951,880 7,774,361
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 2,278,312 $ 167,771 $ 5,273,178
Year Ended March 31, 2002 6,059,211 479,920 7,169,676
Year Ended March 31, 2001 15,411,959 1,401,796 6,982,923
UTILITIES FUND
Year Ended March 31, 2003 $ 655,934 $ 49,190 $ 547,156
Year Ended March 31, 2002 1,271,828 86,184 663,815
Year Ended March 31, 2001 1,866,797 121,963 643,717
INSTITUTIONAL CLASS
- -------------------
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 5,032,432 $ 384,676 $ 1,921,921
Year Ended March 31, 2002 7,741,523 656,870 1,866,951
Year Ended March 31, 2001 14,662,130 1,439,144 1,436,449
CLASS A
- -------
ENERGY FUND
Year Ended March 31, 2003 $ 47,926 $ 3,111 $ 13,598
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 20,833 $ 1,436 $ 10,460
GOLD & PRECIOUS METALS FUND
Year Ended March 31, 2003 $ 11,649 $ 832 $ 10,637
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 9,687 $ 688 $ 9,750
Administrative Transfer
Advisory Services Agency
-------- -------- ------
LEISURE FUND
Year Ended March 31, 2003 $ 119,744 $ 7,971 $ 39,891
REAL ESTATE OPPORTUNITY FUND
Year Ended March 31, 2003 $ 8,600 $ 982 $ 2,124
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 12,982 $ 976 $ 7,798
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 5,271 $ 390 $ 3,544
UTILITIES FUND
Year Ended March 31, 2003 $ 2,533 $ 192 $ 1,045
CLASS B
- -------
ENERGY FUND
Year Ended March 31, 2003 $ 5,555 $ 361 $ 2,355
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 4,450 $ 307 $ 2,419
GOLD & PRECIOUS METALS FUND
Year Ended March 31, 2003 $ 6,563 $ 471 $ 898
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 2,401 $ 170 $ 1,618
LEISURE FUND
Year Ended March 31, 2003 $ 36,036 $ 2,397 $ 15,848
REAL ESTATE OPPORTUNITY FUND
Year Ended March 31, 2003 $ 516 $ 59 $ 285
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 1,084 $ 81 $ 857
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 73 $ 5 $ 131
UTILITIES FUND
Year Ended March 31, 2003 $ 1,296 $ 98 $ 294
Administrative Transfer
Advisory Services Agency
-------- -------- ------
CLASS C
- -------
ENERGY FUND
Year Ended March 31, 2003 $ 75,869 $ 4,911 $ 51,772
Year Ended March 31, 2002 71,360 4,614 36,128
Year Ended March 31, 2001 28,834 1,873 7,544
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 85,164 $ 5,932 $ 66,317
Year Ended March 31, 2002 89,895 6,538 43,206
Year Ended March 31, 2001 40,178 2,948 8,719
GOLD & PRECIOUS METALS FUND
Year Ended March 31, 2003 $ 18,502 $ 1,321 $ 12,141
Year Ended March 31, 2002 1,690 129 2,548
Year Ended March 31, 2001 56 4 65
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 53,017 $ 3,791 $ 98,464
Year Ended March 31, 2002 92,387 6,869 68,972
Year Ended March 31, 2001 30,819 2,330 14,710
LEISURE FUND
Year Ended March 31, 2003 $ 123,328 $ 8,252 $ 85,622
Year Ended March 31, 2002 66,957 4,491 37,966
Year Ended March 31, 2001 13,858 913 4,604
REAL ESTATE OPPORTUNITY FUND
Year Ended March 31, 2003 $ 6,162 $ 680 $ 9,500
Year Ended March 31, 2002 7,330 791 6,027
Year Ended March 31, 2001 8,340 816 2,078
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 47,458 $ 3,639 $ 136,791
Year Ended March 31, 2002 82,082 6,955 121,293
Year Ended March 31, 2001 58,968 5,691 34,315
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 21,116 $ 1,555 $ 99,233
Year Ended March 31, 2002 67,072 5,268 88,258
Year Ended March 31, 2001 52,776 4,761 30,893
Administrative Transfer
Advisory Services Agency
-------- -------- ------
UTILITIES FUND
Year Ended March 31, 2003 $ 7,076 $ 530 $ 12,459
Year Ended March 31, 2002 16,021 1,087 10,315
Year Ended March 31, 2001 8,377 547 2,420
CLASS K
- -------
ENERGY FUND
Year Ended March 31, 2003 $ 1,034 $ 67 $ 2,083
Year Ended March 31, 2002 40 2 274
Period Ended March 31, 20011 3 0 8
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 7,688 $ 533 $ 5,226
Year Ended March 31, 2002 2,642 191 1,181
Period Ended March 31, 20011 2 0 8
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 13,857 $ 988 $ 15,184
Year Ended March 31, 2002 7,002 519 4,885
Period Ended March 31, 20011 2 0 7
LEISURE FUND
Year Ended March 31, 2003 $ 428,717 $ 28,689 $ 599,451
Period Ended March 31, 2002(2) 101,257 6,857 13
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 128,789 $ 9,805 $ 289,239
Year Ended March 31, 2002 57,321 4,797 20,793
Period Ended March 31, 2001(1) 1 0 13
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 4,377 $ 323 $ 10,612
Year Ended March 31, 2002 2,436 183 2,901
Period Ended March 31, 2001(1) 2 0 7
(1) For the period December 1, 2000, commencement of operations, through
March 31, 2001.
(2) For the period December 17, 2001, commencement of operations, through
March 31, 2002.
DIRECTORS AND OFFICERS OF THE COMPANY
The overall direction and supervision of the Company come from the board of
directors. The board of directors is responsible for making sure that the Funds'
general investment policies and programs are carried out and that the Funds are
properly administered.
The officers of the Company, all of whom are officers and employees of INVESCO,
are responsible for the day-to-day administration of the Company and the Funds.
The officers of the Company receive no direct compensation from the Company or
the Funds for their services as officers. INVESCO has the primary responsibility
for making investment decisions on behalf of the Funds. These investment
decisions are reviewed by the investment committee of INVESCO.
The tables below provide information about each of the Company's directors and
officers. The first table provides information for the Independent Directors,
and the second table provides information for the directors who are "interested
persons" of the Company as defined in Section 2(a)(19) of the 1940 Act (the
"Interested Directors"). For the Interested Directors, information about their
principal occupations and other directorships reflects their affiliation with
INVESCO and its affiliated companies.
INDEPENDENT DIRECTORS
Name, Address, and Age Position(s) Held Principal Occupation(s) Number of Other Director-
With Company, During Past Five Years(2) Funds in ships Held by
Term of Office(1) Fund Com- Director
and Length of plex Over
Time Served(2) seen by
Director
Bob R. Baker Vice Chairman of Consultant (2000-present). 48
(3)(4)(5)(9)(10)(11)(12) the Board (2003- Formerly, President and Chief
37 Castle Pines Dr. N. present) Executive Officer (1988-2000)
Castle Rock, Colorado of AMC Cancer Research
Age: 66 Center, Denver, Colorado;
until mid-December 1988,
Vice Chairman of the Board of
First Columbia Financial
Corporation, Englewood,
Colorado; formerly, Chairman
of the Board and Chief
Executive Officer of First
Columbia Financial Corporation.
Name, Address, and Age Position(s) Held Principal Occupation(s) Number of Other Director-
With Company, During Past Five Years(2) Funds in ships Held by
Term of Office(1) Fund Com- Director
and Length of plex Over
Time Served(2) seen by
Director
Sueann Ambron, Ph.D.(5) Director (since Dean of the Business School, 48
University of Colorado 2003) College of Business,
at Denver University of Colorado at
1250 14th Street Denver (2000-present).
Denver, Colorado Formerly, President and
Age: 58 Chief Executive Officer of
Avulet, Inc., Sunnyvale,
California (1998-1999), and
Vice President and General
Manager, Multimedia Services
Division, Motorola, Inc.,
Schaumburg, Illinois (1996-
1998).
Victor L. Andrews, Ph.D. Director Professor Emeritus, Chairman 48
(5)(7)(10)(11) Emeritus and Chairman and CFO
34 Seawatch Drive of the Roundtable of the
Savannah, Georgia Department of Finance of
Age: 73 Georgia State University; and
President, Andrews Financial
Associates, Inc. (consulting
firm). Formerly, member of
the faculties of the Harvard
Business School and the Sloan
School of Management of MIT.
Lawrence H. Budner Director Trust Consultant. Formerly, 48
(3)(6)(10)(11) Senior Vice President and
7608 Glen Albens Circle Senior Trust Officer of
Dallas, Texas InterFirst Bank, Dallas,
Age: 73 Texas.
Name, Address, and Age Position(s) Held Principal Occupation(s) Number of Other Director-
With Company, During Past Five Years(2) Funds in ships Held by
Term of Office(1) Fund Com- Director
and Length of plex Over
Time Served(2) seen by
Director
James T. Bunch Director (since Co-President and Founder of 48
(4)(5)(6)(8)(9)(12) 2000) Green, Manning & Bunch Ltd.,
3600 Republic Plaza Denver, Colorado
370 Seventeenth Street (1988-present); Director and
Denver, Colorado Vice President of Western
Age: 60 Golf Association and Evans
Scholars Foundation;
Executive Committee, United
States Golf Association.
Formerly, General Counsel and
Director of Boettcher & Co.,
Denver, Colorado; and
formerly, Chairman and
Managing Partner of Davis,
Graham & Stubbs, Denver,
Colorado.
Gerald J. Lewis(3)(7)(8)(9) Director (since Chairman of Lawsuit Reso- 48 Director of General Chemical
701 "B" Street 2000) lution Services, San Diego, Group, Inc., Hampdon, New
Suite 2100 California (1987-present). Hampshire (1996-present).
San Diego, California Formerly, Associate Justice Director of Wheelabrator
Age: 69 of the California Court of Technologies, Inc., Fisher
Appeals; and Of Counsel, Scientific, Inc., Henley
Latham & Watkins, San Diego, Manufacturing, Inc., and
California (1987-1997). California Coastal
Properties, Inc.
Name, Address, and Age Position(s) Held Principal Occupation(s) Number of Other Director-
With Company, During Past Five Years(2) Funds in ships Held by
Term of Office(1) Fund Com- Director
and Length of plex Over
Time Served(2) seen by
Director
John W. McIntyre Director Retired. Trustee of Gables 48
(3)(4)(6)(8)(12) Residential Trust; Trustee
7 Piedmont Center Suite 100 and Chairman of the J.M. Tull
Atlanta, Georgia Charitable Foundation;
Age: 72 Director of Kaiser Foundation
Health Plans of Georgia, Inc.
Formerly, Vice Chairman of
the Board of Directors of The
Citizens and Southern
Corporation and Chairman of
the Board and Chief Executive
Officer of The Citizens and
Southern Georgia Corp. and
The Citizens and Southern
National Bank; formerly,
Trustee of INVESCO Global
Health Sciences Fund and
Trustee of Employee's
Retirement System of GA,
Emory University.
Larry Soll, Ph.D. Director (since Retired. Formerly, Chairman 48 Director of Synergen since
(5)(7)(9)(10)(11) 1997) of the Board (1987-1994), incorporation in 1982;
2358 Sunshine Canyon Drive Chief Executive Officer Director of Isis
Boulder, Colorado (1982-1989 and 1993-1994) and Pharmaceuticals, Inc.
Age: 61 President (1982-1989) of
Synergen Inc.; and formerly,
Trustee of INVESCO Global
Health Sciences Fund.
INTERESTED DIRECTORS AND OFFICERS.
Messrs. Cunningham and Healey are Interested Directors by virtue of the fact
that they are officers of INVESCO. Mr. Williamson is an Interested Director by
virtue of the fact that he is an officer of AMVESCAP PLC, the parent company of
INVESCO.
Name, Address, and Age Position(s) Held Principal Occupation(s) Number of Other Director-
With Company, During Past Five Years(2) Funds in ships Held by
Term of Office(1) Fund Com- Director
and Length of plex Over-
Time Served(2) seen by
Director
Mark H. Williamson(4) Chairman of the President and Chief Executive 48
4350 South Monaco Street Board (since Officer, AIM Investment
Denver, Colorado 1999). Formerly, Management and Chief
Age: 52 President (1998- Executive Officer of the AIM
2002) and Chief Division of AMVESCAP PLC
Executive Officer (1998-2002). Formerly, Chief
(2003-present). Executive Officer, Managed
Products Division, AMVESCAP
PLC (2001-2002). Formerly,
Chairman of the Board
(1998-2002), President
(1998-2002), and Chief
Executive Officer (1998-2002)
of INVESCO Funds Group, Inc.
and of INVESCO Distributors,
Inc. Formerly, Chief
Operating Officer and
Chairman of the Board of
INVESCO Global Health
Sciences Fund; formerly,
Chairman and Chief Executive
Officer of NationsBanc
Advisors, Inc.; and formerly,
Chairman of NationsBanc
Investments, Inc.
Name, Address, and Age Position(s) Held Principal Occupation(s) Number of Other Director-
With Company, During Past Five Years(2) Funds in ships Held by
Term of Office(1) Fund Com- Director
and Length of plex Over-
Time Served(2) seen by
Director
Raymond R. Cunningham President President (2003-present) and 48 Director of INVESCO Funds
(11)(12) (2003-present), Chief Executive Officer Group, Inc. and Chairman of
4350 South Monaco Street Chief Executive (2003-present) of INVESCO the Board of INVESCO
Denver, Colorado Officer (2003- Funds Group, Inc.; Chairman Distributors, Inc.
Age: 52 present) and of the Board (2003-present),
Director (2001- President (2003-present), and
present). Formerly, Chief Executive Officer
Vice President (2003-present) of INVESCO
(2001-2002). Distributors, Inc. Formerly,
Chief Operating Officer
(2002-2003) and Senior Vice
President (1999-2002) of
INVESCO Funds Group, Inc. and
INVESCO Distributors, Inc.;
and formerly, Senior Vice
President of GT Global -
North America (1992-1998).
Richard W. Healey Director (since Senior Vice 40 Director of INVESCO Funds
4350 South Monaco Street (2000) President of INVESCO Group, Inc. and INVESCO Dis
Denver, Colorado Funds Group, Inc.; tributors, Inc.
Age: 48 Senior Vice
President of INVESCO
Distributors, Inc.
Formerly, Senior
Vice President of GT
Global - North
America (1996-1998)
and The Boston
Company (1993-1996).
Name, Address, and Age Position(s) Held Principal Occupation(s) Number of Other Director-
With Company, During Past Five Years(2) Funds in ships Held by
Term of Office(1) Fund Com- Director
and Length of plex Over-
Time Served(2) seen by
Director
Glen A. Payne Secretary Senior Vice President,
4350 South Monaco Street General Counsel and Secretary
Denver, Colorado of INVESCO Funds Group, Inc.;
Age: 55 Senior Vice President,
Secretary and General Counsel
of INVESCO Distributors, Inc.
Formerly, Secretary of
INVESCO Global Health
Sciences Fund; General
Counsel of INVESCO Trust
Company (1989-1998); and
employee of a U.S. regulatory
agency, Washington, D.C.
(1973-1989).
Ronald L. Grooms Chief Accounting Senior Vice President and Director of INVESCO Funds
4350 South Monaco Street Officer, Chief Treasurer of INVESCO Funds Group, Inc. and INVESCO
Denver, Colorado Financial Officer Group, Inc.; and Senior Vice Distributors, Inc.
Age: 56 and Treasurer President and Treasurer of
INVESCO Distributors, Inc.
Formerly, Treasurer and
Principal Financial and
Accounting Officer of INVESCO
Global Health Sciences Fund;
and Senior Vice President and
Treasurer of INVESCO Trust
Company (1988-1998).
William J. Galvin, Jr. Assistant Secretary Senior Vice President and Director of INVESCO Funds
4350 South Monaco Street Assistant Secretary of Group, Inc. and INVESCO
Denver, Colorado INVESCO Funds Group, Inc.; Distributors, Inc.
Age: 46 and Senior Vice President
and Assistant Secretary of
INVESCO Distributors, Inc.
Formerly, Trust Officer of
INVESCO Trust Company
(1995-1998).
Name, Address, and Age Position(s) Held Principal Occupation(s) Number of Other Director-
With Company, During Past Five Years(2) Funds in ships Held by
Term of Office(1) Fund Com- Director
and Length of plex Over-
Time Served(2) seen by
Director
Pamela J. Piro Assistant Treasurer Vice President and Assistant
4350 South Monaco Street Treasurer of INVESCO Funds
Denver, Colorado Group, Inc.; and Assistant
Age: 42 Treasurer of INVESCO
Distributors, Inc. Formerly,
Assistant Vice President
(1996-1997).
Tane' T. Tyler Assistant Secretary Vice President and Assistant
4350 South Monaco Street (since 2002) General Counsel of INVESCO
Denver, Colorado Funds Group, Inc.
Age: 37
(1) Each director shall hold office until his or her successor shall have been
duly chosen and qualified, or until he or she shall have resigned or shall have
been removed in the manner provided by law. Each officer shall hold office until
the first meeting of the board of directors after the annual meeting of the
shareholders next following his or her election or, if no such annual meeting of
the shareholders is held, until the annual meeting of the board of directors in
the year following his or her election, and, until his or her successor is
chosen and qualified or until he or she shall have resigned or died, or until he
or she shall have been removed as provided in the Company's bylaws. The board of
directors has adopted a retirement policy providing for mandatory retirement of
a Fund director at the end of the calendar quarter in which the director becomes
75, with a director being afforded the opportunity to retire voluntarily upon
reaching age 72 or at any time between ages 72 and 75.
(2) Except as otherwise indicated, each individual has held the position(s)
shown for at least the last five years.
(3) Member of the audit committee of the Company.
(4) Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
(5) Member of the investments and management liaison committee of the Company.
(6) Member of the brokerage committee of the Company.
(7) Member of the derivatives committee of the Company.
(8) Member of the legal committee of the Company.
(9) Member of the nominating committee of the Company.
(10) Member of the compensation committee of the Company.
(11) Member of the retirement plan committee of the Company.
(12) Member of the valuation committee of the Company.
BOARD OF DIRECTORS STANDING COMMITTEES
The board of directors has an audit committee comprised of four directors who
are Independent Directors. The committee meets quarterly with the Company's
independent accountants and officers to review accounting principles used by the
Company, the adequacy of internal controls, the responsibilities and fees of the
independent accountants, and other matters. This committee held 4 meetings
during the fiscal year ended March 31, 2003.
The Company has an investments and management liaison committee which meets
quarterly with various management personnel of INVESCO in order to facilitate
better understanding of management and operations of the Company, and to review
legal and operational matters which have been assigned to the committee by the
board of directors, in furtherance of the board of directors' overall duty of
supervision. This committee held 4 meetings during the fiscal year ended March
31, 2003.
The Company has a brokerage committee. The committee meets periodically to
review soft dollar and other brokerage transactions by the Funds and to review
policies and procedures of INVESCO with respect to brokerage transactions. It
reports on these matters to the Company's board of directors. This committee
held 4 meetings during the fiscal year ended March 31, 2003.
The Company has a derivatives committee. The committee meets quarterly to review
derivatives investments made by the Funds. It monitors the use of derivatives by
the Funds and the procedures utilized by INVESCO to ensure that the use of such
instruments follows the policies adopted by the Company's board of directors.
The committee reports on these matters to the Company's board of directors. It
held 4 meetings during the fiscal year ended March 31, 2003.
The Company has a valuation committee, a legal committee, a compensation
committee, and a retirement plan committee. These committees meet when necessary
to review valuation, legal, compensation, and retirement plan matters of
importance to the Company. During the fiscal year ended March 31, 2003, the
legal committee met 3 times, the compensation committee met 2 times, and the
valuation and retirement plan committees did not meet.
The Company has a nominating committee. The committee meets periodically to
review and nominate candidates for positions as independent directors to fill
vacancies on the board of directors. The nominating committee will consider
nominees recommended by shareholders. If a shareholder desires to nominate a
candidate, he or she must submit a request in writing to the Chairman of the
nominating committee. All requests should be sent to The President, INVESCO
Funds Group, Inc., 4350 South Monaco Street, Denver, CO 80237. During the fiscal
year ended March 31, 2003, the nominating committee met 4 times.
The following table provides information regarding the dollar range of equity
securities beneficially owned by each director in each Fund and in the
investment companies in the INVESCO Funds that are overseen by the director, as
a whole, as of December 31, 2002:
- ----------------------------------------------------------------------------------------------------------
Director Dollar Range of Equity Securities Aggregate Dollar
Owned in Each Fund(1) Range of Equity
Securities in All
Registered Investment
Companies Overseen by
the director in the
INVESCO Funds(1)
- ----------------------------------------------------------------------------------------------------------
INDEPENDENT
DIRECTORS
- ----------------------------------------------------------------------------------------------------------
Bob R. Baker INVESCO Energy Fund $1-$10,000 $10,001-$50,000
INVESCO Financial Services Fund $1-$10,000
INVESCO Gold & Precious Metals Fund $1-$10,000
INVESCO Health Sciences Fund $1-$10,000
INVESCO Leisure Fund $1-$10,000
INVESCO Real Estate Opportunity Fund $1-$10,000
INVESCO Technology Fund $1-$10,000
INVESCO Telecommunications Fund $1-$10,000
INVESCO Utilities Fund $1-$10,000
- ----------------------------------------------------------------------------------------------------------
Sueann Ambron INVESCO Energy Fund $0
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Real Estate Opportunity Fund
INVESCO Technology Fund
INVESCO Telecommunications Fund
INVESCO Utilities Fund
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Director Dollar Range of Equity Securities Aggregate Dollar
Owned in Each Fund(1) Range of Equity
Securities in All
Registered Investment
Companies Overseen by
the director in the
INVESCO Funds(1)
- -----------------------------------------------------------------------------------------------------------
Victor L. Andrews INVESCO Energy Fund $1-$10,000 $50,001-$100,000
INVESCO Financial Services Fund $1-$10,000
INVESCO Gold & Precious Metals Fund $1-$10,000
INVESCO Health Sciences Fund $1-$10,000
INVESCO Leisure Fund $50,001-$100,000
INVESCO Real Estate Opportunity Fund $1-$10,000
INVESCO Technology Fund $1-$10,000
INVESCO Telecommunications Fund $1-$10,000
INVESCO Utilities Fund $1-$10,000
- ----------------------------------------------------------------------------------------------------------
Lawrence H. Budner INVESCO Energy Fund $1-$10,000 Over $100,000
INVESCO Financial Services Fund $1-$10,000
INVESCO Gold & Precious Metals Fund $1-$10,000
INVESCO Health Sciences Fund $10,001-$50,000
INVESCO Leisure Fund $10,001-$50,000
INVESCO Real Estate Opportunity Fund $1-$10,000
INVESCO Technology Fund $1-$10,000
INVESCO Telecommunications Fund $1-$10,000
INVESCO Utilities Fund $1-$10,000
- ----------------------------------------------------------------------------------------------------------
James T. Bunch INVESCO Energy Fund $1-$10,000 $50,001-$100,000
INVESCO Financial Services Fund $1-$10,000
INVESCO Gold & Precious Metals Fund $1-$10,000
INVESCO Health Sciences Fund $1-$10,000
INVESCO Leisure Fund $1-$10,000
INVESCO Real Estate Opportunity Fund $1-$10,000
INVESCO Technology Fund $1-$10,000
INVESCO Telecommunications Fund $1-$10,000
INVESCO Utilities Fund $1-$10,000
- ----------------------------------------------------------------------------------------------------------
Gerald J. Lewis INVESCO Energy Fund $1-$10,000 $50,001-$100,000
INVESCO Financial Services Fund $1-$10,000
INVESCO Gold & Precious Metals Fund $1-$10,000
INVESCO Health Sciences Fund $1-$10,000
INVESCO Leisure Fund $1-$10,000
INVESCO Real Estate Opportunity Fund $1-$10,000
INVESCO Technology Fund $1-$10,000
INVESCO Telecommunications Fund $1-$10,000
INVESCO Utilities Fund $1-$10,000
- ----------------------------------------------------------------------------------------------------------
John W. McIntyre INVESCO Energy Fund $1-$10,000 Over $100,000
INVESCO Financial Services Fund $1-$10,000
INVESCO Gold & Precious Metals Fund $1-$10,000
INVESCO Health Sciences Fund $1-$10,000
INVESCO Leisure Fund $50,001-$100,000
INVESCO Real Estate Opportunity Fund $1-$10,000
INVESCO Technology Fund $10,001-$50,000
INVESCO Telecommunications Fund $1-$10,000
INVESCO Utilities Fund $1-$10,000
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Director Dollar Range of Equity Securities Aggregate Dollar
Owned in Each Fund(1) Range of Equity
Securities in All
Registered Investment
Companies Overseen by
the director in the
INVESCO Funds(1)
- ----------------------------------------------------------------------------------------------------------
Larry Soll INVESCO Energy Fund $50,001-$100,000 Over $100,000
INVESCO Financial Services Fund $10,001-$50,000
INVESCO Gold & Precious Metals Fund $10,001-$50,000
INVESCO Health Sciences Fund $10,001-$50,000
INVESCO Leisure Fund $10,001-$50,000
INVESCO Real Estate Opportunity Fund $1-$10,000
INVESCO Technology Fund $10,001-$50,000
INVESCO Telecommunications Fund $1-$10,000
INVESCO Utilities Fund $1-$10,000
- ----------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
- ----------------------------------------------------------------------------------------------------------
Mark H. Williamson INVESCO Energy Fund Over $100,000 Over $100,000
INVESCO Financial Services Fund $50,001-$100,000
INVESCO Gold & Precious Metals Fund None
INVESCO Health Sciences Fund $10,001-$50,000
INVESCO Leisure Fund $10,001-$50,000
INVESCO Real Estate Opportunity Fund None
INVESCO Technology Fund $10,001-$50,000
INVESCO Telecommunications Fund $10,001-$50,000
INVESCO Utilities Fund None
- ----------------------------------------------------------------------------------------------------------
Raymond R. Cunningham INVESCO Energy Fund None Over $100,000
INVESCO Financial Services Fund None
INVESCO Gold & Precious Metals Fund None
INVESCO Health Sciences Fund $50,001-$100,000
INVESCO Leisure Fund $10,001-$50,000
INVESCO Real Estate Opportunity Fund None
INVESCO Technology Fund $10,001-$50,000
INVESCO Telecommunications Fund $10,001-$50,000
INVESCO Utilities Fund None
- ----------------------------------------------------------------------------------------------------------
Richard Healey INVESCO Energy Fund Over $100,000 Over $100,000
INVESCO Financial Services Fund $1-$10,000
INVESCO Gold & Precious Metals Fund None
INVESCO Health Sciences Fund $1-$10,000
INVESCO Leisure Fund $10,001-$50,000
INVESCO Real Estate Opportunity Fund None
INVESCO Technology Fund $1-$10,000
INVESCO Telecommunications Fund $1-$10,000
INVESCO Utilities Fund None
- ----------------------------------------------------------------------------------------------------------
(1) All valuations of Fund shares are as of December 31, 2002.
The following table shows the compensation paid by the Company to its
Independent Directors for services rendered in their capacities as directors of
the Company; the benefits accrued as Company expenses with respect to the
Retirement Plan discussed below; and the estimated annual benefits to be
received by these directors upon retirement as a result of their service to the
Company, all for the fiscal year ended March 31, 2003.
In addition, the table sets forth the total compensation paid by all of the
INVESCO Funds to these directors for services rendered in their capacities as
directors during the year ended December 31, 2002. As of December 31, 2002,
there were 48 INVESCO Funds.
- --------------------------------------------------------------------------------------------------
Name of Person Aggregate Compen- Benefits Accrued Estimated Annual Total Compensa-
and Position sation From As Part of Company Benefits Upon tion From INVESCO
Company(1) Expenses(2) Retirement(3) Funds Paid To
Directors(7)
- --------------------------------------------------------------------------------------------------
Bob R. Baker, Vice $34,423 $0 $9,323 $138,000
Chairman of the
Board
- --------------------------------------------------------------------------------------------------
Sueann Ambron(4) $6,393 $0 $0 $0
- --------------------------------------------------------------------------------------------------
Victor L. Andrews $30,503 $0 $9,323 $127,500
- --------------------------------------------------------------------------------------------------
Lawrence H. Budner $29,697 $7,837 $9,323 $121,500
- --------------------------------------------------------------------------------------------------
James T. Bunch $31,203 $0 $0 $124,625
- --------------------------------------------------------------------------------------------------
Fred A. Deering(5) $35,698 $0 $10,146 $140,500
- --------------------------------------------------------------------------------------------------
Wendy L. Gramm(5) $0 $0 $0 $74,875
- --------------------------------------------------------------------------------------------------
Gerald J. Lewis $28,870 $0 $0 $116,500
- --------------------------------------------------------------------------------------------------
John W. McIntyre $31,388 $7,837 $9,323 $124,000
- --------------------------------------------------------------------------------------------------
Larry Soll $31,522 $0 $0 $126,000
- --------------------------------------------------------------------------------------------------
Total $259,697 $15,674 $47,438 $1,093,500
- --------------------------------------------------------------------------------------------------
% of Net Assets 0.0055%(6) 0.0003%(6) 0.0060%(7)
- --------------------------------------------------------------------------------------------------
(1) The vice chairman of the board, the chairs of certain of the Funds'
committees who are Independent Directors, and the members of the Funds'
committees who are Independent Directors each receive compensation for serving
in such capacities in addition to the compensation paid to all Independent
Directors.
(2) Represents estimated benefits accrued with respect to the Retirement Plan
and Deferred Retirement Plan Account Agreement discussed below, and not
compensation deferred at the election of the directors.
(3) These amounts represent the Company's share of the estimated annual benefits
payable by the INVESCO Funds upon the directors' retirement, calculated using
the current method of allocating director compensation among the INVESCO Funds.
These estimated benefits assume retirement at age 72. With the exception of Dr.
Ambron and Messrs. Bunch and Lewis, each of these directors has served as a
director of one or more of the funds in the INVESCO Funds for the minimum
five-year period required to be eligible to participate in the Retirement Plan.
(4) Dr. Ambron commenced her service as a director of the Company on January 1,
2003.
(5) Dr. Gramm resigned as a director of the Company on February 7, 2002. Mr.
Deering retired as a director of the Company on March 31, 2003.
(6) Total as a percentage of the Company's net assets as of March 31, 2003.
(7) Total compensation as a percentage of the net assets of the INVESCO Funds as
of December 31, 2002.
Messrs. Cunningham, Healey and Williamson, as Interested Directors of the
Company and the other INVESCO Funds, receive compensation as officers or
employees of INVESCO or its affiliated companies, and do not receive any
director's fees or other compensation from the Company or the other funds in the
INVESCO Funds for their service as directors.
PARTICIPATION IN CERTAIN PLANS AND AGREEMENTS
The boards of directors of the INVESCO Funds have adopted a Retirement Plan (the
"Plan") and a Deferred Retirement Plan Account Agreement (the "Agreement").
Certain of the Independent Directors of the Company participate either in the
Plan or in the Agreement. Under the Plan and the Agreement, each participating
director who is not an interested person of the Funds (as defined in Section
2(a)(19) of the 1940 Act) and who has served for at least five years (a
"Participating Qualified Director") is entitled to receive a benefit upon
retirement.
THE PLAN
Commencing with attainment of age 72 by a Participating Qualified Director who
has elected to participate in the Plan and who voluntarily retires prior to
reaching age 72, and commencing with the date of retirement of a Participating
Qualified Director who retires upon reaching age 72 or at any time subsequent to
age 72 up to the mandatory retirement age of 75, a Participating Qualified
Director shall receive quarterly payments at an annual rate of $34,000 (the
"Annual Benefit"). Directors who became Participating Qualified Directors on or
before January 1, 2001 who retire upon reaching age 72 (or at age 73 or 74, if
the Director extends his retirement date for one to two years, but less than
three years) are entitled to payment for one year of twice the Annual Benefit.
Payment of the Annual Benefit will continue for the remainder of the
Participating Qualified Director's life or ten years, whichever is longer. If a
Participating Qualified Director becomes disabled before the date upon which his
or her Annual Benefit payments would normally commence, such benefit payments
will begin. If a Participating Qualified Director dies prior to the receipt of
the Annual Benefit for ten years, the Annual Benefit will be paid to his/her
beneficiary or estate until an aggregate of ten years of payments has been
received. A Participating Qualified Director who has elected to participate in
the Plan receives no benefits from the Agreement. The Plan is administered by a
committee of four directors, including at least one director who is not a Plan
participant. The cost of the Plan will be allocated among the INVESCO Funds in a
manner determined to be fair and equitable by the committee. The Company began
making payments under an earlier Plan to former director Daniel D. Chabris as of
October 1, 1998 and to former director Kenneth T. King as of January 1, 2000.
Messrs. Chabris and King are entitled to receive quarterly payments at an annual
rate equal to 50% of the annual retainer fees and annual board meeting fees
which are paid to an active Fund director. Annual payments made to Messrs.
Chabris and King exceed $34,000 per year.
THE AGREEMENT
A Participating Qualified Director who has elected to participate in the
Agreement receives no benefits from the Plan. Pursuant to the terms of the
Agreement, a deferred retirement account is established for a Qualified
Participating Director (the "Account"). The dollar amount credited to the
Account is in an amount which, based upon an assumed account appreciation rate
of 6.25% per annum, will provide the Participating Qualified Director with an
account value of $340,000 upon reaching age 72. Once the initial dollar amount
of the Account is established, Account proceeds are invested in shares of one or
more of the INVESCO Funds. The value of the Account fluctuates with the
appreciation or depreciation in the shares of the Funds owned by the Account and
Account shares are increased by the amount of any dividends and capital gains
distributions paid with respect to the shares. Upon retirement, a Participating
Qualified Director is entitled to receive the value in the Account either in a
lump sum payment or in payments over a stipulated number of months. The Account
value continues to fluctuate as long as monthly payments are made. If a
Participating Qualified Director becomes disabled or dies prior to his or her
retirement and if, at the time of disability or death, the value of a
Participating Qualified Director's Account is less than $340,000, the Director
or the Director's beneficiary or estate will not be paid the value in the
Account but will receive $34,000 per annum for ten years. If, at the time of the
Participating Qualified Director's death or disability prior to retirement, the
value in the director's Account is $340,000 or more, the Participating Qualified
Director or his or her estate or beneficiary will receive the value in the
Account either in a lump sum or in quarterly installments. The cost of providing
the initial dollar amount to be allocated to a Participating Qualified
Director's Account and the cost of payment of any death or disability benefit
that aggregates more than the Account value will be allocated among the INVESCO
Funds in a manner determined to be fair and equitable by a committee appointed
to administer the Agreement. The committee is composed of three interested
Directors and one Independent Director of the Funds.
The Company has no stock options, pension, or retirement plans for affiliated
directors of the INVESCO Funds or for management or other personnel, and pays no
salary or compensation to any of its officers.
DEFERRED COMPENSATION PLAN
The Independent Directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of the INVESCO Funds.
Certain of the deferred amounts have been invested in the shares of all INVESCO
Funds except Funds offered by INVESCO Variable Investment Funds, Inc., in which
the directors are legally precluded from investing. Each Independent Director
may, therefore, be deemed to have an indirect interest in shares of each such
INVESCO Fund, in addition to any INVESCO Fund shares the Independent Director
may own either directly or beneficially. Each of the Independent Directors has
agreed to invest a minimum of $100,000 of his or her own resources in shares of
the INVESCO Funds. Compensation contributed to a deferred compensation plan may
constitute all or a portion of this $100,000 commitment.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of June 30, 2003, the following persons owned more than 5% of the outstanding
shares of the Funds indicated below. This level of share ownership is considered
to be a "principal shareholder" relationship with a Fund under the 1940 Act.
Shares that are owned "of record" are held in the name of the person indicated.
Shares that are owned "beneficially" are held in another name, but the owner has
the full economic benefit of ownership of those shares:
INVESTOR CLASS
- --------------
ENERGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co. Inc. Special Custody Acct. Beneficial 30.43%
for the Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
National Financial Services Corp. Beneficial 7.76%
The Exclusive Benefit of Customers
One World Financial Center
Attn: Kate - Recon.
200 Liberty Street, 5th Floor
New York, NY 10281-5500
- -----------------------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co Beneficial 33.40%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
National Financial Services Corp. Beneficial 5.88%
The Exclusive Benefit of Customers
One World Financial Center
Attn: Kate - Recon.
200 Liberty Street, 5th Floor
New York, NY 10281-5500
- -----------------------------------------------------------------------------------------------
GOLD & PRECIOUS METALS FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co Beneficial 21.90%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co Inc. Beneficial 23.54%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
National Financial Services Corp. Beneficial 5.47%
The Exclusive Benefit of Customers
One World Financial Center
Attn: Kate - Recon.
200 Liberty Street, 5th Floor
New York, NY 10281-5500
- -----------------------------------------------------------------------------------------------
LEISURE FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co Inc Beneficial 27.43%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
National Financial Services Corp. Beneficial 5.34%
The Exclusive Benefit of Customers
One World Financial Center
Attn: Kate - Recon.
200 Liberty Street, 5th Floor
New York, NY 10281-5500
- -----------------------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co Inc Beneficial 13.67%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
TECHNOLOGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co Beneficial 25.33%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co Inc. Beneficial 24.20%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
National Financial Services Corp. Beneficial 8.23%
The Exclusive Benefit of Customers
One World Financial Center
Attn: Kate - Recon.
200 Liberty Street, 5th Floor
New York, NY 10281-5500
- -----------------------------------------------------------------------------------------------
UTILITIES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co Beneficial 34.62%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS
- -------------------
TECHNOLOGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
State Street Global ADV TR Beneficial 99.99%
Boeing Company Master Trust
105 Rosemond Avenue Wesin
Westwood, MA 02090-2318
- -----------------------------------------------------------------------------------------------
CLASS A
- -------
ENERGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Prudential Securities, Inc. Beneficial 7.48%
Acct 910-404559-000
Attn: Mutual Funds
1 New York Plaza
New York, NY 10004-1901
- -----------------------------------------------------------------------------------------------
Charles Schwab & Co, Inc. Beneficial 30.81%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
UBS Financial Services, Inc. Beneficial 13.34%
Alan D. Moore
C/O Red Oak Capital
15303 Dallas Pkwy
Suite 350, LB-45
Addison, TX 750001-4677
- -----------------------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co, Inc. Beneficial 46.77%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
Merrill Lynch Beneficial 10.12%
Security #97MN6
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
- -----------------------------------------------------------------------------------------------
GOLD & PRECIOUS METALS FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Mid Atlantic Capital Corp Cust Beneficial 6.71%
Nutramax Laboratories Inc. Yolk PSP
2208 Lakeside Blvd
Edgewood, MD 21040-1102
- -----------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co, Inc. Beneficial 37.85%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
Prudential Securities, Inc. Beneficial 6.63%
Acct 910-4U4559-000
Attn: Mutual Funds
1 New York Plaza
New York, NY 10004-1901
- -----------------------------------------------------------------------------------------------
LEISURE FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co, Inc. Beneficial 35.41%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
FTC & Co. Beneficial 68.19%
Account #00022
P.O. Box 173736 Denver, CO 80217-3736
- -----------------------------------------------------------------------------------------------
Charles Schwab & Co, Inc. Beneficial 7.98%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
TECHNOLOGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co, Inc. Beneficial 12.32%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
FTC & Co., Account #00022 Beneficial 48.92%
Datalynx
P.O. Box 173736 Denver, CO 80217-3736
- -----------------------------------------------------------------------------------------------
FTC & Co. Beneficial 9.75%
Attn: Datalynx #00319
P.O. Box 173736 Denver, CO 80217-3736
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Charles Schwab & Co, Inc. Beneficial 26.90%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
Prudential Securities, Inc. Beneficial 35.95%
Acct. 910-4U4559-000
Attn: Mutual Funds
1 New York Plaza
New York, NY 10004-1901
- -----------------------------------------------------------------------------------------------
UTILITIES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
UBS Financial Services, Inc. Beneficial 6.40%
Dorothy S. Depp
700 Ocean Ave, Apt 314
Spring Lake, NJ 07762-1272
- -----------------------------------------------------------------------------------------------
Charles Schwab & Co, Inc. Beneficial 12.22%
Special Custody Acct For The Exclusive
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Prudential Securities, Inc. Beneficial 52.26%
Acct 910-4U4559-000
Attn: Mutual Funds
1 New York Plaza
New York, NY 10004-1901
- -----------------------------------------------------------------------------------------------
Pershing LLC Beneficial 5.75%
P.O. Box 2052
Jersey City, NJ 07303-2052
- -----------------------------------------------------------------------------------------------
CLASS B
- -------
ENERGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
AMVESCAP NATL TC CUST IRA R/O Beneficial 6.45%
Jeffrey D. Barrow
17569 Plum Creek Trl
Chagrin Falls, OH 44023-5605
- -----------------------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
None
- -----------------------------------------------------------------------------------------------
GOLD & PRECIOUS METALS FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Pershing LLC Beneficial 8.52%
P.O. Box 2052
Jersey City, NJ 07303-2052
- -----------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Dean Witter For The Benefit of Beneficial 5.11%
Robert G. Leggett
PO Box 250
New York, NY 10008-0250
- -----------------------------------------------------------------------------------------------
Merrill Lynch Beneficial 6.78%
Security #97MN6
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
- -----------------------------------------------------------------------------------------------
American Enterprise Investment Svcs Beneficial 6.11%
FBO 224368931
PO Box 9446
Minneapolis, MN 55440-9446
- -----------------------------------------------------------------------------------------------
LEISURE FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
None
- -----------------------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
American Enterprise Investment Svcs Beneficial 9.41%
FBO 215222551
PO Box 9446
Minneapolis, MN 55440-9446
- -----------------------------------------------------------------------------------------------
First Clearing Corporation Beneficial 6.19%
A/C 5740-9809
Michael J. McGlynn IRA
1 Woodstream Ct
New Hartford, NY 13413-2712
- -----------------------------------------------------------------------------------------------
American Enterprise Investment Shrs Beneficial 13.46%
FBO 217843921
P.O. Box 9446
Minneapolis, MN 55440-9446
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Valgeen M. Smeltzer Trustee Beneficial 31.66%
Valgean M. Smeltzer Trust
3227 Caughey Rd
Erie, PA 16506-2739
- -----------------------------------------------------------------------------------------------
TECHNOLOGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
FISERV Securities Inc. Beneficial 7.85%
FAO 10594500
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103-7008
- -----------------------------------------------------------------------------------------------
FISERV Securities Inc. Beneficial 6.34%
FAO 10335088
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103-7008
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
American Enterprise Investment Svcs Beneficial 17.23%
FBO 146005061
PO Box 9446
Minneapolis, MN 55440-9446
- -----------------------------------------------------------------------------------------------
National Investor Services FBO Beneficial 6.09%
434-04898-24
55 Water Street, 32nd Floor
New York, NY 10041-0028
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
NFSC FEBO #OKS-809233 Beneficial 17.59%
NFS/FMTC SEP IRA
FBO Norm Detrick
3820 Roberts RD6
Akron, OH 44333-1177
- -----------------------------------------------------------------------------------------------
NFSC FEBO #STL-534951 Beneficial 48.68%
NFS/FMTC Rollover IRA
FBO Michael W. Mulcahy
19322 Araglin Ct
Strongsville, OH 44149-0958
- -----------------------------------------------------------------------------------------------
UTILITIES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
UBS Financial Services, Inc. Beneficial 11.18%
Eileen Gehring
15 Macopin Ct
Livingston, NJ 07039-2948
- -----------------------------------------------------------------------------------------------
UBS Financial Services, Inc. Beneficial 10.69%
Theresa Hampl
136 Randolph Ave
Dumont, NJ 07628-2948
- -----------------------------------------------------------------------------------------------
UBS Financial Services, Inc. Beneficial 8.54%
Robert T. Harmon & Nancy Harmon JTWROS
14 Schindler Ct
Chatham, NJ 07928-1938
- -----------------------------------------------------------------------------------------------
UBS Financial Services, Inc. Beneficial 7.99%
UBS Painewebber CDN FBO
Federick P. Schmitt
PO Box 3321
Weehawken, NJ 07086-8154
- -----------------------------------------------------------------------------------------------
First Clearing Corporation Beneficial 42.08%
A/C 4054-9678
Edward J. Harper II IRA
FCC Cust
P.O. Box 527
Greenville, NC 27835-0527
- -----------------------------------------------------------------------------------------------
CLASS C
- -------
ENERGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
None
- -----------------------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Merrill Lynch Beneficial 9.56%
Security #97MN6
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
- -----------------------------------------------------------------------------------------------
GOLD & PRECIOUS METALS FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Merrill Lynch Beneficial 14.78%
Security #97MN6
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
- -----------------------------------------------------------------------------------------------
William Heller Record 5.84%
418 S Westgate Ave
Los Angeles, CA 90049-4210
- -----------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
None
- -----------------------------------------------------------------------------------------------
LEISURE FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Merrill Lynch Beneficial 6.73%
Security #97MN6
4800 Deer Lake Drive East
Jacksonville, FL 32246-6486
- -----------------------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Carroll M. Bahnsen, Trustee Record 6.08%
Carroll M. Bahnsen Trust
210 Geitner Avenue
Newton, NC 28658-9647
- -----------------------------------------------------------------------------------------------
Paramount Securities, Ltd. Beneficial 10.37%
4 State Rd #PMB-506
Media, PA
- -----------------------------------------------------------------------------------------------
TECHNOLOGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
None
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
None
- -----------------------------------------------------------------------------------------------
UTILITIES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
None
- -----------------------------------------------------------------------------------------------
CLASS K
- -------
ENERGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Circle Trust Co. Cust. Beneficial 12.95%
GoldK Omnibus Account
Metro Center
1 Station Pl.
Stamford, CT 06902-6800
- -----------------------------------------------------------------------------------------------
Circle Trust Co. Cust. Beneficial 22.21%
Lynch Anselmo Ott Bryan & Co.
401K Profit Sharing Plan
Metro Center
1 Station Place
Stamford, CT 06902
- -----------------------------------------------------------------------------------------------
MCB Trust Beneficial 8.88%
Services Cust
Grand Vehicle Works Holdings C
700 17th St., Ste 300
Denver, CO 80202-3531
- -----------------------------------------------------------------------------------------------
JP Morgan Chase Bank Beneficial 12.78%
Deloitte & Touche Profit Sharing
Attn: Angela Ma
3 Metrotech Ctr FL 6
Brooklyn, NY 11245-0001
- -----------------------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Saxon & Co. Beneficial 35.74%
FBO 20-01-302-9912426
P.O. Box 7780-1888
Philadelphia, PA 19182-0001
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Circle Trust Co. Beneficial 8.25%
Pacific Coast Cabling Inc.
401K PSP
Metro Center
One Station Pl.
Stamford, CT 06902-6800
- -----------------------------------------------------------------------------------------------
TransAmerica Life Ins & Annuity Co. Beneficial 30.46%
Attn: Daisy Lo
Retirement Services - Separate Acct
P.O. Box 30368 Los Angeles, CA 90030 - 0368
- -----------------------------------------------------------------------------------------------
JPMorgan Chase Bank Beneficial 9.26%
Deloitte & Touche Profit Sharing
Attn: Angela Ma
3 Metrotech Ctr. FL 6
Brooklyn, NY 11245-0001
- -----------------------------------------------------------------------------------------------
HEALTH SCIENCES FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Saxon & Co. Beneficial 68.47%
FBO 20-01-302-9912426
P.O. Box 7780-1888
Philadelphia, PA 19182-0001
- -----------------------------------------------------------------------------------------------
LEISURE FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
None
- -----------------------------------------------------------------------------------------------
TECHNOLOGY FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Transamerica Life Ins. & Annuity Co. Beneficial 58.42%
Attn: Daisy Lo
Retirement Services - Separate Account
P.O. Box 30368 Los Angeles, CA 90030-0368
- -----------------------------------------------------------------------------------------------
Saxon & Co. Beneficial 29.87%
FBO 20-01-302-9912426
P.O. Box 7780-1888
Philadelphia, PA 19182-0001
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
- -----------------------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage
(Record/Beneficial) Owned
===============================================================================================
Saxon & Co. Beneficial 12.57%
FBO 20-01-302-9912426
P. O. Box 7780-1888
Philadelphia, PA 19182-0001
- -----------------------------------------------------------------------------------------------
JPMorgan Chase Bank Beneficial 83.53%
Deloitte & Touche Profit Sharing Plan
Attn: Angela Ma
3 Metrotech Ctr. FL 6
Brooklyn, NY 11245-0001
- -----------------------------------------------------------------------------------------------
As of June 30, 2003, officers and directors of the Company, as a group,
beneficially owned less than 1% of any Fund's outstanding shares.
DISTRIBUTOR
Effective July 1, 2003, A I M Distributors, Inc. ("ADI") became the distributor
of the Funds. ADI bears all expenses, including the cost of printing and
distributing prospectuses, incident to marketing of the Funds' shares, except
for such distribution expenses as are paid out of Fund assets under the
Company's Plans of Distribution (each individually a "Plan" and collectively,
the "Plans"), which have been adopted by each Fund pursuant to Rule 12b-1 under
the 1940 Act. Prior to July 1, 2003, INVESCO Distributors, Inc. ("IDI") was the
distributor of the Funds.
INVESTOR CLASS. The Company has adopted a Master Plan and Agreement of
Distribution - Investor Class (the "Investor Class Plan") with respect to
Investor Class shares, which provides that the Investor Class shares of each
Fund will make monthly payments to ADI computed at an annual rate no greater
than 0.25% of average net assets attributable to Investor Class shares. These
payments permit ADI, at its discretion, to engage in certain activities and
provide services in connection with the distribution of a Fund's Investor Class
shares to investors. Payments by a Fund under the Investor Class Plan, for any
month, may be made to compensate ADI for permissible activities engaged in and
services provided.
CLASS A. The Company has adopted a Master Distribution Plan and Agreement -
Class A pursuant to Rule 12b-1 under the 1940 Act relating to the Class A shares
of the Funds (the "Class A Plan").
The Class A Plan is designed to compensate ADI, on a monthly basis, for certain
promotional and other sales-related costs, and to implement a dealer incentive
program which provides for periodic payments to financial intermediaries who
furnish continuing personal shareholder services to their customers who purchase
and own Class A shares of the Funds. Payment can also be directed by ADI to
financial intermediaries that have entered into service agreements with respect
to Class A shares of the Funds and that provide continuing personal services to
their customers who own Class A shares of the Funds. The service fees payable to
financial intermediaries are calculated at the annual rate of 0.25% of the
average daily net asset value of those Fund shares that are held in such
financial intermediaries' customers' accounts.
Of the aggregate amount payable under the Class A Plan, payments to financial
intermediaries that provide continuing personal shareholder services to their
customers who purchase and own Class A shares of the Funds, in amounts up to
0.25% of the average daily net assets of the Class A shares of each Fund
attributable to the customers of such financial intermediaries, are
characterized as service fees. Payments to financial intermediaries in excess of
such amount and payments to ADI would be characterized as an asset-based sales
charge pursuant to the Class A Plan. The Class A Plan also imposes a cap on the
total amount of sales charges, including asset-based sales charges, that may be
paid by the Company with respect to the Class A shares of a Fund.
Except for the INVESCO Utilities Fund-Class A ("Utilities Fund"), under the
Class A Plan, Class A shares of the Funds pay compensation to ADI at an annual
rate of 0.35% per annum of the average daily net assets attributable to Class A
shares for the purpose of financing any activity which is primarily intended to
result in the sale of Class A shares. During any period in which a Fund is
closed due to high asset levels, the Class A shares of the Fund will reduce this
payment of 0.35% to 0.25% per annum.
For the Utilities Fund, the Company under the Class A Plan pays compensation to
ADI at an annual rate of 0.25% per annum of the average daily net assets
attributable to the Utilities Fund for the purpose of financing any activity
which primarily intended to result in the sale of Class A.
CLASS B. The Company has adopted a Master Distribution Plan and Agreement -
Class B pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of
the Funds (the "Class B Plan"). Under the Class B Plan, Class B shares of the
Funds pay compensation monthly to ADI at an annual rate of 1.00% per annum of
the average daily net assets attributable to Class B shares for the purpose of
financing any activity which is primarily intended to result in the sale of
Class B shares. Of such amount, each Fund pays a service fee of 0.25% of the
average daily net assets attributable to Class B shares to selected financial
intermediaries that have entered into service agreements with respect to Class B
shares of the Funds and that provide continuing personal shareholder services to
their customers who purchase and own Class B shares. Any amounts not paid as a
service fee would constitute an asset-based sales charge pursuant to the Class B
Plan. The Class B Plan also imposes a cap on the total amount of sales charges,
including asset-based sales charges, that may be paid by the Company with
respect to the Class B shares of a Fund.
The Class B Plan may obligate the Class B shares to continue to make payments to
ADI following termination of the Class B Plan with respect to Class B shares
sold by or attributable to the distribution efforts of ADI unless there has been
a complete termination of the Class B Plan (as defined in such Plan).
Additionally, the Class B Plan expressly authorizes ADI to assign, transfer, or
pledge its rights to payments pursuant to the Class B Plan. As a result, the
contingent deferred sales charge (CDSC) on Class B shares will continue to be
applicable even in the event of a complete termination of the Class B Plan (as
defined in such Plan).
CLASS C. The Company has adopted a Master Distribution Plan and Agreement -
Class C pursuant to Rule 12b-1 under the 1940 Act relating to the Class C shares
of the Funds (the "Class C Plan"). Under the Class C Plan, Class C shares of the
Funds pay compensation monthly to ADI at an annual rate of 1.00% per annum of
the average daily net assets attributable to Class C shares for the purpose of
financing any activity which is primarily intended to result in the sale of
Class C shares. The Class C Plan is designed to compensate ADI for certain
promotional and other sales-related costs, and to implement a financial
intermediary incentive program which provides for periodic payments to selected
financial intermediaries that have entered onto service agreements and furnish
continuing personal shareholder services to their customers who purchase and own
Class C shares of a Fund.
Of the aggregate amount payable under the Class C Plan, payments to financial
intermediaries that provide continuing personal shareholder services to their
customers who purchase and own Class C shares of a Fund, in amounts of up to
0.25% of the average daily net assets of the Class C shares of the Fund
attributable to the customers of such financial intermediaries, are
characterized as a service fee. Payments to financial intermediaries in excess
of such amount and payments to ADI would be characterized as an asset-based
sales charge pursuant to the Class C Plan. The Class C Plan also imposes a cap
on the total amount of sales charges, including asset-based sales charges, that
may be paid by the Company with respect to the Class C shares.
ADI may pay sales commissions to financial intermediaries that sell Class C
shares of the 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 or
serviced by the financial intermediary, and will consist of an asset-based sales
charge of 0.75% of the purchase price of Class C shares sold plus an advance of
the first year service fee of 0.25% with respect to such shares. ADI will retain
all payments received by it relating to Class C shares for the first thirteen
months after they are purchased. The portion of the payments to ADI under the
Class C Plan which constitutes an asset-based sales charge (0.75%) is intended
in part to permit ADI to recoup a portion of on-going sales commissions to
financial intermediaries plus financing costs, if any. After the first thirteen
months, ADI will make such payments quarterly to financial intermediaries based
on the average net asset value of Class C shares which are attributable to
shareholders for whom the financial intermediaries are designated as dealers of
record. These commissions are not paid on sales to investors who may not be
subject to payment of the CDSC and in circumstances where ADI grants an
exemption on particular transactions. Should the financial intermediary elect to
waive the asset-based sales charge, the 12b-1 fees will begin to be paid by ADI
to the financial intermediary immediately.
CLASS K (ENERGY, FINANCIAL SERVICES, HEALTH SCIENCES, LEISURE, TECHNOLOGY, AND
TELECOMMUNICATIONS FUNDS). The Company has adopted a Master Distribution Plan
and Agreement - Class K pursuant to Rule 12b-1 under the 1940 Act relating to
Class K shares (the "Class K Plan"). Under the Class K Plan, Class K shares of
the Funds pay compensation monthly to ADI at an annual rate of 0.45% of average
net assets attributable to Class K shares for the purpose of financing any
activity which is primarily intended to result in the sale of Class K shares.
The Class K Plan is designed to compensate ADI for certain promotional and other
sales-related costs, and to implement a financial intermediary incentive program
which provides for periodic payments to selected financial intermediaries that
have entered into service agreements and furnish continuing personal shareholder
services to their customers who purchase and own Class K shares of a Fund.
Of the aggregate amount payable under the Class K Plan, payments to financial
intermediaries that provide continuing personal shareholder services to their
customers who purchase and own Class K shares of a Fund may be characterized as
a service fee.
ALL PLANS. Activities appropriate for financing under the Plans include, but are
not limited to, the following: printing of prospectuses and statements of
additional information and reports for other than existing shareholders;
preparation and distribution of advertising material and sales literature;
expenses of organizing and conducting sales seminars; and supplemental payments
to financial intermediaries such as asset-based sales charges or as payments of
service fees under shareholder service arrangements.
A significant expenditure under the Plans is compensation paid to financial
intermediaries, which may include INVESCO-affiliated companies, in order to
obtain various distribution-related and/ or administrative services for the
Funds. Each Fund is authorized by a Plan to use its assets to finance the
payments made to obtain those services from selected financial intermediaries
which may enter into agreements with ADI. Payments will be made by ADI to
financial intermediaries who sell shares of a Fund and may be made to banks,
savings and loan associations, and other depository institutions ("Banks").
Although the Glass-Steagall Act limits the ability of certain Banks to act as
underwriters of mutual fund shares, INVESCO does not believe that these
limitations would affect the ability of such Banks to enter into arrangements
with ADI, but can give no assurance in this regard. However, to the extent it is
determined otherwise in the future, arrangements with Banks might have to be
modified or terminated, and, in that case, the size of the Funds possibly could
decrease to the extent that the Banks would no longer invest customer assets in
the Funds. Neither the Company nor its investment advisor will give any
preference to Banks which enter into such arrangements when selecting
investments to be made by a Fund.
Effective July 1, 2003, ADI became the distributor of the Funds. Prior to July
1, 2003 IDI was the distributor of the Funds and as such the Funds made payments
to IDI, the Funds' former distributor, under the Investor Class, Class A, Class
B, Class C and, if applicable, Class K Plans during the fiscal year ended March
31, 2003 in the following amounts:
FUND INVESTOR CLASS CLASS A CLASS B CLASS C CLASS K
Energy Fund $ 710,505 $19,438 $ 6,195 $102,870 $ 526
Financial Services Fund $2,428,349 $ 9,547 $ 5,826 $134,199 $ 5,109
Gold & Precious Metals Fund $ 279,306 $ 4,965 $ 6,902 $ 22,606 N/A(1)
Health Sciences Fund $2,942,165 $ 4,556 $ 3,194 $ 89,870 $ 9,856
Leisure Fund $1,625,603 $52,465 $44,957 $176,639 $277,058
Real Estate Opportunity Fund $ 59,074 $ 3,327 $ 580 $ 8,070 N/A(1)
Technology Fund $2,923,222 $ 6,303 $ 1,332 $ 88,805 $ 98,700
Telecommunications Fund $ 948,389 $ 2,727 $ 99 $ 37,403 $ 3,117
Utilities Fund $ 230,252 $ 1,046 $ 1,559 $ 10,094 N/A(1)
(1) Class K shares are not offered.
In addition, as of the fiscal year ended March 31, 2003 the following distribution accruals
had been incurred by the Funds and will be paid during the fiscal year ended March 31, 2004:
FUND INVESTOR CLASS CLASS A CLASS B CLASS C CLASS K
Energy Fund $ 46,874 $ 2,770 $ 1,144 $ 7,741 $ 100
Financial Services Fund $ 147,069 $ 1,253 $ 764 $ 8,177 $ 465
Gold & Precious Metals Fund $ 19,287 $ 422 $ 1,738 $ 2,309 N/A(1)
Health Sciences Fund $ 185,484 $ 577 $ 467 $ 5,182 $ 737
Leisure Fund $ 105,106 $ 7,193 $ 6,290 $ 14,074 $ 23,460
Real Estate Opportunity Fund $ 4,158 $ 661 $ 101 $ 556 N/A(1)
Technology Fund $ 174,578 $ 1,194 $ 423 $ 4,925 $ 8,100
Telecommunications Fund $ 55,275 $ 110 $ 12 $ 2,258 $ 248
Utilities Fund $ 14,474 $ 121 $ 157 $ 546 N/A(1)
(1) Class K shares are not offered.
For the fiscal year ended March 31, 2003, allocation of 12b-1 amounts paid by
the Funds for the following categories of expenses were:
INVESTOR
CLASS CLASS A CLASS B CLASS C CLASS K
ENERGY FUND
Advertising $ 58 $ 0 $ 0 $ 0 $ 0
Sales literature, printing, and postage $ 55,708 $ 0 $ 0 $ 0 $ 0
Public Relations/Promotion $ 68,082 $ 0 $ 0 $ 0 $ 0
Compensation to securities dealers
and other organizations $ 375,807 $19,438 $ 6,195 $102,870 $ 526
Marketing personnel $ 210,850 $ 0 $ 0 $ 0 $ 0
FINANCIAL SERVICES FUND
Advertising $ 223 $ 0 $ 0 $ 0 $ 0
Sales literature, printing, and postage $ 170,544 $ 0 $ 0 $ 0 $ 0
Public Relations/Promotion $ 246,041 $ 0 $ 0 $ 0 $ 0
Compensation to securities dealers
and other organizations $1,243,518 $ 9,547 $ 5,826 $134,199 $ 5,109
Marketing personnel $ 768,023 $ 0 $ 0 $ 0 $ 0
GOLD & PRECIOUS METALS FUND
Advertising $ 32 $ 0 $ 0 $ 0 N/A(1)
Sales literature, printing, and postage $ 35,454 $ 0 $ 0 $ 0 N/A(1)
Public Relations/Promotion $ 36,978 $ 0 $ 0 $ 0 N/A(1)
Compensation to securities dealers
and other organizations $ 86,179 $ 4,965 $ 6,902 $ 22,606 N/A(1)
Marketing personnel $ 120,663 $ 0 $ 0 $ 0 N/A(1)
HEALTH SCIENCES FUND
Advertising $ 291 $ 0 $ 0 $ 0 $ 0
Sales literature, printing, and postage $ 225,321 $ 0 $ 0 $ 0 $ 0
Public Relations/Promotion $ 326,062 $ 0 $ 0 $ 0 $ 0
Compensation to securities dealers
and other organizations $1,370,151 $ 4,556 $ 3,194 $ 89,870 $ 9,856
Marketing personnel $1,020,340 $ 0 $ 0 $ 0 $ 0
LEISURE FUND
Advertising $ 154 $ 0 $ 0 $ 0 $ 0
Sales literature, printing, and postage $ 122,412 $ 0 $ 0 $ 0 $ 0
Public Relations/Promotion $ 162,199 $ 0 $ 0 $ 0 $ 0
Compensation to securities dealers
and other organizations $ 830,348 $52,465 $44,957 $176,639 $277,058
Marketing personnel $ 510,490 $ 0 $ 0 $ 0 $ 0
INVESTOR
CLASS CLASS A CLASS B CLASS C CLASS K
REAL ESTATE OPPORTUNITY FUND
Advertising $ 7 $ 0 $ 0 $ 0 N/A(1)
Sales literature, printing, and postage $ 6,799 $ 0 $ 0 $ 0 N/A(1)
Public Relations/Promotion $ 6,587 $ 0 $ 0 $ 0 N/A(1)
Compensation to securities dealers
and other organizations $ 23,911 $3,327 $ 580 $ 8,070 N/A(1)
Marketing personnel $ 21,770 $ 0 $ 0 $ 0 N/A(1)
TECHNOLOGY FUND
Advertising $ 291 $ 0 $ 0 $ 0 $ 0
Sales literature, printing, and postage $ 205,397 $ 0 $ 0 $ 0 $ 0
Public Relations/Promotion $ 314,573 $ 0 $ 0 $ 0 $ 0
Compensation to securities dealers
and other organizations $1,446,121 $6,303 $1,332 $88,805 $ 98,700
Marketing personnel $ 956,840 $ 0 $ 0 $ 0 $ 0
TELECOMMUNICATIONS FUND
Advertising $ 107 $ 0 $ 0 $ 0 $ 0
Sales literature, printing, and postage $ 77,422 $ 0 $ 0 $ 0 $ 0
Public Relations/Promotion $ 115,467 $ 0 $ 0 $ 0 $ 0
Compensation to securities dealers
and other organizations $ 403,177 $2,727 $ 99 $37,403 $ 3,117
Marketing personnel $ 352,216 $ 0 $ 0 $ 0 $ 0
UTILITIES FUND
Advertising $ 23 $ 0 $ 0 $ 0 N/A(1)
Sales literature, printing, and postage $ 18,628 $ 0 $ 0 $ 0 N/A(1)
Public Relations/Promotion $ 26,436 $ 0 $ 0 $ 0 N/A(1)
Compensation to securities dealers
and other organizations $ 103,183 $1,046 $1,559 $10,094 N/A(1)
Marketing personnel $ 81,982 $ 0 $ 0 $ 0 N/A(1)
(1) Class K shares are not offered.
The services which are provided by securities dealers and other organizations
may vary by financial intermediary but include, among other things, processing
new shareholder account applications, preparing and transmitting to the
Company's Transfer Agent computer-processable tapes of all Fund transactions by
customers, serving as the primary source of information to customers in
answering questions concerning the Funds, and assisting in other customer
transactions with the Funds.
The Plans provide that they shall continue in effect with respect to each Fund
as long as such continuance is approved at least annually by the vote of the
board of directors of the Company cast in person at a meeting called for the
purpose of voting on such continuance, including the vote of a majority of the
Independent Directors. A Plan can be terminated at any time by a Fund, without
penalty, if a majority of the Independent Directors, or shareholders of the
relevant class of shares of the Fund, vote to terminate a Plan. The Company may,
in its absolute discretion, suspend, discontinue, or limit the offering of its
shares at any time. In determining whether any such action should be taken, the
board of directors intends to consider all relevant factors including, without
limitation, the size of a Fund, the investment climate for a Fund, general
market conditions, and the volume of sales and redemptions of a Fund's shares.
The Plans may continue in effect and payments may be made under a Plan following
any temporary suspension or limitation of the offering of Fund shares; however,
the Company is not contractually obligated to continue a Plan for any particular
period of time. Suspension of the offering of a Fund's shares would not, of
course, affect a shareholder's ability to redeem his or her shares.
So long as the Plans are in effect, the selection and nomination of persons to
serve as Independent Directors of the Company shall be committed to the
Independent Directors then in office at the time of such selection or
nomination. The Plans may not be amended to increase the amount of a Fund's
payments under a Plan without approval of the shareholders of that Fund's
respective class of shares, and all material amendments to a Plan must be
approved by the board of directors of the Company, including a majority of the
Independent Directors. Under the agreement implementing the Plans, ADI or a
Fund, the latter by vote of a majority of the Independent Directors, or a
majority of the holders of the relevant class of a Fund's outstanding voting
securities, may terminate such agreement without penalty upon thirty days'
written notice to the other party. No further payments will be made by a Fund
under a Plan in the event of its termination.
To the extent that a Plan constitutes a plan of distribution adopted pursuant to
Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so as to
authorize the use of Fund assets in the amounts and for the purposes set forth
therein, notwithstanding the occurrence of an assignment, as defined by the 1940
Act, and rules thereunder. To the extent it constitutes an agreement pursuant to
a plan, a Fund's obligation to make payments to ADI shall terminate
automatically, in the event of such "assignment." In this event, a Fund may
continue to make payments pursuant to a Plan only upon the approval of new
arrangements regarding the use of the amounts authorized to be paid by a Fund
under a Plan. Such new arrangements must be approved by the directors, including
a majority of the Independent Directors, by a vote cast in person at a meeting
called for such purpose. These new arrangements might or might not be with ADI.
On a quarterly basis, the directors review information about the distribution
services that have been provided to each Fund and the 12b-1 fees paid for such
services. On an annual basis, the directors consider whether a Plan should be
continued and, if so, whether any amendment to the Plan, including changes in
the amount of 12b-1 fees paid by each class of a Fund, should be made.
The only Company directors and interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, who have a direct or indirect financial
interest in the operation of the Plans are the officers and directors of the
Company who are also officers either of ADI or other companies affiliated with
ADI. The benefits which the Company believes will be reasonably likely to flow
to a Fund and its shareholders under the Plans include the following:
o Enhanced marketing efforts, if successful, should result in an increase
in net assets through the sale of additional shares and afford greater
resources with which to pursue the investment objectives of the Funds;
o The sale of additional shares reduces the likelihood that redemption of
shares will require the liquidation of securities of the Funds in amounts
and at times that are disadvantageous for investment purposes; and
o Increased Fund assets may result in reducing each investor's share of
certain expenses through economies of scale (e.g. exceeding established
breakpoints in an advisory fee schedule and allocating fixed expenses over
a larger asset base), thereby partially offsetting the costs of a Plan.
The positive effect which increased Fund assets will have on INVESCO's revenues
could allow INVESCO and its affiliated companies:
o To have greater resources to make the financial commitments necessary to
improve the quality and level of the Funds' shareholder services (in both
systems and personnel);
o To increase the number and type of mutual funds available to investors
from INVESCO and its affiliated companies (and support them in their
infancy), and thereby expand the investment choices available to all
shareholders; and
o To acquire and retain talented employees who desire to be associated with
a growing organization.
SALES CHARGES AND DEALER CONCESSIONS
SALES CHARGES
Class A shares of the Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000.
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
----------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION(1) PRICE INVESTED PRICE
------------------ ----- -------- -----
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) There is no sales charge on purchases of $1,000,000 or more; however,
ADI may pay a dealer concession and/or advance a service fee on such
transactions as set forth below.
ADI may elect to re-allow the entire initial sales charge to financial
intermediaries for all sales with respect to which orders are placed with ADI
during a particular period. Financial intermediaries to whom substantially the
entire sales charge is re-allowed may be deemed to be "underwriters" as that
term is defined under the Securities Act of 1933.
In addition to amounts paid to financial intermediaries as a dealer concession
out of the initial sales charge paid by investors, ADI may, from time to time,
at its expense or as an expense for which it may be compensated under a Plan, if
applicable, pay a bonus or other consideration or incentive to financial
intermediaries who sell a minimum dollar amount of the shares of the INVESCO
Funds during a specified period of time. At the option of the financial
intermediary, such incentives may take the form of payment for travel expenses,
including lodging, incurred in connection with trips taken by qualifying
financial intermediaries and their families to places within or outside the
United States. The total amount of such additional bonus payments or other
consideration shall not exceed 0.25% of the public offering price of the shares
sold. Any such bonus or incentive programs will not change the price paid by
investors for the purchase of a Fund's shares or the amount a Fund will receive
as proceeds from such sales. Financial intermediaries may not use sales of a
Fund's shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
ADI may pay sales commissions to financial intermediaries that sell Class B
shares of the Funds at the time of such sales. Payments with respect to Class B
shares will equal 4.00% of the purchase price of the Class B shares sold by the
financial intermediary, 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's service fee of 0.25% with respect to such shares. The portion of the
payments to ADI under the Class B Plan which constitutes an asset-based sales
charge (0.75%) is intended in part to permit ADI to recoup a portion of such
sales commissions plus financing costs.
ADI may pay sales commissions to financial intermediaries that sell Class C
shares of the 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
financial intermediary, and will consist of a sales commission of 0.75% of the
purchase price of Class C shares sold plus an advance of the first year's
service fee of 0.25% with respect to such shares. ADI will retain all payments
received by it relating to Class C shares for the first thirteen months after
they are purchased. The portion of the payments to ADI under the Class C Plan
which constitutes an asset-based sales charge (0.75%) is intended in part to
permit ADI to recoup a portion of on-going sales commissions to financial
intermediaries plus financing costs, if any. After the first thirteen months,
ADI will make such payments quarterly to financial intermediaries based on the
average net asset value of Class C shares which are attributable to shareholders
for whom the financial intermediaries are designated as dealers of record. These
commissions are not paid on sales to investors who may not be subject to payment
of the CDSC and in circumstances where ADI grants an exemption on particular
transactions. Should the financial intermediary elect to waive the sales
commission, the 12b- 1 fees will begin to be paid by ADI to the financial
intermediary immediately.
DEALER CONCESSIONS (CLASS A AND CLASS K ONLY)
Investors who purchase $1,000,000 or more of Class A shares do not pay an
initial sales charge. ADI may pay financial intermediaries for share purchases
(measured on an annual basis) by non- qualified investors and qualified plans of
Class A and Class K shares of the Funds as follows.
Non-Qualified Investors. ADI may pay financial intermediaries for share
purchases of $1,000,000 or more of Class A shares of the Funds sold at net asset
value to non-qualified investors as follows: 1.00% of the first $2 million of
such purchases, 0.80% on the next $1 million of such purchases, 0.50% on the
next $17 million of such purchases, and 0.25% of amounts in excess of $20
million of such purchases.
Qualified Plans. ADI may pay financial intermediaries for Class A and Class K
share purchases as follows:
Class A - Option 1: For qualified plans of $1,000,000 or more, 0.50% of the
first $20 mil- lion and 0.25% of amounts in excess of $20 million. The
trail commission will be paid out beginning in the 13th month.
Class A - Option 2: No additional fee is paid to financial intermediaries;
however, the trail commission will begin to accrue immediately.
Class K - Option 1: For qualified plans of $1,000,000 or more, 0.70% of the
first $5 million and 0.45% of amounts in excess of $5 million. The trail
commission will be paid out beginning in the 13th month.
Class K - Option 2: No additional fee is paid to financial intermediaries;
however, the trail commission will begin to accrue immediately.
REDUCTIONS IN INITIAL SALES CHARGES (CLASS A ONLY)
Reductions in the initial sales charges shown in the sales charges table
(quantity discounts) apply to purchases of Class A shares of the Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "Purchaser" as hereinafter defined.
The term "Purchaser" means:
o an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a
pension, profit-sharing, or other benefit plan established exclusively
for the benefit of any such person, such as an IRA, Roth IRA, a
single- participant money purchase/profit sharing plan or an
individual participant in a 403(b) Plan (unless such 403(b) plan
qualifies as the Purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), if:
a. the employer/sponsor submits contributions for all participating
employees in a single contribution transmittal (i.e., the Funds
will not accept contributions submitted with respect to
individual participants);
b. each transmittal is accompanied by a single check or wire
transfer; and
c. all new participants are added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate, or
single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under
Section 401 of the Code) and 457 plans, if more than one beneficiary
or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or Savings
Incentive Match Plans for Employees IRA (SIMPLE IRA), where the
employer has notified ADI in writing that all of its related employee
SEP, SAR-SEP or SIMPLE IRA accounts should be linked; or
o any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six
months and has some purpose other than the purchase at a discount of
redeemable securities of a registered investment company.
Investors or financial intermediaries seeking to qualify orders for a reduced
initial sales charge must identify such orders and, if necessary, support their
qualification for the reduced charge. ADI reserves the right to determine
whether any Purchaser is entitled, by virtue of the foregoing definition, to the
reduced sales charge. No person or entity may distribute Class A shares of the
INVESCO Funds without payment of the applicable sales charge other than to
persons or entities that qualify for a reduction in the sales charge as provided
herein.
1. LETTER OF INTENT (CLASS A ONLY). A Purchaser, as previously defined, may pay
reduced initial sales charges by completing the appropriate section of the
account application and by fulfilling a Letter of Intent ("LOI"). The LOI
confirms such Purchaser's intention as to the total investment to be made in
shares of the Funds within the following thirteen consecutive months. By marking
the LOI section on the account application and by signing the account
application, the Purchaser indicates that he/she understands and agrees to the
terms of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the thirteen- month period will be made at the public offering price
applicable to a single transaction of the total dollar amount indicated by the
LOI, as described under "Sales Charges and Dealer Concessions." It is the
Purchaser's responsibility at the time of purchase to specify the account
numbers that should be considered in determining the appropriate sales charge.
The offering price may be further reduced as described under "Right of
Accumulation" if the Transfer Agent is advised of all other accounts at the time
of the investment. Shares acquired through reinvestment of dividends and capital
gains distributions will not be applied to the LOI. At any time during the
thirteen- month period after meeting the original obligation, a Purchaser may
revise his or her intended investment amount upward by submitting a written and
signed request. Such a revision will not change the original expiration date. By
signing an LOI, a Purchaser is not making a binding commitment to purchase
additional shares, but if purchases made within the thirteen-month period do not
total the amount specified, the Purchaser will pay the increased amount of sales
charge as described below. Purchases made within ninety 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 ninety-day period. The Transfer Agent
will process necessary adjustments upon the expiration or completion date of the
LOI. Purchases made more than ninety days before signing an LOI will be applied
toward completion of the LOI based on the value of the shares purchased
calculated at the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the transfer agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the Purchaser. All shares purchased, including those
escrowed, will be registered in the Purchaser's name. If the total investment
specified under this LOI is completed within the thirteen-month period, the
escrowed shares will be promptly released. If the intended investment is not
completed, the Purchaser will pay the Transfer Agent the difference between the
sales charge on the specified amount and the amount actually purchased. If the
Purchaser does not pay such difference within twenty days of the expiration
date, he/she irrevocably constitutes and appoints the Transfer Agent as his/her
attorney to surrender for redemption any or all shares, to make up such
difference within sixty days of the expiration date.
If at any time before completing the LOI Program, the Purchaser wishes to cancel
the agreement, he/she must give written notice to ADI. If at any time before
completing the LOI Program the Purchaser requests the Transfer Agent to
liquidate or transfer beneficial ownership of his/her total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
2. RIGHT OF ACCUMULATION (CLASS A ONLY). A Purchaser may also qualify for
reduced initial sales charges based upon such Purchaser's existing investment in
Class A shares of the Funds at the time of the proposed purchase. To determine
whether a reduced initial sales charge applies to a proposed purchase, ADI takes
into account not only the money which is invested upon such proposed purchase,
but also the value of all Class A shares of the Funds owned by such Purchaser,
calculated at the then current public offering price. If a Purchaser so
qualifies for a reduced sales charge, the reduced sales charge applies to the
total amount of money then being invested by such Purchaser, calculated at the
then current public offering price, and not just to the portion that exceeds the
breakpoint above which a reduced sales charge applies. For example, if a
Purchaser already owns Class A shares with a value of $20,000 and wishes to
invest an additional $20,000 in Class A shares, 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 financial intermediary must furnish ADI with a
list of the account numbers and the names in which such accounts of the
Purchaser are registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE (CLASS A ONLY). Purchases of Class A shares of the
Funds at net asset value (without payment of an initial sales charge) may be
made in connection with: (a) the reinvestment of dividends and distributions
from a Fund; (b) exchanges of shares of certain funds; (c) use of the
reinstatement privilege; or (d) a merger, consolidation or acquisition of assets
of a fund.
The following Purchasers will not pay initial sales charges on purchases of
Class A shares because there is a reduced sales effort involved in sales to
these Purchasers:
o INVESCO and its affiliates, or their clients;
o Any current or retired officer, director, or employee (and members of
their immediate family) of INVESCO, its affiliates or the INVESCO
Funds and any foundation, trust, or employee benefit plan established
exclusively for the benefit of, or by, such persons;
o Sales representatives and employees (and members of their immediate
family) of selling group members or financial institutions that have
arrangements with such selling group members;
o Financial intermediaries that place trades for their own accounts or
the accounts of their clients and that charge a management,
consulting, or other fee for their services; and clients of such
financial intermediaries who place trades for their own accounts if
the accounts are linked to the master account of such financial
intermediary on the books and records of a broker or agent;
o Employee benefit plans designated as Purchasers as defined above, and
non-qualified plans offered in conjunction therewith, provided the
initial investment in the plan(s) is at least $1 million; the sponsor
signs a $1 million LOI; the employer-sponsored plan(s) has at least
100 eligible employees; or all plan transactions are executed through
a single omnibus account and the financial intermediary has entered
into the appropriate agreements with the ADI. Section 403(b) plans
sponsored by public educational institutions are not eligible for a
sales charge exception based on the aggregate investment made by the
plan or the number of eligible employees. Purchases of the Funds by
such plans are subject to initial sales charges; and
o A shareholder of a fund that merges or consolidates with a Fund or
that sells its assets to a Fund in exchange for shares of that Fund.
As used above, immediate family includes an individual and his or her spouse,
children, parents, and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
In addition to the exceptions described in the Investor Class, Class A, B, C,
and K Prospectus, CDSCs will not apply to the following:
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 10% annually of the participant's or beneficiary's account
value in a fund; (ii) in kind transfers of assets where the participant or
beneficiary notifies the distributor of the transfer not 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 A, Class B,
Class C, or Class K shares of a Fund; (iv) tax-free returns of excess
contributions or returns of excess deferral amounts; and (v) distributions
on the death or disability (as defined in the Internal Revenue Code of
1986, as amended) of the participant or beneficiary;
o Liquidation by a Fund when the account value falls below the minimum
required account size of $250;
o Investment account(s) of INVESCO; and
o Class C shares if the investor's financial intermediary of record
notifies ADI prior to the time of investment that the financial
intermediary waives the payment otherwise payable to it.
Upon the redemption of Class A shares purchased in amounts of $1 million or
more, no CDSC will be applied in the following situations:
o Redemptions from employee benefit plans designated as qualified
Purchasers, as defined above, where the redemptions are in connection with
employee terminations or withdrawals, provided the total amount invested in
the plan is at least $1,000,000; the sponsor signs a $1 million LOI; or the
employer-sponsored plan has at least 100 eligible employees; provided,
however, that 403(b) plans sponsored by public educational institutions
shall qualify for the CDSC waiver on the basis of the value of each plan
participant's aggregate investment in a Fund, and not on the aggregate
investment made by the plan or on the number of eligible employees;
o Private foundations or endowment funds; and
o Redemption of shares by the investor where the investor's financial
intermediary waives the amounts otherwise payable to it by ADI and notifies
ADI prior to the time of investment.
SHARE PRICES AND NET ASSET VALUE (ALL CLASSES)
Each Fund's shares are bought or sold at a price that is the Fund's NAV per
share, less any applicable sals charge. The NAV for each Fund is calculated by
subtracting total liabilities from total assets (the market value of the
securities the Fund holds plus cash and other assets). Each Fund's per share NAV
is calculated by dividing its NAV by the number of Fund shares outstanding and
rounding the result to the nearest full cent. Each Fund calculates its NAV as of
the close of regular trading on the New York Stock Exchange ("NYSE"), normally
4:00 p.m. Eastern time, on each day the NYSE is open.
Each Fund values securities (including options) listed on the NYSE, the American
Stock Exchange, or other national securities exchanges and other securities for
which market quotations are readily available, at the last reported sale price
on the day the securities are being valued. Securities traded primarily on the
Nasdaq Stock Market ("Nasdaq") are normally valued by each Fund at the Nasdaq
Official Closing Price ("NOCP") provided by Nasdaq each business day. The NOCP
is the most recently reported price as of 4:00:02 p.m., Eastern time, unless
that price is outside the range of the "inside" bid and asked for prices (i.e.,
the bid and asked prices that dealers quote to each other when trading for their
own accounts); in that case, Nasdaq will adjust the price to equal the inside
bid or asked price, whichever is closer. Because of delays in reporting trades,
the NOCP may not be based on the price of the last trade to occur before the
narket closes.
If there is no reported sale of a security on a particular day, the security is
valued at the closing bid price on that day. Foreign securities are translated
from the local currency into U.S. dollars using current exchange rates. The
Funds value all other securities and assets, including restricted securities, by
a method that the Board believes accurately reflects fair value.
If INVESCO believes that the price of a security obtained under a Fund's
valuation procedures (as described above) does not represent the amount that the
Fund reasonably expects to receive on a current sale of the security, the Fund
will value the security based on a method that the Board believes accurately
reflects fair value.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may be
purchased appears in the Prospectuses under the caption "How To Buy Shares."
The sales charge normally deducted on purchases of Class A shares of the Funds
is used to compensate ADI and participating financial intermediaries for their
expenses incurred in connection with the distribution of such shares. Since
there is little expense associated with unsolicited orders placed directly with
ADI by persons, who because of their relationship with the Funds or with INVESCO
and its affiliates, are familiar with the Funds, or whose programs for purchase
involve little expense (e.g., because of the size of the transaction and
shareholder records required), ADI believes that it is appropriate and in the
Funds' best interests that such persons be permitted to purchase Class A shares
of the Funds through ADI without payment of a sales charge. The persons who may
purchase Class A shares of the Funds without a sales charge are set forth herein
under the caption "Reductions in Initial Sales Charges - Purchases at Net Asset
Value."
The following formula may be used by an investor to determine the public
offering price per Class A share of an investment:
Net Asset Value/(1 - Sales Charge as % of Offering Price) = Offering Price
Information concerning redemption of a Fund's shares is set forth in the
Prospectuses under the caption "How To Sell Shares." Shares of the Funds may be
redeemed directly through ADI or through any financial intermediary who has
entered into an agreement with ADI. In addition to the Funds' obligation to
redeem shares, ADI may also repurchase shares as an accommodation to the
shareholders. To effect a repurchase, those financial intermediaries who have
executed agreements with ADI must phone orders to the order desk of the Funds at
1-800-347-4246 and guarantee delivery of all required documents in good order. A
repurchase is effected at the net asset value of each Fund next determined after
such order is received. Such arrangement is subject to timely receipt by ADI of
all required documents in good order. If such documents are not received within
a reasonable time after the order is placed, the order is subject to
cancellation. While there is no charge imposed by the Funds or by ADI (other
than any applicable CDSC) when shares are redeemed or repurchased, financial
intermediaries may charge a fair service fee for handling the transaction.
INVESCO intends to redeem all shares of the Funds in cash.
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the New York Stock Exchange ("NYSE") is restricted, as determined
by applicable rules and regulations of the SEC, (b) the NYSE is closed for other
than customary weekend and holiday closings, (c) the SEC has by order permitted
such suspension, or (d) an emergency as determined by the SEC exists making
disposition of portfolio securities or the valuation of the net assets of a Fund
not reasonably practicable.
OTHER SERVICE PROVIDERS
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1670 Broadway, Suite 1000, Denver, Colorado, are the
independent accountants of the Company. The independent accountants are
responsible for auditing the financial statements of the Funds.
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts, is the
custodian of the cash and investment securities of the Company. The custodian is
also responsible for, among other things, receipt and delivery of each Fund's
investment securities in accordance with procedures and conditions specified in
the custody agreement with the Company. 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.
TRANSFER AGENT
INVESCO, 4350 South Monaco Street, Denver, Colorado, is the Company's transfer
agent, registrar, and dividend disbursing agent. Services provided by INVESCO
include the issuance, cancellation, and transfer of shares of the Funds, and the
maintenance of records regarding the ownership of such shares.
LEGAL COUNSEL
The firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N. W., 2nd
Floor, Washington, D.C., is legal counsel for the Company. The firm of Moye,
Giles, O'Keefe, Vermeire & Gorrell LLP, 1225 17th Street, Suite 2900, Denver,
Colorado, acts as special counsel to the Company.
BROKERAGE ALLOCATION AND OTHER PRACTICES
As the investment advisor to the Funds, INVESCO places orders for the purchase
and sale of securities with broker-dealers based upon an evaluation of the
financial responsibility of the broker-dealers and the ability of the
broker-dealers to effect transactions at the best available prices.
While INVESCO seeks reasonably competitive commission rates, the Funds do not
necessarily pay the lowest commission or spread available. INVESCO is permitted
to, and does, consider qualitative factors in addition to price in the selection
of brokers. Among other things, INVESCO considers the quality of executions
obtained on a Fund's portfolio transactions, viewed in terms of the size of
transactions, prevailing market conditions in the security purchased or sold,
and general economic and market conditions. INVESCO has found that a broker's
consistent ability to execute transactions is at least as important as the price
the broker charges for those services.
In seeking to ensure that the commissions charged a Fund are consistent with
prevailing and reasonable commissions, INVESCO monitors brokerage industry
practices and commissions charged by broker-dealers on transactions effected for
other institutional investors like the Funds.
Consistent with the standard of seeking to obtain favorable execution on
portfolio transactions, INVESCO may select brokers that provide research
services to INVESCO and the Company, as well as other INVESCO mutual funds and
other accounts managed by INVESCO. Research services include statistical and
analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by
brokers through which a Fund effects securities transactions may be used by
INVESCO in servicing all of its accounts and not all such services may be used
by INVESCO in connection with a particular Fund. Conversely, a Fund receives
benefits of research acquired through the brokerage transactions of other
clients of INVESCO.
In order to obtain reliable trade execution and research services, INVESCO may
utilize brokers that charge higher commissions than other brokers would charge
for the same transaction. This practice is known as "paying up." However, even
when paying up, INVESCO is obligated to obtain favorable execution of a Fund's
transactions.
Portfolio transactions also may be effected through broker-dealers that
recommend the Funds to their clients, or that act as agent in the purchase of a
Fund's shares for their clients. When a number of broker-dealers can provide
comparable best price and execution on a particular transaction, INVESCO may
consider the sale of a Fund's shares by a broker-dealer in selecting among
qualified broker-dealers.
Certain of the INVESCO Funds utilize fund brokerage commissions to pay custody
fees for each respective fund. This program requires that the participating
funds receive favorable execution.
BROKERAGE COMMISSIONS AND UNDERWRITING DISCOUNTS
The aggregate dollar amount of brokerage commissions and underwriting discounts
paid by each Fund for the periods outlined in the table below were:
ENERGY FUND
Year Ended March 31, 2003 $ 1,874,405
Year Ended March 31, 2002 3,393,626
Year Ended March 31, 2001 4,306,516
FINANCIAL SERVICES FUND
Year Ended March 31, 2003 $ 2,680,782
Year Ended March 31, 2002 4,316,512
Year Ended March 31, 2001 3,618,637
GOLD & PRECIOUS METALS FUND
Year Ended March 31, 2003 $ 642,351
Year Ended March 31, 2002 204,569
Year Ended March 31, 2001 387,218
HEALTH SCIENCES FUND
Year Ended March 31, 2003 $ 4,918,477
Year Ended March 31, 2002 5,839,126
Year Ended March 31, 2001 8,574,242
LEISURE FUND
Year Ended March 31, 2003 $ 1,189,376
Year Ended March 31, 2002 963,821
Year Ended March 31, 2001 1,084,892
REAL ESTATE OPPORTUNITY FUND
Year Ended March 31, 2003 $ 252,155
Year Ended March 31, 2002 299,249
Year Ended March 31, 2001 596,977
TECHNOLOGY FUND
Year Ended March 31, 2003 $ 11,471,075
Year Ended March 31, 2002 13,742,652
Year Ended March 31, 2001 17,486,205
TELECOMMUNICATIONS FUND
Year Ended March 31, 2003 $ 2,988,990
Year Ended March 31, 2002 5,492,773
Year Ended March 31, 2001 8,149,792
UTILITIES FUND
Year Ended March 31, 2003 $ 455,873
Year Ended March 31, 2002 569,850
Year Ended March 31, 2001 571,816
For the fiscal years ended March 31, 2003, 2002 and 2001 brokers providing
research services received $18,752,340, $22,446,763, and $28,925,873,
respectively, in commissions on portfolio transactions effected for the Funds.
The aggregate dollar amount of such portfolio transactions was $9,314,654,214,
$12,365,551,799, and $19,997,541,726, respectively. Commissions totaling
$614,244, $811,039, and $1,299,597, respectively were allocated to certain
brokers in recognition of their sales of shares of the Funds on portfolio
transactions of the Funds effected during the fiscal years ended March 31, 2003,
2002 and 2001.
At March 31, 2003, the Funds held equity and debt securities of their regular
brokers or dealers, or their parents, as follows:
- --------------------------------------------------------------------------------
Fund Broker or Dealer Value of Securities at
March 31, 2003
================================================================================
Energy New Center Asset Trust 10,000,000
State Street Boston 9,000,000
State Street Bank & Trust 360,000
- --------------------------------------------------------------------------------
Financial Services Citigroup Inc. 40,375,400
Merrill Lynch & Co. 38,232,000
- --------------------------------------------------------------------------------
American International 36,118,379
Group
- --------------------------------------------------------------------------------
New Center Asset Trust 25,000,000
- --------------------------------------------------------------------------------
American Express 20,379,959
- --------------------------------------------------------------------------------
Morgan Stanley 15,853,890
- --------------------------------------------------------------------------------
UBS AG 10,871,420
- --------------------------------------------------------------------------------
Goldman Sachs Group 8,441,920
- --------------------------------------------------------------------------------
Prudential Financial Inc. 5,873,400
- --------------------------------------------------------------------------------
State Street Bank & Trust 533,000
- --------------------------------------------------------------------------------
Gold & Precious Metals State Street Bank & Trust 8,531,000
- --------------------------------------------------------------------------------
Health Sciences State Street Bank & Trust 4,424,000
- --------------------------------------------------------------------------------
Leisure State Street Bank & Trust 5,814,000
- --------------------------------------------------------------------------------
Real Estate Opportunity State Street Bank & Trust 1,485,000
- --------------------------------------------------------------------------------
Technology New Center Asset Trust 50,000,000
State Street Boston 29,000,000
- --------------------------------------------------------------------------------
State Street Bank & Trust 1,910,000
- --------------------------------------------------------------------------------
Telecommunications State Street Boston 13,000,000
- --------------------------------------------------------------------------------
New Center Asset Trust 10,000,000
State Street Bank & Trust 571,000
- --------------------------------------------------------------------------------
Utilities None
- --------------------------------------------------------------------------------
Neither INVESCO nor any affiliate of INVESCO receives any brokerage commissions
on portfolio transactions effected on behalf of the Funds, and there is no
affiliation between INVESCO or any person affiliated with INVESCO or the Funds
and any broker or dealer that executes transactions for the Funds.
CAPITAL STOCK
The Company is authorized to issue up to six billion five hundred million shares
of common stock with a par value of $0.01 per share. As of June 30, 2003, the
following shares of each Fund were outstanding:
Energy Fund - Investor Class 12,655,029
Energy Fund - Class A 586,554
Energy Fund - Class B 103,693
Energy Fund - Class C 542,602
Energy Fund - Class K 27,724
Financial Services Fund - Investor Class 32,695,300
Financial Services Fund - Class A 218,147
Financial Services Fund - Class B 49,984
Financial Services Fund - Class C 471,976
Financial Services Fund - Class K 79,281
Gold & Precious Metals Fund - Investor Class 37,091,848
Gold & Precious Metals Fund - Class A 1,122,009
Gold & Precious Metals Fund - Class B 1,147,385
Gold & Precious Metals Fund - Class C 1,079,371
Health Sciences Fund - Investor Class 24,239,387
Health Sciences Fund - Class A 51,145
Health Sciences Fund - Class B 21,733
Health Sciences Fund - Class C 170,268
Health Sciences Fund - Class K 62,107
Leisure Fund - Investor Class 17,593,072
Leisure Fund - Class A 1,058,624
Leisure Fund - Class B 322,351
Leisure Fund - Class C 636,384
Leisure Fund - Class K 2,465,577
Real Estate Opportunity Fund - Investor Class 2,938,517
Real Estate Opportunity Fund - Class A 303,621
Real Estate Opportunity Fund - Class B 30,962
Real Estate Opportunity Fund - Class C 87,379
Technology Fund - Institutional Class 48,241,992
Technology Fund - Investor Class 51,335,046
Technology Fund - Class A 382,038
Technology Fund - Class B 33,819
Technology Fund - Class C 340,648
Technology Fund - Class K 1,536,418
Telecommunications Fund - Investor Class 33,336,194
Telecommunications Fund - Class A 60,110
Telecommunications Fund - Class B 6,356
Telecommunications Fund - Class C 310,069
Telecommunications Fund - Class K 505,513
Utilities Fund - Investor Class 8,556,163
Utilities Fund - Class A 74,472
Utilities Fund - Class B 23,559
Utilities Fund - Class C 77,733
A share of each class of a Fund represents an identical interest in that Fund's
investment portfolio and has the same rights, privileges, and preferences.
However, each class may differ with respect to sales charges, if any,
distribution and/or service fees, if any, other expenses allocable exclusively
to each class, voting rights on matters exclusively affecting that class, and
its exchange privilege, if any. The different sales charges and other expenses
applicable to the different classes of shares of the Funds will affect the
performance of those classes. Each share of a Fund is entitled to participate
equally in dividends for that class, other distributions and the proceeds of any
liquidation of a class of that Fund. However, due to the differing expenses of
the classes, dividends and liquidation proceeds on Institutional Class, Investor
Class, Class A, B, C, and K shares will differ. All shares of a Fund will be
voted together, except that only the shareholders of a particular class of a
Fund may vote on matters exclusively affecting that class, such as the terms of
a Rule 12b-1 Plan as it relates to the class. All shares issued and outstanding
are, and all shares offered hereby when issued will be, fully paid and
nonassessable. The board of directors has the authority to designate additional
classes of common stock without seeking the approval of shareholders and may
classify and reclassify any authorized but unissued shares.
Shares have no preemptive rights and are freely transferable on the books of
each Fund.
All shares of the Company have equal voting rights based on one vote for each
share owned. The Company is not generally required and does not expect to hold
regular annual meetings of shareholders. However, when requested to do so in
writing by the holders of 10% or more of the outstanding shares of the Company
or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company. The Funds will assist shareholders in
communicating with other shareholders as required by the 1940 Act.
Fund shares have noncumulative voting rights, which means that the holders of a
majority of the shares of the Company voting for the election of directors of
the Company can elect 100% of the directors if they choose to do so. If that
occurs, the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the board of directors.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company.
TAX CONSEQUENCES OF OWNING SHARES OF A FUND
Each Fund intends to continue to conduct its business and satisfy the applicable
diversification of assets, distribution, and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. Each Fund qualified as a regulated investment
company and intends to continue to qualify during its current fiscal year. It is
the policy of each Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Funds' qualification as
regulated investment companies, it is anticipated that none of the Funds will
pay federal income or excise taxes and that all of the Funds will be accorded
conduit or "pass through" treatment for federal income tax purposes. Therefore,
any taxes that a Fund would ordinarily owe are paid by its shareholders on a
pro-rata basis. If a Fund does not distribute all of its net investment income
or net capital gains, it will be subject to income and excise taxes on the
amount that is not distributed. If a Fund does not qualify as a regulated
investment company, it will be subject to income tax on its net investment
income and net capital gains at the corporate tax rates.
Dividends paid by a Fund from net investment income as well as distributions of
net realized short-term capital gains and net realized gains from certain
foreign currency transactions are taxable for federal income tax purposes as
ordinary income to shareholders. After the end of each calendar year, the Funds
send shareholders information regarding the amount and character of dividends
paid in the year, including the dividends eligible for the dividends-received
deduction for corporations. Dividends eligible for the dividends-received
deduction will be limited to the aggregate amount of qualifying dividends that a
Fund derives from its portfolio investments.
A Fund realizes a capital gain or loss when it sells a portfolio security for
more or less than it paid for that security. Capital gains and losses are
divided into short-term and long-term, depending on how long the Fund held the
security which gave rise to the gain or loss. If the security was held one year
or less the gain or loss is considered short-term, while holding a security for
more than one year will generate a long-term gain or loss. A capital gain
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as dividends, as
discussed above. If total long-term gains on sales exceed total short-term
losses, including any losses carried forward from previous years, a Fund will
have a net capital gain. Distributions by a Fund of net capital gains are, for
federal income tax purposes, taxable to the shareholder as a long-term capital
gain regardless of how long a shareholder has held shares of the particular
Fund. Such distributions are not eligible for the dividends-received deduction.
After the end of each calendar year, the Funds send information to shareholders
regarding the amount and character of distributions paid during the year.
All dividends and other distributions are taxable income to the shareholder,
whether such dividends and distributions are reinvested in additional shares or
paid in cash. If the net asset value of a Fund's shares should be reduced below
a shareholder's cost as a result of a distribution, such distribution would be
taxable to the shareholder although a portion would be a return of invested
capital. The net asset value of shares of a Fund reflects accrued net investment
income and undistributed realized capital and foreign currency gains; therefore,
when a distribution is declared, the net asset value is reduced by the amount of
the distribution. If shares of a Fund are purchased shortly before a
distribution, the full price for the shares will be paid and some portion of the
price may then be returned to the shareholder as a taxable dividend or capital
gain. However, the net asset value per share will be reduced by the amount of
the distribution. If a shareholder reinvests the distribution in a Fund, the
shareholder's basis in the Fund increases by the amount of the distribution and
the value of the Fund's investment is unchanged by the distribution.
If it invests in foreign securities, a Fund may be subject to the withholding of
foreign taxes on dividends or interest it receives on foreign securities.
Foreign taxes withheld will be treated as an expense of the Fund unless the Fund
meets the qualifications and makes the election to enable it to pass these taxes
through to shareholders for use by them as a foreign tax credit or deduction.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes.
A Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average value of at least 50% of its assets produce, or are held for the
production of, passive income. Each Fund intends to "mark-to-market" its stock
in any PFIC. In this context, "marking-to-market" means including in ordinary
income for each taxable year the excess, if any, of the fair market value of the
PFIC stock over the Fund's adjusted basis in the PFIC stock as of the end of the
year. In certain circumstances, a Fund will also be allowed to deduct from
ordinary income the excess, if any, of its adjusted basis in PFIC stock over the
fair market value of the PFIC stock as of the end of the year. The deduction
will only be allowed to the extent of any PFIC mark-to-market gains recognized
as ordinary income in prior years. A Fund's adjusted tax basis in each PFIC
stock for which it makes this election will be adjusted to reflect the amount of
income included or deduction taken under the election.
Gains or losses (1) from the disposition of foreign currencies, (2) from the
disposition of debt securities denominated in foreign currencies that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time a
Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of a Fund's investment company taxable income to be
distributed to its shareholders.
INVESCO may provide Fund shareholders with information concerning the average
cost basis of their shares in order to help them prepare their tax returns. This
information is intended as a convenience to shareholders and will not be
reported to the Internal Revenue Service (the "IRS"). The IRS permits the use of
several methods to determine the cost basis of mutual fund shares. The cost
basis information provided by INVESCO will be computed using the single-category
average cost method, although neither INVESCO nor the Funds recommend any
particular method of determining cost basis. Other methods may result in
different tax consequences. Even if you have reported gains or losses for a Fund
in past years using another basis method, you may be able to use the average
cost method for determining gains or losses in the current year. However, once
you have elected to use the average cost method, you must continue to use it
unless you apply to the IRS for permission to change methods. Likewise, changing
to any basis method other than the average cost method requires IRS approval.
If you sell Fund shares at a loss after holding them for six months or less,
your loss will be treated as long-term (instead of short-term) capital loss to
the extent of any capital gain distributions that you may have received on those
shares. Similarly, if you sell Fund shares at a loss after holding them for six
months or less, your loss will be disallowed to the extent of any exempt
interest dividends that you may have received on those shares. If you pay a
sales charge to acquire shares, that sales charge is generally treated as part
of your cost basis for determining gain or loss upon disposition of those
shares. However, if you exchange your shares within ninety days of acquisition
and the sales charge was paid on the original shares, then the sales charge is
not treated as part of your cost basis on the original shares, but instead,
carries over to be included as part of your cost basis in the new or replacement
shares.
Each Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and its net capital gains for the one-year period
ending on October 31 of that year, plus certain other amounts.
You should consult your own tax adviser regarding specific questions as to
federal, state, and local taxes. Dividends and capital gain distributions will
generally be subject to applicable state and local taxes. Qualification as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, for income tax purposes does not entail government supervision of
management or investment policies.
PERFORMANCE
From time to time, the Funds' advertising and/or sales literature may include
discussions of general economic conditions, interest rates or generic topics
pertaining to the mutual fund industry.
To keep shareholders and potential investors informed, INVESCO will occasionally
advertise the Funds' total return for one-, five-, and ten-year periods (or
since inception). Most advertisements of the Funds will disclose the maximum
front-end sales charge imposed on purchases of a Fund's Class A shares and/or
the applicable CDSC imposed on redemptions of a Fund's Class B and Class C
shares. If any advertised performance data does not reflect the maximum
front-end sales charge (if any), or the applicable CDSC, such advertisement will
disclose that the sales charge or CDSC has not been deducted in computing the
performance data, and that, if reflected, such charges would reduce the
performance quoted.
Each Fund's total return is calculated in accordance with a standardized formula
for computation of annualized total return. Standardized total return for Class
A shares reflects the deduction of the maximum front-end sales charge at the
time of purchase. Standardized total return for Class B and Class C shares
reflects the deduction of the maximum applicable CDSC on a redemption of shares
held for the period. A 1% - 5% CDSC may be charged on redemptions of Class B
shares held six years or less, other than shares acquired through reinvestment
of dividends and other distributions. A 1% CDSC may be charged on redemptions of
Class C shares held thirteen months or less, other than shares acquired through
reinvestment of dividends and other distributions. Please see the section
entitled "Distributor" for additional information on CDSCs. 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. Average annual returns are
calculated by determining the growth or decline in value of a hypothetical
investment in a Fund over a stated period, 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 returns tend to even out variations in a Fund's returns, investors should
realize that the Fund's performance is not constant over time, but changes from
year to year, and that average annual returns do not represent the actual
year-to-year performance of the Fund.
In addition to average annual returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total return shows the actual rate of return on
an investment for the period cited; average annual total return represents the
average annual percentage change in the value of an investment. Both cumulative
and average annual total returns tend to "smooth out" fluctuations in a Fund's
investment results, because they do not show the interim variations in
performance over the periods cited. Total returns may be quoted with or without
taking a Fund's maximum applicable Class A front-end sales charge or Class B or
Class C CDSC into account. Excluding sales charges from a total return
calculation produces a higher total return figure.
We may also advertise Real Estate Opportunity and Utilities Funds' "30-day SEC
yield." "30-day SEC yield" is based on historical earnings and is not intended
to indicate future performance. The "30-day SEC yield" of a Fund refers to the
income generated by an investment in the Fund over a 30-day period (which period
will be stated in the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during that period is assumed
to be generated each 30-day period over a 52-week period and is shown as a
percentage of the investment.
The "30-day SEC yield" for Real Estate Opportunity and Utilities Funds for the
30 days ended March 31, 2003 were:
INVESTOR
FUND CLASS CLASS A CLASS B CLASS C
Real Estate Opportunity 3.95% 3.89% 3.35% 3.09%
Utilities 2.91% 2.68% 2.18% 2.16%
More information about the Funds' recent and historical performance is contained
in the Company's Annual Report to Shareholders. You can get a free copy by
calling or writing to INVESCO using the telephone number or address on the back
cover of the Funds' Prospectuses.
When we quote mutual fund rankings published by Lipper Inc., we may compare a
Fund to others in its appropriate Lipper category, as well as the broad-based
Lipper general fund groupings. These rankings allow you to compare a Fund to its
peers. Other independent financial media also produce performance- or
service-related comparisons, which you may see in our promotional materials.
Performance figures are based on historical earnings and are not intended to
suggest future performance.
Average annual total return performance for the one-, five-, and ten- (or since
inception) periods ended March 31, 2003 was:
10 YEAR OR
FUND AND CLASS 1 YEAR 5 YEAR SINCE INCEPTION
INVESTOR CLASS
ENERGY FUND
Return Before Taxes (12.72)% 5.35% 8.93%
Return After Taxes on Distributions (12.72)% 5.00% 7.46%
Return After Taxes on Distributions
and Sale of Fund Shares (7.81)% 4.35% 6.76%
FINANCIAL SERVICES FUND
Return Before Taxes (22.39)% (1.20)% 10.38%
Return After Taxes on Distributions (22.55)% (2.50)% 7.45%
Return After Taxes on Distributions
and Sale of Fund Shares (13.73)% (1.02)% 7.42%
GOLD & PRECIOUS METALS FUND
Return Before Taxes 4.80% (0.95)% (3.25)%
Return After Taxes on Distributions 4.80% (1.14)% (4.53)%
Return After Taxes on Distributions
and Sale of Fund Shares 2.95% (0.87)% (2.71)%
HEALTH SCIENCES FUND
Return Before Taxes (18.99)% 0.15% 11.34%
Return After Taxes on Distributions (18.99)% (1.77)% 9.00%
Return After Taxes on Distributions
and Sale of Fund Shares (11.66)% 0.05% 9.11%
LEISURE FUND
Return Before Taxes (20.87)% 7.87% 12.29%
Return After Taxes on Distributions (20.87)% 6.21% 10.04
Return After Taxes on Distributions
and Sale of Fund Shares (12.81)% 6.19% 9.55%
REAL ESTATE OPPORTUNITY FUND
Return Before Taxes (1.12)% (1.15)% 2.20%(1)
Return After Taxes on Distributions (2.46)% (3.39)% (0.44)%(1)
Return After Taxes on Distributions
and Sale of Fund Shares (0.68)% (2.09)% 0.41%(1)
10 YEAR OR
FUND AND CLASS 1 YEAR 5 YEAR SINCE INCEPTION
TECHNOLOGY FUND
Return Before Taxes (44.43)% (9.05)% 5.72%
Return After Taxes on Distributions (44.43)% (9.53)% 2.99%
Return After Taxes on Distributions
and Sale of Fund Shares (27.28)% (6.42)% 4.13%
TELECOMMUNICATIONS FUND
Return Before Taxes (35.60)% (15.09)% 1.36%(2)
Return After Taxes on Distributions (35.60)% (15.39)% (0.06)%(2)
Return After Taxes on Distributions
and Sale of Fund Shares (21.86)% (10.90)% 0.89%(2)
UTILITIES FUND
Return Before Taxes (20.99)% (7.64)% 3.07%
Return After Taxes on Distributions (21.84)% (8.71)% 0.91%
Return After Taxes on Distributions
and Sale of Fund Shares (12.87)% (5.79)% 1.80%
INSTITUTIONAL CLASS
TECHNOLOGY FUND
Return Before Taxes (43.94)% N/A (12.43)%(3)
Return After Taxes on Distributions (43.94)% N/A (12.97)%(3)
Return After Taxes on Distributions
and Sale of Fund Shares (26.98)% N/A (8.91)%(3)
CLASS A - (INCLUDING FRONT-END SALES CHARGE)
ENERGY FUND
Return Before Taxes (17.32)% N/A (17.32)%(4)
Return After Taxes on Distributions (17.32)% N/A (17.32)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (10.64)% N/A (10.64)%(4)
FINANCIAL SERVICES FUND
Return Before Taxes (26.62)% N/A (26.62)%(4)
Return After Taxes on Distributions (26.90)% N/A (26.90)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (16.33)% N/A (16.33)%(4)
10 YEAR OR
FUND AND CLASS 1 YEAR 5 YEAR SINCE INCEPTION
GOLD & PRECIOUS METALS FUND
Return Before Taxes (1.24)% N/A (1.24)%(4)
Return After Taxes on Distributions (1.24)% N/A (1.24)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (0.84)% N/A (0.84)%(4)
HEALTH SCIENCES FUND
Return Before Taxes (23.39)% N/A (23.39)%(4)
Return After Taxes on Distributions (23.39)% N/A (23.39)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (14.36)% N/A (14.36)%(4)
LEISURE FUND
Return Before Taxes (25.10)% N/A (25.10)%(4)
Return After Taxes on Distributions (25.10)% N/A (25.10)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (15.41)% N/A (15.41)%(4)
REAL ESTATE OPPORTUNITY FUND
Return Before Taxes (6.88)% N/A (6.88)%(4)
Return After Taxes on Distributions (8.44)% N/A (8.44)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (4.22)% N/A (4.22)%(4)
TECHNOLOGY FUND
Return Before Taxes (47.23)% N/A (47.23)%(4)
Return After Taxes on Distributions (47.23)% N/A (47.23)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (29.00)% N/A (29.00)%(4)
TELECOMMUNICATIONS FUND
Return Before Taxes (39.45)% N/A (39.45)%(4)
Return After Taxes on Distributions (39.45)% N/A (39.45)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (24.22)% N/A (24.22)%(4)
10 YEAR OR
FUND AND CLASS 1 YEAR 5 YEAR SINCE INCEPTION
UTILITIES FUND
Return Before Taxes (25.39)% N/A (25.39)%(4)
Return After Taxes on Distributions (26.38)% N/A (26.38)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (15.58)% N/A (15.58)%(4)
CLASS B - (INCLUDING CDSC)
ENERGY FUND
Return Before Taxes (18.24)% N/A (18.24)%(4)
Return After Taxes on Distributions (18.24)% N/A (18.24)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (11.20)% N/A (11.20)%(4)
FINANCIAL SERVICES FUND
Return Before Taxes (27.48)% N/A (27.48)%(4)
Return After Taxes on Distributions (27.66)% N/A (27.66)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (16.85)% N/A (16.85)%(4)
GOLD & PRECIOUS METALS FUND
Return Before Taxes (0.63)% N/A (0.63)%(4)
Return After Taxes on Distributions (0.63)% N/A (0.63)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (0.39)% N/A (0.39)%(4)
HEALTH SCIENCES FUND
Return Before Taxes (24.39)% N/A (24.39)%(4)
Return After Taxes on Distributions (24.39)% N/A (24.39)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (14.97)% N/A (14.97)%(4)
10 YEAR OR
FUND AND CLASS 1 YEAR 5 YEAR SINCE INCEPTION
LEISURE FUND
Return Before Taxes (26.33)% N/A (26.33)%(4)
Return After Taxes on Distributions (26.33)% N/A (26.33)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (16.17)% N/A (16.17)%(4)
REAL ESTATE OPPORTUNITY FUND
Return Before Taxes (6.94)% N/A (6.94)%(4)
Return After Taxes on Distributions (8.50)% N/A (8.50)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (4.25)% N/A (4.25)%(4)
TECHNOLOGY FUND
Return Before Taxes (49.62)% N/A (49.62)%(4)
Return After Taxes on Distributions (49.62)% N/A (49.62)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (30.47)% N/A (30.47)%(4)
TELECOMMUNICATIONS FUND
Return Before Taxes (41.17)% N/A (41.17)%(4)
Return After Taxes on Distributions (41.17)% N/A (41.17)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (25.28)% N/A (25.28)%(4)
UTILITIES FUND
Return Before Taxes (26.67)% N/A (26.67)%(4)
Return After Taxes on Distributions (27.40)% N/A (27.40)%(4)
Return After Taxes on Distributions
and Sale of Fund Shares (16.37)% N/A (16.37)%(4)
CLASS C - (INCLUDING CDSC)
ENERGY FUND
Return Before Taxes (14.33)% N/A 7.26%(5)
Return After Taxes on Distributions (14.33)% N/A 6.70%(5)
Return After Taxes on Distributions
and Sale of Fund Shares (8.80)% N/A 5.89%(5)
10 YEAR OR
FUND AND CLASS 1 YEAR 5 YEAR SINCE INCEPTION
FINANCIAL SERVICES FUND
Return Before Taxes (24.22)% N/A 0.18%(5)
Return After Taxes on Distributions (24.25)% N/A (0.64)%(5)
Return After Taxes on Distributions
and Sale of Fund Shares (14.85)% N/A 0.12%(5)
GOLD & PRECIOUS METALS FUND
Return Before Taxes 3.13% N/A 13.27%(5)
Return After Taxes on Distributions 3.13% N/A 12.92%(5)
Return After Taxes on Distributions
and Sale of Fund Shares 1.92% N/A 10.66%(5)
HEALTH SCIENCES FUND
Return Before Taxes (21.16)% N/A (10.81)%(5)
Return After Taxes on Distributions (21.16)% N/A (12.00)%(5)
Return After Taxes on Distributions
and Sale of Fund Shares (12.99)% N/A (8.51)%(5)
LEISURE FUND
Return Before Taxes (22.65)% N/A (6.91)%(5)
Return After Taxes on Distributions (22.65)% N/A (8.20)%(5)
Return After Taxes on Distributions
and Sale of Fund Shares (13.91)% N/A (5.54)%(5)
REAL ESTATE OPPORTUNITY FUND
Return Before Taxes (2.81)% N/A 7.56%(5)
Return After Taxes on Distributions (3.18)% N/A 6.66%(5)
Return After Taxes on Distributions
and Sale of Fund Shares (1.72)% N/A 5.67%(5)
TECHNOLOGY FUND
Return Before Taxes (45.87)% N/A (42.30)%(5)
Return After Taxes on Distributions (45.87)% N/A (42.54)%(5)
Return After Taxes on Distributions
and Sale of Fund Shares (28.17)% N/A (28.82)%(5)
10 YEAR OR
FUND AND CLASS 1 YEAR 5 YEAR SINCE INCEPTION
TELECOMMUNICATIONS FUND
Return Before Taxes (37.20)% N/A (47.24)%(5)
Return After Taxes on Distributions (37.20)% N/A (47.45)%(5)
Return After Taxes on Distributions
and Sale of Fund Shares (22.84)% N/A (31.22)%(5)
UTILITIES FUND
Return Before Taxes (22.85)% N/A (22.75)%(5)
Return After Taxes on Distributions (23.17)% N/A (23.24)%(5)
Return After Taxes on Distributions
and Sale of Fund Shares (14.02)% N/A (16.97)%(5)
CLASS K
ENERGY FUND
Return Before Taxes (13.52)% N/A (3.16)%(6)
Return After Taxes on Distributions (13.52)% N/A (3.16)%(6)
Return After Taxes on Distributions
and Sale of Fund Shares (8.30)% N/A (2.52)%(6)
FINANCIAL SERVICES FUND
Return Before Taxes (22.62)% N/A (9.90)%(6)
Return After Taxes on Distributions (22.81)% N/A (10.65)%(6)
Return After Taxes on Distributions
and Sale of Fund Shares (13.86)% N/A (7.86)%(6)
HEALTH SCIENCES FUND
Return Before Taxes (19.50)% N/A (15.39)%(6)
Return After Taxes on Distributions (19.50)% N/A (15.39)%(6)
Return After Taxes on Distributions
and Sale of Fund Shares (11.98)% N/A 2.02)%(6)
10 YEAR OR
FUND AND CLASS 1 YEAR 5 YEAR SINCE INCEPTION
LEISURE FUND
Return Before Taxes (21.14)% N/A (11.75)%(7)
Return After Taxes on Distributions (21.14)% N/A (11.75)%(7)
Return After Taxes on Distributions
and Sale of Fund Shares (12.98)% N/A (9.37)%(7)
TECHNOLOGY FUND
Return Before Taxes (44.47)% N/A (42.11)%(6)
Return After Taxes on Distributions (44.47)% N/A (42.11)%(6)
Return After Taxes on Distributions
and Sale of Fund Shares (27.31)% N/A (30.81)%(6)
TELECOMMUNICATIONS FUND
Return Before Taxes (35.77)% N/A (48.09)%(6)
Return After Taxes on Distributions (35.77)% N/A (48.09)%(6)
Return After Taxes on Distributions
and Sale of Fund Shares (21.96)% N/A (34.45)%(6)
(1) The Fund commenced investment operations on January 2, 1997.
(2) The Fund commenced investment operations on August 1, 1994.
(3) Institutional Class shares commenced investment operations on December 22,
1998.
(4) Class A and Class B shares commenced operations on April 1, 2002.
(5) Class C shares commenced operations on February 15, 2000.
(6) Class K shares commenced operations on December 1, 2000.
(7) Class K shares commenced operations on December 17, 2001.
Average annual total return before taxes was computed by finding the average
annual compounded rates of return that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
n
P(1 + T) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
Average annual total return after taxes on distributions and after taxes on
distributions and sale of Fund shares is computed by finding the average annual
compounded rates of return that would equate the initial amount invested to the
ending value, according to the following formula:
After taxes on distributions:
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
ATV = ending value of a hypothetical $1,000
D
payment made at the beginning of the 1-, 5-, or 10- year periods
at the end of the 1-, 5-, or 10-year periods (or fractional
portion) after taxes on fund distributions but not after taxes on
redemptions.
After taxes on distributions and redemption:
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
ATV = ending value of a hypothetical $1,000 payment made at the
DR
beginning of the 1-, 5-, or 10- year periods at the end of the
1-, 5-, or 10-year periods (or fractional portion) after taxes on
fund distributions and redemptions.
The average annual total return performance figures shown above were determined
by solving the above formula for "T" for each time period indicated.
The "30-day SEC yield" is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
(a-b) 6
Yield = 2[----- + 1) - 1]
(cd)
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last
day of the period
In conjunction with performance reports, comparative data between a Fund's
performance for a given period and other types of investment vehicles, including
certificates of deposit, may be provided to prospective investors and
shareholders.
In conjunction with performance reports and/or analyses of shareholder services
for a Fund, comparative data between that Fund's performance for a given period
and recognized indices of investment results for the same period, and/or
assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company, S&P,
Lipper Inc., Lehman Brothers, National Association of Securities Dealers
Automated Quotations, Frank Russell Company, Value Line Investment Survey, the
American Stock Exchange, Morgan Stanley Capital International, Wilshire
Associates, the Financial Times Stock Exchange, the New York Stock Exchange, the
Nikkei Stock Average, and Deutcher Aktienindex, all of which are unmanaged
market indicators. In addition, rankings, ratings, and comparisons of investment
performance and/or assessments of the quality of shareholder service made by
independent sources may be used in advertisements, sales literature or
shareholder reports, including reprints of, or selections from, editorials or
articles about the Fund. These sources utilize information compiled (i)
internally; (ii) by Lipper Inc.; or (iii) by other recognized analytical
services. The Lipper Inc. mutual fund rankings and comparisons which may be used
by the Funds in performance reports will be drawn from the following mutual fund
groupings, in addition to the broad-based Lipper general fund groupings.
LIPPER MUTUAL
FUND FUND CATEGORY
Energy Natural Resources
Financial Services Financial Services
Gold & Precious Metals Gold Oriented
Health Sciences Health/Biotechnology
Leisure Specialty/Miscellaneous
Real Estate Opportunity Real Estate Funds
Technology Science and Technology
Telecommunications Global Funds
Utilities Utility
Sources for Fund performance information and articles about the Funds include,
but are not limited to, the following:
AMERICAN ASSOCIATION OF INDIVIDUAL INVESTORS' JOURNAL
ARIZONA REPUBLIC
BANXQUOTE
BARRON'S
BLOOMBERG NEWS
BOSTON GLOBE
BUSINESS WEEK
CNBC
CNN
CHICAGO SUN-TIMES
CHICAGO TRIBUNE
DENVER BUSINESS JOURNAL
DENVER POST
DOW JONES NEWS WIRE
FINANCIAL TIMES
FORBES
FORTUNE
IBBOTSON ASSOCIATES, INC.
INSTITUTIONAL INVESTOR
INVESTOR'S BUSINESS DAILY
KIPLINGER'S PERSONAL FINANCE
LIPPER INC.'S MUTUAL FUND PERFORMANCE ANALYSIS
LOS ANGELES TIMES
MONEY MAGAZINE
MORNINGSTAR
MUTUAL FUNDS MAGAZINE
NEW YORK TIMES
ROCKY MOUNTAIN NEWS
SMART MONEY
TIME
U.S. NEWS AND WORLD REPORT
USA TODAY
WALL STREET JOURNAL
WASHINGTON POST
WIESENBERGER INVESTMENT COMPANIES SERVICES
PROXY VOTING
The Boards of Directors of the INVESCO Mutual Funds have expressly delegated to
INVESCO the responsibility to vote proxies related to the securities held in the
Funds' portfolios. Under this authority, INVESCO is required by the Boards of
Directors to act solely in the interests of shareholders of the Funds. Other
INVESCO clients who have delegated proxy voting authority to INVESCO similarly
require that proxy votes be cast in the best interests of the client.
On behalf of the Funds and its other clients, INVESCO acquires and holds a
company's securities in the portfolios it manages in the expectation that they
will be a good investment and appreciate in value. As such, INVESCO votes
proxies with a focus on the investment implications of each matter upon which a
vote is solicited.
A copy of the description of the Funds' proxy voting policy and procedures, as
administered by INVESCO is available without charge by calling 1-800-525-8085.
It is also available on the website of the Securities and Exchange Commission,
at www.sec.gov, and on the Funds' website, www.invescofunds.com.
PROXY VOTING ADMINISTRATION -- INVESCO's proxy review and voting process, which
has been in place for many years, meets INVESCO's obligations to all of its
clients, including the Funds.
To discharge its responsibilities to the Funds, INVESCO has established a Proxy
Committee that establishes guidelines and generally oversees the proxy voting
process. The Committee consists of INVESCO's General Counsel, its Chief
Investment Officer, its Vice President of Investment Operations and INVESCO's
Proxy Administrator. In addition to INVESCO's knowledge of its portfolio
companies, the Committee relies upon independent research provided by third
parties in fulfilling its responsibilities.
INVESCO, in turn, has engaged a third party, Institutional Shareholder Services
("ISS"), to act as its agent for the administrative and ministerial aspects of
proxy voting of portfolio securities, as well as to provide independent
research. ISS votes proxies for the Funds on routine matters in accordance with
guidelines established by INVESCO and the Funds. These guidelines are reviewed
periodically by the Proxy Committee and the Funds' Boards of Directors;
accordingly, they are subject to change. Although it occurs infrequently, the
guidelines may be overridden by INVESCO in any particular vote, depending upon
specific factual circumstances. ISS also serves as the proxy voting record
keeper for INVESCO.
Issues that are not covered by INVESCO's proxy voting guidelines, or that are
determined by INVESCO on a case-by-case basis, are referred to INVESCO's Chief
Investment Officer, who has been granted the ultimate authority and
responsibility by the Proxy Committee and the Funds' Boards of Directors to
decide how the proxies shall be voted on these issues. The INVESCO Chief
Investment Officer, through the Proxy Administrator, is responsible for
notifying ISS how to vote on these issues.
GUIDELINES AND POLICIES -- Overview -- As part of its investment process,
INVESCO examines the management of all portfolio companies. The ability and
judgment of management is, in INVESCO's opinion, critical to the investment
success of any portfolio company. INVESCO generally will not hold securities of
companies whose management it questions, and accords substantial weight to
management opinions. Not surprisingly, INVESCO casts most of its proxy votes,
particularly on routine matters, in accordance with portfolio company management
recommendations.
At the same time, when INVESCO believes that the position of the management of a
portfolio company may not be in the best interests of shareholders, the
Committee or an individual portfolio manager can vote against the management
recommendation. In certain cases, INVESCO consistently will vote against
management in furtherance of established guidelines on specific matters.
As a general rule, INVESCO votes against any proposals which 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.
In addition, absent specific prior authorization from INVESCO's General Counsel,
INVESCO does not:
o Engage in conduct that involves an attempt to change or influence the
control of a portfolio company.
o Announce its voting intentions and the reasons therefor.
o Participate in a proxy solicitation or otherwise seek proxy-voting
authority from any other portfolio company shareholder.
o Act in concert with other portfolio company shareholders in connection
with any proxy issue or other activity involving the control or
management of a portfolio company.
Although INVESCO reserves the right to vote proxy issues on behalf of the Funds
on a case-by- case basis if facts and circumstances so warrant, it will usually
vote on issues in the manner described below.
ROUTINE MATTERS -- INVESCO generally votes in favor of ratification of
accountants, changing corporate names and similar matters. It generally
withholds voting authority on unspecified "other matters" that may be listed on
a proxy card.
BOARDS OF DIRECTORS -- INVESCO generally votes for management's slate of
director nominees. However, it votes against incumbent nominees with poor
attendance records, or who have otherwise acted in a manner INVESCO believes is
not in the best interests of shareholders.
INVESCO generally opposes attempts to classify boards of directors to eliminate
cumulative voting.
COMPENSATION -- INVESCO believes that it is important that a company's equity
based compensation plan is aligned with the interests of shareholders, including
the Funds and its other clients. Many compensation plans are examined on a
case-by-case basis by INVESCO, and INVESCO generally opposes packages that it
believes provide excessive awards or create excessive shareholder dilution.
INVESCO usually opposes proposals to reprice options because the underlying
stock has fallen in value.
ANTI-TAKEOVER AND SIMILAR CORPORATE GOVERNANCE ISSUES -- INVESCO generally
opposes poison pills, unequal voting rights plans, provisions requiring
supermajority approval of a merger and other matters that are designed to limit
the ability of shareholders to approve merger transactions. INVESCO generally
votes in favor of increases in authorized shares.
SOCIAL ISSUES -- INVESCO believes that it is management's responsibility to
handle such issues, and generally votes with management on these types of
issues, or abstains. INVESCO will oppose issues that it believes will be a
detriment to the investment performance of a portfolio company.
CONFLICTS OF INTEREST -- Historically, INVESCO has not had situations in which
the interests of its Fund shareholders or other clients are at variance with
INVESCO's own interests. In routine matters, INVESCO votes proxies in accordance
with established guidelines, and the opportunity for conflict simply does not
arise.
In matters that INVESCO examines on a case-by-case basis, or where parties may
seek to influence INVESCO's vote (for example, a merger proposal), or in any
instance where INVESCO believes there may be an actual or perceived conflict of
interest, INVESCO votes the proxy in what it believes to be in the best
investment interests of its Fund shareholders and other clients. In such
matters, INVESCO's Chief Investment Officer makes the decision, which is
reviewed by INVESCO's General Counsel.
Matters in which INVESCO votes against its established guidelines, or matters in
which INVESCO believes there may be an actual perceived conflict of interest,
together with matters in which INVESCO votes against management recommendations,
are reported to the Funds' Boards of Directors on a quarterly basis, together
with the reasons for such votes.
CODE OF ETHICS
INVESCO and ADI permit investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires INVESCO's and ADI's personnel to
conduct their personal investment activities in a manner that INVESCO and ADI
believe is not detrimental to the Funds, or INVESCO's other advisory clients.
The Code of Ethics is on file with, and may be obtained from, the Commission.
FINANCIAL STATEMENTS
The financial statements for the Funds for the fiscal year ended March 31, 2003
are incorporated herein by reference from INVESCO Sector Funds, Inc.'s Annual
Report to Shareholders dated March 31, 2003.
APPENDIX A
BOND RATINGS
The following is a description of Moody's and S&P's bond ratings:
MOODY'S CORPORATE BOND RATINGS
INVESTMENT GRADE
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-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 rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
NON-INVESTMENT GRADE
Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
S&P CORPORATE BOND RATINGS
INVESTMENT GRADE
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
NON-INVESTMENT GRADE
BB - Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to default and
are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
INVESCO Sector Funds, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the statement of investment securities, 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 INVESCO Energy Fund, INVESCO
Financial Services Fund, INVESCO Gold & Precious Metals Fund, INVESCO Health
Sciences Fund, INVESCO Leisure Fund, INVESCO Real Estate Opportunity Fund,
INVESCO Technology Fund, INVESCO Telecommunications Fund and INVESCO Utilities
Fund (constituting INVESCO Sector Funds, Inc., hereafter referred to as the
"Fund") at March 31, 2003, the results of each of their operations for the year
then ended, the changes in each of their 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 auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 2003 by
correspondence with the custodian, transfer agent and brokers, and the
application of alternative auditing procedures where securities purchased had
not been received, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Denver, Colorado
April 30, 2003
FS-1
INVESTMENT HOLDINGS
STATEMENT OF INVESTMENT SECURITIES
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
ENERGY FUND
96.32 COMMON STOCKS
0.60 GAS UTILITIES
Equitable Resources 40,000 $ 1,500,400
==========================================================================================
25.06 INTEGRATED OIL & GAS
BP PLC Sponsored ADR
Representing 6 Ord Shrs UK 276,000 10,650,840
ChevronTexaco Corp 88,000 5,689,200
ConocoPhillips 165,000 8,844,000
Eni SpA Sponsored ADR
Representing 5 Ord Shrs(a) IT 82,000 5,475,140
Murphy Oil 300,000 13,251,000
Occidental Petroleum 165,000 4,943,400
Royal Dutch Petroleum New York
Registry 1.25 Gldr Shrs NL 135,000 5,501,250
TotalFinaElf SA Sponsored ADR
Representing 1/2 Ord Shr FR 137,000 8,667,990
==========================================================================================
63,022,820
3.48 NATURAL GAS PIPELINES
Enbridge Energy Management LLC 220,000 8,756,000
==========================================================================================
11.09 OIL & GAS DRILLING
Atwood Oceanics(b) 165,300 4,172,172
Grey Wolf(b) 400,000 1,576,000
Nabors Industries Ltd(b) BD 260,000 10,366,200
Noble Corp(b) 198,000 6,221,160
Rowan Cos 282,000 5,544,120
==========================================================================================
27,879,652
28.73 OIL & GAS EQUIPMENT & SERVICES
Baker Hughes 170,000 5,088,100
BJ Services(b) 160,000 5,502,400
Cal Dive International(b) 430,000 7,744,300
Cooper Cameron(b) 111,000 5,495,610
FMC Technologies(b) 289,100 5,550,720
Grant Prideco(b) 708,200 8,540,892
Halliburton Co 265,000 5,493,450
Lone Star Technologies(b) 388,600 8,207,232
Maverick Tube(b) 300,000 5,580,000
National-Oilwell Inc(b) 115,000 2,574,850
Schlumberger Ltd NL 100,000 3,801,000
Weatherford International Ltd(b) BD 230,000 8,687,100
==========================================================================================
72,265,654
21.65 OIL & GAS EXPLORATION,
PRODUCTION & TRANSPORTATION
Apache Corp 145,200 8,964,648
Burlington Resources 111,000 5,295,810
Devon Energy 55,000 2,652,100
FS-2
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
EnCana Corp CA 160,000 $ 5,177,600
Forest Oil(b) 228,000 5,084,400
Kerr-McGee Corp 132,000 5,360,520
Pioneer Natural Resources(b) 405,000 10,165,500
Remington Oil & Gas(b) 150,000 2,554,500
Talisman Energy CA 232,000 9,201,120
==========================================================================================
54,456,198
5.71 OIL & GAS REFINING & MARKETING
Sunoco Inc 195,000 7,131,150
Valero Energy 175,000 7,241,500
==========================================================================================
14,372,650
TOTAL COMMON STOCKS (COST $220,616,631) 242,253,374
==========================================================================================
9.34 SHORT-TERM INVESTMENTS
7.56 COMMERCIAL PAPER
3.98 CONSUMER RECEIVABLES
New Center Asset Trust, Series 1,
Discount Notes 1.420%, 4/1/2003 $ 10,000,000 10,000,000
==========================================================================================
3.58 DIVERSIFIED FINANCIAL SERVICES
State Street Boston, Discount Notes,
1.390%, 4/1/2003 $ 9,000,000 9,000,000
==========================================================================================
TOTAL COMMERCIAL PAPER (Amortized Cost
$19,000,000) 19,000,000
==========================================================================================
1.64 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$4,139,034) 4,139,034 4,139,034
==========================================================================================
0.14 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $360,012 (Collateralized
by Federal Home Loan Bank, Discount Notes,
due 4/1/2003, value $370,000) (Cost
$360,000) $ 360,000 360,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $23,499,034) 23,499,034
==========================================================================================
105.66 TOTAL INVESTMENTS AT VALUE
(COST $244,115,665) 265,752,408
==========================================================================================
(5.66) OTHER ASSETS LESS LIABILITIES (14,240,725)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 251,511,683
==========================================================================================
FINANCIAL SERVICES FUND
96.51 COMMON STOCKS
39.50 BANKS
Bank of America 690,700 $ 46,166,388
Bank of New York 817,400 16,756,700
Bank One 552,600 19,131,012
Charter One Financial 146,200 4,043,892
City National 43,300 1,902,602
Compass Bancshares 243,100 7,601,737
FS-3
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Fifth Third Bancorp 420,950 $ 21,106,433
First Tennessee National 154,700 6,143,137
FleetBoston Financial 436,000 10,411,680
Investors Financial Services 235,000 5,722,250
M&T Bank 178,100 13,995,098
Mellon Financial 485,400 10,319,604
National Commerce Financial 391,200 9,271,440
New York Community Bancorp 147,700 4,401,460
Northern Trust 329,300 10,027,185
Synovus Financial 642,500 11,494,325
TCF Financial 362,700 14,522,508
UBS AG(b) 254,600 10,871,420
Wachovia Corp 836,800 28,509,776
Wells Fargo & Co 910,700 40,972,393
Zions Bancorp 87,300 3,734,694
==========================================================================================
297,105,734
5.17 CONSUMER FINANCE
Fannie Mae 150,900 9,861,315
Freddie Mac 279,400 14,836,140
SLM Corp 127,600 14,153,392
==========================================================================================
38,850,847
0.17 DATA PROCESSING SERVICES
Concord EFS(b) 138,100 1,298,140
==========================================================================================
14.19 DIVERSIFIED FINANCIAL SERVICES
Ambac Financial Group 399,100 20,162,532
American Express 613,300 20,379,959
Citigroup Inc 1,172,000 40,375,400
Franklin Resources 233,300 7,677,903
Goldman Sachs Group 124,000 8,441,920
Moody's Corp 81,800 3,781,614
Prudential Financial 200,800 5,873,400
==========================================================================================
106,692,728
2.23 INSURANCE BROKERS
Marsh & McLennan 393,300 16,766,379
==========================================================================================
13.55 INVESTMENT ADVISER/BROKER DEALER SERVICES
Eaton Vance 165,700 4,429,161
Federated Investors Class B Shrs 336,950 8,575,377
Legg Mason 237,300 11,566,002
Lehman Brothers Holdings 403,100 23,279,025
Merrill Lynch & Co 1,080,000 38,232,000
Morgan Stanley 413,400 15,853,890
==========================================================================================
101,935,455
2.88 LIFE & HEALTH INSURANCE
AFLAC Inc 306,800 9,832,940
Lincoln National 70,700 1,979,600
Nationwide Financial Services Class A Shrs 91,000 2,217,670
Principal Financial Group 280,300 7,607,342
==========================================================================================
21,637,552
FS-4
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
6.78 MULTI-LINE INSURANCE
American International Group 730,402 $ 36,118,379
Radian Group 446,700 14,910,846
==========================================================================================
51,029,225
5.79 PROPERTY & CASUALTY INSURANCE
Allstate Corp 506,500 16,800,605
PMI Group 74,900 1,913,695
SAFECO Corp 383,100 13,397,007
St Paul 359,500 11,432,100
==========================================================================================
43,543,407
1.67 REAL ESTATE INVESTMENT TRUSTS
iStar Financial 430,900 12,569,353
==========================================================================================
4.58 REINSURANCE
Endurance Specialty Holdings Ltd(b) 166,200 4,020,378
PartnerRe Ltd 226,300 11,371,575
Platinum Underwriters Holdings Ltd 388,500 9,848,475
RenaissanceRe Holdings Ltd 230,200 9,219,510
==========================================================================================
34,459,938
TOTAL COMMON STOCKS (COST $693,290,685) 725,888,758
==========================================================================================
3.40 SHORT-TERM INVESTMENTS
3.33 COMMERCIAL PAPER -- CONSUMER RECEIVABLES
New Center Asset Trust, Series 1, Discount
Notes 1.420%, 4/1/2003 (Amortized Cost
$25,000,000) $ 25,000,000 25,000,000
==========================================================================================
0.07 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $533,018 (Collateralized
by Federal Home Loan Bank, Discount Notes,
due 4/1/2003, value $545,000) (Cost
$533,000) $ 533,000 533,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $25,533,000) 25,533,000
==========================================================================================
99.91 TOTAL INVESTMENTS AT VALUE
(COST $718,823,685) 751,421,758
==========================================================================================
0.09 OTHER ASSETS LESS LIABILITIES 692,085
==========================================================================================
100.00 NET ASSETS AT VALUE $ 752,113,843
==========================================================================================
GOLD & PRECIOUS METALS FUND
85.12 COMMON STOCKS & RIGHTS
14.22 DIVERSIFIED METALS & MINING
Apollo Gold(a)(b) CA 1,300,000 $ 3,084,401
Freeport McMoRan Copper & Gold Class B
Shrs(b) 245,000 4,177,250
Gold Fields Ltd Sponsored ADR Representing
Ord Shrs SF 450,000 4,725,000
North American Palladium Ltd(b) CA 200,000 503,076
Solitario Resources(b) CA 631,000 274,544
FS-5
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Teck Cominco Ltd Class B Shrs(a) CA 280,000 $ 2,120,534
==========================================================================================
14,884,805
59.64 GOLD
Agnico-Eagle Mines Ltd(a) CA 404,000 5,296,440
AngloGold Ltd Sponsored ADR
Representing Ord Shrs SF 117,000 3,531,060
Ashanti Goldfields Ltd GDR
Representing Ord Shrs(b) GH 660,000 3,748,800
Barrick Gold CA 315,000 4,901,400
Chesapeake Gold(b) CA 182,700 444,655
Claude Resources(b) CA 305,100 292,458
Glamis Gold Ltd(a)(b) CA 800,000 8,272,000
Glamis Gold Ltd Rights(b)
(to purchase Cmn Shrs) CA 226,700 0
Goldcorp Inc CA 295,000 3,129,950
Harmony Gold Mining Ltd Sponsored ADR
Representing Ord Shrs SF 300,000 3,669,000
IAMGOLD Corp(a) CA 1,200,000 5,221,117
Kinross Gold(b) CA 700,000 4,301,982
Meridian Gold(b) CA 500,000 4,725,000
Newmont Mining 195,000 5,099,250
Pacific Rim Mining(b) CA 1,254,900 409,499
Placer Dome CA 505,000 4,949,000
Rio Narcea Gold Mines Ltd(b) CA 515,900 736,524
Wheaton River Minerals Ltd(a)(b) CA 4,400,000 3,709,168
==========================================================================================
62,437,303
11.26 PRECIOUS METALS & MINERALS
Aber Diamond(b) CA 230,000 4,270,233
Compania de Minas Buenaventura SA Sponsored
ADR Representing Series B Shrs PE 160,000 4,000,000
Impala Platinum Holdings Ltd SF 49,000 2,496,379
SouthernEra Resources Ltd(b) CA 250,000 1,019,749
==========================================================================================
11,786,361
TOTAL COMMON STOCKS & RIGHTS (COST
$75,551,902) 89,108,469
==========================================================================================
2.37 PREFERRED STOCKS -- DIVERSIFIED METALS & MINING
Freeport McMoRan Copper & Gold Depository
Shrs Representing 1/20 Series Gold Pfd Shr
(Cost $1,405,625) 75,000 2,482,500
==========================================================================================
4.83 OTHER SECURITIES -- GOLD BULLION
Gold Bullion(b) (Cost $4,266,114) 14,974(d) 5,051,577
==========================================================================================
18.99 SHORT-TERM INVESTMENTS
10.84 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$11,344,418) 11,344,418 11,344,418
==========================================================================================
FS-6
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
8.15 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $8,531,291 (Collateralized
by Federal Home Loan Bank, Discount
Notes, due 4/1/2003, value $8,705,000)
(Cost $8,531,000) $ 8,531,000 $ 8,531,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(COST $19,875,418) 19,875,418
==========================================================================================
111.31 TOTAL INVESTMENTS AT VALUE
(COST $101,099,059) 116,517,964
==========================================================================================
(11.31) OTHER ASSETS LESS LIABILITIES (11,841,514)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 104,676,450
==========================================================================================
HEALTH SCIENCES FUND
98.72 COMMON STOCKS
17.69 BIOTECHNOLOGY
Amgen Inc(b) 717,200 $ 41,274,860
Biotech HOLDRs Trust(b)(e) 512,900 47,827,925
Chiron Corp(b) 295,300 11,073,750
Genentech Inc(b) 311,100 10,891,611
Genzyme Corp-General Division(b) 358,500 13,067,325
Gilead Sciences(b) 664,460 27,900,675
IDEC Pharmaceuticals(b) 208,500 7,176,362
MedImmune Inc(b) 360,800 11,845,064
==========================================================================================
171,057,572
0.99 HEALTH CARE DISTRIBUTORS & SERVICES
McKesson Corp 385,500 9,610,515
==========================================================================================
18.93 HEALTH CARE EQUIPMENT
Biomet Inc 398,600 12,217,090
Boston Scientific(b) 576,440 23,495,694
C.R. Bard 407,100 25,671,726
Edwards Lifesciences(b) 403,800 11,064,120
Guidant Corp(b) 565,600 20,474,720
Medtronic Inc 589,500 26,598,240
Stryker Corp 168,500 11,567,525
Varian Medical Systems(b) 458,180 24,709,647
Zimmer Holdings(b) 559,262 27,196,911
==========================================================================================
182,995,673
1.43 HEALTH CARE FACILITIES
HCA Inc 131,120 5,423,123
Health Management Associates Class A Shrs 299,300 5,686,700
Triad Hospitals(b) 102,100 2,746,490
==========================================================================================
13,856,313
2.34 HEALTH CARE SUPPLIES
Alcon Inc(b) 462,150 18,957,393
FS-7
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Smith & Nephew PLC 605,100 $ 3,701,467
==========================================================================================
22,658,860
1.37 HOUSEHOLD PRODUCTS
Procter & Gamble 149,300 13,295,165
==========================================================================================
1.39 MANAGED HEALTH CARE
First Health Group(b) 257,840 6,559,450
UnitedHealth Group 74,600 6,838,582
==========================================================================================
13,398,032
54.58 PHARMACEUTICALS
Abbott Laboratories 1,058,830 39,822,596
AmerisourceBergen Corp 173,925 9,131,063
Barr Laboratories(b) 269,700 15,372,900
Bristol-Myers Squibb 1,778,100 37,571,253
Eli Lilly & Co 685,700 39,187,755
Forest Laboratories(b) 859,084 46,364,763
GlaxoSmithKline PLC Sponsored ADR
Representing 2 Ord Shrs 658,700 23,179,653
Johnson & Johnson 818,462 47,364,396
Merck & Co 767,100 42,021,738
Novartis AG Sponsored ADR
Representing Ord Shrs 881,700 32,675,802
Pfizer Inc 980,151 30,541,505
Pharmaceutical HOLDRs Trust(a)(e)(f) 578,400 42,888,360
Pharmaceutical Resources(b) 323,500 13,742,280
Pharmacia Corp 808,307 34,999,693
Teva Pharmaceutical Industries Ltd Sponsored
ADR Representing Ord Shrs 753,140 31,368,281
Wyeth 1,096,600 41,473,412
==========================================================================================
527,705,450
TOTAL COMMON STOCKS (COST $821,536,195) 954,577,580
==========================================================================================
0.77 PREFERRED STOCKS
0.00 BIOTECHNOLOGY
Ingenex Inc, Conv Pfd, Series B Shrs(b)(l) 103,055 1
==========================================================================================
0.77 HEALTH CARE EQUIPMENT
Athersys Inc, Conv Pfd, Class F Shrs(b)(l) 416,667 5,416,667
Optimize Inc, Pfd, Series 5 Shrs(b)(l) 1,337,276 628,450
Scimagix Inc, Pfd, Series C Shrs(b)(l) 641,635 1,350,000
UltraGuide Inc, Pfd
Series E Shrs(b)(l) 445,050 84,560
Series F Shrs(b)(l) 50,000 9,500
==========================================================================================
7,489,177
TOTAL PREFERRED STOCKS (Cost $9,078,452) 7,489,178
==========================================================================================
2.96 SHORT-TERM INVESTMENTS
2.50 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$24,193,400) 24,193,400 24,193,400
==========================================================================================
FS-8
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
0.46 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $4,424,151 (Collateralized
by Federal Home Loan Bank, Discount Notes,
due 4/1/2003, value $4,515,000) (Cost
$4,424,000) $ 4,424,000 $ 4,424,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(COST $28,617,400) 28,617,400
==========================================================================================
102.45 TOTAL INVESTMENTS AT VALUE
(COST $859,232,047) 990,684,158
==========================================================================================
(2.45) OTHER ASSETS LESS LIABILITIES (23,730,992)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 966,953,166
==========================================================================================
LEISURE FUND
96.28 COMMON STOCKS
10.18 ADVERTISING
Harte-Hanks Inc 332,450 $ 6,349,795
JC Decaux SA(b) FR 218,400 2,073,367
Omnicom Group 706,000 38,244,020
Valassis Communications(b) 541,900 14,306,160
WPP Group PLC UK 1,090,730 5,879,053
==========================================================================================
66,852,395
2.34 APPAREL, ACCESSORIES & LUXURY GOODS
Jones Apparel Group(b) 256,900 7,046,767
Polo Ralph Lauren Class A Shrs(b) 363,400 8,321,860
==========================================================================================
15,368,627
7.95 BREWERS
Anheuser-Busch Cos 340,400 15,866,044
Carlsberg A/S Class B Shrs(a) DA 443,084 14,974,333
Diageo PLC UK 224,600 2,304,041
Heineken NV NL 477,200 17,699,295
Interbrew BE 66,535 1,347,512
==========================================================================================
52,191,225
5.10 BROADCASTING-- RADIO/TV
Belo Corp Series A Shrs 360,000 7,293,600
Clear Channel Communications(b) 124,049 4,207,742
Fox Kids Europe NV(b) NL 905,629 5,039,934
Granada PLC UK 324,208 292,102
Gray Television 640,100 5,760,900
Sinclair Broadcast Group Class A Shrs(b) 508,500 3,996,810
Spanish Broadcasting System Class A Shrs(b) 271,200 1,665,168
Television Broadcasts Ltd Sponsored ADR
Representing 2 Ord Shrs HK 154,500 946,869
Univision Communications Class A Shrs(b) 174,300 4,272,093
==========================================================================================
33,475,218
10.52 CABLE & SATELLITE OPERATORS
Cablevision Systems New York Group(b) 833,293 15,824,234
FS-9
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Comcast Corp Class A Shrs(b) 342,400 $ 9,789,216
EchoStar Communications Class A Shrs(b) 408,585 11,799,935
Liberty Media Series A Shrs(b) 3,253,914 31,660,583
==========================================================================================
69,073,968
1.59 CABLE & SATELLITE PROGRAMMERS
USA Interactive(b) 389,800 10,442,742
==========================================================================================
14.36 CASINOS & GAMING
Harrah's Entertainment(b) 982,000 35,057,400
International Game Technology(b) 588,000 48,157,200
MGM MIRAGE(b) 152,016 4,446,468
Park Place Entertainment(b) 95,200 677,824
Wynn Resorts Ltd(b) 387,700 5,986,088
==========================================================================================
94,324,980
0.37 CONSUMER ELECTRONICS
Sony Corp Sponsored ADR
Representing Ord Shrs JA 70,100 2,462,613
==========================================================================================
1.54 CRUISE LINES
Carnival Corp 268,900 6,483,179
Royal Caribbean Cruises Ltd 170,344 2,560,270
Steiner Leisure Ltd(b) 93,000 1,050,900
==========================================================================================
10,094,349
0.71 DIVERSIFIED FINANCIAL SERVICES
Pargesa Holding AG Class B Shrs SZ 2,708 4,688,831
==========================================================================================
0.66 DIVERSIFIED METALS & MINING
Anglo American PLC ADR
Representing Ord Shrs(a) UK 303,140 4,334,902
==========================================================================================
0.83 FOOTWEAR
Foot Locker 151,000 1,615,700
NIKE Inc Class B Shrs 75,000 3,856,500
==========================================================================================
5,472,200
0.71 GENERAL MERCHANDISE STORES
Target Corp 57,200 1,673,672
Tuesday Morning(b) 152,400 2,999,232
==========================================================================================
4,672,904
6.39 HOTELS & RESORTS
Accor SA FR 106,500 2,942,508
Cendant Corp(b) 563,700 7,158,990
Extended Stay America(b) 191,600 1,935,160
Hilton Hotels 605,150 7,025,791
Marriott International Class A Shrs 279,100 8,878,171
NH Hoteles SA(b) SP 418,600 3,416,687
Starwood Hotels & Resorts Worldwide
Paired Certificates SBI 445,860 10,607,009
==========================================================================================
41,964,316
0.30 INDUSTRIAL CONGLOMERATES
Campagnie Nationale a Portefeuille(a) BE 20,300 1,962,610
==========================================================================================
FS-10
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
2.58 INVESTMENT COMPANIES
iShares Trust
Russell 3000 Index Fund 185,000 $ 8,750,500
S&P 500 Index Fund 96,300 8,167,203
==========================================================================================
16,917,703
1.39 LEISURE FACILITIES
Cedar Fair LP(a) 97,800 2,437,176
Intrawest Corp CA 396,480 4,139,251
Six Flags(b) 362,500 2,030,000
Vail Resorts (b) 45,100 502,865
==========================================================================================
9,109,292
8.31 LEISURE PRODUCTS
Activision Inc(b) 88,300 1,275,935
Electronic Arts(b) 30,500 1,788,520
Hasbro Inc 138,400 1,922,376
Leapfrog Enterprises(b) 51,100 1,218,224
Mattel Inc 2,151,200 48,402,000
==========================================================================================
54,607,055
9.83 MOVIES & ENTERTAINMENT
AOL Time Warner(b) 1,169,500 12,700,770
Groupe Bruxelles Lambert SA BE 363,900 13,103,894
Metro-Goldwyn-Mayer Inc(b) 1,054,900 11,076,450
Pixar(b) 103,700 5,608,096
Regal Entertainment Group Class A Shrs 129,900 2,331,705
Viacom Inc
Class A Shrs(b) 101,880 3,718,620
Class B Shrs(b) 179,900 6,569,948
Walt Disney 556,199 9,466,507
==========================================================================================
64,575,990
7.53 PUBLISHING & PRINTING
E. W. Scripps Class A Shrs 73,300 5,551,742
Gannett Co 144,000 10,141,920
Knight-Ridder Inc 232,800 13,618,800
McClatchy Co Class A Shrs 131,900 7,068,521
McGraw-Hill Cos 76,700 4,263,753
Media General Class A Shrs 54,600 2,688,504
New York Times Class A Shrs 141,200 6,092,780
==========================================================================================
49,426,020
1.65 RESTAURANTS
CBRL Group 272,600 7,482,870
Yum! Brands(b) 136,900 3,330,777
==========================================================================================
10,813,647
0.35 SOFT DRINKS
Coca-Cola Femsa SA de CV Sponsored ADR
Representing 10 Ord Series L Shrs MX 134,500 2,305,330
==========================================================================================
0.39 SPECIALTY STORES
Hollywood Entertainment(b) 122,300 1,961,692
FS-11
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Toys "R" Us(b) 74,900 $ 626,913
==========================================================================================
2,588,605
0.10 TELECOMMUNICATIONS EQUIPMENT
General Motors Class H Shrs(b) 60,600 678,720
==========================================================================================
0.60 TOBACCO
Altria Group 130,900 3,921,764
==========================================================================================
TOTAL COMMON STOCKS (COST $575,154,170) 632,326,006
==========================================================================================
2.62 PREFERRED STOCKS
1.76 MOVIES & ENTERTAINMENT
News Corp Ltd Sponsored ADR
Representing 4 Pfd Ltd Voting Shrs AS 542,178 11,597,187
==========================================================================================
0.86 SOFT DRINKS
Companhia de Bebidas das Americas
Sponsored ADR Representing 100 Pfd Shrs BR 340,000 5,644,000
==========================================================================================
TOTAL PREFERRED STOCKS (COST $19,368,824) 17,241,187
==========================================================================================
2.97 SHORT-TERM INVESTMENTS
0.47 US GOVERNMENT OBLIGATIONS
US Government Securities(c)
(Cost $3,111,943) $ 3,111,943 3,111,943
==========================================================================================
1.61 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$10,594,794) 10,594,794 10,594,794
==========================================================================================
0.89 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $5,814,199 (Collateralized
by Federal Home Loan Bank, Discount
Notes, due 4/1/2003, value $5,935,000)
(Cost $5,814,000) $ 5,814,000 5,814,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(COST $19,520,737) 19,520,737
==========================================================================================
101.87 TOTAL INVESTMENTS AT VALUE
(COST $614,043,731) 669,087,930
==========================================================================================
(1.87) OTHER ASSETS LESS LIABILITIES (12,304,201)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 656,783,729
==========================================================================================
REAL ESTATE OPPORTUNITY FUND
95.21 COMMON STOCKS
1.11 CASINOS & GAMING
Park Place Entertainment(b) 36,900 $ 262,728
==========================================================================================
1.43 FOREST PRODUCTS
Weyerhaeuser Co 7,100 339,593
==========================================================================================
1.00 HOMEBUILDING
Ryland Group 5,500 237,545
==========================================================================================
FS-12
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
1.00 HOTELS & RESORTS
Starwood Hotels & Resorts Worldwide Paired
Certificates SBI 9,900 $ 235,521
==========================================================================================
1.49 PAPER PRODUCTS
Bowater Inc 9,500 352,925
==========================================================================================
86.86 REAL ESTATE INVESTMENT TRUSTS
Alexandria Real Estate Equities 24,200 1,017,610
Apartment Investment & Management Class A Shrs 9,200 335,616
Archstone-Smith Trust 19,210 421,852
Avalonbay Communities 12,100 446,490
Boston Properties 29,900 1,133,210
CarrAmerica Realty 36,400 922,740
Developers Diversified Realty 41,700 1,007,055
EastGroup Properties 17,400 444,744
Equity Office Properties Trust 37,600 956,920
Equity Residential SBI 32,200 775,054
Essex Property Trust 7,000 365,750
General Growth Properties 20,800 1,122,160
Impac Mortgage Holdings 27,900 362,421
iStar Financial 33,900 988,863
Mack-Cali Realty 26,500 820,705
Mid-Atlantic Realty Trust SBI 34,200 623,466
Mills Corp 24,700 770,640
Pan Pacific Retail Properties 6,500 246,025
Parkway Properties 19,800 746,064
Post Properties 16,900 408,135
Prentiss Properties Trust SBI 22,800 617,880
ProLogis SBI 43,270 1,095,596
RFS Hotel Investors 56,400 547,080
Rouse Co 21,900 756,645
Simon Property Group 21,000 752,430
SL Green Realty 22,200 678,432
Universal Health Realty Income Trust SBI 4,700 121,730
Vornado Realty Trust SBI 27,600 988,080
Weingarten Realty Investors 28,300 1,106,813
==========================================================================================
20,580,206
2.32 REAL ESTATE MANAGEMENT & DEVELOPMENT
Catellus Development(b) 12,300 258,300
St Joe 10,700 291,040
==========================================================================================
549,340
TOTAL COMMON STOCKS (COST $21,860,776) 22,557,858
==========================================================================================
6.27 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $1,485,051 (Collateralized
by Federal Home Loan Bank, Bonds, due
3/26/2004 at 1.350%, value $1,515,587)
(Cost $1,485,000) $ 1,485,000 1,485,000
==========================================================================================
FS-13
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
101.48 TOTAL INVESTMENTS AT VALUE
(COST $23,345,776) $ 24,042,858
==========================================================================================
(1.48) OTHER ASSETS LESS LIABILITIES (349,747)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 23,693,111
==========================================================================================
TECHNOLOGY FUND
92.58 COMMON STOCKS
0.68 AEROSPACE & DEFENSE
Lockheed Martin 226,300 $ 10,760,565
==========================================================================================
10.47 APPLICATION SOFTWARE
Amdocs Ltd(b) 1,204,720 15,998,682
BEA Systems(b) 2,941,800 29,976,942
Cadence Design Systems(b) 906,800 9,068,000
Check Point Software Technologies Ltd(b) 973,650 14,088,715
Intuit Inc(b) 582,300 21,661,560
Mercury Interactive(b) 808,500 23,996,280
PeopleSoft Inc(b) 1,018,700 15,586,110
SAP AG Sponsored ADR Representing 1/4
Ord Shr 114,900 2,178,504
Siebel Systems(b) 1,343,600 10,762,236
Software HOLDRs Trust(a)(e)(f) 834,700 21,209,727
Wipro Ltd Sponsored ADR Representing Ord Shrs(a) 84,000 2,360,400
==========================================================================================
166,887,156
0.54 CABLE & SATELLITE OPERATORS
Comcast Corp Class A Shrs(b) 300,400 8,588,436
==========================================================================================
7.82 COMPUTER HARDWARE
Apple Computer(b) 1,426,200 20,166,468
Dell Computer(b) 1,685,700 46,036,467
Hewlett-Packard Co 1,318,600 20,504,230
International Business Machines 428,900 33,638,627
Sun Microsystems(b) 1,317,300 4,294,398
==========================================================================================
124,640,190
5.55 COMPUTER STORAGE & PERIPHERALS
EMC Corp(b) 3,713,000 26,844,990
Emulex Corp(b) 830,600 15,905,990
Lexmark International Class A Shrs(b) 225,400 15,090,530
McDATA Corp Class A Shrs(b) 992,300 8,523,857
Network Appliance(b) 1,974,500 22,094,655
==========================================================================================
88,460,022
3.89 DATA PROCESSING SERVICES
First Data 696,100 25,762,661
Fiserv Inc(b) 627,450 19,752,126
Paychex Inc 599,350 16,464,144
==========================================================================================
61,978,931
0.98 DIVERSIFIED COMMERCIAL SERVICES
CheckFree Corp(b) 696,800 15,664,064
==========================================================================================
FS-14
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
5.22 ELECTRONIC EQUIPMENT & INSTRUMENTS
Celestica Inc(b) 1,326,200 $ 15,158,466
Flextronics International Ltd(b) 2,564,400 22,361,568
Jabil Circuit(b) 1,645,600 28,798,000
MKS Instruments(b) 64,500 806,250
Samsung Electronics Ltd Sponsored GDR
Representing 1/2 Ord Shr(g) 142,300 16,079,900
==========================================================================================
83,204,184
0.36 HOTELS & RESORTS
Hotels.com Class A Shrs(a)(b) 100,000 5,767,500
==========================================================================================
0.36 INTEGRATED TELECOMMUNICATION SERVICES
Verizon Communications 160,500 5,673,675
==========================================================================================
3.49 INTERNET RETAIL
Amazon.com Inc(b) 451,000 11,739,530
eBay Inc(b) 515,100 43,932,879
==========================================================================================
55,672,409
0.83 INTERNET SOFTWARE & SERVICES
Internet Security Systems(b) 227,400 2,258,082
VeriSign Inc(b) 344,700 3,012,678
Yahoo! Inc(b) 329,700 7,919,394
==========================================================================================
13,190,154
1.80 INVESTMENT COMPANIES
Nasdaq-100 Trust Series 1 Shrs(b) 1,138,900 28,757,225
==========================================================================================
1.92 IT CONSULTING & SERVICES
Affiliated Computer Services Class A
Shrs(b) 412,000 18,235,120
BISYS Group(b) 460,000 7,507,200
Cognizant Tech Solutions Class A Shrs(b) 72,900 4,909,815
==========================================================================================
30,652,135
0.50 MOVIES & ENTERTAINMENT
AOL Time Warner(b) 732,600 7,956,036
==========================================================================================
4.38 NETWORKING EQUIPMENT
Cisco Systems(b)(i) 4,359,860 56,590,983
Juniper Networks(b) 650,000 5,310,500
NetScreen Technologies(b) 466,800 7,832,904
==========================================================================================
69,734,387
4.21 SEMICONDUCTOR EQUIPMENT
Applied Materials(b) 1,624,500 20,436,210
ASML Holding NV New York Registered
Shrs(b) 363,300 2,386,881
Cymer Inc(b) 35,400 837,210
KLA-Tencor Corp(b) 416,300 14,962,655
Lam Research(b) 735,100 8,372,054
Novellus Systems(b) 733,800 20,010,726
==========================================================================================
67,005,736
16.87 SEMICONDUCTORS
Altera Corp(b) 1,188,600 16,093,644
Analog Devices(b) 345,000 9,487,500
FS-15
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Broadcom Corp Class A Shrs(b) 285,200 $ 3,522,220
Cypress Semiconductor(b) 252,200 1,740,180
Fairchild Semiconductor International
Class A Shrs(b) 603,400 6,311,564
GlobespanVirata Inc(b) 468,200 2,106,900
Intel Corp 3,736,800 60,835,104
Intersil Corp Class A Shrs(b) 282,400 4,394,144
Linear Technology 982,900 30,342,123
Maxim Integrated Products 715,900 25,858,308
Microchip Technology 1,092,800 21,746,720
National Semiconductor(b) 461,400 7,862,256
PMC-Sierra Inc(b) 271,000 1,612,450
QLogic Corp(b) 289,200 10,740,888
RF Micro Devices(b) 1,026,900 6,191,180
Skyworks Solutions(a)(b) 670,000 4,174,100
Taiwan Semiconductor Manufacturing Ltd
Sponsored ADR Representing 5 Ord Shrs 1,952,136 13,352,610
Texas Instruments 943,900 15,451,643
United Microelectronics Sponsored ADR
Representing 5 Ord Shrs 1,693,300 5,096,833
Vitesse Semiconductor(b) 674,100 1,442,574
Xilinx Inc(b)(h) 871,800 20,408,838
==========================================================================================
268,771,779
16.45 SYSTEMS SOFTWARE
Adobe Systems 842,700 25,980,441
BMC Software(b) 1,156,200 17,447,058
Micromuse Inc(b) 607,000 3,156,400
Microsoft Corp 4,327,200 104,761,512
Networks Associates(b) 899,000 12,415,190
Oracle Corp(b) 3,671,500 39,832,103
Symantec Corp(b) 1,177,600 46,138,368
VERITAS Software(b) 701,300 12,328,854
==========================================================================================
262,059,926
4.92 TELECOMMUNICATIONS EQUIPMENT
ADC Telecommunications(b) 2,022,292 4,165,922
Alcatel SA Sponsored ADR Representing
Ord Shrs 981,300 6,761,157
CIENA Corp(b) 591,900 2,586,603
Corning Inc(b) 412,500 2,409,000
Lucent Technologies(b) 2,375,800 3,492,426
Nokia Corp Sponsored ADR Representing Ord
Shrs(a) 1,561,900 21,882,219
Nortel Networks(b) 2,589,900 5,386,992
QUALCOMM Inc 711,950 25,672,917
UTStarcom Inc(b) 303,600 6,068,964
==========================================================================================
78,426,200
1.34 WIRELESS TELECOMMUNICATION SERVICES
Nextel Communications Class A Shrs(b) 530,700 7,106,073
Vodafone Group PLC Sponsored ADR
Representing 10 Ord Shrs 781,200 14,233,464
==========================================================================================
21,339,537
TOTAL COMMON STOCKS (COST $1,730,029,294) 1,475,190,247
==========================================================================================
FS-16
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
0.07 PREFERRED STOCKS
0.00 BIOTECHNOLOGY
Ingenex Inc, Conv Pfd, Series B Shrs(b)(l) 51,527 $ 1
==========================================================================================
0.07 NETWORKING EQUIPMENT
Calient Networks, Pfd, Series D
Shrs(b)(f)(l) 1,925,754 1,106,133
==========================================================================================
TOTAL PREFERRED STOCKS (COST $14,213,578) 1,106,134
==========================================================================================
0.01 FIXED INCOME SECURITIES -- CORPORATE BONDS
0.01 NETWORKING EQUIPMENT
Kestrel Solutions, Conv Sub Notes(g)(k)(l),
5.500%, 7/15/2005 (Cost $2,500,000) $ 2,500,000 200,000
==========================================================================================
0.32 OTHER SECURITIES -- DIVERSIFIED FINANCIAL SERVICES
BlueStream Ventures LP(b)(j)(l)(Cost
$12,268,055) 5,184,864
==========================================================================================
7.21 SHORT-TERM INVESTMENTS
4.96 COMMERCIAL PAPER
3.14 CONSUMER RECEIVABLES
New Center Asset Trust, Series 1, Discount
Notes 1.420%, 4/1/2003 $ 50,000,000 50,000,000
==========================================================================================
1.82 DIVERSIFIED FINANCIAL SERVICES
State Street Boston, Discount Notes,
1.390%, 4/1/2003 $ 29,000,000 29,000,000
==========================================================================================
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $79,000,000) 79,000,000
==========================================================================================
2.13 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$33,984,450) 33,984,450 33,984,450
==========================================================================================
0.12 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $1,910,065 (Collateralized
by Federal Home Loan Bank, Discount Notes,
due 4/1/2003, value $1,950,000) (Cost
$1,910,000) $ 1,910,000 1,910,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $114,894,450) 114,894,450
==========================================================================================
100.19 TOTAL INVESTMENTS AT VALUE
(COST $1,873,905,377) 1,596,575,695
==========================================================================================
(0.19) OTHER ASSETS LESS LIABILITIES (3,099,757)
==========================================================================================
100.00 NET ASSETS AT VALUE $1,593,475,938
==========================================================================================
TELECOMMUNICATIONS FUND
89.63 COMMON STOCKS & WARRANTS
2.77 APPLICATION SOFTWARE
Amdocs Ltd(b) UK 290,500 $ 3,857,840
BEA Systems(b) 246,100 2,507,759
Software HOLDRs Trust(e) 52,500 1,334,025
==========================================================================================
7,699,624
FS-17
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
5.92 BROADCASTING -- RADIO/TV
Clear Channel Communications(b) 100,000 $ 3,392,000
Fox Entertainment Group Class A Shrs(b) 304,000 8,107,680
Univision Communications Class A Shrs(b) 202,400 4,960,824
==========================================================================================
16,460,504
13.11 CABLE & SATELLITE OPERATORS
Comcast Corp Class A Shrs(b)(i) 454,552 12,995,642
Cox Communications Class A Shrs(b) 276,700 8,608,137
EchoStar Communications Class A Shrs(b) 375,500 10,844,440
Liberty Media Series A Shrs(b) 412,600 4,014,598
==========================================================================================
36,462,817
2.08 ELECTRONIC EQUIPMENT & INSTRUMENTS
Garmin Ltd(b) CJ 8,100 289,980
Samsung Electronics Ltd GDR
Representing 1/2 Ord Shr(g) KS 48,600 5,491,800
==========================================================================================
5,781,780
22.67 INTEGRATED TELECOMMUNICATION SERVICES
ALLTEL Corp 139,400 6,239,544
AT&T Corp 195,300 3,163,860
BCE Inc(a) CA 286,200 5,253,340
BellSouth Corp(i) 133,300 2,888,611
CenturyTel Inc 212,800 5,873,280
Deutsche Telekom AG GM 551,200 6,080,856
France Telecom SA(a) FR 97,700 1,992,545
France Telecom SA Warrants(b) (Exp 2003) FR 97,700 383,797
KT Corp Sponsored ADR
Representing 1/2 Ord Shr KS 155,600 2,671,652
Portugal Telecom SGPS SA Sponsored ADR
Representing Ord Shrs PO 814,900 5,557,618
Qwest Communications International(b) 972,100 3,392,629
SBC Communications(i) 147,186 2,952,551
Sprint Corp 276,500 3,248,875
Telefonos de Mexico SA de CV Sponsored ADR
Representing 20 Series L ShrsMX 111,100 3,301,892
Verizon Communications(i) 284,200 10,046,470
==========================================================================================
63,047,520
1.24 MOVIES & ENTERTAINMENT
Viacom Inc Class B Shrs(b) 94,500 3,451,140
==========================================================================================
4.50 NETWORKING EQUIPMENT
Cisco Systems(b)(i) 626,900 8,137,162
Extreme Networks(b) 166,800 722,244
Foundry Networks(b) 252,900 2,033,316
Juniper Networks(b) 198,000 1,617,660
==========================================================================================
12,510,382
2.15 SEMICONDUCTORS
Agere Systems Class A Shrs(b) 707,900 1,132,640
RF Micro Devices(b) 91,100 549,242
Semiconductor HOLDRs Trust(e) 116,300 2,685,367
FS-18
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Skyworks Solutions(a)(b) 259,200 $ 1,614,816
==========================================================================================
5,982,065
3.13 SYSTEMS SOFTWARE
Symantec Corp(b) 222,600 8,721,468
==========================================================================================
13.75 TELECOMMUNICATIONS EQUIPMENT
ADC Telecommunications(b) 981,800 2,022,508
ADTRAN Inc(b) 24,300 872,613
Advanced Fibre Communications(b) 52,900 800,906
Alcatel SA Sponsored ADR
Representing Ord Shrs FR 569,800 3,925,922
Comverse Technology(b) 99,800 1,128,738
Corning Inc(b) 513,600 2,999,424
Lucent Technologies(b) 599,700 881,559
Motorola Inc 333,500 2,754,710
Nokia Corp Sponsored ADR
Representing Ord Shrs(a)(i) FI 629,700 8,822,097
Nortel Networks(b) CA 1,516,900 3,155,152
QUALCOMM Inc(h) 302,200 10,897,332
==========================================================================================
38,260,961
18.31 WIRELESS TELECOMMUNICATION SERVICES
America Movil SA Sponsored ADR
Representing 20 Series L ShrsMX 108,200 1,446,634
AT&T Wireless Services(b) 1,983,100 13,088,460
Boston Communications Group(b) 43,900 687,474
Nextel Communications Class A Shrs(b) 965,000 12,921,350
Nextel Partners Class A Shrs(b) 134,300 676,872
Orange SA(b) FR 451,200 3,618,768
Sprint Corp-PCS Group Series 1 Shrs(b) 698,800 3,046,768
Telecom Italia Mobile SpA(a) IT 322,000 1,314,110
Vodafone Group PLC Sponsored ADR
Representing 10 Ord Shrs UK 775,571 14,130,904
==========================================================================================
50,931,340
TOTAL COMMON STOCKS & WARRANTS
(COST $255,802,849) 249,309,601
==========================================================================================
0.16 PREFERRED STOCKS
0.16 NETWORKING EQUIPMENT
Calient Networks, Pfd, Series D Shrs(b)(l)
(Cost $5,438,366) 752,715 432,352
==========================================================================================
0.07 FIXED INCOME SECURITIES -- CORPORATE BONDS
0.07 NETWORKING EQUIPMENT
Kestrel Solutions, Conv Sub Notes(g)(k)(l)
5.500%, 7/15/2005 (Cost $2,500,000) $2,500,000 200,000
==========================================================================================
1.84 OTHER SECURITIES -- DIVERSIFIED FINANCIAL SERVICES
BlueStream Ventures LP(b)(j)(l) (Cost
$12,072,288) 5,102,127
==========================================================================================
15.09 SHORT-TERM INVESTMENTS
8.27 COMMERCIAL PAPER
3.60 CONSUMER RECEIVABLES
New Center Asset Trust, Series 1, Discount
Notes 1.420%, 4/1/2003 $ 10,000,000 10,000,000
==========================================================================================
FS-19
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
4.67 DIVERSIFIED FINANCIAL SERVICES
State Street Boston, Discount Notes,
1.390%, 4/1/2003 $ 13,000,000 $ 13,000,000
==========================================================================================
TOTAL COMMERCIAL PAPER (Amortized
Cost $23,000,000) 23,000,000
==========================================================================================
6.62 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$18,406,718) 18,406,718 18,406,718
==========================================================================================
0.20 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $571,020 (Collateralized
by Federal Home Loan Bank, Discount
Notes, due 4/1/2003, value $585,000)
(Cost $571,000) $ 571,000 571,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $41,977,718) 41,977,718
==========================================================================================
0.11 OPTIONS PURCHASED -- PUTS
0.11 TELECOMMUNICATIONS EQUIPMENT
QUALCOMM Inc, 7/19/2003, $35 (Cost $261,403) 1,511 309,755
==========================================================================================
106.90 TOTAL INVESTMENTS AT VALUE
(COST $318,052,624) 297,331,553
==========================================================================================
(6.90) OTHER ASSETS LESS LIABILITIES (19,188,925)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 278,142,628
==========================================================================================
UTILITIES FUND
96.82 COMMON STOCKS
69.11 ELECTRIC UTILITIES
Ameren Corp 55,700 $ 2,175,085
American Electric Power 35,600 813,460
Cinergy Corp 103,700 3,489,505
Consolidated Edison 78,100 3,004,507
Dominion Resources 63,900 3,538,143
DPL Inc 58,600 730,156
DTE Energy 50,600 1,955,690
Duke Energy 54,300 789,522
Energy East 136,200 2,424,360
Entergy Corp 73,600 3,543,840
Exelon Corp 67,775 3,416,538
FPL Group 60,000 3,535,800
Hawaiian Electric Industries 41,900 1,707,844
NiSource Inc 92,100 1,676,220
Pepco Holdings 46,900 816,060
Pinnacle West Capital 52,400 1,741,776
PNM Resources 17,200 386,828
PPL Corp 98,500 3,507,585
Progress Energy 69,500 2,720,925
Public Service Enterprise Group 60,800 2,230,752
Puget Energy 93,200 1,986,092
SCANA Corp 86,600 2,591,072
FS-20
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Southern Co 84,400 $ 2,400,336
==========================================================================================
51,182,096
2.23 GAS UTILITIES
KeySpan Corp 51,200 1,651,200
==========================================================================================
17.53 INTEGRATED TELECOMMUNICATION SERVICES
AT&T Corp 12,700 205,740
BellSouth Corp 148,200 3,211,494
CenturyTel Inc 127,600 3,521,760
SBC Communications 135,712 2,722,383
Verizon Communications 93,796 3,315,689
==========================================================================================
12,977,066
5.78 NATURAL GAS PIPELINES
Enbridge Energy Management LLC 22,387 891,002
Kinder Morgan Management LLC(b) 104,771 3,389,342
==========================================================================================
4,280,344
2.17 WATER UTILITIES
Philadelphia Suburban 73,300 1,608,935
==========================================================================================
96.82 TOTAL INVESTMENTS AT VALUE
(COST $73,529,285) 71,699,641
==========================================================================================
3.18 OTHER ASSETS LESS LIABILITIES 2,358,450
==========================================================================================
100.00 NET ASSETS AT VALUE $ 74,058,091
==========================================================================================
(a) Loaned security, a portion or all of the security is on loan at March 31,
2003.
(b) Security is non-income producing.
(c) The security is purchased with the cash collateral received from securities
on loan (Note 5).
(d) Represents troy ounces.
(e) HOLDRs - Holding Company Depositary Receipts
(f) Security is an affiliated company (Note 4).
(g) Securities aquired pursuant to Rule 144A. The Fund deems such securities to
be "liquid" because an institutional market exists.
(h) Securities are pledged with broker as collateral for written options.
(i) A portion of the security has been designated as collateral for remaining
commitments to purchase additional interests in BlueStream Ventures LP.
(j) The Technology and Telecommunications Funds have remaining commitments of
$10,575,000 and $10,406,250, respectively, to purchase additional interests
in BlueStream Ventures LP, which are subject to the terms of the limited
partership agreement.
(k) Defaulted security. The issuer is in default with respect to interest
payments and the Fund has stopped accruing interest income.
FS-21
(l) The following are restricted and illiquid securities at March 31, 2003:
SCHEDULE OF RESTRICTED AND ILLIQUID
SECURITIES
% OF
ACQUISITION ACQUISITION NET ASSETS
DESCRIPTION DATE(S) COSTS AT VALUE
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND
Athersys Inc, Conv Pfd, Class F Shrs 4/17/00 $ 5,000,000 0.56%
Ingenex Inc, Conv Pfd, Series B Shrs 9/27/94 600,000 0.00
Optimize Inc, Pfd, Series 5 Shrs 10/10/02 628,450 0.06
Scimagix Inc, Pfd, Series C Shrs 5/24/01 1,350,000 0.14
UltraGuide Inc, Pfd
Series E Shrs 6/1/01 1,348,502 0.01
Series F Shrs 6/1/01 151,500 0.00
================================================================================
0.77%
================================================================================
TECHNOLOGY FUND
BlueStream Ventures LP 8/3/00-
12/9/02 $ 12,268,055 0.32%
Calient Networks, Pfd, Series D Shrs 12/8/00 13,913,578 0.07
Ingenex Inc, Conv Pfd, Series B Shrs 9/27/94 300,000 0.00
Kestrel Solutions, Conv Sub Notes
5.500%, 7/15/2005 7/20/00 2,500,000 0.01
================================================================================
0.40%
================================================================================
TELECOMMUNICATIONS FUND
BlueStream Ventures LP 8/3/00-
12/9/02 $ 12,072,288 1.84%
Calient Networks, Pfd, Series D Shrs 12/8/00 5,438,366 0.16
Kestrel Solutions, Conv Sub Notes
5.500%, 7/15/2005 7/20/00 2,500,000 0.07
================================================================================
2.07%
================================================================================
OPTION CONTRACTS
NUMBER OF EXPIRATION EXERCISE PREMIUMS
CONTRACTS DATES PRICE RECEIVED VALUE
- -------------------------------------------------------------------------------
TECHNOLOGY FUND
OPTIONS WRITTEN
CALLS
Xilinx Inc (6,539) 4/19/03 $27.50 $928,509 $(114,433)
================================================================================
TELECOMMUNICATIONS FUND
OPTIONS WRITTEN
CALLS
QUALCOMM Inc (1,511) 7/19/03 $42.50 $297,659 $(230,428)
================================================================================
FS-22
SUMMARY OF INVESTMENTS BY COUNTRY
% OF
COUNTRY NET ASSETS
COUNTRY CODE AT VALUE VALUE
- --------------------------------------------------------------------------------
ENERGY FUND
Bermuda BD 7.57% $ 19,053,300
Canada CA 5.72 14,378,720
France FR 3.45 8,667,990
Italy IT 2.18 5,475,140
Netherlands NL 3.70 9,302,250
United Kingdom UK 4.23 10,650,840
United States 78.81 198,224,168
Other Assets Less Liabilities (5.66) (14,240,725)
================================================================================
100.00% $ 251,511,683
================================================================================
GOLD & PRECIOUS METALS FUND
Canada CA 55.08% $ 57,661,730
Ghana GH 3.58 3,748,800
Peru PE 3.82 4,000,000
South Africa SF 13.78 14,421,439
United States 35.05 36,685,995
Other Assets Less Liabilities (11.31) (11,841,514)
================================================================================
100.00% $ 104,676,450
================================================================================
LEISURE FUND
Australia AS 1.77% $ 11,597,187
Belgium BE 2.50 16,414,016
Brazil BR 0.86 5,644,000
Canada CA 0.63 4,139,251
Denmark DA 2.28 14,974,333
France FR 0.76 5,015,875
Hong Kong HK 0.15 946,869
Japan JA 0.37 2,462,613
Mexico MX 0.35 2,305,330
Netherlands NL 3.46 22,739,229
Spain SP 0.52 3,416,687
Switzerland SZ 0.71 4,688,831
United Kingdom UK 1.95 12,810,098
United States 85.56 561,933,611
Other Assets Less Liabilities (1.87) (12,304,201)
================================================================================
100.00% $ 656,783,729
================================================================================
FS-23
SUMMARY OF INVESTMENTS BY COUNTRY
(CONTINUED)
% OF
COUNTRY NET ASSETS
COUNTRY CODE AT VALUE VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
Canada CA 3.02% $ 8,408,492
Cayman Islands CJ 0.10 289,980
Finland FI 3.17 8,822,097
France FR 3.57 9,921,032
Germany GM 2.19 6,080,856
Italy IT 0.47 1,314,110
South Korea KS 2.93 8,163,452
Mexico MX 1.71 4,748,526
Portugal PO 2.00 5,557,618
United Kingdom UK 6.47 17,988,744
United States 81.27 226,036,646
Other Assets Less Liabilities (6.90) (19,188,925)
================================================================================
100.00% $ 278,142,628
================================================================================
See Notes to Financial Statements
FS-24
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
FINANCIAL
ENERGY SERVICES
FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b) $ 244,115,665 $ 718,823,685
================================================================================
At Value(a)(b) $ 265,752,408 $ 751,421,758
Cash 0 1,593
Receivables:
Investment Securities Sold 368,936 1,180,061
Fund Shares Sold 771,634 276,376
Dividends and Interest 152,418 960,379
Prepaid Expenses and Other Assets 44,387 75,452
================================================================================
TOTAL ASSETS 267,089,783 753,915,619
================================================================================
LIABILITIES
Payables:
Custodian 9,741 0
Distribution to Shareholders 0 123,047
Investment Securities Purchased 9,872,390 0
Fund Shares Repurchased 1,471,960 1,410,677
Securities Loaned 4,139,034 0
Accrued Distribution Expenses
Investor Class 46,874 147,069
Class A 2,770 1,253
Class B 1,144 764
Class C 7,741 8,177
Class K 100 465
Accrued Expenses and Other Payables 26,346 110,324
================================================================================
TOTAL LIABILITIES 15,578,100 1,801,776
================================================================================
NET ASSETS AT VALUE $ 251,511,683 $ 752,113,843
================================================================================
NET ASSETS
Paid-in Capital(c) $ 292,005,495 $ 781,919,715
Accumulated Undistributed Net Investment
Loss (28,917) (27,883)
Accumulated Undistributed Net Realized
Loss on Investment Securities and
Foreign Currency Transactions (62,101,638) (62,379,689)
Net Appreciation of Investment
Securities and Foreign Currency
Transactions 21,636,743 32,601,700
================================================================================
NET ASSETS AT VALUE, Applicable to
Shares Outstanding $ 251,511,683 $ 752,113,843
================================================================================
NET ASSETS AT VALUE:
Investor Class $ 231,023,351 $ 734,439,759
================================================================================
Class A $ 9,130,699 $ 5,310,648
================================================================================
Class B $ 1,501,954 $ 989,629
================================================================================
Class C $ 9,566,346 $ 10,026,026
================================================================================
Class K $ 289,333 $ 1,347,781
================================================================================
FS-25
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
FINANCIAL
ENERGY SERVICES
FUND FUND
(CONTINUED) (CONTINUED)
- --------------------------------------------------------------------------------
Shares Outstanding
Investor Class 13,745,599 33,736,622
Class A 542,002 244,946
Class B 89,871 45,528
Class C 581,459 469,023
Class K 18,602 63,360
================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and
Redemption Price per Share $ 16.81 $ 21.77
Class A
Redemption Price per Share $ 16.85 $ 21.68
Offering Price per Share (Maximum
sales charge of 5.50%) $ 17.83 $ 22.94
Class B, Offering and Redemption
Price per Share $ 16.71 $ 21.74
Class C, Offering and Redemption
Price per Share $ 16.45 $ 21.38
Class K, Offering and Redemption
Price per Share $ 15.55 $ 21.27
================================================================================
(a) Investment securities at cost and value at March 31, 2003 include repurchase
agreements of $360,000 and $533,000 for Energy and Financial Services Funds,
respectively.
(b) Investment securities at cost and value at March 31, 2003 include $4,005,265
of securities loaned for Energy Fund (Note 5).
(c) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 500 million have been
allocated to Energy Fund and 700 million to Financial Services Fund: 100
million to each Class of Energy Fund, 300 million to Financial Services Fund
- Investor Class and 100 million to each additional Class of Financial
Services Fund.
See Notes to Financial Statements
FS-26
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
GOLD & HEALTH
PRECIOUS SCIENCES
METALS FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b)(c) $ 101,099,059 $ 859,232,047
================================================================================
At Value(a)(b)(c) $ 116,517,964 $ 990,684,158
Cash 245,147 19,111
Receivables:
Fund Shares Sold 3,240,837 3,397,774
Dividends and Interest 25,635 1,197,618
Prepaid Expenses and Other Assets 39,495 92,854
================================================================================
TOTAL ASSETS 120,069,078 995,391,515
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 3,848,188 0
Fund Shares Repurchased 157,417 3,914,950
Securities Loaned 11,344,418 24,193,400
Depreciation on Forward Foreign
Currency Contracts 1,612 0
Accrued Distribution Expenses
Investor Class 19,287 185,484
Class A 422 577
Class B 1,738 467
Class C 2,309 5,182
Class K -- 737
Accrued Expenses and Other Payables 17,237 137,552
================================================================================
TOTAL LIABILITIES 15,392,628 28,438,349
================================================================================
NET ASSETS AT VALUE $ 104,676,450 $ 966,953,166
================================================================================
NET ASSETS
Paid-in Capital(d) $ 281,090,573 $ 1,200,414,039
Accumulated Undistributed Net Investment
Loss (140,069) (158,098)
Accumulated Undistributed Net Realized
Loss on Investment Securities and
Foreign Currency Transactions (191,693,016) (364,758,358)
Net Appreciation of Investment
Securities and Foreign Currency
Transactions 15,418,962 131,455,583
================================================================================
NET ASSETS AT VALUE, Applicable to
Shares Outstanding $ 104,676,450 $ 966,953,166
================================================================================
NET ASSETS AT VALUE:
Investor Class $ 98,387,540 $ 954,764,627
================================================================================
Class A $ 1,514,115 $ 3,731,315
================================================================================
Class B $ 2,315,329 $ 620,876
================================================================================
Class C $ 2,459,466 $ 5,846,096
================================================================================
Class K -- $ 1,990,252
================================================================================
FS-27
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
GOLD & HEALTH
PRECIOUS SCIENCES
METALS FUND FUND
(CONTINUED) (CONTINUED)
- --------------------------------------------------------------------------------
Shares Outstanding
Investor Class 41,060,996 24,782,519
Class A 633,436 96,766
Class B 968,914 16,194
Class C 976,679 156,852
Class K -- 52,636
================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and
Redemption Price per Share $ 2.40 $ 38.53
Class A
Redemption Price per Share $ 2.39 $ 38.56
Offering Price per Share (Maximum
sales charge of 5.50%) $ 2.53 $ 40.80
Class B, Offering and Redemption
Price per Share $ 2.39 $ 38.34
Class C, Offering and Redemption
Price per Share $ 2.52 $ 37.27
Class K, Offering and Redemption
Price per Share -- $ 37.81
================================================================================
(a) Investment securities at cost and value at March 31, 2003 include repurchase
agreements of $8,531,000 and $4,424,000 for Gold & Precious Metals and
Health Sciences Funds, respectively.
(b) Investment securities at March 31, 2003 includes gold bullion cost of
$4,266,114 and value of $5,051,577 for Gold & Precious Metals Fund.
(c) Investment securities at cost and value at March 31, 2003 include
$10,736,161 and $23,272,794 of securities loaned for Gold & Precious Metals
and Health Sciences Funds, respectively (Note 5).
(d) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 800 million have been
allocated to Gold & Precious Metals Fund and 500 million to Health Sciences
Fund: 200 million to each Class of Gold & Precious Metals Fund and 100
million to each Class of Health Sciences Fund.
See Notes to Financial Statements
FS-28
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
REAL ESTATE
LEISURE OPPORTUNITY
FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b) $ 614,043,731 $ 23,345,776
================================================================================
At Value(a)(b) $ 669,087,930 $ 24,042,858
Cash 1,239 1,861
Foreign Currency (Cost $6,207 and $0,
respectively) 6,335 0
Receivables:
Investment Securities Sold 2,468,771 106,648
Fund Shares Sold 707,448 63,369
Dividends and Interest 508,967 127,465
Foreign Tax Reclaims 55,957 0
Prepaid Expenses and Other Assets 62,468 21,265
================================================================================
TOTAL ASSETS 672,899,115 24,363,466
================================================================================
LIABILITIES
Payables:
Distributions to Shareholders 0 6,503
Investment Securities Purchased 672,936 0
Fund Shares Repurchased 1,530,885 653,847
Securities Loaned 13,706,737 0
Accrued Distribution Expenses
Investor Class 105,106 4,158
Class A 7,193 661
Class B 6,290 101
Class C 14,074 556
Class K 23,460 --
Accrued Expenses and Other Payables 48,705 4,529
================================================================================
TOTAL LIABILITIES 16,115,386 670,355
================================================================================
NET ASSETS AT VALUE $ 656,783,729 $ 23,693,111
================================================================================
NET ASSETS
Paid-in Capital(c) $ 677,098,635 $ 31,772,926
Accumulated Undistributed Net
Investment Income (Loss) (48,343) 9,823
Accumulated Undistributed Net Realized
Loss on Investment Securities and
Foreign Currency Transactions (75,317,281) (8,786,720)
Net Appreciation of Investment
Securities and Foreign Currency
Transactions 55,050,718 697,082
================================================================================
NET ASSETS AT VALUE, Applicable to
Shares Outstanding $ 656,783,729 $ 23,693,111
================================================================================
NET ASSETS AT VALUE:
Investor Class $ 536,108,142 $ 20,313,257
================================================================================
Class A $ 27,174,768 $ 2,408,721
================================================================================
Class B $ 8,268,127 $ 133,437
================================================================================
Class C $ 17,767,841 $ 837,696
================================================================================
Class K $ 67,464,851 --
================================================================================
FS-29
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
REAL ESTATE
LEISURE OPPORTUNITY
FUND FUND
- --------------------------------------------------------------------------------
Shares Outstanding
Investor Class 17,391,376 2,697,435
Class A 880,146 323,961
Class B 269,777 17,990
Class C 592,268 108,422
Class K 2,194,824 --
================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and
Redemption Price per Share $ 30.83 $ 7.53
Class A
Redemption Price per Share $ 30.88 $ 7.44
Offering Price per Share (Maximum
sales charge of 5.50%) $ 32.68 $ 7.87
Class B, Offering and Redemption
Price per Share $ 30.65 $ 7.42
Class C, Offering and Redemption
Price per Share $ 30.00 $ 7.73
Class K, Offering and Redemption
Price per Share $ 30.74 --
================================================================================
(a) Investment securities at cost and value at March 31, 2003 include repurchase
agreements of $5,814,000 and $1,485,000 for Leisure and Real Estate
Opportunity Funds, respectively.
(b) Investment securities at cost and value at March 31, 2003 include
$13,094,173 of securities loaned for Leisure Fund (Note 5).
(c) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 500 million have been
allocated to Leisure Fund and 400 million to Real Estate Opportunity Fund:
100 million to each Class.
See Notes to Financial Statements
FS-30
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b) $ 1,873,905,377 $ 318,052,624
================================================================================
At Value(a)(b) $ 1,596,575,695 $ 297,331,553
Cash 6,204 6,580
Receivables:
Investment Securities Sold 54,863,674 1,457,710
Fund Shares Sold 5,018,934 137,164
Dividends and Interest 525,375 397,037
Prepaid Expenses and Other Assets 160,176 104,556
================================================================================
TOTAL ASSETS 1,657,150,058 299,434,600
================================================================================
LIABILITIES
Options Written at Value (Premiums
Received $928,509 and $297,659,
respectively) 114,433 230,428
Payables:
Investment Securities Purchased 20,722,456 1,953,643
Fund Shares Repurchased 8,425,828 562,373
Securities Loaned 33,984,450 18,406,718
Accrued Distribution Expenses
Investor Class 174,578 55,275
Class A 1,194 110
Class B 423 12
Class C 4,925 2,258
Class K 8,100 248
Accrued Expenses and Other Payables 237,733 80,907
================================================================================
TOTAL LIABILITIES 63,674,120 21,291,972
================================================================================
NET ASSETS AT VALUE $ 1,593,475,938 $ 278,142,628
================================================================================
NET ASSETS
Paid-in Capital(c) $ 6,042,626,245 $ 1,955,452,313
Accumulated Undistributed Net
Investment Loss (232,309) (66,378)
Accumulated Undistributed Net Realized
Loss on Investment Securities,
Foreign Currency Transactions and
Option Contracts (4,172,402,393) (1,656,590,047)
Net Depreciation of Investment
Securities, Foreign Currency
Transactions and Option Contracts (276,515,605) (20,653,260)
================================================================================
NET ASSETS AT VALUE, Applicable to
Shares Outstanding $ 1,593,475,938 $ 278,142,628
================================================================================
NET ASSETS AT VALUE:
Institutional Class $ 707,040,240 --
================================================================================
Investor Class $ 853,529,554 $ 274,946,793
================================================================================
Class A $ 4,459,686 $ 325,550
================================================================================
Class B $ 531,767 $ 15,865
================================================================================
Class C $ 5,758,958 $ 2,188,211
================================================================================
Class K $ 22,155,733 $ 666,209
================================================================================
FS-31
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
(CONTINUED) (CONTINUED)
- --------------------------------------------------------------------------------
Shares Outstanding
Institutional Class 40,770,656 --
Investor Class 50,510,923 34,558,571
Class A 262,641 41,098
Class B 31,586 2,011
Class C 351,409 283,394
Class K 1,320,710 84,345
================================================================================
NET ASSET VALUE PER SHARE:
Institutional Class, Offering and
Redemption Price per Share $ 17.34 --
Investor Class, Offering and
Redemption Price per Share $ 16.90 $ 7.96
Class A
Redemption Price per Share $ 16.98 $ 7.92
Offering Price per Share (Maximum
sales charge of 5.50%) $ 17.97 $ 8.38
Class B, Offering and Redemption
Price per Share $ 16.84 $ 7.89
Class C, Offering and Redemption
Price per Share $ 16.39 $ 7.72
Class K, Offering and Redemption
Price per Share $ 16.78 $ 7.90
================================================================================
(a) Investment securities at cost and value at March 31, 2003 include repurchase
agreements of $1,910,000 and $571,000 for the Technology and
Telecommunications Funds, respectively.
(b) Investment securities at cost and value at March 31, 2003 include
$31,829,843 and $17,205,652 of securities loaned for Technology and
Telecommunications Funds, respectively (Note 5).
(c) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 1 billion have been
allocated to Technology Fund and 1.1 billion to Telecommunications Fund: 300
million to Technology Fund - Institutional Class and Investor Class, 100
million to each additional Class of Technology Fund, 300 million to
Telecommunications Fund - Investor Class and 200 million to each additional
Class of Telecommunications Fund.
See Notes to Financial Statements
FS-32
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UTILITIES
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost $ 73,529,285
================================================================================
At Value $ 71,699,641
Receivables:
Investment Securities Sold 151,526
Fund Shares Sold 22,796
Dividends and Interest 113,246
Loans to Affiliated Fund (Note 6) 2,200,000
Prepaid Expenses and Other Assets 38,582
================================================================================
TOTAL ASSETS 74,225,791
================================================================================
LIABILITIES
Payables:
Custodian 8,843
Distributions to Shareholders 23,888
Fund Shares Repurchased 103,481
Accrued Distribution Expenses
Investor Class 14,474
Class A 121
Class B 157
Class C 546
Accrued Expenses and Other Payables 16,190
================================================================================
TOTAL LIABILITIES 167,700
================================================================================
NET ASSETS AT VALUE $ 74,058,091
================================================================================
NET ASSETS
Paid-in Capital(a) $ 116,412,319
Accumulated Undistributed Net Investment Loss (43,913)
Accumulated Undistributed Net Realized Loss on
Investment Securities (40,480,671)
Net Depreciation of Investment Securities (1,829,644)
================================================================================
NET ASSETS AT VALUE, Applicable to Shares Outstanding $ 74,058,091
================================================================================
NET ASSETS AT VALUE:
Investor Class $ 72,749,091
================================================================================
Class A $ 449,557
================================================================================
Class B $ 192,632
================================================================================
Class C $ 666,811
================================================================================
FS-33
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UTILITIES
FUND
(CONTINUED)
- --------------------------------------------------------------------------------
Shares Outstanding
Investor Class 8,881,314
Class A 55,310
Class B 23,629
Class C 81,169
================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and Redemption Price per Share $ 8.19
Class A
Redemption Price per Share $ 8.13
Offering Price per Share (Maximum sales charge of 5.50%) $ 8.60
Class B, Offering and Redemption Price per Share $ 8.15
Class C, Offering and Redemption Price per Share $ 8.22
================================================================================
(a) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 400 million have been
allocated to Utilities Fund: 100 million to each Class.
See Notes to Financial Statements
FS-34
STATEMENT OF OPERATIONS
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
FINANCIAL
ENERGY SERVICES
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 3,070,714 $ 15,953,262
Dividends from Affiliated Investment
Companies 1,432 13,560
Interest 179,899 683,454
Securities Loaned Income 22,711 0
Foreign Taxes Withheld (64,984) (14,787)
================================================================================
TOTAL INCOME 3,209,772 16,635,489
================================================================================
EXPENSES
Investment Advisory Fees 2,180,691 6,240,794
Distribution Expenses 816,474 2,466,453
Transfer Agent Fees 1,421,179 3,286,277
Administrative Services Fees 141,109 434,701
Custodian Fees and Expenses 63,123 154,671
Directors' Fees and Expenses 28,463 75,053
Interest Expenses 2,770 6,158
Professional Fees and Expenses 40,362 70,249
Registration Fees and Expenses
Investor Class 56,121 68,158
Class A 33 14
Class B 8 6
Class C 716 700
Class K 1,471 1,471
Reports to Shareholders 231,087 505,772
Other Expenses 17,972 51,659
================================================================================
TOTAL EXPENSES 5,001,579 13,362,136
Fees and Expenses Absorbed/Reimbursed
by Investment Adviser (25,187) (9,970)
Fees and Expenses Paid Indirectly (39,730) (120,799)
================================================================================
NET EXPENSES 4,936,662 13,231,367
================================================================================
NET INVESTMENT INCOME (LOSS) (1,726,890) 3,404,122
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (15,930,670) (63,593,616)
Foreign Currency Transactions 4,369 2,771,359
================================================================================
Total Net Realized Loss (15,926,301) (60,822,257)
================================================================================
Change in Net Appreciation/Depreciation of:
Investment Securities (32,597,193) (200,871,286)
Foreign Currency Transactions 0 578,729
================================================================================
Total Change in Net Appreciation/
Depreciation (32,597,193) (200,292,557)
================================================================================
NET LOSS ON INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS (48,523,494) (261,114,814)
================================================================================
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (50,250,384) $ (257,710,692)
================================================================================
See Notes to Financial Statements
FS-35
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
GOLD & HEALTH
PRECIOUS SCIENCES
METALS FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 1,130,458 $ 7,642,641
Dividends from Affiliated Investment
Companies 193 0
Interest 65,789 1,057,768
Securities Loaned Income 81,867 23,360
Foreign Taxes Withheld (51,397) (211,719)
================================================================================
TOTAL INCOME 1,226,910 8,512,050
================================================================================
EXPENSES
Investment Advisory Fees 872,426 7,301,319
Distribution Expenses 317,235 2,912,258
Transfer Agent Fees 663,698 4,499,468
Administrative Services Fees 62,346 521,471
Custodian Fees and Expenses 74,783 193,304
Directors' Fees and Expenses 15,272 93,700
Interest Expenses 3,928 55,920
Professional Fees and Expenses 30,114 88,461
Registration Fees and Expenses
Investor Class 28,521 81,710
Class A 26 57
Class B 16 9
Class C 709 757
Class K -- 1,490
Reports to Shareholders 127,695 744,825
Other Expenses 12,739 54,025
================================================================================
TOTAL EXPENSES 2,209,508 16,548,774
Fees and Expenses Absorbed/Reimbursed
by Investment Adviser (431) (46,227)
Fees and Expenses Paid Indirectly (35,642) (149,727)
================================================================================
NET EXPENSES 2,173,435 16,352,820
================================================================================
NET INVESTMENT LOSS (946,525) (7,840,770)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 13,253,503 (174,505,515)
Foreign Currency Transactions (378,438) 2,888,105
================================================================================
Total Net Realized Gain (Loss) 12,875,065 (171,617,410)
================================================================================
Change in Net Appreciation/Depreciation of:
Investment Securities (13,851,974) (86,875,175)
Foreign Currency Transactions 3,527,175 (302,242)
================================================================================
Total Change in Net Appreciation/
Depreciation (10,324,799) (87,177,417)
================================================================================
NET GAIN (LOSS) ON INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS 2,550,266 (258,794,827)
================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 1,603,741 $ (266,635,597)
================================================================================
See Notes to Financial Statements
FS-36
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
REAL ESTATE
LEISURE OPPORTUNITY
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 5,639,202 $ 1,403,338
Dividends from Affiliated Investment
Companies 13,503 0
Interest 377,555 22,419
Securities Loaned Income 126,700 0
Foreign Taxes Withheld (242,648) 0
================================================================================
TOTAL INCOME 5,914,312 1,425,757
================================================================================
EXPENSES
Investment Advisory Fees 5,033,513 192,643
Distribution Expenses 2,130,359 72,018
Transfer Agent Fees 3,196,058 214,102
Administrative Services Fees 337,249 21,559
Custodian Fees and Expenses 219,159 9,627
Directors' Fees and Expenses 53,937 9,823
Interest Expenses 60 122
Professional Fees and Expenses 59,213 29,278
Registration Fees and Expenses
Investor Class 61,914 14,355
Class A 31 40
Class B 13 12
Class C 694 710
Class K 1,175 --
Reports to Shareholders 384,113 58,243
Other Expenses 39,395 4,429
================================================================================
TOTAL EXPENSES 11,516,883 626,961
Fees and Expenses Absorbed/Reimbursed
by Investment Adviser (213,960) (207,889)
Fees and Expenses Paid Indirectly (808) (730)
================================================================================
NET EXPENSES 11,302,115 418,342
================================================================================
NET INVESTMENT INCOME (LOSS) (5,387,803) 1,007,415
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (64,777,824) 33,309
Foreign Currency Transactions 947,408 0
================================================================================
Total Net Realized Gain (Loss) (63,830,416) 33,309
================================================================================
Change in Net Appreciation/Depreciation of:
Investment Securities (139,569,928) (2,096,036)
Foreign Currency Transactions 20,986,955 0
================================================================================
Total Change in Net Appreciation/
Depreciation (118,582,973) (2,096,036)
================================================================================
NET LOSS ON INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS (182,413,389) (2,062,727)
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS $ (187,801,192) $ (1,055,312)
================================================================================
See Notes to Financial Statements
FS-37
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 3,714,705 $ 3,913,369
Dividends from Affiliated Investment
Companies 0 40,672
Interest 2,433,548 714,980
Securities Loaned Income 188,766 205,579
Foreign Taxes Withheld (212,626) (241,485)
================================================================================
TOTAL INCOME 6,124,393 4,633,115
================================================================================
EXPENSES
Investment Advisory Fees 11,673,473 2,309,149
Distribution Expenses 2,900,084 915,538
Transfer Agent Fees 10,338,284 5,386,698
Administrative Services Fees 892,715 170,044
Custodian Fees and Expenses 294,267 123,339
Directors' Fees and Expenses 133,696 31,221
Interest Expenses 8,418 2,969
Professional Fees and Expenses 134,083 55,220
Registration Fees and Expenses
Institutional 22,779 --
Investor Class 185,595 114,342
Class A 7 15
Class B 4 5
Class C 677 716
Class K 1,452 1,472
Reports to Shareholders 1,017,230 779,158
Other Expenses 92,971 26,364
================================================================================
TOTAL EXPENSES 27,695,735 9,916,250
Fees and Expenses Absorbed/Reimbursed
by Investment Adviser (233,001) (3,453,759)
Fees and Expenses Paid Indirectly (2,015) (74,314)
================================================================================
NET EXPENSES 27,460,719 6,388,177
================================================================================
NET INVESTMENT LOSS (21,336,326) (1,755,062)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (1,341,077,063) (397,915,271)
Foreign Currency Transactions (1,037) (120,611)
Option Contracts 20,689,078 314,778
================================================================================
Total Net Realized Loss (1,320,389,022) (397,721,104)
================================================================================
Change in Net Appreciation/Depreciation of:
Investment Securities (32,763,181) 204,480,051
Foreign Currency Transactions 0 5,240,216
Option Contracts (4,996,760) (114,268)
================================================================================
Total Change in Net Appreciation/
Depreciation (37,759,941) 209,605,999
================================================================================
NET LOSS ON INVESTMENT SECURITIES,
FOREIGN CURRENCY TRANSACTIONS AND
OPTION CONTRACTS (1,358,148,963) (188,115,105)
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS $(1,379,485,289) $ (189,870,167)
================================================================================
See Notes to Financial Statements
FS-38
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
UTILITIES
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 3,192,572
Interest 295,851
Securities Loaned Income 1,380
Foreign Taxes Withheld (4,252)
================================================================================
TOTAL INCOME 3,485,551
================================================================================
EXPENSES
Investment Advisory Fees 666,839
Distribution Expenses 230,974
Transfer Agent Fees 560,954
Administrative Services Fees 50,010
Custodian Fees and Expenses 16,960
Directors' Fees and Expenses 14,978
Interest Expenses 266
Professional Fees and Expenses 28,014
Registration Fees and Expenses
Investor Class 21,891
Class A 12
Class B 9
Class C 703
Reports to Shareholders 104,971
Other Expenses 7,734
================================================================================
TOTAL EXPENSES 1,704,315
Fees and Expenses Absorbed/Reimbursed by Investment Adviser (543,805)
Fees and Expenses Paid Indirectly (316)
================================================================================
NET EXPENSES 1,160,194
================================================================================
NET INVESTMENT INCOME 2,325,357
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Loss on Investment Securities (13,056,963)
Change in Net Appreciation/Depreciation of Investment
Securities (13,674,867)
================================================================================
NET LOSS ON INVESTMENT SECURITIES (26,731,830)
================================================================================
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (24,406,473)
================================================================================
See Notes to Financial Statements
FS-39
STATEMENT OF CHANGES IN NET ASSETS
ENERGY FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (1,726,890) $ (1,466,773)
Net Realized Loss (15,926,301) (44,619,544)
Change in Net Appreciation/Depreciation (32,597,193) 5,832,460
================================================================================
NET DECREASE IN NET
ASSETS FROM OPERATIONS (50,250,384) (40,253,857)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 218,874,059 644,971,752
Class A 19,736,581 --
Class B 1,571,590 --
Class C 16,754,905 20,669,161
Class K 343,185 35,899
================================================================================
257,280,320 665,676,812
Amounts Paid for Repurchases of Shares
Investor Class (298,479,641) (692,833,382)
Class A (9,898,155) --
Class B (50,708) --
Class C (17,803,340) (16,337,642)
Class K (85,824) (2,743)
================================================================================
(326,317,668) (709,173,767)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (69,037,348) (43,496,955)
================================================================================
TOTAL DECREASE IN NET ASSETS (119,287,732) (83,750,812)
NET ASSETS
Beginning of Period 370,799,415 454,550,227
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss of
($28,917) and ($23,683), respectively) $ 251,511,683 $ 370,799,415
================================================================================
See Notes to Financial Statements
FS-40
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
FINANCIAL SERVICES FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Income $ 3,404,122 $ 3,116,228
Net Realized Gain (Loss) (60,822,257) 17,633,179
Change in Net Appreciation/Depreciation (200,292,557) 15,800,834
================================================================================
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (257,710,692) 36,550,241
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class (4,532,916) (74,131,190)
Class A (54,866) --
Class B (6,424) --
Class C (18,276) (769,067)
Class K (9,840) (74,131)
================================================================================
TOTAL DISTRIBUTIONS (4,622,322) (74,974,388)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 2,282,256,437 1,480,559,448
Class A 8,745,135 --
Class B 1,184,600 --
Class C 19,297,579 27,338,396
Class K 964,477 1,778,835
Reinvestment of Distributions
Investor Class 4,373,500 70,771,361
Class A 46,662 --
Class B 5,986 --
Class C 15,533 715,041
Class K 9,812 74,046
================================================================================
2,316,899,721 1,581,237,127
Amounts Paid for Repurchases of Shares
Investor Class (2,529,161,658) (1,647,802,644)
Class A (2,632,329) --
Class B (49,759) --
Class C (22,397,274) (22,844,846)
Class K (355,893) (825,978)
================================================================================
(2,554,596,913) (1,671,473,468)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (237,697,192) (90,236,341)
================================================================================
TOTAL DECREASE IN NET ASSETS (500,030,206) (128,660,488)
NET ASSETS
Beginning of Period 1,252,144,049 1,380,804,537
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($27,883) and ($108,164),
respectively) $ 752,113,843 $ 1,252,144,049
================================================================================
See Notes to Financial Statements
FS-41
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
GOLD & PRECIOUS METALS FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (946,525) $ (618,754)
Net Realized Gain (Loss) 12,875,065 (561,100)
Change in Net Appreciation/Depreciation (10,324,799) 38,665,964
================================================================================
NET INCREASE IN NET
ASSETS FROM OPERATIONS 1,603,741 37,486,110
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 288,729,638 250,552,619
Class A 8,742,700 --
Class B 2,670,343 --
Class C 20,351,688 3,043,172
================================================================================
320,494,369 253,595,791
Amounts Paid for Repurchases of Shares
Investor Class (297,679,646) (247,531,594)
Class A (6,894,638) --
Class B (228,708) --
Class C (17,964,744) (2,690,754)
================================================================================
(322,767,736) (250,222,348)
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (2,273,367) 3,373,443
================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (669,626) 40,859,553
NET ASSETS
Beginning of Period 105,346,076 64,486,523
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($140,069) and ($789,954),
respectively) $ 104,676,450 $ 105,346,076
================================================================================
See Notes to Financial Statements
FS-42
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
HEALTH SCIENCES FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (7,840,770) $ (12,583,295)
Net Realized Loss (171,617,410) (148,326,289)
Change in Net Appreciation/Depreciation (87,177,417) 226,759,441
================================================================================
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (266,635,597) 65,849,857
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class 0 (583,793)
Class C 0 (8,161)
Class K 0 (1,034)
================================================================================
TOTAL DISTRIBUTIONS 0 (592,988)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 3,275,394,183 2,819,831,341
Class A 11,568,902 --
Class B 709,368 --
Class C 86,806,161 444,052,177
Class K 1,290,276 3,560,641
Reinvestment of Distributions
Investor Class 0 569,872
Class C 0 7,780
Class K 0 1,034
================================================================================
3,375,768,890 3,268,022,845
Amounts Paid for Repurchases of Shares
Investor Class (3,532,369,079) (2,989,733,603)
Class A (7,580,049) --
Class B (38,094) --
Class C (94,578,217) (440,088,546)
Class K (1,224,074) (994,361)
================================================================================
(3,635,789,513) (3,430,816,510)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (260,020,623) (162,793,665)
================================================================================
TOTAL DECREASE IN NET ASSETS (526,656,220) (97,536,796)
NET ASSETS
Beginning of Period 1,493,609,386 1,591,146,182
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($158,098) and ($124,891),
respectively) $ 966,953,166 $ 1,493,609,386
================================================================================
See Notes to Financial Statements
FS-43
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
LEISURE FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
(Note 1)
OPERATIONS
Net Investment Loss $ (5,387,803) $ (4,636,576)
Net Realized Loss (63,830,416) (11,436,792)
Change in Net Appreciation/Depreciation (118,582,973) 43,733,217
================================================================================
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (187,801,192) 27,659,849
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class 0 (6,606,439)
Class C 0 (83,069)
================================================================================
TOTAL DISTRIBUTIONS 0 (6,689,508)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 207,349,184 729,179,032
Class A 37,428,048 --
Class B 9,606,745 --
Class C 42,717,603 54,801,929
Class K 37,654,639 59,960,773
Reinvestment of Distributions
Investor Class 0 6,410,599
Class C 0 79,560
================================================================================
334,756,219 850,431,893
Amounts Paid for Repurchases of Shares
Investor Class (306,714,154) (561,176,279)
Class A (7,012,073) --
Class B (467,634) --
Class C (36,749,162) (43,833,698)
Class K (17,226,143) (1,210,408)
================================================================================
(368,169,166) (606,220,385)
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (33,412,947) 244,211,508
================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (221,214,139) 265,181,849
NET ASSETS
Beginning of Period 877,997,868 612,816,019
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($48,343) and ($445,820),
respectively) $ 656,783,729 $ 877,997,868
================================================================================
See Notes to Financial Statements
FS-44
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
REAL ESTATE OPPORTUNITY FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Income $ 1,007,415 $ 959,897
Net Realized Gain (Loss) 33,309 (1,776,058)
Change in Net Appreciation/Depreciation (2,096,036) 3,077,128
================================================================================
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (1,055,312) 2,260,967
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class (869,479) (883,840)
Class A (66,360) --
Class B (4,005) --
Class C (17,981) (19,583)
================================================================================
TOTAL DISTRIBUTIONS (957,825) (903,423)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 40,930,071 65,554,193
Class A 4,016,740 --
Class B 164,213 --
Class C 3,324,794 6,576,932
Reinvestment of Distributions
Investor Class 812,836 847,345
Class A 61,410 --
Class B 3,335 --
Class C 15,925 17,365
================================================================================
49,329,324 72,995,835
Amounts Paid for Repurchases of Shares
Investor Class (39,958,634) (75,885,547)
Class A (1,612,336) --
Class B (28,724) --
Class C (2,852,451) (7,520,965)
================================================================================
(44,452,145) (83,406,512)
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 4,877,179 (10,410,677)
================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,864,042 (9,053,133)
NET ASSETS
Beginning of Period 20,829,069 29,882,202
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income
of $9,823 and $4,923, respectively) $ 23,693,111 $ 20,829,069
================================================================================
See Notes to Financial Statements
FS-45
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
TECHNOLOGY FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (21,336,326) $ (29,818,014)
Net Realized Loss (1,320,389,022) (1,701,319,209)
Change in Net Appreciation/Depreciation (37,759,941) 1,093,675,772
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS (1,379,485,289) (637,461,451)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Institutional Class 400,830,100 1,144,541,447
Investor Class 4,495,198,217 4,626,109,679
Class A 39,607,123 --
Class B 784,386 --
Class C 16,773,376 98,155,680
Class K 18,036,725 31,102,806
================================================================================
4,971,229,927 5,899,909,612
Amounts Paid for Repurchases of Shares
Institutional Class (460,489,454) (884,671,106)
Investor Class (4,742,030,065) (4,604,480,513)
Class A (34,425,710) --
Class B (225,672) --
Class C (23,667,790) (91,350,472)
Class K (9,475,180) (4,487,304)
================================================================================
(5,270,313,871) (5,584,989,395)
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (299,083,944) 314,920,217
================================================================================
TOTAL DECREASE IN NET ASSETS (1,678,569,233) (322,541,234)
NET ASSETS
Beginning of Period 3,272,045,171 3,594,586,405
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($232,309) and ($771,569),
respectively) $ 1,593,475,938 $ 3,272,045,171
================================================================================
See Notes to Financial Statements
FS-46
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
TELECOMMUNICATIONS FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (1,755,062) $ (6,130,769)
Net Realized Loss (397,721,104) (861,726,352)
Change in Net Appreciation/Depreciation 209,605,999 246,742,633
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS (189,870,167) (621,114,488)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 921,394,710 2,027,191,892
Class A 9,330,840 --
Class B 24,155 --
Class C 47,707,611 327,970,659
Class K 632,772 1,234,228
================================================================================
979,090,088 2,356,396,779
Amounts Paid for Repurchases of Shares
Investor Class (1,033,252,143) (2,325,417,357)
Class A (8,626,147) --
Class B (3,783) --
Class C (53,919,269) (323,176,133)
Class K (500,459) (104,957)
================================================================================
(1,096,301,801) (2,648,698,447)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (117,211,713) (292,301,668)
================================================================================
TOTAL DECREASE IN NET ASSETS (307,081,880) (913,416,156)
NET ASSETS
Beginning of Period 585,224,508 1,498,640,664
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($66,378) and ($65,928),
respectively) $ 278,142,628 $ 585,224,508
================================================================================
See Notes to Financial Statements
FS-47
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
UTILITIES FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Income $ 2,325,357 $ 1,845,871
Net Realized Loss (13,056,963) (22,801,292)
Change in Net Appreciation/Depreciation (13,674,867) (53,674,952)
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS (24,406,473) (74,630,373)
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class (2,288,373) (1,869,306)
Class A (16,410) --
Class B (4,725) --
Class C (9,547) (728)
================================================================================
TOTAL DISTRIBUTIONS (2,319,055) (1,870,034)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 110,818,499 138,696,599
Class A 2,519,233 --
Class B 263,926 --
Class C 11,010,192 8,575,353
Reinvestment of Distributions
Investor Class 2,165,716 1,774,320
Class A 12,275 --
Class B 1,446 --
Class C 9,205 718
================================================================================
126,800,492 149,046,990
Amounts Paid for Repurchases of Shares
Investor Class (138,522,409) (173,267,204)
Class A (1,960,442) --
Class B (34,745) --
Class C (11,876,032) (9,358,343)
================================================================================
(152,393,628) (182,625,547)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (25,593,136) (33,578,557)
================================================================================
TOTAL DECREASE IN NET ASSETS (52,318,664) (110,078,964)
NET ASSETS
Beginning of Period 126,376,755 236,455,719
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($43,913) and ($5,069),
respectively) $ 74,058,091 $ 126,376,755
================================================================================
See Notes to Financial Statements
FS-48
NOTES TO FINANCIAL STATEMENTS
INVESCO SECTOR FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Sector
Funds, Inc. is incorporated in Maryland and presently consists of nine separate
Funds: Energy Fund, Financial Services Fund, Gold & Precious Metals Fund
(formerly Gold Fund), Health Sciences Fund, Leisure Fund, Real Estate
Opportunity Fund, Technology Fund, Telecommunications Fund and Utilities Fund
(individually the "Fund" and collectively, the "Funds"). Effective July 31,
2002, Gold Fund's name changed to Gold & Precious Metals Fund. The investment
objectives of the Funds are: to seek capital growth through investments in
specific business sectors for Energy, Financial Services, Gold & Precious
Metals, Health Sciences, Leisure and Technology Funds; to achieve capital growth
and current income for Real Estate Opportunity, Telecommunications and Utilities
Funds. INVESCO Sector Funds, Inc. is registered under the Investment Company Act
of 1940 (the "Act") as a diversified, open-end management investment company.
Effective April 1, 2002, the Funds began offering two additional classes of
shares, referred to as Class A and Class B shares. Effective December 17, 2001,
Leisure Fund began offering an additional class of shares, referred to as Class
K shares. Income, expenses (other than those attributable to a specific class)
and realized and unrealized gains and losses are allocated daily to each class
of shares based on the relative proportion of net assets represented by such
class. Operating expenses directly attributable to a specific class are charged
against operations of that class. Class A shares are sold with a front-end sales
charge ranging from 5.50% to 2.00% of the offering price on purchases of less
than $1,000,000. Class B shares and Class C shares are subject to a contingent
deferred sales charge paid by the redeeming shareholder. Class B shares convert
to Class A shares after eight years along with a pro rata portion of its
reinvested dividends and distributions.
Effective April 1, 2002, the Investor Class shares are offered only to
grandfathered investors who have established and maintained an account in any of
the funds managed and distributed by INVESCO Funds Group, Inc. ("IFG") in
Investor Class shares prior to April 1, 2002.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
A. SECURITY VALUATION -- Domestic (U.S.) equity securities traded on national
securities exchanges or in the over-the-counter market are valued at the last
sales price at the close of the regular trading day on the exchange (generally
4:00 p.m. Eastern time) where such securities are primarily traded. If last
sales prices are not available, securities are valued at the closing bid price
for the regular trading day as obtained from one or more dealers making a market
for such securities or by a pricing service approved by the Fund's board of
directors.
Foreign equity securities are valued at the closing price. The closing price is
designated by the principal stock exchange in the country in which the
securities are traded. In the event that closing prices are not available for
foreign securities, a snapshot of prices will be obtained from the principal
stock exchange at or prior to the close of the New York Stock Exchange. Foreign
currency exchange rates are determined daily prior to the close of the New York
Stock Exchange.
Gold bullion is valued at the close of the New York Stock Exchange and its
valuation is obtained by a pricing service approved by the Fund's board of
directors.
Option contracts are valued at the average of the closing bid and ask prices
from the exchange with the highest trading volume on that particular day.
FS-49
Debt securities are valued at evaluated bid prices as determined by a pricing
service approved by the Fund's board of directors. If evaluated bid prices are
not available, debt securities are valued by averaging the bid prices obtained
from one or more dealers making a market for such securities.
Investments in shares of investment companies are valued at the net asset value
of the respective fund as calculated each day.
If market quotations or pricing service valuations are not readily available, or
events or circumstances that may affect the value of portfolio securities are
identified between the closing of their principal markets and the time that the
net asset value per share is determined, securities are valued at fair value as
determined in good faith under procedures established by the Fund's board of
directors. Restricted and illiquid securities are valued in accordance with
procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Fund are fully
collateralized by securities issued by the U.S. Government, its agencies or
instrumentalities and such collateral is in the possession of the Fund's
custodian. The collateral is evaluated daily to ensure its market value exceeds
the current market value of the repurchase agreements including accrued
interest. In the event of default on the obligation to repurchase, the Fund has
the right to liquidate the collateral and apply the proceeds in satisfaction of
the obligation.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income, which may be comprised of stated coupon rate,
market discount, original issue discount or amortized premium, is recorded on
the accrual basis. Discounts or premiums on debt securities purchased are
amortized over the life of the respective security as adjustments to interest
income. Cost is determined on the specific identification basis. Certain
dividends from foreign securities will be recorded as soon as the Fund is
informed of the dividend if such information is obtained subsequent to the
ex-dividend date. Investment income received from foreign sources may be subject
to foreign withholding taxes. Dividend and interest income is shown gross of
foreign withholding taxes in the accompanying financial statements. Income and
expenses on foreign securities are translated into U.S. dollars at rates of
exchange prevailing when accrued. The cost of foreign securities is translated
into U.S. dollars at the rates of exchange prevailing when such securities are
acquired. During the year ended March 31, 2003, Energy Fund was reimbursed for
certain trading losses in the amount of $35,462.
Each Fund may invest in securities issued by other INVESCO investment companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share. During the year ended March 31, 2003, Energy, Financial
Services, Gold & Precious Metals, Leisure and Telecommunications Funds invested
in INVESCO Treasurer's Series Money Market Reserve Fund. During that same period
there were no such investments by Health Sciences, Real Estate Opportunity,
Technology and Utilities Funds. The income from this investment is recorded in
the Statement of Operations.
The Fund may have elements of risk due to investments in specific industries or
foreign issuers located in a specific country. Such investments may subject the
Fund to additional risks resulting from future political or economic conditions
and/or possible impositions of adverse foreign governmental laws or currency
exchange restrictions. Net realized and unrealized gain or loss from investment
securities includes fluctuations from currency exchange rates and fluctuations
in market value.
FS-50
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
The Gold & Precious Metals Fund may invest in gold bullion which may have
significant price movements over short periods of time and may be affected by
unpredictable international monetary and political policies. Further, gold
bullion may have storage and transaction costs associated with its ownership
which may be higher than that of other types of securities.
Restricted securities held by a Fund may not be sold except in exempt
transactions or in a public offering registered under the Securities Act of
1933. The risk of investing in such securities is generally greater than the
risk of investing in the securities of widely held, publicly traded companies.
Lack of a secondary market and resale restrictions may result in the inability
of a Fund to sell a security at a fair price and may substantially delay the
sale of the security which each Fund seeks to sell. In addition, these
securities may exhibit greater price volatility than securities for which
secondary markets exist.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to
shareholders are recorded by the Fund on the ex-dividend/distribution date. The
Fund distributes net realized capital gains, if any, to its shareholders at
least annually, if not offset by capital loss carryovers.
E. TAX INFORMATION -- The Fund has complied, and continues to comply, with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and, accordingly, has made or intends to make sufficient distributions
of net investment income and net realized capital gains, if any, to relieve it
from all federal and state income taxes and federal excise taxes.
Dividends paid by the Fund from net investment income and distributions of net
realized short-term capital gains are, for federal income tax purposes, taxable
as ordinary income to shareholders. The tax composition of distributions from
ordinary income, long-term capital gains and of the ordinary income
distributions declared for the year ended March 31, 2003, and amounts qualifying
for the dividends received deduction available to the Fund's corporate
shareholders were as follows:
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 2003 MARCH 31, 2003 MARCH 31, 2003 MARCH 31, 2002 MARCH 31, 2002
ORDINARY INCOME LONG-TERM CAPITAL QUALIFYING ORDINARY INCOME LONG-TERM CAPITAL
FUND DISTRIBUTIONS GAIN DISTRIBUTIONS PERCENTAGE DISTRIBUTIONS GAIN DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------------------------------------
Financial Services Fund $ 3,324,494 $ 1,297,828 100.00% $ 6,877,940 $ 68,096,448
Health Sciences Fund 0 0 0.00% 548,602 44,386
Leisure Fund 0 0 0.00% 1,613,479 5,076,029
Real Estate Opportunity Fund 957,825 0 1.61% 903,423 0
Utilities Fund 2,319,055 0 1.00% 1,870,034 0
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from accounting principles generally accepted
in the United States.
FS-51
The tax components of the Fund at March 31, 2003 include:
NET TAX
COST OF GROSS TAX GROSS TAX APPRECIATION
INVESTMENTS FOR UNREALIZED UNREALIZED (DEPRECIATION)
FUND TAX PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS
- --------------------------------------------------------------------------------------------------------
Energy Fund $ 247,769,524 $ 28,433,184 $ 10,450,300 $ 17,982,884
Financial Services Fund 719,839,008 77,427,623 45,844,873 31,582,750
Gold & Precious Metals Fund 104,610,389 21,144,944 9,237,369 11,907,575
Health Sciences Fund 895,666,927 140,758,771 45,741,540 95,017,231
Leisure Fund 613,757,329 122,008,477 66,677,876 55,330,601
Real Estate Opportunity Fund 23,648,035 997,063 602,240 394,823
Technology Fund 1,975,193,766 86,437,493 465,055,564 (378,618,071)
Telecommunications Fund 324,308,326 13,728,939 40,705,712 (26,976,773)
Utilities Fund 73,840,716 3,212,948 5,354,023 (2,141,075)
ACCUMULATED CUMULATIVE EFFECT
UNDISTRIBUTED CAPITAL LOSS OF OTHER
FUND ORDINARY INCOME CARRYOVERS TIMING DIFFERENCES
- --------------------------------------------------------------------------------------------------------
Energy Fund $ 0 $ (58,447,779) $ (28,917)
Financial Services Fund 93,812 (52,702,581) (8,783,479)
Gold & Precious Metals Fund 1,354,029 (189,650,608) (25,176)
Health Sciences Fund 0 (297,476,816) (31,004,760)
Leisure Fund 0 (63,392,926) (12,252,581)
Real Estate Opportunity Fund 12,213 (8,274,056) (212,795)
Technology Fund 0 (3,791,182,138) (279,350,098)
Telecommunications Fund 0 (1,622,403,229) (27,997,494)
Utilities Fund 0 (37,516,958) (2,696,195)
The primary difference between book and tax appreciation/depreciation is wash
sale loss deferrals. Telecommunications Fund has a partnership tax deferral in
the amount of $2,267,247. The net tax appreciation/depreciation on investments
excludes the effect of foreign currency transactions and written options
activity.
Capital loss carryovers expire in the years 2005, 2006, 2007, 2008, 2009, 2010
and 2011. To the extent future capital gains and income are offset by capital
loss carryovers and deferred post-October 31 losses, such gains and income will
not be distributed to shareholders. Deferred post-October 31 capital and
currency losses are: Financial Services Fund $8,661,785, Gold & Precious Metals
Fund $2,834, Health Sciences Fund $30,846,662, Leisure Fund $12,210,757, Real
Estate Opportunity Fund $210,405, Technology Fund $279,932,903,
Telecommunications Fund $27,931,116 and Utilities Fund $2,652,282.
Due to inherent differences in the recognition of income, expenses and realized
gains/losses under accounting principles generally accepted in the United States
and Federal income tax purposes, permanent and temporary differences between
book and tax basis reporting have been identified and appropriately reclassified
on the Statement of Assets and Liabilities. Energy, Health Sciences, Leisure,
Technology and Telecommunications Funds reclassified $1,820,004, $7,795,809,
$5,933,695, $22,459,448, $2,314,505, respectively, of net investment losses to
paid-in capital. Gold & Precious Metals Fund reclassified $1,596,421 of net
investment losses to accumulated undistributed net realized losses.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
FS-52
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. OPTIONS -- The Funds may buy or write put and call options, including
securities index options, on portfolio securities for hedging purposes or as a
substitute for an investment. The Funds generally invest in options to hedge
against adverse movements in the value of portfolio holdings.
When an option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying security at a fixed price, upon exercise of the
option. In writing an option, the Fund bears the market risk of an unfavorable
change in the price of the security underlying the written option. Exercise of
an option written by the Fund could result in the Fund buying or selling a
security at a price different from the current market value.
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option, or the cost of the security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
Securities designated to cover outstanding written options are noted in the
Statement of Investment Securities where applicable. Options written are
reported as a liability in the Statement of Assets and Liabilities. Gains and
losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity to
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The use of such instruments may involve certain additional risks as a
result of unanticipated movements in the market. A lack of correlation between
the value of an instrument underlying an option and the asset being hedged, or
unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful. In addition, there can be no assurance that a liquid secondary
market will exist for any option purchased or sold.
Written option activity for the year ended March 31, 2003, was as follows:
CALL OPTIONS PUT OPTIONS
- ----------------------------------------------------------------------------------------------------
NUMBER AMOUNT NUMBER AMOUNT
OF OPTIONS OF PREMIUMS OF OPTIONS OF PREMIUMS
- ----------------------------------------------------------------------------------------------------
TECHNOLOGY FUND
Options outstanding at March 31, 2002 (43,575) $ 17,656,466 0 $ 0
Options written (132,549) 33,132,524 (12,597) 1,519,455
Options closed or expired 169,585 (49,860,481) 12,597 (1,519,455)
Options outstanding at March 31, 2003 (6,539) $928,509 0 0
TELECOMMUNICATIONS FUND
Options outstanding at March 31, 2002 (1,600) $ 261,852
Options written (7,009) 1,017,875
Options closed or expired 7,098 (982,068)
Options outstanding at March 31, 2003 (1,511) $ 297,659
H. EXPENSES -- Each Fund or Class bears expenses incurred specifically on its
behalf and, in addition, each Fund or Class bears a portion of general expenses,
based on the relative net assets of each Fund or Class.
Under an agreement between each Fund and the Fund's Custodian, certain Custodian
Fees and Expenses are reduced by credits granted by the Custodian from any
temporarily uninvested cash. Similarly, Custodian Fees and Expenses for Energy,
Financial Services, Gold & Precious Metals, Health Sciences and
Telecommunications Funds are reduced by credits earned from security brokerage
FS-53
transactions under certain broker/service arrangements with third parties. Such
credits are included in Fees and Expenses Paid Indirectly in the Statement of
Operations.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. IFG serves as the Funds'
investment adviser. As compensation for its services to the Funds, IFG receives
an investment advisory fee which is accrued daily at the applicable rate and
paid monthly. The fee is based on the annual rate of each Fund's average net
assets as follows:
AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------------
$700 $2 $4 $6
$0 TO $350 TO MILLION BILLION BILLION BILLION OVER
$350 $700 TO $2 TO $4 TO $6 TO $8 $8
FUND MILLION MILLION BILLION BILLION BILLION BILLION BILLION
- -----------------------------------------------------------------------------------------------------
Energy Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Financial Services Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Gold & Precious Metals Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Health Sciences Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Leisure Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Technology Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Utilities Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------------
$500 $1 $2 $4 $6
$0 TO MILLION BILLION BILLION BILLION BILLION OVER
$500 TO $1 TO $2 TO $4 TO $6 TO $8 $8
FUND MILLION BILLION BILLION BILLION BILLION BILLION BILLION
- -----------------------------------------------------------------------------------------------------
Real Estate Opportunity Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Telecommunications Fund 0.65% 0.55% 0.45% 0.45% 0.40% 0.375% 0.35%
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
compensation of marketing and advertising expenditures to INVESCO Distributors,
Inc. ("IDI" or the "Distributor"), a wholly owned subsidiary of IFG, of 0.25% of
annual average net assets of Investor Class shares. A master distribution plan
and agreement for Class A, Class B and Class C shares pursuant to Rule 12b-1 of
the Act provides for compensation of certain promotional and other sales related
costs to IDI. Class A shares of the Fund pay compensation to IDI at a rate of
0.35% of annual average net assets. During any period that Class A shares of the
Fund are closed to new investors, the Fund will reduce this payment for Class A
shares from 0.35% to 0.25% per annum. Class B and Class C shares of the Fund pay
compensation to IDI at a rate of 1.00% of annual average net assets. Of these
amounts, IDI may pay a service fee of 0.25% of the average net assets of the
Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the applicable class of shares of the Fund. Any
amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose caps on the total sales charges,
including asset-based sales charges, that may be paid by the respective class. A
plan of distribution pursuant to Rule 12b-1 of the Act provides for financing
the distribution and continuing personal shareholder servicing of Class K shares
of 0.45% of annual average net assets. Any unreimbursed expenses IDI incurs with
respect to Investor Class, Class A, Class C and Class K shares in any fiscal
year can not be recovered in subsequent years. For the year ended March 31,
2003, amounts paid to the Distributor were as follows:
FS-54
INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund $ 710,505 $ 19,438 $ 6,195 $ 102,870 $ 526
Financial Services Fund 2,428,349 9,547 5,826 134,199 5,109
Gold & Precious Metals Fund 279,306 4,965 6,902 22,606 --
Health Sciences Fund 2,942,165 4,556 3,194 89,870 9,856
Leisure Fund 1,625,603 52,465 44,957 176,639 277,058
Real Estate Opportunity Fund 59,074 3,327 580 8,070 --
Technology Fund 2,923,222 6,303 1,332 88,805 98,700
Telecommunications Fund 948,389 2,727 99 37,403 3,117
Utilities Fund 230,252 1,046 1,559 10,094 --
If the Class B Plan is terminated, the Board of Directors may allow the Class B
shares to continue payments of the asset-based sales charge to the Distributor
for allowable unreimbursed expenses incurred for distributing shares before the
Class B Plan was terminated. The Class B Plan allows for the carry-forward of
distribution expenses, to be recovered from asset-based sales charges in
subsequent fiscal periods. Distribution fees related to the Distributor for the
year ended March 31, 2003, for Class B were as follows:
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
AMOUNT RETAINED EXPENSES OF NET ASSETS
FUND BY DISTRIBUTOR UNDER PLAN OF CLASS
- --------------------------------------------------------------------------------------------------
Energy Fund - Class B Plan $ 7,253 $ 50,817 3.38%
Financial Services Fund - Class B Plan 6,587 38,040 3.84%
Gold & Precious Metals Fund - Class B Plan 8,631 89,799 3.88%
Health Sciences Fund - Class B Plan 3,649 22,662 3.65%
Leisure Fund - Class B Plan 50,672 300,396 3.63%
Real Estate Opportunity Fund - Class B Plan 672 5,126 3.84%
Technology Fund - Class B Plan 1,736 20,563 3.87%
Telecommunications Fund - Class B Plan 112 556 3.50%
Utilities Fund - Class B Plan 1,712 7,112 3.69%
Distribution Expenses for each class as presented in the Statement of Operations
for the year ended March 31, 2003 were as follows:
INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund $ 685,019 $ 22,209 $ 7,338 $ 101,292 $ 616
Financial Services Fund 2,314,987 10,800 6,591 128,891 5,184
Gold & Precious Metals Fund 278,665 5,387 8,640 24,543 --
Health Sciences Fund 2,810,808 5,134 3,661 82,986 9,669
Leisure Fund 1,563,784 59,657 51,248 177,740 277,930
Real Estate Opportunity Fund 59,144 3,989 681 8,204 --
Technology Fund 2,714,413 7,497 1,755 79,762 96,657
Telecommunications Fund 877,339 2,837 112 32,223 3,027
Utilities Fund 218,659 1,167 1,716 9,432 --
IFG receives a transfer agent fee from each Class at an annual rate of $22.50
per shareholder account, or, where applicable, per participant in an omnibus
account, per year. IFG may pay such fee for participants in omnibus accounts to
affiliates or third parties. The fee is paid monthly at one-twelfth of the
annual fee and is based upon the actual number of accounts in existence during
each month. Transfer agent fees for each class as presented in the Statement of
Operations for the year ended March 31, 2003 were as follows:
FS-55
INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund -- $ 1,351,371 $ 13,598 $ 2,355 $ 51,772 $ 2,083
Financial Services Fund -- 3,201,855 10,460 2,419 66,317 5,226
Gold & Precious Metals Fund -- 640,022 10,637 898 12,141 --
Health Sciences Fund -- 4,374,452 9,750 1,618 98,464 15,184
Leisure Fund -- 2,455,246 39,891 15,848 85,622 599,451
Real Estate Opportunity Fund -- 202,193 2,124 285 9,500 --
Technology Fund $ 1,921,921 7,981,678 7,798 857 136,791 289,239
Telecommunications Fund -- 5,273,178 3,544 131 99,233 10,612
Utilities Fund -- 547,156 1,045 294 12,459 --
In accordance with an Administrative Services Agreement, each Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.045% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG has voluntarily agreed to absorb and assume certain fees and expenses
incurred by the Funds. IFG is entitled to reimbursement from a Fund share class
that has fees and expenses voluntarily absorbed pursuant to this arrangement if
such reimbursements do not cause a share class to exceed voluntary expense
limitations and the reimbursement is made within three years after IFG incurred
the expense. For the year ended March 31, 2003, total fees and expenses
voluntarily absorbed were as follows:
INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund -- $ 0 $ 0 $ 582 $ 20,103 $ 4,502
Financial Services Fund -- 0 3,917 2,056 0 3,997
Gold & Precious Metals Fund -- 0 431 0 0 --
Health Sciences Fund -- 0 6,829 1,648 37,750 0
Leisure Fund -- 0 0 4,408 0 209,552
Real Estate Opportunity Fund -- 195,593 0 936 11,360 --
Technology Fund $ 0 0 818 1,027 100,306 130,850
Telecommunications Fund -- 3,343,479 0 1,069 100,846 8,365
Utilities Fund -- 526,139 1,095 943 15,628 --
At March 31, 2003, the reimbursement that may potentially be made by the Funds
to IFG that will expire during the calendar years ended 2005 and 2006, are as
follows:
INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund -- $ 0 $ 0 $ 582 $ 20,103 $ 4,502
Financial Services Fund -- 0 3,917 2,056 0 3,997
Gold & Precious Metals Fund -- 0 431 0 0 --
Health Sciences Fund -- 0 6,829 1,648 37,750 0
Leisure Fund -- 0 0 4,408 0 209,552
Real Estate Opportunity Fund -- 171,596 0 936 10,559 --
Technology Fund $ 0 0 818 1,027 100,306 130,850
Telecommunications Fund -- 3,015,954 0 1,069 90,199 8,022
Utilities Fund -- 442,999 1,095 943 13,761 --
FS-56
During the year ended March 31, 2003, the reimbursement that was made by the
Funds to IFG were as follows:
INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund -- $ 0 $ 0 $ 23 $ 0 $ 0
Financial Services Fund -- 0 0 0 0 0
Gold & Precious Metals Fund -- 0 0 0 495 --
Health Sciences Fund -- 0 62 0 0 1,052
Leisure Fund -- 0 345 0 0 81,554
Real Estate Opportunity Fund -- 0 431 0 0 --
Technology Fund $ 146,221 0 717 0 0 72,949
Telecommunications Fund -- 0 0 0 0 0
Utilities Fund -- 0 0 32 0 --
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended March
31, 2003, the aggregate cost of purchases and proceeds from sales of investment
securities (excluding all U.S. Government securities and short-term securities)
were as follows:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------------------------
Energy Fund $ 408,740,450 $ 482,197,618
Financial Services Fund 548,905,269 772,106,486
Gold & Precious Metals Fund 86,860,593 84,190,776
Health Sciences Fund 1,960,059,993 2,220,999,802
Leisure Fund 143,284,512 161,229,805
Real Estate Opportunity Fund 64,102,072 59,811,861
Technology Fund 1,954,796,496 2,111,792,047
Telecommunications Fund 451,481,007 547,641,041
Utilities Fund 53,521,881 67,293,763
There were no purchases or sales of U.S. Government Securities.
NOTE 4 -- TRANSACTIONS WITH AFFILIATES AND AFFILIATED COMPANIES. Certain of the
Funds' officers and directors are also officers and directors of IFG or IDI.
Each Fund has adopted a retirement plan covering all independent directors of
the Fund who will have served as an independent director for at least five years
at the time of retirement. Benefits under this plan are based on an annual rate
as defined in the plan agreement, as amended March 1, 2001. Effective November
8, 2002, the plan provides that a director, prior to retirement, may elect to
convert amounts accrued under this plan into a new deferred retirement plan.
Pension expenses for the year ended March 31, 2003, included in Directors' Fees
and Expenses in the Statement of Operations and pension liability included in
Accrued Expenses in the Statement of Assets and Liabilities were as follows:
PENSION PENSION
FUND EXPENSES LIABILITY
- --------------------------------------------------------------------------------------------------
Energy Fund $ 8,483 $ 17,442
Financial Services Fund 28,573 74,609
Gold & Precious Metals Fund 2,306 13,523
Health Sciences Fund 38,593 95,696
Leisure Fund 16,795 29,900
Real Estate Opportunity Fund 531 1,469
Technology Fund 47,637 141,768
Telecommunications Fund 8,540 40,554
Utilities Fund 3,050 12,237
FS-57
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of the INVESCO Funds. The
deferred amounts may be invested in the shares of any of the INVESCO Funds,
excluding the INVESCO Variable Investment Funds.
An affiliated company represents ownership by a Fund of at least 5% of the
voting securities of the issuer or may be affiliated with other INVESCO
investment companies during the period, as defined in the Act. A summary of the
transactions during the year ended March 31, 2003, in which the issuer was an
affiliate of the Fund, is as follows:
REALIZED
PURCHASES SALES GAIN (LOSS) ON
------------------------------------------------ INVESTMENT VALUE AT
AFFILIATE SHARES COST SHARES PROCEEDS SECURITIES 3/31/2003
- --------------------------------------------------------------------------------------------------------------
ENERGY FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 93,897,299 $93,897,299 95,042,365 $95,042,365 $ 0 $ 4,139,034
FINANCIAL SERVICES FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 46,028,775 46,028,775 46,028,775 46,028,775 0 --
GOLD & PRECIOUS METALS FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 233,983,415 233,983,415 237,869,295 237,869,295 0 11,344,418
HEALTH SCIENCES FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 361,349,392 361,349,392 343,090,592 343,090,592 0 24,193,400
Pharmaceutical HOLDRs
Trust 2,205,300 174,015,044 1,760,000 140,744,454 (3,355,550) 42,888,360
LEISURE FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 288,556,802 288,556,802 314,042,259 314,042,259 0 10,594,794
FS-58
REALIZED
PURCHASES SALES GAIN (LOSS) ON
------------------------------------------------ INVESTMENT VALUE AT
AFFILIATE SHARES COST SHARES PROCEEDS SECURITIES 3/31/2003
- --------------------------------------------------------------------------------------------------------------
TECHNOLOGY FUND
Calient Networks, Pfd
Series D Shrs -- -- -- -- -- $ 1,106,133
INVESCO Treasurer's
Series Money
Market Reserve
Fund 622,363,052 $622,363,052 670,243,884 $670,243,884 $ 0 33,984,450
Software HOLDRs Trust 954,400 22,443,535 119,700 3,200,177 221,898 21,209,727
TELECOMMUNICATIONS FUND
Broadband HOLDRs Trust 1,057,500 9,494,055 1,057,500 8,652,026 (842,029) --
INVESCO Treasurer's
Series Money
Market Reserve
Fund 453,774,284 453,774,284 472,945,556 472,945,556 0 18,406,718
UTILITIES FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 2,633,600 2,633,600 4,842,800 4,842,800 0 --
Dividend income from INVESCO Treasurer's Series Money Market Reserve Fund is
disclosed in the Statement of Operations. The following Funds received dividend
income from affiliated investments: Health Sciences Fund received $352,761 from
Pharmaceutical HOLDRs Trust and Technology Fund received $523,966 from Software
HOLDRs Trust. No dividend income was received from any other affiliate.
NOTE 5 -- SECURITIES LOANED. The Funds have entered into a securities lending
agreement with the custodian. Under the terms of the agreement, the Funds
receive income, recorded monthly, after deduction of other amounts payable to
the custodian or to the borrower from lending transactions. In exchange for such
fees, the custodian is authorized to loan securities on behalf of the Funds,
against receipt of collateral at least equal in value to the value of securities
loaned. Cash collateral is invested by the custodian in the INVESCO Treasurer's
Series Money Market Reserve Fund or securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. As of March 31, 2003, Energy,
Gold & Precious Metals, Health Sciences, Leisure, Technology and
Telecommunications Funds have on loan securities valued at $4,005,265,
$10,736,161, $23,272,794, $13,094,173, $31,829,843 and $17,205,652,
respectively, and cash collateral of $4,139,034, $11,344,418, $24,193,400,
$13,706,737, $33,984,450 and $18,406,718, repectively, has been invested in the
INVESCO Treasurer's Series Money Market Reserve Fund or U.S. Government
obligations and is disclosed in the Statement of Investment Securities. The Fund
bears the risk of any deficiency in the amount of collateral available for
return to a borrower due to a loss in an approved investment. The securities
loaned income is recorded in the Statement of Operations. Of the securities
lending income received for Energy, Gold & Precious Metals, Health Sciences,
Leisure, Technology, Telecommunications and Utilities Funds $22,711, $81,867,
$23,360, $123,994, $187,904, $205,579 and $1,380, respectively, were received
from investments in INVESCO Treasurer's Series Money Market Reserve Fund. During
the year ended March 31, 2003, there were no such securities lending
arrangements for Financial Services and Real Estate Opportunity Funds.
NOTE 6 -- INTERFUND BORROWING AND LENDING. Each Fund is party to an interfund
lending agreement between each Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing Fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. The Funds may borrow up to 10% of its total net assets
FS-59
for temporary or emergency purposes. During the year ended March 31, 2003,
Energy, Financial Services, Gold & Precious Metals, Health Sciences, Leisure,
Real Estate Opportunity, Technology, Telecommunications and Utilities Funds
borrowed cash at a weighted average rate ranging from 1.50% to 2.00% and
interest expenses amounted to $2,770, $2,346, $4,423, $54,615, $60, $122,
$7,840, $3,044 and $266 respectively. During that same period, Energy, Health
Sciences, Technology and Utilities Funds lent cash at a weighted average rate
ranging from 1.58% to 2.06% and interest income amounted $609, $7,082, $24,118
and $95, respectively. At March 31, 2003, INVESCO Combination Stock & Bond
Funds, Inc. - Total Return Fund had borrowed from Utilities Fund at an interest
rate of 1.58%. The amount of the lending and the related accrued interest are
presented in the Statement of Assets and Liabilities. On April 1, 2003, INVESCO
Combination Stock & Bond Funds, Inc. - Total Return Fund paid the borrowing back
to Utilities Fund in full including interest.
NOTE 7 -- LINE OF CREDIT. Each Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the net assets at value of each respective
Fund. Each Fund agrees to pay annual fees and interest on the unpaid principal
balance based on prevailing market rates as defined in the agreement. During the
year ended March 31, 2003, Financial Services and Technology Funds borrowed cash
at a weighted average rate of 2.31%, and interest expenses amounted to $450 and
$578, respectively. During that same period, there were no such borrowings for
Energy, Gold & Precious Metals, Health Sciences, Leisure, Real Estate
Opportunity, Telecommunications and Utilities Funds.
NOTE 8 -- CONTINGENT DEFERRED SALES CHARGE ("CDSC"). Class A shares may charge a
1.00% CDSC if a shareholder purchased $1,000,000 or more and redeemed these
shares within 18 months from the date of purchase. Effective November 15, 2002,
qualified plans investing in Class A shares may pay a 1.00% CDSC and Class K
shares may pay a 0.70% CDSC if a shareholder redeemed these shares within 12
months from the date of purchase. A CDSC is charged by Class B shares on
redemptions or exchanges of shares at a maximum of 5.00% beginning at the time
of purchase to 0.00% at the beginning of the seventh year. A 1.00% CDSC is
charged by Class C shares on redemptions or exchanges held thirteen months or
less. Shares acquired through reinvestment of dividends or other distributions
are not charged a CDSC. The CDSC may be reduced or certain sales charge
exceptions may apply. The CDSC is paid by the redeeming shareholder and
therefore it is not an expense of the Fund. For the year ended March 31, 2003,
the Distributor received the following CDSC from Class A, Class B, Class C and
Class K shareholders:
FUND CLASS A CLASS B CLASS C CLASS K
- ------------------------------------------------------------------------------------------------
Energy Fund $ 0 $ 1,393 $ 7,690 $ 0
Financial Services Fund 0 1,307 13,978 0
Gold & Precious Metals Fund 0 1 2,197 --
Health Sciences Fund 0 747 11,340 0
Leisure Fund 0 12,171 16,172 0
Real Estate Opportunity Fund 0 243 770 --
Technology Fund 0 276 7,494 0
Telecommunications Fund 0 181 18,384 0
Utilities Fund 0 1,250 578 --
NOTE 9 -- SHARE INFORMATION. Changes in fund share transactions during the years
ended March 31, 2003 and 2002 were as follows:
FS-60
ENERGY FUND FINANCIAL SERVICES FUND GOLD & PRECIOUS METALS FUND
YEAR ENDED MARCH 31 YEAR ENDED MARCH 31 YEAR ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002 2003 2002
Shares Sold
Investor Class 12,665,097 33,986,047 92,466,548 52,167,572 113,839,180 141,069,920
Class A 1,144,145 -- 357,198 -- 3,326,766 --
Class B 93,080 -- 47,478 -- 1,053,937 --
Class C 984,511 1,099,872 774,225 981,786 7,482,496 1,500,683
Class K 22,288 2,143 41,708 64,647 -- --
Shares Issued from
Reinvestment of Distributions
Investor Class 0 0 196,653 2,638,995 0 0
Class A 0 -- 2,132 -- 0 --
Class B 0 -- 267 -- 0 --
Class C 0 0 673 27,003 0 0
Class K 0 0 454 2,787 -- --
==================================================================================================================
14,909,121 35,088,062 93,887,336 55,882,790 125,702,379 142,570,603
Shares Repurchased
Investor Class (17,525,270) (37,979,338) (102,655,456) (58,464,938) (118,596,254) (140,424,339)
Class A (602,143) -- (114,384) -- (2,693,330) --
Class B (3,209) -- (2,217) -- (85,023) --
Class C (1,052,371) (895,102) (911,176) (829,034) (6,718,167) (1,325,678)
Class K (5,719) (170) (16,126) (30,145) -- --
==================================================================================================================
(19,188,712) (38,874,610) (103,699,359) (59,324,117) (128,092,774) (141,750,017)
NET INCREASE
(DECREASE) IN
FUND SHARES (4,279,591) (3,786,548) (9,812,023) (3,441,327) (2,390,395) 820,586
==================================================================================================================
NOTE 9 -- SHARE INFORMATION (CONTINUED)
HEALTH SCIENCES FUND LEISURE FUND REAL ESTATE OPPORTUNITY FUND
YEAR ENDED MARCH 31 YEAR ENDED MARCH 31 YEAR ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002 2003 2002
(Note 1)
Shares Sold
Investor Class 79,949,743 57,443,476 6,136,558 19,352,726 5,248,092 8,923,885
Class A 287,786 -- 1,104,358 -- 527,534 --
Class B 17,220 -- 284,942 -- 21,438 --
Class C 2,159,153 9,130,105 1,250,725 1,453,013 417,652 908,498
Class K 32,296 71,569 1,128,435 1,628,033 -- --
Shares Issued from
Reinvestment of Distributions
Investor Class 0 10,932 0 178,618 105,846 116,421
Class A 0 -- 0 -- 8,241 --
Class B 0 -- 0 -- 444 --
Class C 0 152 0 2,249 1,932 2,433
Class K 0 20 0 0 -- --
=================================================================================================================
82,446,198 66,656,254 9,905,018 22,614,639 6,331,179 9,951,237
Shares Repurchased
Investor Class (86,187,098) (60,958,816) (9,267,982) (15,369,925) (5,234,590) (10,471,115)
Class A (191,020) -- (224,212) -- (211,814) --
Class B (1,026) -- (15,165) -- (3,892) --
Class C (2,342,780) (9,026,936) (1,084,357) (1,175,755) (372,001) (1,038,382)
Class K (30,847) (20,420) (529,876) (31,768) -- --
=================================================================================================================
(88,752,771) (70,006,172) (11,121,592) (16,577,448) (5,822,297) (11,509,497)
NET INCREASE
(DECREASE) IN
FUND SHARES (6,306,573) (3,349,918) (1,216,574) (6,037,191) 508,882 (1,558,260)
=================================================================================================================
FS-61
TECHNOLOGY FUND TELECOMMUNICATIONS FUND UTILITIES FUND
YEAR ENDED MARCH 31 YEAR ENDED MARCH 31 YEAR ENDED MARCH 31
- -----------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002 2003 2002
Shares Sold
Institutional Class 19,889,258 31,869,203 -- -- -- --
Investor Class 224,764,422 139,817,995 104,306,735 113,031,996 12,818,438 10,812,169
Class A 2,174,042 -- 1,088,209 -- 282,591 --
Class B 44,687 -- 2,489 -- 27,752 --
Class C 788,820 3,082,019 5,665,489 19,484,375 1,261,896 679,313
Class K 920,699 1,038,923 70,829 77,229 -- --
Shares Issued from
Reinvestment of Distributions
Investor Class 0 0 0 0 254,574 154,281
Class A 0 -- 0 -- 1,448 --
Class B 0 -- 0 -- 172 --
Class C 0 0 0 0 1,058 50
=================================================================================================================
248,581,928 175,808,140 111,133,751 132,593,600 14,647,929 11,645,813
Shares Repurchased
Institutional Class (23,113,782) (26,698,958) -- -- -- --
Investor Class (235,589,807) (139,766,344) (116,174,811) (128,834,470) (15,880,668) (13,656,118)
Class A (1,911,401) -- (1,047,111) -- (228,729) --
Class B (13,101) -- (478) -- (4,295) --
Class C 1,073,531) (2,897,877) (6,240,763) (19,131,108) (1,350,991) (732,739)
Class K (498,359) (140,570) (56,707) (7,033) -- --
=================================================================================================================
(262,199,981) (169,503,749) (123,519,870) (147,972,611) (17,464,683) (14,388,857)
NET INCREASE
(DECREASE) IN
FUND SHARES (13,618,053) 6,304,391 (12,386,119) (15,379,011) (2,816,754) (2,743,044)
=================================================================================================================
FS-62
FINANCIAL HIGHLIGHTS
ENERGY FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30 $ 19.38
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) (0.10) (0.07) (0.08) (0.00) (0.00) 0.00
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.35) (0.40) 3.84 3.72 2.39 (5.04)
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.45) (0.47) 3.76 3.72 2.39 (5.04)
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00 0.01 3.04
====================================================================================================================================
Net Asset Value -- End of Period $ 16.81 $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30
====================================================================================================================================
TOTAL RETURN (12.72%) (2.38%) 23.09% 27.19%(d) 21.19% (28.51%)
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 231,023 $ 358,439 $ 445,845 $ 221,432 $ 196,136 $ 137,455
Ratio of Expenses to Average Net Assets(e) 1.69% 1.53% 1.41% 1.60%(f) 1.68% 1.58%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.57%) (0.34%) (0.35%) (0.26%)(f) (0.05%) 0.01%
Portfolio Turnover Rate 144% 144% 166% 109%(d) 279% 192%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001.
(c) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis for the period ended March 31, 2000 and the years
ended October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(f) Annualized
FS-63
FINANCIAL HIGHLIGHTS
ENERGY FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 19.26 $ 19.26
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.05) (0.17)
Net Losses on Securities (Both Realized
and Unrealized) (2.36) (2.38)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.41) (2.55)
================================================================================
Net Asset Value -- End of Period $ 16.85 $ 16.71
================================================================================
TOTAL RETURN(c) (12.51%) (13.24%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 9,131 $ 1,502
Ratio of Expenses to Average Net Assets(d)(e) 1.46% 2.33%
Ratio of Net Investment Loss to Average Net Assets(e) (0.33%) (1.16%)
Portfolio Turnover Rate 144% 144%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class B, ratio of expenses to average net assets would have been 2.41% and
ratio of net investment loss to average net assets would have been (1.24%).
FS-64
FINANCIAL HIGHLIGHTS
ENERGY FUND -- CLASS C
- ---------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- --------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 18.98 $ 19.58 $ 17.39 $ 14.35
==============================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.11) (0.07) (0.05) (0.01)
Net Gains or (Losses) on Securities (Both
Realized and Unrealized) (2.42) (0.53) 3.67 3.05
==============================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.53) (0.60) 3.62 3.04
==============================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00
==============================================================================================================
NET ASSET VALUE -- END OF PERIOD $ 16.45 $ 18.98 $ 19.58 $ 17.39
==============================================================================================================
TOTAL RETURN(c) (13.33%) (3.06%) 22.35% 21.11%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 9,566 $ 12,324 $ 8,704 $ 16
Ratio of Expenses to Average Net Assets(e)(f) 2.33% 2.27% 2.05% 2.05%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.22%) (1.08%) (1.10%) (1.11%)(g)
Portfolio Turnover Rate 144% 144% 166% 109%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 2.53%
and ratio of net investment loss to average net assets would have been (1.42%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March
31, 2000.
FS-65
FINANCIAL HIGHLIGHTS
ENERGY FUND -- CLASS K
- -----------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -----------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 17.98 $ 19.62 $ 16.76
=========================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.14) (0.05) (0.15)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (2.29) (1.59) 3.01
=========================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.43) (1.64) 2.86
=========================================================================================
Net Asset Value -- End of Period $ 15.55 $ 17.98 $ 19.62
=========================================================================================
TOTAL RETURN (13.52%) (8.36%) 17.06%(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 289 $ 37 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 2.07% 11.62% 3.11%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.90%) (10.45%) (2.34%)(f)
Portfolio Turnover Rate 144% 144% 166%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended
March 31, 2003.
(c) Based on operations for the period shown and, accordingly, is not representative of a
full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment
Adviser, if applicable, which is before any expense offset arrangements (which may
include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the year ended
March 31, 2003. If such expenses had not been voluntarily absorbed, ratio of expenses
to average net assets would have been 5.36% and ratio of net investment loss to
average net assets would have been (4.19%).
(f) Annualized
(g) Portfolio turnover is calculated at the Fund level. Represents the year ended March
31, 2001.
FS-66
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45 $ 29.14
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.10 0.07 0.10 0.03 0.08 0.25
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (6.42) 0.94 2.97 0.05 3.52 3.01
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (6.32) 1.01 3.07 0.08 3.60 3.26
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.13 1.67 1.32 2.68 2.32 3.95
====================================================================================================================================
Net Asset Value -- End of Period $ 21.77 $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45
====================================================================================================================================
TOTAL RETURN (22.39%) 3.82% 11.25% 0.60%(b) 13.52 11.76%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 734,440 $ 1,234,230 $ 1,368,583 $ 1,133,350 $ 1,242,555 $ 1,417,655
Ratio of Expenses to Average Net Assets(c) 1.40% 1.27% 1.25% 1.29%(d) 1.26% 1.05%
Ratio of Net Investment Income to Average
Net Assets 0.38% 0.24% 0.36% 0.25%(d) 0.25% 0.85%
Portfolio Turnover Rate 60% 81% 99% 38%(b) 83% 52%
(a) From November 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(d) Annualized
FS-67
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND -- CLASS A & CLASS B
- -----------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- -----------------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 28.22 $ 28.22
=========================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.06 (0.03)
Net Losses on Securities (Both Realized
and Unrealized) (6.37) (6.30)
=========================================================================================
TOTAL FROM INVESTMENT OPERATIONS (6.31) (6.33)
=========================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.23 0.15
=========================================================================================
Net Asset Value -- End of Period $ 21.68 $ 21.74
=========================================================================================
TOTAL RETURN(b) (22.36%) (22.48%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 5,311 $ 990
Ratio of Expenses to Average Net Assets(c)(d) 1.38% 2.09%
Ratio of Net Investment Income (Loss) to Average Net Assets(d) 0.49% (0.20%)
Portfolio Turnover Rate 60% 60%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the
Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by Investment
Adviser, which is before any expense offset arrangements (which may include custodian
fees).
(d) Various expenses of each Class were absorbed by IFG for the year ended March 31,
2003. If such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 1.51% for Class A and 2.40% for Class B and ratio
of net investment income (loss) to average net assets would have been 0.36% for Class
A and (0.51%) for Class B.
FS-68
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND -- CLASS C
- -------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 27.89 $ 28.72 $ 27.06 $ 23.66
=========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) (0.25) (0.10) (0.09) 0.00
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (6.22) 0.87 3.05 3.48
=========================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (6.47) 0.77 2.96 3.48
=========================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.04 1.60 1.30 0.08
=========================================================================================================================
Net Asset Value -- End of Period $ 21.38 $ 27.89 $ 28.72 $ 27.06
=========================================================================================================================
TOTAL RETURN(d) (23.22%) 2.98% 10.87% 14.72%(e)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 10,026 $ 16,880 $ 12,221 $ 138
Ratio of Expenses to Average Net Assets(f) 2.45% 2.07% 1.85% 1.63%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.68%) (0.57%) (0.31%) 0.39%(g)
Portfolio Turnover Rate 60% 81% 99% 38%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Income aggregated less than $0.01 on a per share basis for the period ended March 31, 2000.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include
custodian fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FS-69
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND -- CLASS K
- ---------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- ---------------------------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 27.69 $ 28.67 $ 29.35
===============================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss) 0.15 (0.03) (0.17)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.41) 0.90 (0.38)
===============================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (6.26) 0.87 (0.55)
===============================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.16 1.85 0.13
===============================================================================================================
Net Asset Value -- End of Period $ 21.27 $ 27.69 $ 28.67
===============================================================================================================
TOTAL RETURN (22.62%) 3.38% (1.97%)(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 1,348 $ 1,033 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.78% 1.63% 3.35%(f)
Ratio of Net Investment Income (Loss) to Average Net Assets(e) 0.18% (0.12%) (1.80%)(f)
Portfolio Turnover Rate 60% 81% 99%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 2.13%
and ratio of net investment loss to average net assets would have been (0.17%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FS-70
FINANCIAL HIGHLIGHTS
GOLD & PRECIOUS METALS FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90 $ 3.21
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss) (0.02) (0.01) (0.01) (0.01) (0.03) 0.01
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.13 0.87 (0.12) (0.22) (0.04) (1.29)
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.11 0.86 (0.13) (0.23) (0.07) (1.28)
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00 0.00 0.03
====================================================================================================================================
Net Asset Value -- End of Period $ 2.40 $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90
====================================================================================================================================
TOTAL RETURN 4.80% 60.14% (8.38%) (12.58%)(c) (3.68%) (39.98%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 98,388 $ 104,831 $ 64,429 $ 81,470 $ 99,753 $ 107,249
Ratio of Expenses to Average Net Assets(d) 1.88% 2.10% 2.34% 2.08%(e) 2.20% 1.90%
Ratio of Net Investment Loss to Average
Net Assets (0.79%) (0.80%) (0.99%) (0.76%)(e) (1.60%) (0.93%)
Portfolio Turnover Rate 84% 46% 90% 37%(c) 141% 133%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2001 and October 31, 1999.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(e) Annualized
FS-71
FINANCIAL HIGHLIGHTS
GOLD & PRECIOUS METALS FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 2.29 $ 2.29
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.02) (0.02)
Net Gains on Securities (Both Realized and Unrealized) 0.12 0.12
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.10
================================================================================
Net Asset Value -- End of Period $ 2.39 $ 2.39
================================================================================
TOTAL RETURN(c) 4.37% 4.37%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 1,514 $ 2,315
Ratio of Expenses to Average Net Assets(d)(e) 2.09% 2.18%
Ratio of Net Investment Loss to Average Net Assets(e) (1.09%) (1.12%)
Portfolio Turnover Rate 84% 84%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of Class A were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class A, ratio of expenses to average net assets would have been 2.11% and
ratio of net investment loss to average net assets would have been (1.11%).
FS-72
GOLD & PRECIOUS METALS FUND -- CLASS C
- ------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 2.42 $ 1.53 $ 1.60 $ 1.75
======================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss(c) (0.00) (0.07) (0.01) (0.00)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) 0.10 0.96 (0.02) (0.15)
======================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.89 (0.03) (0.15)
======================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00
======================================================================================================
Net Asset Value -- End of Period $ 2.52 $ 2.42 $ 1.53 $ 1.60
======================================================================================================
TOTAL RETURN(d) 4.13% 58.17% (1.95%) (8.57%)(e)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 2,459 $ 515 $ 57 $ 1
Ratio of Expenses to Average Net Assets(f) 2.65% 3.33% 3.38% 3.54%(g)
Ratio of Net Investment Loss to Average Net Assets (1.60%) (1.67%) (1.41%) (0.82%)(g)
Portfolio Turnover Rate 84% 46% 90% 37%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31,
2003 and the period ended March 31, 2000.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements
(which may include custodian fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to
March 31, 2000.
FS-73
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12 $ 57.50
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss) (0.28) (0.38) (0.12) (0.06) 0.14 0.13
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (8.75) 2.18 (0.51) 3.53 5.02 13.55
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (9.03) 1.80 (0.63) 3.47 5.16 13.68
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 9.11 6.34 8.89 9.06
====================================================================================================================================
Net Asset Value -- End of Period $ 38.53 $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12
====================================================================================================================================
TOTAL RETURN (18.99%) 3.95% (4.12%) 6.30%(d) 8.44% 28.58%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 954,765 $ 1,475,313 $ 1,580,378 $ 1,622,624 $ 1,574,020 $ 1,328,196
Ratio of Expenses to Average Net Assets(e) 1.44% 1.31% 1.23% 1.18%(f) 1.22% 1.12%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.68%) (0.75%) (0.20%) (0.22%)(f) 0.07% 0.25%
Portfolio Turnover Rate 179% 160% 177% 107%(d) 127% 92%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(f) Annualized
FS-74
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 47.56 $ 47.56
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.22) (0.44)
Net Losses on Securities (Both Realized and Unrealized) (8.78) (8.78)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (9.00) (9.22)
================================================================================
Net Asset Value -- End of Period $ 38.56 $ 38.34
================================================================================
TOTAL RETURN(c) (18.92%) (19.39%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 3,731 $ 621
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.06%
Ratio of Net Investment Loss to Average Net Assets(e) (0.69%) (1.22%)
Portfolio Turnover Rate 179% 179%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.88% for Class A
and 2.51% for Class B and ratio of net investment loss to average net assets
would have been (1.16%) for Class A and (1.67%) for Class B.
FS-75
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND -- CLASS C
- -----------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -----------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 46.68 $ 45.40 $ 55.50 $ 62.05
=================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (1.20) (0.35) (0.05) (0.03)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (8.21) 1.65 (0.94) (6.52)
=================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (9.41) 1.30 (0.99) (6.55)
=================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 9.11 0.00
=================================================================================================================
Net Asset Value -- End of Period $ 37.27 $ 46.68 $ 45.40 $ 55.50
=================================================================================================================
TOTAL RETURN(d) (20.16%) 2.85% (4.79%) (10.56%)(e)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 5,846 $ 15,892 $ 10,767 $ 470
Ratio of Expenses to Average Net Assets(f)(g) 2.81% 2.26% 2.03% 1.65%(h)
Ratio of Net Investment Loss to Average Net Assets(g) (2.04%) (1.70%) (1.08%) (0.54%)(h)
Portfolio Turnover Rate 179% 160% 177% 107%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 3.27% and
ratio of net investment loss to average net assets would have been (2.50%).
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31,
2000.
FS-76
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND -- CLASS K
- --------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- --------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 46.98 $ 45.43 $ 55.84
==================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.23) (0.48) (0.22)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (8.94) 2.05 (10.19)
==================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (9.17) 1.57 (10.41)
==================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 0.00
==================================================================================================
Net Asset Value -- End of Period $ 37.81 $ 46.98 $ 45.43
==================================================================================================
TOTAL RETURN (19.50%) 3.42% (18.64%)(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 1,990 $ 2,405 $ 1
Ratio of Expenses to Average Net Assets(e) 2.07% 1.71% 3.62%(f)
Ratio of Net Investment Loss to Average Net Assets (1.29%) (1.09%) (2.75%)(f)
Portfolio Turnover Rate 179% 160% 177%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31,
2002.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full
year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements
(which may include custodian fees).
(f) Annualized
(g) Portfolio turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FS-77
FINANCIAL HIGHLIGHTS
LEISURE FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92 $ 27.21
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss(c) (0.23) (0.03) (0.00) (0.13) (0.00) (0.00)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (7.89) 2.21 (3.05) 7.27 17.20 3.69
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (8.12) 2.18 (3.05) 7.14 17.20 3.69
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 3.23 1.91 2.98
====================================================================================================================================
Net Asset Value -- End of Period $ 30.83 $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92
====================================================================================================================================
TOTAL RETURN (20.87%) 6.01% (5.50%) 17.34%(d) 65.13% 15.16%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 536,108 $ 799,465 $ 607,428 $ 549,523 $ 443,348 $ 228,681
Ratio of Expenses to Average Net Assets(e) 1.50% 1.40% 1.36% 1.28%(f) 1.44% 1.41%
Ratio of Net Investment Loss to Average
Net Assets (0.69%) (0.64%) (0.51%) (0.65%)(f) (0.68%) (0.09%)
Portfolio Turnover Rate 20% 27% 28% 23%(d) 35% 31%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2003 and the period ended March 31,
2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001 and the years ended
October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(f) Annualized
FS-78
FINANCIAL HIGHLIGHTS
LEISURE FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 38.96 $ 38.96
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.17) (0.38)
Net Losses on Securities (Both Realized
and Unrealized) (7.91) (7.93)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (8.08) (8.31)
================================================================================
Net Asset Value -- End of Period $ 30.88 $ 30.65
================================================================================
TOTAL RETURN(c) (20.74%) (21.33%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 27,175 $ 8,268
Ratio of Expenses to Average Net Assets(d)(e) 1.42% 2.14%
Ratio of Net Investment Loss to Average Net Assets(e) (0.56%) (1.29%)
Portfolio Turnover Rate 20% 20%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class B, ratio of expenses to average net assets would have been 2.23% and
ratio of net investment loss to average net assets would have been (1.38%).
FS-79
FINANCIAL HIGHLIGHTS
LEISURE FUND -- CLASS C
- ----------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- ----------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 38.29 $ 36.80 $ 47.09 $ 45.51
================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.18) (0.17) (0.13) (0.02)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (8.11) 2.02 (3.22) 1.60
================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (8.29) 1.85 (3.35) 1.58
================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 0.00
================================================================================================================
Net Asset Value -- End of Period $ 30.00 $ 38.29 $ 36.80 $ 47.09
================================================================================================================
TOTAL RETURN(c) (21.65%) 5.10% (6.18%) 3.47%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 17,768 $ 16,307 $ 5,388 $ 84
Ratio of Expenses to Average Net Assets(e) 2.44% 2.26% 2.08% 1.71%(f)
Ratio of Net Investment Loss to Average Net Assets (1.62%) (1.48%) (1.08%) (0.42%)(f)
Portfolio Turnover Rate 20% 27% 28% 23%(g)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may
include custodian fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31,
2000.
FS-80
FINANCIAL HIGHLIGHTS
LEISURE FUND -- CLASS K
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR PERIOD
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003 2002(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 38.98 $ 36.11
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.06) (0.09)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (8.18) 2.96
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (8.24) 2.87
================================================================================
Net Asset Value -- End of Period $ 30.74 $ 38.98
================================================================================
TOTAL RETURN (21.14%) 7.95%(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 67,465 $ 62,226
Ratio of Expenses to Average Net Assets(d)(e) 1.87% 1.23%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.05%) (0.48%)(f)
Portfolio Turnover Rate 20% 27%(g)
(a) From December 17, 2001, since inception of Class, to March 31, 2002.
(b) The per share information was computed based on average shares for the
period ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not
representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.21% and ratio of
net investment loss to average net assets would have been (1.39%).
(f) Annualized
(g) Portfolio turnover is calculated at the Fund level. Represents the year
ended March 31, 2002.
FS-81
FINANCIAL HIGHLIGHTS
REAL ESTATE OPPORTUNITY FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15 $ 10.99
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.24 0.26 0.27 0.33 0.38
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.37) 0.78 0.48 (0.28) (1.56) (0.96)
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.09) 1.02 0.74 (0.01) (1.23) (0.58)
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.27 0.25 0.25 0.26 1.02 1.26
====================================================================================================================================
Net Asset Value -- End of Period $ 7.53 $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15
====================================================================================================================================
TOTAL RETURN (1.12%) 14.67% 11.05% (0.03%)(b) (13.29%) (6.49%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 20,313 $ 20,345 $ 28,546 $ 20,046 $ 17,406 $ 23,548
Ratio of Expenses to Average Net Assets(c)(d) 1.60% 1.61% 1.60% 1.34%(e) 1.34% 1.22%
Ratio of Net Investment Income to Average Net Assets(d) 3.92% 3.58% 3.52% 5.54%(e) 4.23% 3.53%
Portfolio Turnover Rate 248% 196% 338%(f) 272%(b)(f) 697%(f) 258%
(a) From August 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March 31, 2003, 2002 and 2001, the period
ended March 31, 2000 and the years ended July 31, 1999 and 1998. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 2.43%, 2.25%, 2.03%, 2.73% (annualized), 2.76% and 1.97%, respectively, and ratio
of net investment income to average net assets would have been 3.09%, 2.94%, 3.09%, 4.15% (annualized), 2.81% and 2.78%,
respectively.
(e) Annualized
(f) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
FS-82
FINANCIAL HIGHLIGHTS
REAL ESTATE OPPORTUNITY FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 7.89 $ 7.89
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.21
Net Losses on Securities (Both Realized
and Unrealized) (0.39) (0.36)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.11) (0.15)
================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.34 0.32
================================================================================
Net Asset Value -- End of Period $ 7.44 $ 7.42
================================================================================
TOTAL RETURN(b) (1.45%) (1.94%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 2,409 $ 133
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.36%
Ratio of Net Investment Income to Average Net Assets(d) 4.57% 3.49%
Portfolio Turnover Rate 248% 248%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class B, ratio of expenses to average net assets would have been 3.73% and
ratio of net investment income to average net assets would have been 2.12%.
FS-83
FINANCIAL HIGHLIGHTS
REAL ESTATE OPPORTUNITY FUND -- CLASS C
- ----------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- ----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 7.95 $ 7.10 $ 6.62 $ 6.58
============================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.14 0.14 0.20 0.08
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.28) 0.82 0.48 0.06
============================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.14) 0.96 0.68 0.14
============================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.08 0.11 0.20 0.10
============================================================================================================================
Net Asset Value -- End of Period $ 7.73 $ 7.95 $ 7.10 $ 6.62
============================================================================================================================
TOTAL RETURN(b) (1.81%) 13.69% 10.20% 2.10%(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 838 $ 484 $ 1,336 $ 143
Ratio of Expenses to Average Net Assets(d)(e) 2.35% 2.37% 2.26% 1.77%(f)
Ratio of Net Investment Income to Average Net Assets(e) 3.25% 2.72% 2.90% 19.13%(f)
Portfolio Turnover Rate 248% 196% 338%(g) 272%(g)(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The applicable CDSC is not included in the Total Return calculation.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March 31, 2003, 2002 and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets
would have been 3.74%, 2.72%, 2.26% and 2.04% (annualized), respectively, and ratio of net investment income to average
net assets would have been 1.86%, 2.37%, 2.90% and 18.86% (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market
conditions.
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FS-84
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD PERIOD
ENDED ENDED
YEAR ENDED MARCH 31 MARCH 31 OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999(b)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 30.93 $ 35.98 $ 102.55 $ 58.43 $ 33.85
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(c)
Net Investment Loss (0.12) (0.16) (0.06) (0.04) (0.16)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (13.47) (4.89) (63.87) 48.07 24.74
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.59) (5.05) (63.93) 48.03 24.58
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 3.91 0.00
====================================================================================================================================
Net Asset Value -- End of Period $ 17.34 $ 30.93 $ 35.98 $ 102.55 $ 58.43
====================================================================================================================================
TOTAL RETURN (43.94%) (14.04%) (63.39%) 86.14%(d) 72.61%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 707,040 $ 1,360,738 $ 1,396,788 $ 4,453,520 $ 951,925
Ratio of Expenses to Average Net Assets(e) 0.90% 0.74% 0.58% 0.56%(f) 0.74%(f)
Ratio of Net Investment Loss to Average Net Assets (0.59%) (0.46%) (0.08%) (0.15%)(f) (0.36%)(f)
Portfolio Turnover Rate 107% 79% 85% 28%(d) 143%(g)
(a) From November 1, 1999 to March 31, 2000.
(b) From December 22, 1998, since inception of Class, to October 31, 1999.
(c) The per share information was computed based on average shares for the years ended March 31, 2003 and 2002 and the period ended
October 31, 1999.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended October 31, 1999.
FS-85
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07 $ 35.97
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss(b) (0.14) (0.08) (0.10) (0.03) (0.07) (0.00)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (13.37) (5.11) (63.58) 47.69 30.17 (1.45)
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.51) (5.19) (63.68) 47.66 30.10 (1.45)
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 3.91 0.00 6.45
====================================================================================================================================
Net Asset Value -- End of Period $ 16.90 $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07
====================================================================================================================================
TOTAL RETURN (44.43%) (14.58%) (63.54%) 85.87%(c) 107.23% (2.47%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 853,530 $ 1,865,251 $ 2,181,879 $ 5,034,087 $ 2,081,613 $ 1,008,771
Ratio of Expenses to Average Net Assets(d) 1.77% 1.37% 0.98% 0.88%(e) 1.20% 1.17%
Ratio of Net Investment Loss
to Average Net Assets (1.46%) (1.08%) (0.47%) (0.48%)(e) (0.79%) (0.49%)
Portfolio Turnover Rate 107% 79% 85% 28%(c) 143% 178%
(a) From November 1, 1999 to March 31, 2000.
(b) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended October 31, 1998.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(e) Annualized
FS-86
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 30.41 $ 30.41
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.20) (0.27)
Net Losses on Securities
(Both Realized and Unrealized) (13.23) (13.30)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.43) (13.57)
================================================================================
Net Asset Value -- End of Period $ 16.98 $ 16.84
================================================================================
TOTAL RETURN(c) (44.16%) (44.62%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 4,460 $ 532
Ratio of Expenses to Average Net Assets(d)(e) 1.47% 2.15%
Ratio of Net Investment Loss to Average Net Assets(e) (1.12%) (1.71%)
Portfolio Turnover Rate 107% 107%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of each Class, less Expenses absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.51% for Class A
and 2.74% for Class B and ratio of net investment loss to average net assets
would have been (1.16%) for Class A and (2.30%) for Class B.
FS-87
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- CLASS C
- -------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 29.73 $ 35.22 $ 101.85 $ 95.51
===================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.62) (0.22) (0.18) (0.15)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (12.72) (5.27) (63.81) 6.49
===================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.34) (5.49) (63.99) 6.34
===================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 0.00
===================================================================================================================
Net Asset Value -- End of Period $ 16.39 $ 29.73 $ 35.22 $ 101.85
===================================================================================================================
TOTAL RETURN(c) (44.87%) (15.59%) (63.89%) 6.63%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 5,759 $ 18,910 $ 15,919 $ 2,970
Ratio of Expenses to Average Net Assets(e)(f) 2.69% 2.54% 1.86% 1.45%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (2.39%) (2.26%) (1.30%) (1.03%)(g)
Portfolio Turnover Rate 107% 79% 85% 28%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 3.95%, and
ratio of net investment loss to average net assets would have been (3.65%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31,
2000.
FS-88
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- CLASS K
- -------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -------------------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 30.22 $ 35.09 $ 60.01
=======================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.07) (0.27) (0.82)
Net Losses on Securities (Both Realized and Unrealized) (13.37) (4.60) (24.10)
=======================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.44) (4.87) (24.92)
=======================================================================================================
Net Asset Value -- End of Period $ 16.78 $ 30.22 $ 35.09
=======================================================================================================
TOTAL RETURN (44.47%) (13.85%) (41.54%)(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 22,156 $ 27,147 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.88% 1.28% 5.18%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.55%) (1.15%) (4.67%)(f)
Portfolio Turnover Rate 107% 79% 85%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if
applicable, which is before any expense offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003.
If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 2.49%, and ratio of net investment loss to average net assets would have been (2.16%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FS-89
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60 $ 15.31
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) (0.04) (0.11) (0.16) (0.10) (0.00) 0.01
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (4.36) (11.42) (38.91) 32.87 12.57 5.32
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.53) (39.07) 32.77 12.57 5.33
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.15 0.37 1.04
====================================================================================================================================
Net Asset Value -- End of Period $ 7.96 $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60
====================================================================================================================================
TOTAL RETURN (35.60%) (48.26%) (61.42%) 103.25%(d) 65.52% 36.79%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 274,947 $ 573,969 $ 1,486,660 $ 4,125,890 $ 1,029,256 $ 276,577
Ratio of Expenses to Average Net Assets(e)(f) 1.81% 1.70% 1.10% 0.99%(g) 1.24% 1.32%
Ratio of Net Investment Loss
to Average Net Assets(f) (0.49%) (0.57%) (0.32%) (0.32%)(g) (0.49%) (0.16%)
Portfolio Turnover Rate 137% 91% 61% 24%(d) 62% 55%
(a) From August 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended July 31, 1999.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable, which is before any
expense offset arrangements (which may include custodian, distribution and transfer agent fees).
(f) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been 2.76% and ratio of net investment loss to average
net assets would have been (1.44%).
(g) Annualized
FS-90
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND-- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 12.36 $ 12.36
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss (0.08) (0.03)
Net Losses on Securities (Both Realized and Unrealized) (4.36) (4.44)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (4.44) (4.47)
================================================================================
Net Asset Value -- End of Period $ 7.92 $ 7.89
================================================================================
TOTAL RETURN(b) (35.92%) (36.17%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 326 $ 16
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.57%
Ratio of Net Investment Loss to Average Net Assets(d) (0.65%) (1.44%)
Portfolio Turnover Rate 137% 137%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by the
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class B, ratio of expenses to average net assets would have been 12.15% and
ratio of net investment loss to average net assets would have been (11.02%).
FS-91
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND -- CLASS C
- -------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 12.10 $ 23.70 $ 64.37 $ 59.28
===================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.34) (0.04) (0.13) (0.06)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (4.04) (11.56) (39.08) 5.15
===================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (4.38) (11.60) (39.21) 5.09
===================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.00
===================================================================================================================
Net Asset Value -- End of Period $ 7.72 $ 12.10 $ 23.70 $ 64.37
===================================================================================================================
TOTAL RETURN(c) (36.20%) (48.95%) (61.69%) 8.59%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 2,188 $ 10,392 $ 11,980 $ 2,530
Ratio of Expenses to Average Net Assets(e)(f) 2.63% 2.60% 1.99% 1.49%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.18%) (1.52%) (1.18%) (0.86%)(g)
Portfolio Turnover Rate 137% 91% 61% 24%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(f) Various expenses the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such expenses
had not been voluntarily absorbed, ratio of expenses to average net assets would have been 5.76% and ratio of
net investment loss to average net assets would have been (4.31%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31,
2000.
FS-92
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND -- CLASS K
- --------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- --------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 12.30 $ 23.80 $ 36.43
============================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss(b) (0.02) (0.15) (0.19)
Net Losses on Securities (Both Realized
and Unrealized) (4.38) (11.35) (12.44)
============================================================================================
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.50) (12.63)
============================================================================================
Net Asset Value -- End of Period $ 7.90 $ 12.30 $ 23.80
============================================================================================
TOTAL RETURN (35.77%) (48.32%) (34.67%)(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 666 $ 864 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 2.06% 2.21% 2.30%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.77%) (1.32%) (1.52%)(f)
Portfolio Turnover Rate 137% 91% 61%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March
31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a
full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment
Adviser, which is before any expense offset arrangements (which may include custodian
fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March
31, 2003 and 2002 and the period ended March 31, 2001. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been 3.30%,
2.42% and 3.38% (annualized), respectively, and ratio of net investment loss to average
net assets would have been (2.01%), (1.53%) and (2.60%) (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31,
2001.
FS-93
FINANCIAL HIGHLIGHTS
UTILITIES FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73 $ 12.42
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.23 0.15 0.13 0.04 0.17 0.30
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.46) (5.54) (3.22) 3.95 3.20 2.56
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.23) (5.39) (3.09) 3.99 3.37 2.86
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.24(b) 0.15 1.13 1.25 0.42 0.55
====================================================================================================================================
Net Asset Value -- End of Period $ 8.19 $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73
====================================================================================================================================
TOTAL RETURN (20.99%) (33.34%) (15.18%) 23.99%(c) 23.22% 23.44%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 72,749 $ 124,578 $ 232,877 $ 260,554 $ 223,334 $ 177,309
Ratio of Expenses to Average Net Assets(d)(e) 1.30% 1.30% 1.30% 1.24%(f) 1.26% 1.29%
Ratio of Net Investment Income
to Average Net Assets(e) 2.63% 1.09% 0.74% 0.50%(f) 1.02% 1.82%
Portfolio Turnover Rate 64% 56% 49% 18%(c) 32% 47%
(a) From November 1, 1999 to March 31, 2000.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangements (which may include custodian and transfer agent fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March 31, 2003, 2002 and 2001, the period
ended March 31, 2000 and the years ended October 31, 1999 and 1998. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 1.90%, 1.57%, 1.40%, 1.33% (annualized), 1.43% and 1.36%, respectively, and ratio
of net investment income to average net assets would have been 2.03%, 0.82%, 0.64%, 0.41% (annualized), 0.85% and 1.75%,
respectively.
(f) Annualized
FS-94
FINANCIAL HIGHLIGHTS
UTILITIES FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.66 $ 10.66
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.16 0.13
Net Losses on Securities (Both Realized
and Unrealized) (2.40) (2.43)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.24) (2.30)
================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.29(b) 0.21(b)
================================================================================
Net Asset Value -- End of Period $ 8.13 $ 8.15
================================================================================
TOTAL RETURN(c) (21.05%) (21.67%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 450 $ 193
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.14%
Ratio of Net Investment Income to Average Net Assets(e) 2.79% 1.84%
Portfolio Turnover Rate 64% 64%
(a) Class commenced operations on April 1, 2002.
(b) Dividends and Distributions included a tax return of capital which
aggregated less than $0.01 on a per share basis.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expensed Absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.74% for Class A
and 2.69% for Class B and ratio of net investment income to average net
assets would have been 2.46% for Class A and 1.29% for Class B.
FS-95
FINANCIAL HIGHLIGHTS
UTILITIES FUND -- CLASS C
- -----------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -----------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.63 $ 16.08 $ 20.40 $ 19.91
=======================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) 0.15 0.03 (0.00) (0.01)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.47) (5.48) (3.22) 0.52
=======================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.32) (5.45) (3.22) 0.51
=======================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.09 0.00 1.10 0.02
=======================================================================================================================
Net Asset Value -- End of Period $ 8.22 $ 10.63 $ 16.08 $ 20.40
=======================================================================================================================
TOTAL RETURN(d) (21.85%) (33.87%) (15.83%) 2.58%(e)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 667 $ 1,799 $ 3,579 $ 248
Ratio of Expenses to Average Net Assets(f)(g) 2.05% 2.04% 2.07% 1.83%(h)
Ratio of Net Investment Income (Loss) to Average Net Assets(g) 1.75% 0.32% (0.02%) (0.32%)(h)
Portfolio Turnover Rate 64% 56% 49% 18%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, which is before any
expense offset arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March 31, 2003, 2002 and 2001
and the period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 3.70%, 2.45%, 2.11% and 1.83% (annualized), respectively, and ratio of net
investment income (loss) to average net assets would have been 0.10%, (0.09%), (0.06%) and (0.32%) (annualized),
respectively.
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FS-96
APPENDIX II
ANNUAL REPORT / DECEMBER 31, 2002
AIM NEW TECHNOLOGY FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
--Servicemark--
AIMinvestments.com
================================================================================
[COVER IMAGE]
VARIATIONS ON A RHYTHM BY RAYMOND JONSON
RAYMOND JONSON EVOLVED FROM PAINTING LANDSCAPES IN HIS BELOVED NEW MEXICO TO
ONE OF AMERICA'S BETTER KNOWN MODERNISTS. HIS WILLINGNESS TO EXPERIMENT AND
TAKE RISKS WAS RARE IN 1930S AMERICA. IT IS OFTEN THAT SAME
WILLINGNESS TO EXPERIMENT AND TAKE RISKS THAT BRINGS ABOUT INNOVATION AND NEW
TECHNOLOGIES. THE FUND SEEKS TO IDENTIFY VISIONARY COMPANIES
WHOSE TECHNOLOGICAL INNOVATIONS WILL SHAPE THE FUTURE.
VARIATIONS ON A RHYTHM, 1931. JACK S. BLANTON MUSEUM OF ART, THE UNIVERSITY OF
TEXAS AT AUSTIN. GIFT OF THOMAS GILCREASE FOUNDATION, 1948. FOR FURTHER
INFORMATION, PLEASE VISIT BLANTONMUSEUM.ORG.
================================================================================
AIM NEW TECHNOLOGY FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY
IN STOCKS OF TECHNOLOGY AND SCIENCE COMPANIES.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o The fund's performance figures are historical, and they reflect fund
expenses, the reinvestment of distributions and changes in net asset value.
o Had the advisor not waived fees and/or absorbed expenses, returns would have
been lower.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh year.
The CDSC on Class C shares is 1% for the first year after purchase. The
performance of the fund's Class A, Class B and Class C shares will differ due
to different sales charge structures and class expenses.
o Investing in a single-sector mutual fund may involve greater risk and
potential reward than investing in a more diversified fund.
o The value of the fund's shares is particularly vulnerable to factors
affecting the technology and science industries, such as substantial
government regulations and the need for government approvals, dependency on
consumer and business acceptance as new technologies evolve, and large and
rapid price movements resulting from, among other things, fierce competition
in these industries. Additional factors affecting the technology and science
industries and the value of fund shares include rapid obsolescence of
products and services, short product cycles, and aggressive pricing. Many
technology companies are small and at an early state of development and,
therefore, may be subject to risks such as limited product lines, markets,
and financial and managerial resources.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which may
reduce the effect of IPO investments on the fund's total return.
o Investing in small and mid-size companies may involve risks not associated
with investing in more established companies. Also, small companies may have
business risk, significant stock price fluctuations and illiquidity.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o In the management discussion and in the Schedule of Investments in this
report, the fund's portfolio holdings are organized according to the Global
Industry Classification Standard, which was developed by and is the exclusive
property and a service mark of Morgan Stanley Capital International Inc. and
Standard & Poor's.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Dow Jones Industrial Average (the Dow) is a price-weighted
average of 30 actively traded blue chip stocks.
o The unmanaged Lipper Science and Technology Fund Index represents an average
of the performance of the 30 largest science and technology funds tracked by
Lipper, Inc., an independent mutual fund performance monitor.
o The unmanaged Pacific Stock Exchange Technology 100 Index (the PSE Technology
100) is a price-weighted index of 100 listed and over-the-counter technology
stocks from 15 technology-related industries.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses. Performance of an index
does not.
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. THERE IS A RISK YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to shareholders or to persons who have
received a current prospectus of the fund.
TO OUR SHAREHOLDERS
DEAR SHAREHOLDER:
[PHOTO OF All of us know how difficult the equity markets were during
ROBERT H. the fiscal year covered by this report, as major domestic
GRAHAM] equity indexes posted negative returns for a third
consecutive year for the first time since 1939-1941. We know
from experience that these conditions eventually end, though
no one can predict exactly when. We remain confident in the
resilience of the American economy. As the fiscal year
closed, the U.S. economy as a whole had expanded for 14
months in a row.
In light of continuing market difficulties, I thought you
would appreciate detailed information on some of the methods
AIM uses to manage your money. This information is presented
in the two pages following this letter. I hope it provides
you with a better understanding of our investment process,
and I encourage you to read it carefully. One of our ongoing
goals is to keep all of our shareholders well informed.
To that end, we have also increased the number of comparative benchmarks we
include in these reports.
o We now compare your fund's performance to a broad market
benchmark--typically the S&P 500 for domestic equity funds, for example,
and the Lehman Aggregate Bond Index for domestic fixed-income funds. We
have selected well-known and widely reported market benchmarks, even if
they do not reflect precisely the kinds of securities in which your fund
invests. The intent is to give you an idea of where your fund stands
vis-a-vis the market as a whole.
o We also have included what we call a style-specific market index, one we
think more closely reflects the securities in which a fund invests. This
can give you a sense of how your fund performed compared to the segments
of the market in which it actually invests. You will notice that sometimes
the performance of the style-specific index can be significantly better or
worse than the performance of the market as a whole.
o In addition, we have included your fund's Lipper category. Lipper, Inc.,
an independent mutual fund performance monitor, classifies funds by
investment objective, style and market segment, among other criteria.
Typically, a Lipper index includes the 30 largest funds within a
particular category, so your fund may or may not be included in the index.
Keep in mind that each fund in a Lipper category may interpret its
objective differently and be managed with its own variation on a basic
style such as growth or value. Nevertheless, Lipper performance numbers
provide one method of comparing your fund's performance with that of a
peer group of similar funds.
Again, our intent is to give you as much relevant information as possible
with which to evaluate your AIM fund.
BACK TO BASICS
When market conditions are as trying as they have been during the fiscal year
covered by this report, we should all keep certain investing fundamentals in
mind. First, professional advice is more important now than ever. A financial
professional can help you understand your entire financial profile. Only then do
you select individual investments to tailor your portfolio to specific goals and
timetables.
He or she can also help you learn the characteristics of various asset
classes. Recently, many investors have been seeking safety in fixed-income
investments. Unfortunately, many do not understand that bond prices move in the
opposite direction of interest rates.
Existing bonds have been rising in value as interest rates have fallen,
contributing to attractive total returns. But rates are now so low the upside
potential of bond prices is limited. Sooner or later, the economy will expand
more robustly, and interest rates will begin to rise. That will lower bond
values, reducing total returns. As ever, diversification is an investing
fundamental.
Finally, a financial advisor can help you develop reasonable expectations.
YOUR FUND MANAGERS' OBSERVATIONS
In the following pages, your fund's portfolio managers discuss your fund's
performance during the fiscal year and the market conditions and investment
strategies that affected that performance. I hope you find their comments
informative.
While corporate IT spending remained sluggish, consumer spending on
technology remained relatively robust during 2002. Nevertheless, technology
stocks performed poorly again during the fiscal year. For the year ended
December 31, 2002, the fund's Class A shares returned -45.31% at net asset value
(the performance of other share classes is shown on page 6). By comparison, the
Lipper Science and Technology Fund Index (which measures the performance of
funds with similar investment strategies) returned -41.38%.
David P. Barnard, one of the portfolio managers on the management team for
AIM New Technology Fund, announced his intention to retire January 31, 2003,
after the close of the fiscal year. Abel Garcia remains on the management team
for your fund, and Warren Tennant has joined the team.
Timely information about your fund and the markets is available on our Web
site, aiminvestments.com. Our Client Services Department can be reached during
regular business hours at 800-959-4246.
Thank you for investing in The AIM Family of Funds--Registered Trademark--. I
look forward to reporting to you again in six months.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
================================================================================
FIRST, PROFESSIONAL ADVICE IS
MORE IMPORTANT NOW THAN EVER.
A FINANCIAL PROFESSIONAL CAN
HELP YOU UNDERSTAND YOUR ENTIRE
FINANCIAL PROFILE.
ROBERT H. GRAHAM
================================================================================
A SPECIAL MESSAGE TO OUR SHAREHOLDERS
INVESTMENT RESEARCH UPDATE
FOR AIM CLIENTS
[EDGAR M. LARSEN PHOTO]
EDGAR M. LARSEN
Chief Investment Officer
[GARY T. CRUM PHOTO]
GARY T. CRUM
Director of Investments
THE FINANCIAL MARKETS have been battered over the past year by a wave of
corporate scandals, accounting restatements, bankruptcies of high-profile
companies and, in a few cases, outright financial fraud. Many investors,
understandably, feel uncertain about whether their portfolios are positioned to
withstand such a prolonged and severe market downturn. Now seems to be an
appropriate time to step back and reiterate AIM's concern for the financial
well-being of all of our clients and AIM's commitment to competitive excellence
across all investment disciplines.
We at AIM are proud of our rigorous qualitative and quantitative analytical
processes, and we remain confident that we will preserve our long-term record of
success through uncompromising fundamental research. During this recent period
of market instability, we have placed even greater focus on meticulous research,
and we continually look for new ways to improve our process.
We have the resources and the people needed to seek out the best investment
opportunities that exist in any market. It should be emphasized that AIM's teams
have not changed their investment strategies; rather our disciplines have been
fine-tuned in order to better understand each portfolio holding and to optimize
each fund's overall structure.
Rigorous accounting analysis is at the forefront of our investment-research
efforts. AIM employs both internal and external accounting experts and
proprietary tools to screen our portfolios for high-risk situations and to look
for investment opportunities.
BEYOND THE BOTTOM LINE
By going beyond the reported bottom-line numbers, we strive to understand where
a company's growth is coming from and how sustainable it may be. Our discipline
takes us through an in-depth examination of the financial statements and
industry conditions, combined with an evaluation of management's style and
strategy.
AIM's portfolio managers have taken advantage of some unique valuations in
this unusual market environment by adding opportunistically to their portfolios.
In addition to strong financial fundamentals and attractively priced securities,
AIM's teams look for companies with experienced and credible management teams.
Sometimes this means not accepting the consensus view of a particular company.
AIM seeks independent thought, both from our own analysts and portfolio
managers, and from trusted Wall Street sources. Our goal is to cultivate an
ongoing dialogue with independent thinkers in every industry, whether they work
for one of our portfolio companies, on Wall Street, at an independent research
boutique, or right here within our own firm. To this end, we have long had a
collaborative environment where communication across investment teams is
encouraged.
For example, AIM's fixed-income and equity analysts attend the same meetings
================================================================================
RIGOROUS ACCOUNTING
ANALYSIS IS AT
THE FOREFRONT OF
OUR INVESTMENT-
RESEARCH EFFORTS.
================================================================================
2
with company managements, and thus analyze the company from two different
perspectives. Our international managers work with our domestic teams to cover
the more globally oriented companies. And the teams that manage AIM's
sector-specific funds share their industry expertise with the rest of our
investment teams. As our professional staff and resources have grown, so have
the direct contacts with company management teams. Last year, AIM's analysts and
portfolio managers had more than 4,000 meetings with the senior executives of
our portfolio companies.
EDUCATION AND TRAINING
Continuing education and training are important in the ever-changing world of
investment analysis. We invite experts from such fields as accounting,
derivatives and banking to AIM so that we remain informed about current
corporate-finance techniques, new accounting regulations and other shifts in the
landscape of American business.
Over the past five years, AIM has devoted substantial resources to our
research department's personnel. Today, 68 percent of our investment management
and research professionals have earned master's degrees in business or finance.
Sixty percent have earned the Chartered Financial Analyst (CFA) or Certified
Public Accountant (CPA) designations.
QUANTITATIVE EXPERTISE
AIM's team of quantitative analysts plays a large role in portfolio construction
and performance monitoring. Our state-of-the-art proprietary tools include the
means to optimize a portfolio's construction, which includes managing and
monitoring risk, analyzing performance, and conducting hypothetical trading
scenarios to see how they would affect the overall portfolio. These tools offer
our investment teams a more acute awareness of how their portfolios stack up
against their benchmarks and their peers.
Attribution tools allow us to monitor relative sector and industry
weightings, individual security weightings, and correlations across different
holdings. Our portfolio management teams aren't the only ones using these
customized risk-assessment tools. They also are used to generate detailed
reports that are reviewed by members of AIM's senior management. We have a
schedule of formalized periodic reviews to assess the construction and the
risk-adjusted performance of the funds, to offer guidance to the portfolio
managers, and to take corrective action when warranted.
DIVERSIFICATION OF AIM'S OFFERINGS
Even during the equity-market bubble of the late 1990s, AIM advocated a
diversified approach to portfolio management for its clients. As growth stocks
registered double-digit gains, we were taking a longer-term view of the markets
and actively diversified our product line across market styles and
capitalization ranges.
As the financial markets have changed over the past few years, so has AIM's
selection of fund offerings. In the past, AIM was recognized for investing in
the equities of U.S. growth companies. Today, AIM's three largest equity
funds--AIM Basic Value Fund, AIM Premier Equity Fund and AIM Constellation
Fund--represent three distinctly different investment disciplines: Value, Blend
and Growth. Complementing those funds are dozens more in all styles, market-cap
ranges, asset classes, and geographic regions.
AIM's clients can create diversified, all-weather portfolios by selecting
from our full spectrum of funds, whether they seek equity or fixed-income, value
or growth, domestic or international, aggressive or conservative, or any
combination in between. Over the course of any complete market cycle, we expect
a portfolio that is a blend of these quality funds will provide a prudent
approach to achieving one's long-term investment goals.
This period of market dislocation has been painful for all of us. But over
the long term, we are confident that tightened accounting regulations, an
increased level of governmental oversight, and the reallocation of resources
following the recent bubble will all result in a healthy resurgence of the
American financial system.
AIM's investment teams and processes continue to be honed and tested in
today's challenging environment. We believe that this prolonged bear market has
created some unparalleled opportunities to invest in leading companies that will
weather the market storm and recover their industry-leading positions when
global economic growth reaccelerates.
We are grateful for the trust our clients have placed in AIM, and we reaffirm
our commitment to excellence across all of our investment disciplines.
Sincerely,
/s/ GARY T. CRUM
Gary T. Crum
Director of Investments/AIM
/s/ EDGAR M. LARSEN
Edgar M. Larsen
Chief Investment Officer/AIM
================================================================================
... WE REAFFIRM OUR
COMMITMENT TO
EXCELLENCE ACROSS ALL
OF OUR INVESTMENT
DISCIPLINES.
================================================================================
3
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
BEAR MARKET PERSISTS THROUGHOUT
FISCAL YEAR
The year ended December 31, 2002, was difficult for technology stocks, as
one-year fund and index performance figures demonstrate. The chart showing the
fund's performance since inception on page 6 demonstrates how vulnerable a
single-sector fund can be to a severe and sustained downturn in the sector in
which it invests.
RELEVANT MARKET CONDITIONS
The U.S. economy grew, albeit unevenly, throughout 2002. The economy was helped
by generally strong consumer confidence and retail sales; in fact, auto and
home sales approached record levels. Mixed economic signals prompted the Federal
Reserve Board (the Fed) to hold short-term interest rates steady, at 1.75%,
until early November, when it cut rates to 1.25%. It was the Fed's only rate cut
of 2002.
Investors remained bearish for much of 2002, and for the major stock market
indexes it was the third consecutive year of negative performance. While markets
generally rallied in March, October, and November, the S&P 500 sustained its
most significant loss in more than a quarter of a century. Every sector of the
S&P 500 declined for the year, with technology and telecommunications sustaining
the most significant declines.
Economic signals were mixed at year's end, but there was increasing evidence
that the worst might be over for the stock market. Positive economic signals
included low inflation, low short-term interest rates, continued strong consumer
spending, and positive economic growth. Nevertheless, a weak job market
(unemployment was at 6.0% in December), continued depressed capital spending by
businesses, and uncertainty about the pace of economic recovery--as well as
developments in Iraq and North Korea--remained concerns as 2002 ended.
After touching five-year lows on October 9, the stock market rallied strongly
in October and November, before easing lower in December. The Dow, for example,
enjoyed its best single-month performance in 15 years in October, and as the
year ended, stock valuations were more attractive than they had been in the last
several years. While no one can say for sure when the markets will rebound,
history suggests that bear markets always end eventually.
FUND STRATEGIES AND TECHNIQUES
In an extraordinarily difficult environment, we increased our exposure to mid-
and large-size companies in an effort to provide greater stability to the fund.
The information technology sector as a whole rallied in October and November,
when tech stocks came to be
================================================================================
IN AN EXTRAORDINARILY
DIFFICULT ENVIRONMENT,
WE INCREASED
OUR EXPOSURE TO MID-
AND LARGE-SIZE
COMPANIES IN AN EFFORT
TO PROVIDE GREATER
STABILITY TO THE FUND.
================================================================================
PORTFOLIO COMPOSITION
As of 12/31/02, based on total net assets
<Table>
<Caption>
======================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
- ------------------------------------------------------------------------------------------------------
1. Dell Computer Corp. 3.5% 1. Semiconductors 10.3%
2. Gilead Sciences, Inc. 3.1 2. Aerospace & Defense 9.0
3. Symantec Corp. 3.0 3. Biotechnology 7.5
4. Alliant Techsystems Inc. 2.7 4. Internet Software & Services 7.0
5. Overture Services, Inc. 2.7 5. Systems Software 6.6
6. Engineered Support Systems, Inc. 2.6 6. Health Care Distributors & Services 6.5
7. Microsoft Corp. 2.5 7. Telecommunications Equipment 6.2
8. Websense, Inc. 2.4 8. Application Software 6.1
9. eBay Inc. 2.3 9. Computer Storage & Peripherals 6.1
10. Mercury Interactive Corp. 2.3 10. Computer Hardware 5.4
The fund's portfolio is subject to change, and there is no assurance that the fund will continue to
hold any particular security.
======================================================================================================
</Table>
4
perceived as "inexpensive" despite the lack of any significant change in their
fundamentals. Nonetheless, we continued to consider only stocks of companies
with strong fundamentals and the prospect for solid earnings growth for
inclusion in the fund.
The fund was hurt by its semiconductor and semiconductor equipment holdings
for much of the year. Historically, such stocks have been among the first
technology-related stocks to benefit from economic recoveries. We reduced our
semiconductor-related holdings when it became clear that a hoped-for recovery in
the tech sector would not materialize in 2002. We increased our defense-related
holdings during the second half of the year, but despite rising international
tensions, such stocks weakened as the year drew to a close. On a more positive
note, our biotechnology holdings did well even though the industry suffered
overall.
Nextel and Accredo Health were among the holdings that helped fund
performance; IDEC Pharmaceuticals was one that did not.
o Nextel, the nation's fifth-largest U.S. mobile phone operator, targets
businesses rather than lower-margin consumers. Nextel has the highest
revenue per user and the lowest subscriber turnover rate in the industry.
o Accredo Health provides prescriptions via overnight shipping, assists with
treatment programs, and offers claim-processing services. The company's
revenues and earnings doubled in 2002, and its stock price climbed
significantly.
o IDEC Pharmaceuticals develops treatments for cancer and autoimmune
diseases, and the company ranks among the select few biotechnology firms
that are profitable. The company's best-selling Rituxan treats
non-Hodgkin's lymphoma. Delivered intravaneously, it spares patients
chemotherapy or radiation therapy.
IN CLOSING
We know that market conditions in recent years have been largely disappointing,
and that stocks in the technology and telecommunications sectors have been
particularly disappointing. We want to assure you that your fund management team
continues to work diligently to meet the fund's investment objective of growth
of capital.
================================================================================
PORTFOLIO MANAGEMENT TEAM
AS OF 12/31/02
ABEL GARCIA, LEAD MANAGER
DAVID P. BARNARD
ROBERT LLOYD
See important fund and index
disclosures inside front cover.
For More Information Visit
[GRAPHIC]
AIMinvestments.com
================================================================================
HISTORY SUGGESTS THAT BEAR MARKETS EVENTUALLY END ...
U. S. STOCK MARKET AS REPRESENTED BY S&P 500
<Table>
<Caption>
=======================================================================================================================
[LINE CHART]
12/31/52 26 4/30/59 57 8/31/65 87 11/30/71 93 4/28/78 96 8/31/84 166 12/31/90 330 4/30/97 801
1/30/53 26 5/29/59 58 9/30/65 89 12/31/71 102 5/31/78 97 9/28/84 166 1/31/91 343 5/30/97 848
2/27/53 25 6/30/59 58 10/29/65 92 1/31/72 103 6/30/78 95 10/31/84 166 2/28/91 367 6/30/97 885
3/31/53 25 7/31/59 60 11/30/65 91 2/29/72 106 7/31/78 100 11/30/84 163 3/29/91 375 7/31/97 954
4/30/53 24 8/31/59 59 12/31/65 92 3/31/72 107 8/31/78 103 12/31/84 167 4/30/91 375 8/29/97 899
5/29/53 24 9/30/59 56 12/31/65 92 4/28/72 107 9/29/78 102 1/31/85 179 5/31/91 389 9/30/97 947
6/30/53 24 10/30/59 57 1/31/66 92 5/31/72 109 10/31/78 93 2/28/85 181 6/28/91 371 10/31/97 914
7/31/53 24 11/30/59 58 2/28/66 91 6/30/72 107 11/30/78 94 3/29/85 180 7/31/91 387 11/28/97 95
8/31/53 23 12/31/59 59 3/31/66 89 7/31/72 107 12/29/78 96 4/30/85 179 8/30/91 395 12/31/97 970
9/30/53 23 1/29/60 55 4/29/66 91 8/31/72 111 1/31/79 99 5/31/85 189 9/30/91 387 1/30/98 980
10/30/53 24 2/29/60 56 5/31/66 86 9/29/72 110 2/28/79 96 6/28/85 191 10/31/91 392 2/27/98 1049
11/30/53 24 3/31/60 55 6/30/66 84 10/31/72 111 3/30/79 101 7/31/85 190 11/29/91 375 3/31/98 1101
12/31/53 24 4/29/60 54 7/29/66 83 11/30/72 116 4/30/79 101 8/30/85 188 12/31/91 417 4/30/98 1111
1/29/54 26 5/31/60 55 8/31/66 77 12/29/72 118 5/31/79 99 9/30/85 182 1/31/92 408 5/29/98 1090
2/26/54 26 6/30/60 56 9/30/66 76 1/31/73 116 6/29/79 102 10/31/85 189 2/28/92 412 6/30/98 1133
3/31/54 26 7/29/60 55 10/31/66 80 2/28/73 111 7/31/79 103 11/29/85 202 3/31/92 403 7/31/98 1120
4/30/54 28 8/31/60 56 11/30/66 80 3/30/73 111 8/31/79 109 12/31/85 211 4/30/92 414 8/31/98 957
5/31/54 29 9/30/60 53 12/30/66 80 4/30/73 106 9/28/79 109 1/31/86 211 5/29/92 415 9/30/98 1017
6/30/54 29 10/31/60 53 1/31/67 86 5/31/73 104 10/31/79 101 2/28/86 226 6/30/92 408 10/30/98 1098
7/30/54 30 11/30/60 55 2/28/67 86 6/29/73 104 11/30/79 106 3/31/86 238 7/31/92 424 11/30/98 1163
8/31/54 29 12/30/60 58 3/31/67 90 7/31/73 108 12/31/79 107 4/30/86 235 8/31/92 414 12/31/98 1229
9/30/54 32 1/31/61 61 4/28/67 94 8/31/73 104 1/31/80 114 5/30/86 247 9/30/92 417 1/29/99 1279
10/29/54 31 2/28/61 63 5/31/67 89 9/28/73 108 2/29/80 113 6/30/86 250 10/30/92 418 2/26/99 1238
11/30/54 34 3/31/61 65 6/30/67 90 10/31/73 108 3/31/80 102 7/31/86 236 11/30/92 431 3/31/99 1286
12/31/54 35 4/28/61 65 7/31/67 94 11/30/73 95 4/30/80 106 8/29/86 252 12/31/92 435 4/30/99 1335
1/31/55 36 5/31/61 66 8/31/67 93 12/31/73 97 5/30/80 111 9/30/86 231 1/29/93 438 5/31/99 1301
2/28/55 36 6/30/61 64 9/29/67 96 1/31/74 96 6/30/80 114 10/31/86 243 2/26/93 443 6/30/99 1372
3/31/55 36 7/31/61 66 10/31/67 93 2/28/74 96 7/31/80 121 11/28/86 249 3/31/93 451 7/30/99 1328
4/29/55 37 8/31/61 68 11/30/67 94 3/29/74 93 8/29/80 122 12/31/86 242 4/30/93 440 8/31/99 1320
5/31/55 37 9/29/61 66 12/29/67 96 4/30/74 90 9/30/80 125 1/30/87 274 5/31/93 450 9/30/99 1282
6/30/55 41 10/31/61 68 1/31/68 92 5/31/74 87 10/31/80 127 2/27/87 284 6/30/93 450 10/29/99 1362
7/29/55 43 11/30/61 71 2/29/68 89 6/28/74 86 11/28/80 140 3/31/87 291 7/30/93 448 11/30/99 1388
8/31/55 43 12/29/61 71 3/29/68 90 7/31/74 79 12/31/80 135 4/30/87 288 8/31/93 463 12/31/99 1469
9/30/55 43 1/31/62 68 4/30/68 97 8/30/74 72 1/30/81 129 5/29/87 290 9/30/93 458 1/31/00 1394
10/31/55 42 2/28/62 69 5/31/68 98 9/30/74 63 2/27/81 131 6/30/87 304 10/29/93 467 2/29/00 1366
11/30/55 45 3/30/62 69 6/28/68 99 10/31/74 73 3/31/81 136 7/31/87 318 11/30/93 461 3/31/00 1498
12/30/55 45 4/30/62 65 7/31/68 97 11/29/74 69 4/30/81 132 8/31/87 329 12/31/93 466 4/28/00 1452
1/31/56 43 5/31/62 59 8/30/68 98 12/31/74 68 5/29/81 132 9/30/87 321 1/31/94 481 5/31/00 142
2/29/56 45 6/29/62 54 9/30/68 102 1/31/75 76 6/30/81 131 10/30/87 251 2/28/94 467 6/30/00 145
3/30/56 48 7/31/62 58 10/31/68 103 2/28/75 81 7/31/81 130 11/30/87 230 3/31/94 445 7/31/00 1430
4/30/56 48 8/31/62 59 11/29/68 108 3/31/75 83 8/31/81 122 12/31/87 247 4/29/94 450 8/31/00 1517
5/31/56 45 9/28/62 56 12/31/68 103 4/30/75 87 9/30/81 116 1/29/88 257 5/31/94 456 9/29/00 1436
6/29/56 46 10/31/62 56 1/31/69 103 5/30/75 91 10/30/81 121 2/29/88 267 6/30/94 444 10/31/00 142
7/31/56 49 11/30/62 62 2/28/69 98 6/30/75 95 11/30/81 126 3/31/88 258 7/29/94 458 11/30/00 1314
8/31/56 47 12/31/62 63 3/31/69 101 7/31/75 88 12/31/81 122 4/29/88 261 8/31/94 475 12/29/00 1320
9/28/56 45 1/31/63 66 4/30/69 103 8/29/75 86 1/29/82 120 5/31/88 262 9/30/94 462 1/31/01 1366
10/31/56 45 2/28/63 64 5/30/69 103 9/30/75 83 2/26/82 113 6/30/88 273 10/31/94 472 2/28/01 1239
11/30/56 45 3/29/63 66 6/30/69 97 10/31/75 89 3/31/82 111 7/29/88 272 11/30/94 453 3/30/01 1160
12/31/56 46 4/30/63 69 7/31/69 91 11/28/75 91 4/30/82 116 8/31/88 261 12/30/94 459 4/30/01 1249
1/31/57 44 5/31/63 70 8/29/69 95 12/31/75 90 5/31/82 111 9/30/88 271 1/31/95 470 5/31/01 1255
2/28/57 43 6/28/63 69 9/30/69 93 1/30/76 100 6/30/82 109 10/31/88 278 2/28/95 487 6/29/01 1224
3/29/57 44 7/31/63 69 10/31/69 97 2/27/76 99 7/30/82 107 11/30/88 273 3/31/95 500 7/31/01 1211
4/30/57 45 8/30/63 72 11/28/69 93 3/31/76 102 8/31/82 119 12/30/88 277 4/28/95 514 8/31/01 1133
5/31/57 47 9/30/63 71 12/31/69 92 4/30/76 101 9/30/82 120 1/31/89 297 5/31/95 533 9/28/01 1040
6/28/57 47 10/31/63 74 1/30/70 85 5/31/76 100 10/29/82 133 2/28/89 288 6/30/95 544 10/31/01 1059
7/31/57 47 11/29/63 73 2/27/70 89 6/30/76 104 11/30/82 138 3/31/89 294 7/31/95 562 11/30/01 1139
8/30/57 45 12/31/63 75 3/31/70 89 7/30/76 103 12/31/82 140 4/28/89 309 8/31/95 561 12/31/01 1148
9/30/57 42 1/31/64 77 4/30/70 81 8/31/76 102 1/31/83 145 5/31/89 320 9/29/95 584 1/31/02 113
10/31/57 41 2/28/64 77 5/29/70 76 9/30/76 105 2/28/83 148 6/30/89 317 10/31/95 581 2/28/02 1106
11/29/57 41 3/31/64 78 6/30/70 72 10/29/76 102 3/31/83 152 7/31/89 346 11/30/95 605 3/29/02 1147
12/31/57 39 4/30/64 79 7/31/70 78 11/30/76 102 4/29/83 164 8/31/89 351 12/29/95 615 4/30/02 1076
1/31/58 41 5/29/64 80 8/31/70 81 12/31/76 107 5/31/83 162 9/29/89 349 1/31/96 636 5/31/02 1067
2/28/58 40 6/30/64 81 9/30/70 84 1/31/77 102 6/30/83 168 10/31/89 340 2/29/96 640 6/28/02 989
3/31/58 42 7/31/64 83 10/30/70 83 2/28/77 99 7/29/83 162 11/30/89 345 3/29/96 645 7/31/02 911
4/30/58 43 8/31/64 81 11/30/70 87 3/31/77 98 8/31/83 164 12/29/89 353 4/30/96 654 8/30/02 916
5/30/58 44 9/30/64 84 12/31/70 92 4/29/77 98 9/30/83 166 1/31/90 329 5/31/96 669 9/30/02 815
6/30/58 45 10/30/64 84 1/29/71 95 5/31/77 96 10/31/83 163 2/28/90 331 6/28/96 670 10/30/02 890
7/31/58 47 11/30/64 84 2/26/71 96 6/30/77 100 11/30/83 166 3/30/90 339 7/31/96 639 11/29/02 936
8/29/58 47 12/31/64 84 3/31/71 100 7/29/77 98 12/30/83 164 4/30/90 330 8/30/96 651 12/31/02 879
9/30/58 50 1/29/65 87 4/30/71 103 8/31/77 96 1/31/84 163 5/31/90 361 9/30/96 687
10/31/58 51 2/26/65 87 5/31/71 99 9/30/77 96 2/29/84 157 6/29/90 358 10/31/96 705
11/28/58 52 3/31/65 86 6/30/71 99 10/31/77 92 3/30/84 159 7/31/90 356 11/29/96 757
12/31/58 55 4/30/65 89 7/30/71 95 11/30/77 94 4/30/84 160 8/31/90 322 12/31/96 740
1/30/59 55 5/31/65 88 8/31/71 99 12/30/77 95 5/31/84 150 9/28/90 306 1/31/97 786
2/27/59 55 6/30/65 84 9/30/71 98 1/31/78 89 6/29/84 153 10/31/90 304 2/28/97 790
3/31/59 55 7/30/65 85 10/29/71 94 2/28/78 87 7/31/84 150 11/30/90 322 3/31/97 757
3/31/78 89
Source: Bloomberg LP
=======================================================================================================================
</Table>
The last three years have been challenging for equity mutual fund investors. The
S&P 500, considered representative of U.S. stock market performance, has
declined significantly since hitting an all-time high in early 2000.
The colored bars on the chart represent bear markets, typically defined as a
20% decline in the stock market. As the chart shows, the 2000-2002 bear market
has been more severe and more prolonged than any other in the last 50 years. But
it shows that market declines have always ended--and that the stock market has
risen over time. While past performance cannot guarantee comparable future
results, and while no one can say precisely when the current decline will end,
history suggests that bear markets eventually end.
That is why AIM urges all investors to maintain a long-term investment
discipline.
5
FUND PERFORMANCE
<Table>
<Caption>
===================================================================================================================================
RESULTS OF A $10,000 INVESTMENT
8/31/00-12/31/02
[MOUNTAIN CHART]
AIM NEW AIM NEW AIM NEW LIPPER SCIENCE
TECHNOLOGY FUND TECHNOLOGY FUND TECHNOLOGY FUND S&P 500 PSE TECHNOLOGY AND TECHNOLOGY
DATE CLASS A SHARES CLASS B SHARES CLASS C SHARES INDEX 100 INDEX FUND INDEX
08/31/00 9450 10000 10000 10000 10000 10000
09/30/00 9592 10130 10130 9472 8876 8975
10/31/00 8335 8800 8800 9432 8302 7990
11/30/00 5973 6310 6310 8689 6939 5931
12/31/00 6370 6730 6730 8732 6959 5868
01/31/01 6285 6629 6640 9042 7843 6463
02/28/01 4159 4389 4379 8218 6412 4779
03/31/01 3270 3440 3440 7698 5658 4079
04/30/01 4159 4380 4370 8295 6579 4875
05/31/01 4149 4369 4370 8351 6340 4648
06/30/01 4310 4539 4540 8148 6201 4571
07/31/01 3837 4030 4030 8068 5878 4205
08/31/01 3478 3650 3660 7564 5405 3679
09/30/01 2760 2900 2900 6953 4420 2890
10/31/01 3176 3330 3330 7086 5117 3327
11/30/01 3478 3650 3660 7629 5809 3812
12/31/01 3629 3810 3810 7697 5874 3830
01/31/02 3469 3630 3630 7584 5845 3763
02/28/02 2911 3050 3050 7438 5367 3260
03/31/02 3289 3440 3440 7718 5856 3557
04/30/02 2911 3040 3040 7250 5174 3134
05/31/02 2731 2850 2860 7197 4965 2970
06/30/02 2467 2570 2580 6684 4389 2579
07/31/02 2108 2200 2200 6164 3875 2303
08/31/02 2004 2100 2100 6204 3825 2249
09/30/02 1843 1920 1920 5530 3296 1936
10/31/02 2060 2150 2160 6016 3845 2229
11/30/02 2268 2370 2370 6370 4391 2570
12/31/02 1985 1998 2070 5995 3916 2245
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
===================================================================================================================================
</Table>
Your fund's total return includes sales charges, expenses, and management fees.
Results for B shares are calculated as if a hypothetical shareholder had
liquidated his entire investment in the fund at the close of the reporting
period and paid the applicable contingent deferred sales charges.
Performance of the fund's Class A, Class B, and Class C shares will differ due
to different sales charge structures and class expenses. For fund performance
calculations and indexes used in this report,please see the inside front cover.
Performance shown in the chart does not reflect deduction of taxes a shareholder
would pay on fund distributions or sale of fund shares. Performance for the
indexes does not reflect the effects of taxes.
FUND RETURNS
AVERAGE ANNUAL TOTAL RETURNS
as of 12/31/02 including sales charges
================================================================================
[HYPO CHART]
CLASS A SHARES
Inception (8/31/00) -49.98%
1 Year -48.28
CLASS B SHARES
Inception (8/31/00) -49.84%
1 Year -48.64
CLASS C SHARES
Inception (8/31/00) -49.07%
1 Year -46.21
DUE TO RECENT SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY
MAY DIFFER SUBSTANTIALLY FROM THE HISTORIC PERFORMANCE SHOWN. CALL YOUR
FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE.
================================================================================
FUND VS. INDEXES
Total Returns 12/31/01-12/31/02
excluding sales charges
================================================================================
CLASS A SHARES -45.31%
CLASS B SHARES -45.93%
CLASS C SHARES -45.67%
S&P 500 (BROAD MARKET INDEX) -22.09%
PSE TECHNOLOGY
100 INDEX (STYLE-SPECIFIC INDEX) -33.33%
LIPPER SCIENCE AND TECHNOLOGY
FUND INDEX (PEER GROUP) -41.38%
================================================================================
6
EDUCATION AND PLANNING
WANT TO BE A LONG-TERM INVESTOR?
THESE FOUR TIPS CAN HELP.
================================================================================
SUCCESSFUL INVESTING
REQUIRES DISCIPLINE AND
TIME. MOST OF US CLAIM TO
BE LONG-TERM INVESTORS--
BUT OUR DISCIPLINE CAN BE
SORELY TESTED DURING PERIODS
OF MARKET VOLATILITY OR
MARKET DECLINES. HERE ARE
FOUR TIPS THAT CAN HELP YOU
MAINTAIN A LONG-TERM
PERSPECTIVE WHEN MARKETS
BECOME UNCERTAIN.
================================================================================
1 DON'T TRY TO TIME THE MARKET
Markets rise and fall, and even the most experienced investment professionals
can't consistently predict when market trends will change. That's why most
investment professionals remain invested for the long term, regardless of
short-term market fluctuations.
Some individual investors, however, exit the market at the first sign of
volatility. History shows that by doing so they risk lowering their long-term
investment returns.
Historically, stocks have provided higher average annual total returns than
other asset classes. The S&P 500--considered representative of the U.S. stock
market as a whole--boasts an average annual total return of 11.07% for the 50
years ended December 31, 2002. During those five decades, America experienced
boom and bust, war and peace--but long-term investors were rewarded for their
discipline and patience.
Markets have always been subject to sharp and sudden declines--and equally
sharp and sudden gains. Investors who exit the market at the first sign of a
decline risk missing out on significant one-day gains.
2 SET REASONABLE EXPECTATIONS
While stocks have outperformed other investments over the last half century,
they are subject to much higher or much lower returns in a given year or over
relatively short investment periods. The 1990s saw much higher-than-average
annual returns, but returns for 2000 were much lower than the historical
averages. Like many other things, investment returns are subject to significant
volatility over the short term--but they average out over time.
Take a look at how returns for the S&P 500 compare over the short term and
the long term. When markets become difficult, as they have been for the last
three years, it's natural to long for the "good old days" of the 1990s when
markets experienced robust growth year after year. Long-term investors, of
course, realize that the 1990s were as much an aberration as are the
double-digit declines
================================================================================
THE LONG AND SHORT OF INVESTING
ANNUAL RETURNS CAN VARY WIDELY, BUT THEY AVERAGE OUT OVER TIME
S&P 500 Index(1)
<Table>
<Caption>
======================================================================================
AVERAGE HIGHEST LOWEST
TIME PERIOD RETURN RETURN RETURN
1971-1980 8.48% -- --
1975 -- 37.23% --
1974 -- -- -26.47%
1981-1990 13.92 -- --
1985 -- 31.73 --
1981 -- -- -4.92
1991-2000 17.44 -- --
1995 -- 37.53 --
2000 -- -- -9.10
30-year average (1971-2000): 13.22 -- --
Source: Lipper, Inc.
================================================================================
</Table>
7
we've seen more recently. Long-term investors look past short-term declines and
keep reasonable long-term expectations.
Remember, on average, a 20% market decline occurs every five years, and 10
20% corrections occurred in the 54-year period from 1946 to 1999. The market
declines of 2000 and 2002 are nothing new to long-term investors.
3 PRACTICE DOLLAR-COST AVERAGING
Saving and investing for long-term goals, such as retirement, is a lifelong
process--something we need to do year after year, regardless of temporary market
conditions.
Dollar-cost averaging can take the guesswork out of investing and can help
you achieve your long-term investment goals. When you practice dollar-cost
averaging, you invest a fixed amount of money at regular intervals regardless of
market conditions. You can decide how much and how often to invest.
There are several advantages to dollar-cost averaging:
o Regular investing helps you make the most of market swings. By investing a
fixed amount on a regular basis, you automatically buy more shares when
prices are low and fewer shares when prices are high.
o Your average cost per share is less than your average price per share.
(The chart below illustrates how dollar-cost averaging works.) The only
time this would not occur is if share prices remain constant.
o This strategy is especially appropriate for long-term investments, such as
retirement plans. This is because the longer you maintain a regular
investment program, the more likely it is that you will buy shares at a
wide variety of prices.
o You will be less tempted to make decisions based on short-term events or
market conditions. Dollar-cost averaging helps take the emotion out of the
investment process.
4 TALK WITH YOUR FINANCIAL ADVISOR
Any time of uncertainty is a good time to speak with your financial advisor.
Your financial advisor can help you maintain a long-term investment
perspective. He or she is familiar with your unique financial situation and
financial goals. He or she can work with you to ensure that your investments are
still appropriate to achieve your long-term financial goals--or can recommend
changes to your investments based on changing market conditions or your changing
needs.
Your financial advisor can help you remain committed to your long-term
financial goals and can explain how a disciplined approach to investing can be
beneficial over the long term. Also, your financial advisor can ensure that your
investments are diversified across various asset classes and investment styles
to manage risk.
The unmanaged Standard and Poor's Composite Index of 500 Stocks (S&P 500) is an
index of common stocks frequently used as a general measure of U.S. stock-market
performance. Results assume the reinvestment of dividends. An investment cannot
be made directly in an index.
No investment technique can assure a profit or protect against losses in
declining markets. Because dollar-cost averaging involves investing continuously
regardless of fluctuating securities prices, you should consider your ability to
continue making purchases during periods of low price levels.
Source: Ibbotson Associates
USING DOLLAR-COST AVERAGING
DOLLAR-COST AVERAGING CAN BENEFIT LONG-TERM INVESTORS
<Table>
<Caption>
================================================================================
AMOUNT SHARE SHARES
MONTH INVESTED PRICE PURCHASED
January $200.00 $24.00 8.333
February 200.00 20.00 10.000
March 200.00 14.00 14.286
April 200.00 18.00 11.111
May 200.00 22.00 9.091
June 200.00 24.00 8.333
Total invested: $1,200.00
Average price per share: 20.33
Total shares purchased: 61.154
Average cost per share: 19.62
This is a hypothetical example demonstrating how dollar-cost averaging works. It
does not reflect the performance of any particular investment.
================================================================================
</Table>
8
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2002
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.18%
AEROSPACE & DEFENSE-8.95%
Alliant Techsystems Inc.(a) 15,350 $ 957,072
- ---------------------------------------------------------------------
Engineered Support Systems, Inc. 25,050 918,333
- ---------------------------------------------------------------------
InVision Technologies, Inc.(a) 10,900 287,324
- ---------------------------------------------------------------------
L-3 Communications Holdings, Inc.(a) 14,200 637,722
- ---------------------------------------------------------------------
Rockwell Collins, Inc. 13,600 316,336
=====================================================================
3,116,787
=====================================================================
APPLICATION SOFTWARE-6.14%
Documentum, Inc.(a) 37,400 585,684
- ---------------------------------------------------------------------
Intuit Inc.(a) 11,900 558,348
- ---------------------------------------------------------------------
Mercury Interactive Corp.(a) 26,700 791,655
- ---------------------------------------------------------------------
PeopleSoft, Inc.(a) 11,000 201,300
=====================================================================
2,136,987
=====================================================================
AUTO PARTS & EQUIPMENT-1.78%
Gentex Corp.(a) 19,600 620,144
=====================================================================
BIOTECHNOLOGY-7.50%
Chiron Corp.(a) 2,100 78,960
- ---------------------------------------------------------------------
Enzon Pharmaceuticals, Inc.(a) 5,800 96,976
- ---------------------------------------------------------------------
Gilead Sciences, Inc.(a) 31,900 1,084,600
- ---------------------------------------------------------------------
IDEC Pharmaceuticals Corp.(a) 15,400 510,818
- ---------------------------------------------------------------------
IDEXX Laboratories, Inc.(a) 4,700 154,395
- ---------------------------------------------------------------------
Millennium Pharmaceuticals, Inc.(a) 8,900 70,666
- ---------------------------------------------------------------------
OraSure Technologies, Inc.(a) 23,500 128,075
- ---------------------------------------------------------------------
PRAECIS Pharmaceuticals Inc.(a) 72,100 234,325
- ---------------------------------------------------------------------
SangStat Medical Corp.(a) 13,300 150,290
- ---------------------------------------------------------------------
Trimeris, Inc.(a) 2,400 103,416
=====================================================================
2,612,521
=====================================================================
COMPUTER & ELECTRONICS RETAIL-0.98%
CDW Computer Centers, Inc.(a) 7,800 342,030
=====================================================================
COMPUTER HARDWARE-5.40%
Dell Computer Corp.(a) 45,900 1,227,366
- ---------------------------------------------------------------------
Hewlett-Packard Co. 15,200 263,872
- ---------------------------------------------------------------------
Pinnacle Systems, Inc.(a) 28,600 389,246
=====================================================================
1,880,484
=====================================================================
COMPUTER STORAGE & PERIPHERALS-6.10%
Imation Corp.(a) 9,100 319,228
- ---------------------------------------------------------------------
Lexmark International, Inc.(a) 4,200 254,100
- ---------------------------------------------------------------------
Overland Storage, Inc.(a) 24,000 349,944
- ---------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
COMPUTER STORAGE & PERIPHERALS-(CONTINUED)
SanDisk Corp.(a) 25,900 $ 525,770
- ---------------------------------------------------------------------
Storage Technology Corp.(a) 22,800 488,376
- ---------------------------------------------------------------------
Western Digital Corp.(a) 29,300 187,227
=====================================================================
2,124,645
=====================================================================
CONSUMER ELECTRONICS-0.63%
Garmin Ltd. (Cayman Islands)(a) 4,000 117,200
- ---------------------------------------------------------------------
Harman International Industries, Inc. 1,700 101,150
=====================================================================
218,350
=====================================================================
DATA PROCESSING SERVICES-0.87%
eSPEED, Inc.-Class A(a) 17,800 301,550
=====================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-1.69%
Itron, Inc.(a) 5,900 113,103
- ---------------------------------------------------------------------
OSI Systems, Inc.(a) 28,000 475,440
=====================================================================
588,543
=====================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-6.45%
Accredo Health, Inc.(a) 10,350 364,837
- ---------------------------------------------------------------------
Cerner Corp.(a) 22,000 687,720
- ---------------------------------------------------------------------
Covance Inc.(a) 6,700 164,753
- ---------------------------------------------------------------------
Express Scripts, Inc.(a) 6,000 288,240
- ---------------------------------------------------------------------
IMPAC Medical Systems, Inc.(a) 10,200 188,904
- ---------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 13,000 302,120
- ---------------------------------------------------------------------
Quest Diagnostics Inc.(a) 4,400 250,360
=====================================================================
2,246,934
=====================================================================
HEALTH CARE EQUIPMENT-0.81%
Boston Scientific Corp.(a) 2,200 93,544
- ---------------------------------------------------------------------
Conceptus, Inc.(a) 15,900 190,482
=====================================================================
284,026
=====================================================================
HEALTH CARE SUPPLIES-0.59%
ICU Medical, Inc.(a) 5,500 205,150
=====================================================================
INTERNET RETAIL-3.05%
Amazon.com, Inc.(a) 13,100 247,459
- ---------------------------------------------------------------------
eBay Inc.(a) 12,000 813,840
=====================================================================
1,061,299
=====================================================================
INTERNET SOFTWARE & SERVICES-7.00%
Expedia, Inc.-Class A(a) 2,800 187,405
- ---------------------------------------------------------------------
Hotels.com-Class A(a) 3,800 207,594
- ---------------------------------------------------------------------
Overture Services, Inc.(a) 34,200 934,002
- ---------------------------------------------------------------------
PEC Solutions, Inc.(a) 9,600 287,040
- ---------------------------------------------------------------------
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES-(CONTINUED)
Websense, Inc.(a) 38,400 $ 820,262
=====================================================================
2,436,303
=====================================================================
IT CONSULTING & SERVICES-2.29%
Affiliated Computer Services, Inc.-Class A(a) 8,000 421,200
- ---------------------------------------------------------------------
Anteon International Corp.(a) 6,900 165,600
- ---------------------------------------------------------------------
Syntel, Inc.(a) 10,000 210,100
=====================================================================
796,900
=====================================================================
NETWORKING EQUIPMENT-2.05%
Cisco Systems, Inc.(a) 32,300 423,130
- ---------------------------------------------------------------------
McDATA Corp.-Class A(a) 13,000 92,300
- ---------------------------------------------------------------------
NetScreen Technologies, Inc.(a) 11,800 198,712
=====================================================================
714,142
=====================================================================
PHARMACEUTICALS-2.28%
American Pharmaceutical Partners, Inc.(a) 16,100 286,580
- ---------------------------------------------------------------------
Biovail Corp. (Canada)(a) 3,700 97,717
- ---------------------------------------------------------------------
Forest Laboratories, Inc.(a) 1,100 108,042
- ---------------------------------------------------------------------
Mylan Laboratories Inc. 8,600 300,140
=====================================================================
792,479
=====================================================================
SEMICONDUCTOR EQUIPMENT-3.90%
Applied Materials, Inc.(a) 23,700 308,811
- ---------------------------------------------------------------------
KLA-Tencor Corp.(a) 10,500 371,385
- ---------------------------------------------------------------------
Lam Research Corp.(a) 14,000 151,200
- ---------------------------------------------------------------------
Novellus Systems, Inc.(a) 9,000 252,720
- ---------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(a) 11,500 273,252
=====================================================================
1,357,368
=====================================================================
SEMICONDUCTORS-10.31%
Analog Devices, Inc.(a) 20,300 484,561
- ---------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 19,100 348,575
- ---------------------------------------------------------------------
Intel Corp. 31,200 485,784
- ---------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 19,100 360,226
- ---------------------------------------------------------------------
Microchip Technology Inc. 24,900 608,805
- ---------------------------------------------------------------------
QLogic Corp.(a) 9,700 334,747
- ---------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ---------------------------------------------------------------------
SEMICONDUCTORS-(CONTINUED)
Silicon Laboratories Inc.(a) 27,300 $ 520,884
- ---------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Taiwan)(a) 49,960 352,218
- ---------------------------------------------------------------------
Zoran Corp.(a) 6,600 92,862
=====================================================================
3,588,662
=====================================================================
SYSTEMS SOFTWARE-6.55%
Microsoft Corp.(a) 17,000 878,900
- ---------------------------------------------------------------------
Oracle Corp.(a) 17,900 193,320
- ---------------------------------------------------------------------
SafeNet, Inc.(a) 6,200 157,170
- ---------------------------------------------------------------------
Symantec Corp.(a) 26,000 1,051,700
=====================================================================
2,281,090
=====================================================================
TELECOMMUNICATIONS EQUIPMENT-6.21%
Inter-Tel, Inc. 20,600 430,746
- ---------------------------------------------------------------------
Nokia Oyj-ADR (Finland) 34,600 536,300
- ---------------------------------------------------------------------
QUALCOMM Inc.(a) 17,300 629,547
- ---------------------------------------------------------------------
UTStarcom, Inc.(a) 28,600 567,138
=====================================================================
2,163,731
=====================================================================
WIRELESS TELECOMMUNICATION SERVICES-4.65%
AT&T Wireless Services Inc.(a) 59,000 333,350
- ---------------------------------------------------------------------
Nextel Communications, Inc.-Class A(a) 66,600 769,230
- ---------------------------------------------------------------------
United States Cellular Corp.(a) 20,700 517,914
=====================================================================
1,620,494
=====================================================================
Total Common Stocks & Other Equity
Interests (Cost $34,581,400) 33,490,619
=====================================================================
MONEY MARKET FUNDS-4.41%
STIC Liquid Assets Portfolio(b) 767,869 767,869
- ---------------------------------------------------------------------
STIC Prime Portfolio(b) 767,869 767,869
=====================================================================
Total Money Market Funds (Cost
$1,535,738) 1,535,738
=====================================================================
TOTAL INVESTMENTS-100.59% (Cost $36,117,138) 35,026,357
=====================================================================
OTHER ASSETS LESS LIABILITIES-(0.59%) (206,937)
=====================================================================
NET ASSETS-100.00% $34,819,420
_____________________________________________________________________
=====================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
F-2
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
<Table>
ASSETS:
Investments, at market value (cost
$36,117,138) $35,026,357
- -----------------------------------------------------------
Receivables for:
Fund shares sold 105,157
- -----------------------------------------------------------
Dividends 4,992
- -----------------------------------------------------------
Investment for deferred compensation plan 9,930
- -----------------------------------------------------------
Other assets 15,492
===========================================================
Total assets 35,161,928
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 212,241
- -----------------------------------------------------------
Deferred compensation plan 9,930
- -----------------------------------------------------------
Accrued distribution fees 44,137
- -----------------------------------------------------------
Accrued transfer agent fees 40,195
- -----------------------------------------------------------
Accrued operating expenses 36,005
===========================================================
Total liabilities 342,508
===========================================================
Net assets applicable to shares outstanding $34,819,420
___________________________________________________________
===========================================================
NET ASSETS:
Class A $17,921,403
___________________________________________________________
===========================================================
Class B $11,287,763
___________________________________________________________
===========================================================
Class C $ 5,610,254
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 8,554,000
___________________________________________________________
===========================================================
Class B 5,469,643
___________________________________________________________
===========================================================
Class C 2,716,113
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 2.10
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $2.10 divided by
94.50%) $ 2.22
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 2.06
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 2.07
___________________________________________________________
===========================================================
</Table>
STATEMENT OF OPERATIONS
For the year ended December 31, 2002
<Table>
INVESTMENT INCOME:
Dividends from affiliated money market funds $ 45,108
- -----------------------------------------------------------
Dividends (net of foreign withholding tax of
$2,646) 4,795
===========================================================
Total investment income 49,903
===========================================================
EXPENSES:
Advisory fees 485,881
- -----------------------------------------------------------
Administrative services fees 50,000
- -----------------------------------------------------------
Custodian fees 19,834
- -----------------------------------------------------------
Distribution fees -- Class A 91,540
- -----------------------------------------------------------
Distribution fees -- Class B 150,409
- -----------------------------------------------------------
Distribution fees -- Class C 73,929
- -----------------------------------------------------------
Transfer agent fees 408,961
- -----------------------------------------------------------
Trustees' fees 8,882
- -----------------------------------------------------------
Other 148,554
===========================================================
Total expenses 1,437,990
===========================================================
Less: Fees waived (318,936)
- -----------------------------------------------------------
Expenses paid indirectly (1,150)
===========================================================
Net expenses 1,117,904
===========================================================
Net investment income (loss) (1,068,001)
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (21,538,599)
- -----------------------------------------------------------
Option contracts written 26,729
===========================================================
(21,511,870)
===========================================================
Change in net unrealized appreciation
(depreciation) of investment securities (9,795,967)
===========================================================
Net gain (loss) from investment securities
and option contracts (31,307,837)
===========================================================
Net increase (decrease) in net assets
resulting from operations $(32,375,838)
___________________________________________________________
===========================================================
</Table>
See Notes to Financial Statements.
F-3
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2002 and 2001
<Table>
<Caption>
2002 2001
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,068,001) $ (1,199,640)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
option contracts (21,511,870) (57,039,237)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (9,795,967) 19,156,038
==========================================================================================
Net increase (decrease) in net assets resulting from
operations (32,375,838) (39,082,839)
==========================================================================================
Share transactions-net:
Class A (4,558,148) 18,653,815
- ------------------------------------------------------------------------------------------
Class B (76,695) 11,339,309
- ------------------------------------------------------------------------------------------
Class C (49,402) 5,592,841
==========================================================================================
Net increase (decrease) in net assets (37,060,083) (3,496,874)
==========================================================================================
NET ASSETS:
Beginning of year 71,879,503 75,376,377
==========================================================================================
End of year $ 34,819,420 $ 71,879,503
__________________________________________________________________________________________
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $126,008,425 $131,756,854
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (13,231) (9,414)
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and option contracts (90,084,993) (68,573,123)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (1,090,781) 8,705,186
==========================================================================================
$ 34,819,420 $ 71,879,503
__________________________________________________________________________________________
==========================================================================================
</Table>
See Notes to Financial Statements.
F-4
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM New Technology Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware statutory trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of twelve separate portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers three different classes of shares: Class A shares, Class B
shares and Class C shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with a contingent deferred
sales charge ("CDSC"). Under some circumstances, Class A shares are subject to
CDSC charges. Generally, Class B shares will automatically convert to Class A
shares eight years after the end of the calendar month of purchase. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is to achieve long-term growth of capital. In
the Schedule of Investments each company is organized in the United States
unless otherwise noted.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued at the closing bid price furnished
by independent pricing services or market makers. Each security reported on
the NASDAQ National Market System is valued at the last sales price as of
the close of the customary trading session on the valuation date or absent
a last sales price, at the closing bid price. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, dividend rate,
yield, quality, type of issue, coupon rate, maturity, individual trading
characteristics and other market data. Securities for which market prices
are not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in
the case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value. For purposes of determining net asset value per share, futures and
option contracts generally will be valued 15 minutes after the close of the
customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the NYSE. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not be
reflected in the computation of the Fund's net asset value. If a
development/event is so significant that there is a reasonably high degree
of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer
reflect actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in
good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying
F-5
security. When the Fund writes a covered call option, an amount equal to
the premium received by the Fund is recorded as an asset and an equivalent
liability. The amount of the liability is subsequently "marked-to-market"
to reflect the current market value of the option written. The current
market value of a written option is the mean between the last bid and asked
prices on that day. If a written call option expires on the stipulated
expiration date, or if the Fund enters into a closing purchase transaction,
the Fund realizes a gain (or a loss if the closing purchase transaction
exceeds the premium received when the option was written) without regard to
any unrealized gain or loss on the underlying security, and the liability
related to such option is extinguished. If a written option is exercised,
the Fund realizes a gain or a loss from the sale of the underlying security
and the proceeds of the sale are increased by the premium originally
received. A risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and
the option is exercised.
F. EXPENSES -- Distribution expenses directly attributable to a class of
shares are charged to the respective classes' operations. Transfer agency
fees and expenses and other shareholder recordkeeping fees and expenses are
charged to each class pursuant to a transfer agency and service agreement
adopted by the Fund with respect to such class. All other expenses are
allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 1.00% of the Fund's
average daily net assets. AIM has contractually agreed to waive fees and/or
reimburse expenses (excluding interest, taxes, dividends on short sales,
extraordinary items and increases in expenses due to expense offset
arrangements, if any) for Class A, Class B and Class C shares to the extent
necessary to limit the total annual fund operating expenses of Class A to 2.00%.
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the
amount of 25% of the advisory fee AIM receives from the affiliated money market
funds in which the Fund has invested. For the year ended December 31, 2002, AIM
waived fees of $318,936.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the year ended December 31, 2002, AIM was
paid $50,000 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 2002, AFS
retained $259,179 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and Class C shares. Of these amounts, the
Fund may pay a service fee of 0.25% of the average daily net assets of the Class
A, Class B or Class C shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own the appropriate class of shares of the Fund. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge. NASD
Rules also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the year ended December 31, 2002, the Class A, Class B and Class C
shares paid $91,540, $150,409 and $73,929, respectively.
Front-end sales commissions and CDSCs are not expenses of the Fund. Front-end
sales commissions are deducted from proceeds from the sales of Fund shares prior
to investment in Class A shares of the Fund. CDSCs are deducted from redemption
proceeds prior to remittance to the shareholder. During the year ended December
31, 2002, AIM Distributors retained $26,036 in front-end sales commissions from
the sale of Class A shares and $12,879, $52 and $1,744 for Class A, Class B and
Class C shares, respectively, for CDSCs imposed upon redemptions by
shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and/or AIM Distributors.
During the year ended December 31, 2002, the Fund paid legal fees of $2,704
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended December 31, 2002, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $1,033 and reductions in custodian
fees of $117 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $1,150.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Trust. The trustees deferring compensation have the option to
select various AIM Funds in which all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended December 31,
2002, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
F-6
NOTE 6--CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 2002 are
summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ---------------------------------------------------------
Beginning of year -- $ --
- ---------------------------------------------------------
Written 400 71,330
- ---------------------------------------------------------
Closed (200) (38,899)
- ---------------------------------------------------------
Exercised (200) (32,431)
=========================================================
End of year -- $ --
_________________________________________________________
=========================================================
</Table>
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
Distributions to Shareholders:
There were no ordinary income or long-term capital gain distributions paid
during the years ended December 31, 2002 and 2001.
Tax Components of Beneficial Interest:
As of December 31, 2002, the components of beneficial interest on a tax basis
were as follows:
<Table>
Unrealized appreciation
(depreciation) -- investments $ (1,278,281)
- -----------------------------------------------------------
Temporary book/tax differences (13,231)
- -----------------------------------------------------------
Capital loss carryforward (87,276,353)
- -----------------------------------------------------------
Post-October capital loss deferral (2,621,140)
- -----------------------------------------------------------
Shares of beneficial interest 126,008,425
===========================================================
$ 34,819,420
___________________________________________________________
===========================================================
</Table>
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 to the tax deferral of
losses on wash sales.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of trustee deferral of compensation and
retirement plan expenses.
The Fund's capital loss carryforward expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
December 31, 2008 $ 1,713,194
- ----------------------------------------------------------
December 31, 2009 64,920,297
- ----------------------------------------------------------
December 31, 2010 20,642,862
==========================================================
$87,276,353
__________________________________________________________
==========================================================
</Table>
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 2002 was
$67,272,925 and $70,007,872, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 2002 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 2,648,022
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (3,926,303)
===========================================================
Net unrealized appreciation (depreciation) of
investment securities $(1,278,281)
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $36,304,638.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of net operating losses on December
31, 2002, undistributed net investment income was increased by $1,064,184 and
shares of beneficial interest was decreased by $1,064,184. This reclassification
had no effect on the net assets of the Fund.
NOTE 10--SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2002 and 2001
were as follows:
<Table>
<Caption>
2002 2001
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 5,223,337 $ 15,302,371 10,000,780 $ 42,952,707
- ----------------------------------------------------------------------------------------------------------------------
Class B 1,752,720 4,858,039 4,015,952 17,550,457
- ----------------------------------------------------------------------------------------------------------------------
Class C 2,520,889 6,642,310 2,552,966 10,916,402
======================================================================================================================
Conversion of Class B shares to Class A shares:*
Class A 66,515 173,943 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class B (66,825) (173,943) -- --
======================================================================================================================
Reacquired:
Class A (7,168,084) (20,034,462) (6,054,184) (24,298,892)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,811,718) (4,760,791) (1,587,360) (6,211,148)
- ----------------------------------------------------------------------------------------------------------------------
Class C (2,549,808) (6,691,712) (1,346,193) (5,323,561)
======================================================================================================================
(2,032,974) $ (4,684,245) 7,581,961 $ 35,585,965
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
* Prior to the year ended December 31, 2002, conversion of Class B shares to
Class A shares were included in Class A shares sold and Class B shares
reacquired.
F-7
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------
AUGUST 31, 2000
YEAR ENDED (DATE OPERATIONS
DECEMBER 31, COMMENCED) TO
--------------------- DECEMBER 31,
2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 3.84 $ 6.74 $ 10.00
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.06)(a) (0.02)(a)
- ----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (1.68) (2.84) (3.24)
==========================================================================================================
Total from investment operations (1.74) (2.90) (3.26)
==========================================================================================================
Net asset value, end of period $ 2.10 $ 3.84 $ 6.74
__________________________________________________________________________________________________________
==========================================================================================================
Total return(b) (45.31)% (43.03)% (32.60)%
__________________________________________________________________________________________________________
==========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $17,921 $40,097 $43,732
__________________________________________________________________________________________________________
==========================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(c) 1.86% 1.72%(d)
- ----------------------------------------------------------------------------------------------------------
Without fee waivers 2.66%(c) 2.40% 2.47%(d)
==========================================================================================================
Ratio of net investment income (loss) to average net assets (1.90)%(c) (1.52)% (0.66)%(d)
__________________________________________________________________________________________________________
==========================================================================================================
Portfolio turnover rate 144% 215% 54%
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $26,154,274.
(d) Annualized.
<Table>
<Caption>
CLASS B
--------------------------------------------
AUGUST 31, 2000
YEAR ENDED (DATE OPERATIONS
DECEMBER 31, COMMENCED) TO
--------------------- DECEMBER 31,
2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 3.81 $ 6.72 $ 10.00
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.09)(a) (0.04)(a)
==========================================================================================================
Net gains (losses) on securities (both realized and
unrealized) (1.68) (2.82) (3.24)
==========================================================================================================
Total from investment operations (1.75) (2.91) (3.28)
==========================================================================================================
Net asset value, end of period $ 2.06 $ 3.81 $ 6.72
__________________________________________________________________________________________________________
==========================================================================================================
Total return(b) (45.93)% (43.30)% (32.80)%
__________________________________________________________________________________________________________
==========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $11,288 $21,318 $21,296
__________________________________________________________________________________________________________
==========================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.65%(c) 2.51% 2.41%(d)
==========================================================================================================
Without fee waivers 3.31%(c) 3.05% 3.16%(d)
==========================================================================================================
Ratio of net investment income (loss) to average net assets (2.55)%(c) (2.17)% (1.36)%(d)
__________________________________________________________________________________________________________
==========================================================================================================
Portfolio turnover rate 144% 215% 54%
__________________________________________________________________________________________________________
==========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $15,040,921.
(d) Annualized.
F-8
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
-------------------------------------------
AUGUST 31, 2000
YEAR ENDED (DATE OPERATIONS
DECEMBER 31, COMMENCED) TO
-------------------- DECEMBER 31,
2002 2001 2000
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 3.81 $ 6.73 $ 10.00
- ---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.09)(a) (0.04)(a)
- ---------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (1.67) (2.83) (3.23)
=========================================================================================================
Total from investment operations (1.74) (2.92) (3.27)
=========================================================================================================
Net asset value, end of period $ 2.07 $ 3.81 $ 6.73
_________________________________________________________________________________________________________
=========================================================================================================
Total return(b) (45.67)% (43.39)% (32.70)%
_________________________________________________________________________________________________________
=========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,610 $10,465 $10,349
_________________________________________________________________________________________________________
=========================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.65%(c) 2.51% 2.41%(d)
- ---------------------------------------------------------------------------------------------------------
Without fee waivers 3.31%(c) 3.05% 3.16%(d)
=========================================================================================================
Ratio of net investment income (loss) to average net assets (2.55)%(c) (2.17)% (1.35)%(d)
_________________________________________________________________________________________________________
=========================================================================================================
Portfolio turnover rate 144% 215% 54%
_________________________________________________________________________________________________________
=========================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $7,392,900.
(d) Annualized.
F-9
NOTE 12--SUBSEQUENT EVENT
The Board of Trustees unanimously approved, on February 6, 2003, an Agreement
and Plan of Reorganization ("Plan") pursuant to which AIM New Technology Fund
("New Technology Fund") would transfer substantially all of its assets to AIM
Global Science and Technology Fund ("Global Science and Technology Fund"), a
series of AIM Investment Funds. As a result of the transaction, shareholders of
New Technology Fund would receive shares of Global Science and Technology Fund
in exchange for their shares of New Technology Fund, and New Technology Fund
would cease operations.
The Plan requires approval of New Technology Fund shareholders and will be
submitted to the shareholders for their consideration at a meeting to be held in
June 2003. If the Plan is approved by shareholders of New Technology Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
F-10
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
AIM New Technology Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM New Technology Fund (one of
the funds constituting AIM Funds Group; hereafter referred to as the "Fund") at
December 31, 2002, and the results of its operations, the changes in its net
assets and the financial highlights for each of the periods indicated are in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2002 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 14, 2003
F-11
OTHER INFORMATION
TRUSTEES AND OFFICERS
As of January 1, 2003
The address of each trustee and officer of AIM Funds Group is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046. Each trustee oversees 89 portfolios in the AIM
Funds complex. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ---------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- ---------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1992 Director and Chairman, A I M Management None
Trustee, Chairman and Group Inc. (financial services holding
President company); and Director and Vice
Chairman, AMVESCAP PLC (parent of AIM
and a global investment management
firm); formerly, President and Chief
Executive Officer, A I M Management
Group Inc.; Director, Chairman and
President, A I M Advisors, Inc.
(registered investment advisor);
Director and Chairman, A I M Capital
Management, Inc. (registered investment
advisor), A I M Distributors, Inc.
(registered broker dealer), A I M Fund
Services, Inc., (registered transfer
agent), and Fund Management Company
(registered broker dealer)
- ---------------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Director, Chairman, President and
Trustee Officer, A I M Management Group Inc. Chief Executive Officer, INVESCO
(financial services holding company); Bond Funds, Inc., INVESCO
Director, Chairman and President, A I M Combination Stock & Bond Funds,
Advisors, Inc. (registered investment Inc., INVESCO Counselor Series
advisor); Director, A I M Capital Funds, Inc., INVESCO Global and
Management, Inc. (registered investment International Funds, Inc., INVESCO
advisor) and A I M Distributors, Inc. Manager Series Funds, Inc.,
(registered broker dealer), Director and INVESCO Money Market Funds, Inc.,
Chairman, A I M Fund Services, Inc. INVESCO Sector Funds, Inc.,
(registered transfer agent), and Fund INVESCO Stock Funds, Inc., INVESCO
Management Company (registered broker Treasurer's Series Funds, Inc. and
dealer); and Chief Executive Officer, INVESCO Variable Investment Funds,
AMVESCAP PLC -- AIM Division (parent of Inc.
AIM and a global investment management
firm); formerly, Director, Chairman and
Chief Executive Officer, INVESCO Funds
Group, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ---------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Badgley Funds, Inc. (registered
Trustee investment company)
- ---------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1987 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- ---------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director, Magellan Insurance Company; Cortland Trust, Inc. (registered
Trustee Member of Advisory Board of Rotary Power investment company)
International (designer, manufacturer,
and seller of rotary power engines); and
Director, The Boss Group (private equity
group); formerly, Director, President
and Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice
President, AB Volvo; and director of
various affiliated Volvo companies
- ---------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 1998 Formerly, Chairman, Mercantile Mortgage None
Trustee Corp.; President and Chief Operating
Officer, Mercantile-Safe Deposit & Trust
Co.; and President, Mercantile
Bankshares Corp.
- ---------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company) and Texana Timber LP
- ---------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company)
- ---------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly, Chief Executive Officer, YWCA None
Trustee of the USA
- ---------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
- ---------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
- ---------------------------------------------------------------------------------------------------------------------------------
Louis S. Sklar -- 1939 1993 Executive Vice President, Development None
Trustee and Operations, Hines Interests Limited
Partnership (real estate development
company)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(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.
TRUSTEES AND OFFICERS (CONTINUED)
As of January 1, 2003
The address of each trustee and officer of AIM Funds Group is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046. Each trustee oversees 89 portfolios in the AIM
Funds complex. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
NAME, YEAR OF BIRTH AND TRUSTEE AND/ PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST OR OFFICER SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- -----------------------------------------------------------------------------------------------------------------------------------
Gary T. Crum(3) -- 1947 1992 Director, Chairman and Director of N/A
Senior Vice President Investments, A I M Capital Management,
Inc.; Director and Executive Vice
President, A I M Management Group Inc.;
Director and Senior Vice President,
A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP
PLC; formerly, Chief Executive Officer
and President A I M Capital Management,
Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Carol F. Relihan -- 1954 1992 Director, Senior Vice President, General N/A
Senior Vice President and Counsel and Secretary, A I M Advisors,
Secretary Inc. and A I M Management Group Inc.;
Director, Vice President and General
Counsel, Fund Management Company; and
Vice President, A I M Fund Services,
Inc., A I M Capital Management, Inc. and
A I M Distributors, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Robert G. Alley -- 1948 1992 Managing Director and Chief Fixed Income N/A
Vice President Officer, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Stuart W. Coco -- 1955 1992 Managing Director and Chief Research N/A
Vice President Officer -- Fixed income, A I M Capital
Management, Inc.; and Vice President,
A I M Advisors, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Melville B. Cox -- 1943 1992 Vice President and Chief Compliance N/A
Vice President Officer, A I M Advisors, Inc. and A I M
Capital Management, Inc.; and Vice
President, A I M Fund Services, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1992 Managing Director and Chief Cash N/A
Vice President Management Officer, A I M Capital
Management, Inc.; Director and
President, Fund Management Company; and
Vice President, A I M Advisors, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Edgar M. Larsen(3) -- 1940 1999 Vice President, A I M Advisors, Inc. and N/A
Vice President President, Chief Executive Officer and
Chief Investment Officer, A I M Capital
Management, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Dana R. Sutton -- 1959 1992 Vice President and Fund Treasurer, A I M N/A
Vice President and Treasurer Advisors, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
(3) Information is current as of January 10, 2003.
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available
upon request, without charge, by calling 1.800.347.4246.
</Table>
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. PricewaterhouseCoopers
Suite 100 11 Greenway Plaza 11 Greenway Plaza LLP
Houston, TX 77046 Suite 100 Suite 100 1201 Louisiana
Houston, TX 77046 Houston, TX 77046 Suite 2900
Houston, TX 77002
COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN
Ballard Spahr Kramer, Levin, Naftalis A I M Fund Services, State Street Bank and
Andrews & Ingersoll, LLP & Frankel LLP Inc. Trust Company
1735 Market Street 919 Third Avenue P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 New York, NY 10022 Houston, TX 77210-4739 Boston, MA 02110
</Table>
================================================================================
[ARTWORK]
MORE AGGRESSIVE
SECTOR EQUITY
INTERNATIONAL/GLOBAL EQUITY
DOMESTIC EQUITY
FIXED INCOME
MORE CONSERVATIVE
================================================================================
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
MORE AGGRESSIVE MORE AGGRESSIVE TAXABLE
AIM Emerging Growth Fund AIM Developing Markets Fund MORE AGGRESSIVE
AIM Small Cap Growth Fund(1) AIM European Small Company Fund
AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund(2) AIM High Yield Fund II
AIM Opportunities I Fund(2,3) AIM International Emerging Growth Fund AIM High Yield Fund
AIM Mid Cap Growth Fund AIM Global Aggressive Growth Fund AIM Strategic Income Fund
AIM Libra Fund AIM European Growth Fund(2) AIM Income Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund(2) AIM Global Income Fund
AIM Opportunities II Fund(2,3) AIM Global Growth Fund AIM Total Return Bond Fund
AIM Constellation Fund AIM Worldwide Spectrum Fund AIM Intermediate Government Fund
AIM Large Cap Growth Fund AIM Global Trends Fund AIM Short Term Bond Fund
AIM Weingarten Fund AIM International Core Equity Fund(2) AIM Floating Rate Fund
AIM Opportunities III Fund(2,3) AIM Limited Maturity Treasury Fund(4,5)
AIM Small Cap Equity Fund MORE CONSERVATIVE AIM Money Market Fund
AIM Capital Development Fund
AIM Mid Cap Core Equity Fund(2) SECTOR EQUITY MORE CONSERVATIVE
AIM Select Equity Fund
AIM Premier Equity II Fund(2) MORE AGGRESSIVE TAX-FREE
AIM Premier Equity Fund(2)
AIM Blue Chip Fund AIM New Technology Fund MORE AGGRESSIVE
AIM Mid Cap Basic Value Fund AIM Global Science and Technology Fund(2)
AIM Large Cap Core Equity Fund AIM Global Energy Fund AIM High Income Municipal Fund
AIM Charter Fund AIM Global Financial Services Fund AIM Municipal Bond Fund
AIM Basic Value Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(4,5)
AIM Large Cap Basic Value Fund AIM Global Utilities Fund AIM Tax-Exempt Cash Fund
AIM Balanced Fund* AIM Real Estate Fund
AIM Basic Balanced Fund* MORE CONSERVATIVE
MORE CONSERVATIVE
MORE CONSERVATIVE
*Domestic equity and income fund
</Table>
Equity and fixed-income funds are shown from more aggressive to more
conservative. When assessing the degree of risk, qualitative and quantitative
factors considered included the funds' portfolio holdings, diversification
permitted within the fund, the funds' standard deviations for three, five, 10,
15, 20 and 25 years, R-squared and beta analysis relative to the style-specific
benchmarks, and the possibility of incorporating portfolio management tools such
as leverage, derivatives and short selling. Fund rankings are relative to one
another within The AIM Family of Funds--Registered Trademark-- and should not be
compared with other investments. There is no guarantee that any one AIM fund
will be less volatile than any other. This order is subject to change. (1)AIM
Small Cap Growth Fund was closed to most investors on March 18, 2002. For more
information on who may continue to invest in AIM Small Cap Growth Fund, please
contact your financial advisor. (2)The following fund name changes became
effective 7/1/02: AIM Asian Growth Fund renamed AIM Asia Pacific Growth Fund;
AIM European Development Fund renamed AIM European Growth Fund; AIM Global
Telecommunications and Technology Fund renamed AIM Global Science and Technology
Fund; AIM International Equity Fund renamed AIM International Growth Fund; AIM
International Value Fund renamed AIM International Core Equity Fund; AIM Large
Cap Opportunities Fund renamed AIM Opportunities III Fund; AIM Mid Cap Equity
Fund renamed AIM Mid Cap Core Equity Fund; AIM Mid Cap Opportunities Fund
renamed AIM Opportunities II Fund; AIM Small Cap Opportunities Fund renamed AIM
Opportunities I Fund; AIM Value Fund renamed AIM Premier Equity Fund; AIM Value
II Fund renamed AIM Premier Equity II Fund. (3)Effective Oct. 1, 2002, the fund
reopened to new investors. (4)Class A shares closed to new investors on Oct. 30,
2002. (5)Class A3 shares were first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges and
expenses, ask your financial advisor for a prospectus. Please read it carefully
before investing. This brochure is not authorized for distribution to
prospective investors unless preceded or accompanied by a currently effective
fund prospectus, which contains more complete information, including sales
charges and expenses. Please read it carefully before investing. If used after
April 20, 2003, this brochure must be accompanied by a fund Performance &
Commentary or by an AIM Quarterly Performance Review for the most recent
quarter-end. Mutual Funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the mutual fund
industry since 1976 and manages $124 billion in assets for approximately 9
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $333 billion in assets
under management. As of 12/31/02.
<Table>
<Caption>
College Separately
Mutual Retirement Savings Managed Offshore Alternative Cash
Funds Products Annuities Plans Accounts Products Investments Management
</Table>
[AIM LOGO APPEARS HERE]
--Servicemark--
[INVEST WITH DISCIPLINE LOGO]
--Registered Trademark--
NTE-AR-1
AIMinvestments.com
APPENDIX III
ANNUAL REPORT / DECEMBER 31, 2002
AIM GLOBAL UTILITIES FUND
[COVER IMAGE]
[AIM LOGO]
--Servicemark--
AIMinvestments.com
================================================================================
[COVER IMAGE]
LE MOULIN DE LA GALETTE BY VINCENT VAN GOGH
STANDING TALL AGAINST THE HORIZON WITH SAILS WHIRLING IN THE AIR,
WINDMILLS HAVE PLAYED AN IMPORTANT PART IN THE HISTORICAL AND ECONOMIC
DEVELOPMENT OF CIVILIZATION THROUGH THE CENTURIES. LIKE THEIR
PREDECESSORS, TODAY'S NETWORK OF GLOBAL UTILITIES ENABLES OUR
CONTINUING ADVANCEMENT.
================================================================================
AIM GLOBAL UTILITIES FUND SEEKS TO ACHIEVE A HIGH TOTAL RETURN BY INVESTING IN
SECURITIES OF DOMESTIC AND FOREIGN UTILITY COMPANIES.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Global Utilities Fund's performance figures are historical, and they
reflect fund expenses, the reinvestment of distributions and changes in net
asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class A, Class B and Class C shares will
differ due to different sales charge structures and class expenses.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o The fund may participate in the initial public offering (IPO) market in some
cycles. A significant portion of the fund's returns during certain periods
was attributable to its investments in IPOs. These investments have a
magnified impact when the fund's asset base is relatively small. As the
fund's assets grow, the impact of IPO investments will decline, which may
reduce the effect of IPO investments on the fund's total return. For
additional information regarding the impact of IPO investments on the fund's
performance, please see the fund's prospectus.
o The fund seeks to meet its objective by investing, normally, at least 80% of
its net assets, plus the amount of any borrowings for investment purposes,
in securities of domestic and foreign public utilities companies. In
complying with this 80% investment requirement, the fund will invest
primarily in marketable equity securities, including convertible securities,
and debt securities, but its investments may include other securities, such
as synthetic instruments. Synthetic instruments are investments that have
economic characteristics similar to the fund's direct investments, and may
include warrants, futures, options, exchange-traded funds and American
Depositary Receipts.
o Investing in a single-sector or single-region mutual fund may involve
greater risk and potential reward than investing in a more diversified fund.
o The fund's investment return and principal value will fluctuate, so an
investor's shares (when redeemed) may be worth more or less than their
original cost.
o In the management discussion and in the Schedule of Investments in this
report, the fund's portfolio holdings are organized according to the Global
Industry Classification Standard, which was developed by and is the
exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lipper Utility Fund Index represents an average of the 30
largest utility funds tracked by Lipper, Inc., an independent mutual fund
performance monitor.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses. Performance of a market
index does not.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT IN A BANK AND IS NEITHER GUARANTEED
NOR INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to shareholders or to persons who have
received a current prospectus of the fund.
TO OUR SHAREHOLDERS
DEAR SHAREHOLDER:
[PHOTO OF All of us know how difficult the equity markets were during
ROBERT H. the fiscal year covered by this report, as major domestic
GRAHAM] equity indexes posted negative returns for a third
consecutive year for the first time since 1939-1941. We know
from experience that these conditions eventually end, though
no one can predict exactly when. We remain confident in the
resilience of the American economy. As the fiscal year
closed, the U.S. economy as a whole had expanded for 14
months in a row.
In light of continuing market difficulties, I thought you
would appreciate detailed information on some of the methods
AIM uses to manage your money. This information is presented
in the two pages following this letter. I hope it provides
you with a better understanding of our investment process,
and I encourage you to read it carefully. One of our ongoing
goals is to keep all of our shareholders well informed.
To that end, we have also increased the number of comparative benchmarks we
include in these reports.
o We now compare your fund's performance to a broad market
benchmark--typically the S&P 500 for domestic equity funds, for example,
and the Lehman Aggregate Bond Index for domestic fixed-income funds. We
have selected well-known and widely reported market benchmarks, even if
they do not reflect precisely the kinds of securities in which your fund
invests. The intent is to give you an idea of where your fund stands
vis-a-vis the market as a whole.
o We also have included what we call a style-specific market index, one we
think more closely reflects the securities in which a fund invests. This
can give you a sense of how your fund performed compared to the segments
of the market in which it actually invests. You will notice that sometimes
the performance of the style-specific index can be significantly better or
worse than the performance of the market as a whole.
o In addition, we have included your fund's Lipper category. Lipper, Inc.,
an independent mutual fund performance monitor, classifies funds by
investment objective, style and market segment, among other criteria.
Typically, a Lipper index includes the 30 largest funds within a
particular category, so your fund may or may not be included in the index.
Keep in mind that each fund in a Lipper category may interpret its
objective differently and be managed with its own variation on a basic
style such as growth or value. Nevertheless, Lipper performance numbers
provide one method of comparing your fund's performance with that of a
peer group of similar funds.
Again, our intent is to give you as much relevant information as possible
with which to evaluate your AIM fund.
BACK TO BASICS
When market conditions are as trying as they have been during the fiscal year
covered by this report, we should all keep certain investing fundamentals in
mind. First, professional advice is more important now than ever. A financial
professional can help you understand your entire financial profile. Only then do
you select individual investments to tailor your portfolio to specific goals and
timetables.
He or she can also help you learn the characteristics of various asset
classes. Recently, many investors have been seeking safety in fixed-income
investments. Unfortunately, many do not understand that bond prices move in the
opposite direction of interest rates.
Existing bonds have been rising in value as interest rates have fallen,
contributing to attractive total returns. But rates are now so low the upside
potential of bond prices is limited. Sooner or later, the economy will expand
more robustly, and interest rates will begin to rise. That will lower bond
values, reducing total returns. As ever, diversification is an investing
fundamental.
Finally, a financial advisor can help you develop reasonable expectations.
YOUR FUND MANAGERS' OBSERVATIONS
In the following pages, your fund's portfolio managers discuss your fund's
performance during the fiscal year and the market conditions and investment
strategies that affected that performance. I hope you find their comments
informative.
As the bear market for stocks extended into a third year, all 10 industry
sectors of the S&P 500 index ended the year with losses. Unfortunately, the
utilities sector was among the most severely affected, and AIM Global Utilities
Fund's portfolio felt the impact. For the year ended December 31, 2002, the fund
had total returns at net asset value of -25.96% for Class A shares (the
performance of other share classes is shown on page 6). This result paralleled
the -22.70% return of the average utility fund as measured by the Lipper Utility
Fund Index. The utility sector continued to struggle with deregulation issues as
well as overcapacity in some areas.
Timely information about your fund and the markets is available on our Web
site, aiminvestments.com. Our Client Services Department can be reached during
regular business hours at 800-959-4246.
Thank you for investing in The AIM Family of Funds--Registered Trademark--. I
look forward to reporting to you again in six months.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
January 27, 2003
================================================================================
FIRST, PROFESSIONAL ADVICE IS
MORE IMPORTANT NOW THAN EVER.
A FINANCIAL PROFESSIONAL CAN
HELP YOU UNDERSTAND YOUR ENTIRE
FINANCIAL PROFILE.
ROBERT H. GRAHAM
================================================================================
A SPECIAL MESSAGE TO OUR SHAREHOLDERS
INVESTMENT RESEARCH UPDATE
FOR AIM CLIENTS
[EDGAR M. LARSEN PHOTO]
EDGAR M. LARSEN
Chief Investment Officer
[GARY T. CRUM PHOTO]
GARY T. CRUM
Director of Investments
THE FINANCIAL MARKETS have been battered over the past year by a wave of
corporate scandals, accounting restatements, bankruptcies of high-profile
companies and, in a few cases, outright financial fraud. Many investors,
understandably, feel uncertain about whether their portfolios are positioned to
withstand such a prolonged and severe market downturn. Now seems to be an
appropriate time to step back and reiterate AIM's concern for the financial
well-being of all of our clients and AIM's commitment to competitive excellence
across all investment disciplines.
We at AIM are proud of our rigorous qualitative and quantitative analytical
processes, and we remain confident that we will preserve our long-term record of
success through uncompromising fundamental research. During this recent period
of market instability, we have placed even greater focus on meticulous research,
and we continually look for new ways to improve our process.
We have the resources and the people needed to seek out the best investment
opportunities that exist in any market. It should be emphasized that AIM's teams
have not changed their investment strategies; rather our disciplines have been
fine-tuned in order to better understand each portfolio holding and to optimize
each fund's overall structure.
Rigorous accounting analysis is at the forefront of our investment-research
efforts. AIM employs both internal and external accounting experts and
proprietary tools to screen our portfolios for high-risk situations and to look
for investment opportunities.
BEYOND THE BOTTOM LINE
By going beyond the reported bottom-line numbers, we strive to understand where
a company's growth is coming from and how sustainable it may be. Our discipline
takes us through an in-depth examination of the financial statements and
industry conditions, combined with an evaluation of management's style and
strategy.
AIM's portfolio managers have taken advantage of some unique valuations in
this unusual market environment by adding opportunistically to their portfolios.
In addition to strong financial fundamentals and attractively priced securities,
AIM's teams look for companies with experienced and credible management teams.
Sometimes this means not accepting the consensus view of a particular company.
AIM seeks independent thought, both from our own analysts and portfolio
managers, and from trusted Wall Street sources. Our goal is to cultivate an
ongoing dialogue with independent thinkers in every industry, whether they work
for one of our portfolio companies, on Wall Street, at an independent research
boutique, or right here within our own firm. To this end, we have long had a
collaborative environment where communication across investment teams is
encouraged.
For example, AIM's fixed-income and equity analysts attend the same meetings
================================================================================
RIGOROUS ACCOUNTING
ANALYSIS IS AT
THE FOREFRONT OF
OUR INVESTMENT-
RESEARCH EFFORTS.
================================================================================
2
with company managements, and thus analyze the company from two different
perspectives. Our international managers work with our domestic teams to cover
the more globally oriented companies. And the teams that manage AIM's
sector-specific funds share their industry expertise with the rest of our
investment teams. As our professional staff and resources have grown, so have
the direct contacts with company management teams. Last year, AIM's analysts and
portfolio managers had more than 4,000 meetings with the senior executives of
our portfolio companies.
EDUCATION AND TRAINING
Continuing education and training are important in the ever-changing world of
investment analysis. We invite experts from such fields as accounting,
derivatives and banking to AIM so that we remain informed about current
corporate-finance techniques, new accounting regulations and other shifts in the
landscape of American business.
Over the past five years, AIM has devoted substantial resources to our
research department's personnel. Today, 68 percent of our investment management
and research professionals have earned master's degrees in business or finance.
Sixty percent have earned the Chartered Financial Analyst (CFA) or Certified
Public Accountant (CPA) designations.
QUANTITATIVE EXPERTISE
AIM's team of quantitative analysts plays a large role in portfolio construction
and performance monitoring. Our state-of-the-art proprietary tools include the
means to optimize a portfolio's construction, which includes managing and
monitoring risk, analyzing performance, and conducting hypothetical trading
scenarios to see how they would affect the overall portfolio. These tools offer
our investment teams a more acute awareness of how their portfolios stack up
against their benchmarks and their peers.
Attribution tools allow us to monitor relative sector and industry
weightings, individual security weightings, and correlations across different
holdings. Our portfolio management teams aren't the only ones using these
customized risk-assessment tools. They also are used to generate detailed
reports that are reviewed by members of AIM's senior management. We have a
schedule of formalized periodic reviews to assess the construction and the
risk-adjusted performance of the funds, to offer guidance to the portfolio
managers, and to take corrective action when warranted.
DIVERSIFICATION OF AIM'S OFFERINGS
Even during the equity-market bubble of the late 1990s, AIM advocated a
diversified approach to portfolio management for its clients. As growth stocks
registered double-digit gains, we were taking a longer-term view of the markets
and actively diversified our product line across market styles and
capitalization ranges.
As the financial markets have changed over the past few years, so has AIM's
selection of fund offerings. In the past, AIM was recognized for investing in
the equities of U.S. growth companies. Today, AIM's three largest equity
funds--AIM Basic Value Fund, AIM Premier Equity Fund and AIM Constellation
Fund--represent three distinctly different investment disciplines: Value, Blend
and Growth. Complementing those funds are dozens more in all styles, market-cap
ranges, asset classes, and geographic regions.
AIM's clients can create diversified, all-weather portfolios by selecting
from our full spectrum of funds, whether they seek equity or fixed-income, value
or growth, domestic or international, aggressive or conservative, or any
combination in between. Over the course of any complete market cycle, we expect
a portfolio that is a blend of these quality funds will provide a prudent
approach to achieving one's long-term investment goals.
This period of market dislocation has been painful for all of us. But over
the long term, we are confident that tightened accounting regulations, an
increased level of governmental oversight, and the reallocation of resources
following the recent bubble will all result in a healthy resurgence of the
American financial system.
AIM's investment teams and processes continue to be honed and tested in
today's challenging environment. We believe that this prolonged bear market has
created some unparalleled opportunities to invest in leading companies that will
weather the market storm and recover their industry-leading positions when
global economic growth reaccelerates.
We are grateful for the trust our clients have placed in AIM, and we reaffirm
our commitment to excellence across all of our investment disciplines.
Sincerely,
/s/ GARY T. CRUM
Gary T. Crum
Director of Investments/AIM
/s/ EDGAR M. LARSEN
Edgar M. Larsen
Chief Investment Officer/AIM
================================================================================
... WE REAFFIRM OUR
COMMITMENT TO
EXCELLENCE ACROSS ALL
OF OUR INVESTMENT
DISCIPLINES.
================================================================================
3
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
BEAR MARKET PERSISTS THROUGHOUT
FISCAL YEAR
Stocks remained in the grip of a protracted bear market. It was a very
broad-based decline; all 10 industry sectors of the S&P 500 had negative total
returns. Unfortunately, the utilities and telecommunications sectors suffered
some of the worst damage--only information technology fared worse--and as a
sector fund, AIM Global Utilities Fund was required to keep at least 80% of net
assets in the sector indicated by its name. The fund's performance felt the
impact, as fund Chairman Robert H. Graham discussed in his letter to
shareholders on page 1 of this report. Details on this year's fund performance,
as well as long-term performance, are presented on page 6. Fiscal year 2002 was
a disappointment to all of us on the fund management team, and we know it was
one to you as well.
RELEVANT MARKET CONDITIONS
Wavering investor sentiment continued to make the stock market volatile.
Concerns about corporate accounting practices, anemic company earnings, mixed
economic signals, and the possibility of terrorism and war weighed heavily on
investors' minds for much of the year. Except for scattered short-lived rallies,
key stock market indexes continued declining until they reached a deep trough in
early October before rebounding.
For the year, value stocks fared better than growth stocks, and mid- and
small-cap stocks held up better than large-cap stocks, but all of these market
segments sustained losses.
Additional problems affected the utilities sector in particular. Most
intractable were weak prices for electricity. Mild weather reduced power usage
for residential heating and cooling, and economic slack undercut commercial
demand. Since many electric companies' generators burn natural gas, a decrease
in power usage typically also affects firms that sell gas.
Deregulation, introduced to drive down consumer prices by encouraging
competition, cut deeply into revenues for both utilities and telecommunications
firms. Further making the year difficult for electric utilities was that many
were downgraded by credit rating services, a reflection of deteriorating
fundamentals.
The rising price of oil enabled many of our energy stocks to contribute
positively, but they were more than outweighed by the poor performance of the
utility sector. Companies operating in deregulated energy markets were the
poorest performers. While we had very few holdings in this area, our position in
Reliant Resources detracted from performance.
This year, the malfeasance of certain high-profile energy traders cast
suspicion on every company even remotely associated with energy trading, even
firms whose own behavior was honorable. Alarmed, investors avoided the whole
sector for several months, and equity valuations plunged.
================================================================================
IN THE DEPLORABLE MARKET
WE FACED FOR MOST
OF THE YEAR, FEW TRULY
POSITIVE OPTIONS EXISTED
FOR A UTILITIES FUND.
================================================================================
PORTFOLIO COMPOSITION
<Table>
<Caption>
========================================================================================================================
INVESTMENT TYPE BREAKDOWN TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
- ------------------------------------------------------------------------------------------------------------------------
[PIE CHART] 1. FPL Group, Inc. 5.1% 1. Electric Utilities 48.1%
EQUITY DOMESTIC 71% 2. Pinnacle West Capital Corp. 5.0 2. Multi-Utilities & Unregulated Power 16.6
EQUITY INTERNATIONAL 18% 3. Energy East Corp. 4.3 3. Integrated Telecommunication Services 11.8
BONDS & CONVERTIBLES 5% 4. DTE Energy Co. 4.2 4. Gas Utilities 10.0
CASH & OTHER 6% 5. Southern Co. (The) 3.8 5. Water Utilities 2.3
6. NiSource Inc. 3.7 6. Wireless Telecommunication Services 1.5
7. National Grid Co. PLC 3.2 7. Diversified Metals & Mining 1.2
(United Kingdom)
8. Industrial Conglomerates 1.1
8. Verizon Communications Inc. 3.2
9. Broadcasting & Cable TV 0.7
9. BellSouth Corp. 2.5
10. Integrated Oil & Gas 0.6
10. Sempra Energy 2.5
The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any
particular security.
========================================================================================================================
</Table>
4
During the fourth quarter, the stock market and the utilities sector finally
did rebound, though not enough to offset the damage of the previous three
quarters. Additionally, power usage increased due to colder weather in the
Northeast and an uptick in business activity, which increased revenue for power
producers. This boost enabled top-10 holdings Southern Company, FPL Group and
Pinnacle West to contribute positively to the fund's performance.
The telecommunications sector, after struggling for several quarters, was the
broad market's top performer in the fourth-quarter rebound. With this
resurgence, the performance of top-10 holdings Verizon Communications and
BellSouth climbed into positive numbers for the year. So did the fund; its total
return at NAV for the fourth quarter topped 10% for all share classes.
FUND STRATEGIES AND TECHNIQUES
We took action on all fronts in managing the fund, but in the deplorable market
we faced for most of the year, few truly positive options existed for a
utilities fund.
To minimize the negative impact of deregulation, we placed more assets in
holdings that do a larger part of their business in regulated markets, where
prices are more stable, taking opportunities to buy stocks of such companies
while they were at historically low valuations. Such companies also typically
pay higher dividends. Among these were some foreign holdings that provided an
additional boost from positive currency translation as the dollar weakened
against other currencies.
When buying equities, we focus on the ratings of their underlying debt as a
measure of quality, so although there were fund holdings that received
downgrades from credit rating agencies, the great majority of our holdings
retained investment grade ratings.
We divested our holdings in Dynegy and El Paso, two energy marketing and
trading firms that were detracting from the fund's performance.
On the horizon: Additional electric capacity is scheduled to become available
in 2003. Regulated utilities typically hold up better, since non-regulated
companies are more vulnerable to falling prices, so we will focus on seeking out
the best regulated utilities.
IN CLOSING
We see reasons for cautious optimism. After the fourth-quarter rebound and the
change in weather and business conditions, the situation for utilities appeared
greatly improved, though in ways not immune to further change. In any case, we
want to assure you that we continue to work diligently on your behalf to achieve
a high total return. The U.S. economy and the stock market have always recovered
from economic downturns, but the timing has always been impossible to predict,
and remains so. We continue to urge our investors to maintain a long-term focus
and to remain well diversified to combat risk.
As of 12/31/02, based on total net assets
<Table>
<Caption>
===========================================
TOP COUNTRIES
- -------------------------------------------
1. United States 79.0%
2. United Kingdom 9.0
3. Italy 3.4
4. Spain 3.4
5. France 2.2
6. Germany 1.5
7. Greece 0.8
8. Brazil 0.7
TOTAL HOLDINGS 66
TOTAL NET ASSETS $157.1 million
===========================================
</Table>
eDELIVERY
REDUCE YOUR PAPER MAIL WITH AIM'S eDELIVERY
Sign up for eDelivery and you can have your fund reports and prospectuses
delivered electronically. To enroll, go to aiminvestments.com, select "My AIM
Account," log in, click on the "Service Center" tab and select "Register for
eDelivery." You will no longer receive paper copies of these documents. Instead
you'll receive a link to the documents via email. (You can cancel the service at
the Web site at any time.)
If you receive account statements, fund reports and prospectuses from your
financial advisor rather than from AIM, eDelivery is not accessible to you. Ask
your financial advisor if his or her firm offers electronic delivery.
================================================================================
PORTFOLIO MANAGEMENT TEAM
AS OF 12/31/02
ROBERT G. ALLEY
CLAUDE C. CODY IV
JAN H. FRIEDLI
CRAIG A. SMITH
MEGGAN M. WALSH
See important fund and index
disclosures inside front cover.
[GRAPHIC]
For More Information Visit
AIMinvestments.com
================================================================================
[GRAPHIC]
5
FUND PERFORMANCE
================================================================================
RESULTS OF A $10,000 INVESTMENT
12/31/92-12/31/02
[MOUNTAIN CHART]
<Table>
<Caption>
AIM GLOBAL UTILITIES S&P 500 LIPPER UTILITY
DATE FUND CLASS A SHARES INDEX FUND INDEX
12/31/92 9450 10000 10000
03/31/93 10294 10437 10847
06/30/93 10585 10486 11153
09/30/93 11159 10757 11687
12/31/93 10614 11007 11340
03/31/94 9789 10591 10540
06/30/94 9320 10634 10205
09/30/94 9501 11153 10397
12/31/94 9387 11151 10287
03/31/95 9711 12235 10747
06/30/95 10554 13401 11450
09/30/95 11275 14465 12242
12/31/95 12021 15335 13076
03/31/96 12169 16157 13026
06/30/96 12578 16880 13500
09/30/96 12445 17400 13195
12/31/96 13688 18850 14298
03/31/97 13549 19357 14157
06/30/97 14974 22732 15416
09/30/97 15939 24432 16193
12/31/97 16931 25134 17973
03/31/98 18748 28638 19756
06/30/98 18475 29587 19452
09/30/98 17406 26648 19250
12/31/98 19639 32318 21280
03/31/99 19196 33927 20488
06/30/99 21002 36311 22721
09/30/99 20847 34047 21949
12/31/99 26340 39109 24370
03/31/00 30786 40008 26101
06/30/00 27691 38943 24771
09/30/00 28146 38566 27246
12/31/00 25675 35551 26459
03/31/01 23618 31342 24715
06/30/01 22348 33174 23916
09/30/01 18781 28311 20976
12/31/01 18400 31337 20809
03/31/02 18559 31423 20357
06/30/02 15520 27217 17725
09/30/02 12321 22516 14701
12/31/02 13636 24413 16083
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
</Table>
Performance of the fund's Class A, B and C shares will differ due to
different sales charge structures and class expenses. For fund performance
calculations and indexes used in this report, please see the inside front cover.
Performance shown in the chart and table does not reflect deduction of taxes
a shareholder would pay on fund distributions or the sale of fund shares.
Performance for the indexes does not reflect the effects of taxes either.
This chart uses a logarithmic scale, which means the price scale (vertical
axis) is structured so that a given distance always represents the same percent
change in price, rather than the same absolute change in price. For example, the
distance from one to 10 is the same as the distance from 10 to 100 on a
logarithmic chart, but the latter distance is 10 times greater on a linear
chart. A logarithmic scale better illustrates performance in the fund's early
years before reinvested distributions and compounding create the potential for
the original investment to grow to very large numbers.
FUND RETURNS
AVERAGE ANNUAL TOTAL RETURNS
as of 12/31/02 including sales charges
================================================================================
[HYPO CHART]
CLASS A SHARES
10 Years 3.15%
5 Years -5.32
1 Year -30.03
CLASS B SHARES
Inception (9/1/93) 1.46%
5 Years -5.27
1 Year -30.15
CLASS C SHARES
Inception (8/4/97) -2.96%
5 Years -4.98
1 Year -27.23
DUE TO RECENT SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY
MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR
FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE.
================================================================================
FUND VS. INDEXES
Total Returns 12/31/01-12/31/02
excluding sales charges
================================================================================
CLASS A SHARES -25.96%
CLASS B SHARES -26.56
CLASS C SHARES -26.52
S&P 500 (BROAD MARKET INDEX) -22.09
LIPPER UTILITY FUND INDEX (PEER GROUP) -22.70
================================================================================
6
EDUCATION AND PLANNING
EXPOSING IRA MYTHS
There's no secret about how to invest for a secure retirement. Disciplined
investing, getting an early start, diversifying your investments and saving in
tax-deferred accounts are just a few rules your financial advisor is likely to
stress. Another important rule is to know the truth about individual retirement
accounts (IRAs), the retirement-savings vehicle used by millions of Americans.
MYTH 1: THERE'S NO REASON TO CONTRIBUTE TO AN IRA IF I CAN'T TAKE A TAX
DEDUCTION FOR MY CONTRIBUTION. While many investors can deduct contributions to
traditional IRAs from their federal income taxes, income limits do apply. But
even if you exceed those income limits, there's still reason to contribute to an
IRA: tax-deferred compounding. Tax-deferred compounding allows your retirement
savings to grow faster in a tax-deferred IRA than in a taxable savings account.
MYTH 2: I CAN'T OPEN AN IRA BECAUSE I DON'T HAVE THE MAXIMUM $3,000 TO
CONTRIBUTE. No problem--just make smaller periodic contributions instead of a
single large contribution. Remember, too, that even if you can't contribute the
maximum allowed, it's important to contribute what you can. Finally, making
periodic contributions to your IRA may allow you to benefit from dollar-cost
averaging--buying more shares when prices are low and fewer shares when prices
are high. Dollar-cost averaging cannot guarantee profits or protect against
losses in declining markets, and since it involves investing regardless of
fluctuating securities prices, investors should consider their ability to
continue making purchases during periods of low prices.
MYTH 3: IT DOESN'T MATTER WHAT TIME OF YEAR I MAKE MY IRA CONTRIBUTION. If you
do make a lump-sum contribution, make it early in the year. By contributing
early in the year, your money can grow all year long and you'll have more time
to accumulate the savings you'll need when you retire.
MYTH 4: AN IRA ISN'T THAT GOOD A DEAL, SINCE MY WITHDRAWALS WILL BE TAXED WHEN I
MAKE THEM. That's true of traditional IRAs--but not of Roth IRAs. Contributions
to traditional IRAs are made with pre-tax dollars and they grow tax-deferred;
withdrawals from traditional IRAs are taxed as ordinary income. Contributions to
Roth IRAs are made with after-tax dollars and they grow tax-free; withdrawals
from Roth IRAs are not taxed as long as they are qualified distributions. Your
financial advisor can explain which type of IRA is best for you.
MYTH 5: I PARTICIPATE IN MY EMPLOYER'S 401(k) PLAN, SO I MAY NOT BE ABLE TO OPEN
AN IRA. It's your income, not your participation in an employer-sponsored
retirement plan, that determines whether or not you can open an IRA. With the
exception of certain high-income individuals and couples, most people can
contribute to a Roth IRA with after-tax dollars--even if they participate in an
employer-sponsored retirement plan. Similarly, most people can contribute to a
traditional IRA using pre-tax dollars even if they participate in an
employer-sponsored retirement plan--although the deduction they receive is
phased out as their income rises.
MYTH 6: IT'S SMARTER TO WAIT UNTIL I'M MAKING MORE MONEY BEFORE I OPEN MY IRA.
When investing for retirement, or for any long-term goal, time is your biggest
asset, so start saving early! The table to the left shows why.
None of the information here should be considered tax advice. You should consult
your tax advisor for information concerning your individual situation.
Withdrawals from retirement accounts other than Roth IRAs are subject to
ordinary income tax. Withdrawals before age 59 1/2 may also be subject to a 10%
penalty.
================================================================================
WANT $1 MILLION FOR RETIREMENT? STARTING EARLY MAKES IT EASIER.
CURRENT YEARS TO SAVE MONTHLY SAVINGS
AGE UNTIL RETIREMENT NEEDED TO REACH $1 MILLION
25 40 $ 158
35 30 $ 442
45 20 $ 1,317
55 10 $ 4,882
All figures assume a 10% annual return on investments. This hypothetical example
is for illustrative purposes only and is not intended to represent the
performance of any particular fund, IRA or investor. Your actual return isn't
likely to be consistent from year to year, and there is no guarantee that a
specific rate of return will be achieved.
================================================================================
7
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2002
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
DOMESTIC STOCKS-70.75%
DIVERSIFIED METALS & MINING-1.24%
Peabody Energy Corp. 66,700 $ 1,949,641
========================================================================
ELECTRIC UTILITIES-43.08%
American Electric Power Co., Inc. 63,600 1,738,188
- ------------------------------------------------------------------------
CenterPoint Energy, Inc. 205,000 1,742,500
- ------------------------------------------------------------------------
Cinergy Corp. 47,000 1,584,840
- ------------------------------------------------------------------------
CMS Energy Corp. 178,000 1,680,320
- ------------------------------------------------------------------------
Consolidated Edison, Inc. 65,000 2,783,300
- ------------------------------------------------------------------------
Constellation Energy Group, Inc. 86,500 2,406,430
- ------------------------------------------------------------------------
Dominion Resources, Inc. 28,000 1,537,200
- ------------------------------------------------------------------------
DTE Energy Co. 143,000 6,635,200
- ------------------------------------------------------------------------
Edison International(a) 55,500 657,675
- ------------------------------------------------------------------------
Entergy Corp. 62,000 2,826,580
- ------------------------------------------------------------------------
Exelon Corp. 34,500 1,820,565
- ------------------------------------------------------------------------
FirstEnergy Corp. 90,000 2,967,300
- ------------------------------------------------------------------------
FPL Group, Inc. 132,000 7,937,160
- ------------------------------------------------------------------------
Northeast Utilities 134,000 2,032,780
- ------------------------------------------------------------------------
OGE Energy Corp. 106,000 1,865,600
- ------------------------------------------------------------------------
PG&E Corp.(a) 77,000 1,070,300
- ------------------------------------------------------------------------
Pinnacle West Capital Corp. 228,600 7,792,974
- ------------------------------------------------------------------------
PPL Corp. 75,000 2,601,000
- ------------------------------------------------------------------------
Progress Energy, Inc. 36,500 1,582,275
- ------------------------------------------------------------------------
Public Service Enterprise Group Inc. 63,600 2,041,560
- ------------------------------------------------------------------------
Puget Energy, Inc. 96,000 2,116,800
- ------------------------------------------------------------------------
Southern Co. (The) 209,700 5,953,383
- ------------------------------------------------------------------------
TXU Corp. 86,500 1,615,820
- ------------------------------------------------------------------------
Wisconsin Energy Corp. 62,500 1,575,000
- ------------------------------------------------------------------------
Xcel Energy, Inc. 101,650 1,118,150
========================================================================
67,682,900
========================================================================
GAS UTILITIES-9.48%
KeySpan Corp. 55,000 1,938,200
- ------------------------------------------------------------------------
Kinder Morgan, Inc. 37,200 1,572,444
- ------------------------------------------------------------------------
NiSource Inc. 290,000 5,800,000
- ------------------------------------------------------------------------
Peoples Energy Corp. 44,000 1,700,600
- ------------------------------------------------------------------------
Sempra Energy 164,000 3,878,600
========================================================================
14,889,844
========================================================================
INDUSTRIAL CONGLOMERATES-1.10%
General Electric Co. 70,800 1,723,980
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-7.23%
BellSouth Corp. 154,100 3,986,567
- ------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES-(CONTINUED)
SBC Communications Inc. 88,000 $ 2,385,680
- ------------------------------------------------------------------------
Verizon Communications Inc. 128,662 4,985,653
========================================================================
11,357,900
========================================================================
MULTI-UTILITIES & UNREGULATED POWER-8.62%
Aquila, Inc.(a) 221,510 392,073
- ------------------------------------------------------------------------
Duke Energy Corp. 129,634 2,533,048
- ------------------------------------------------------------------------
Energy East Corp. 306,200 6,763,958
- ------------------------------------------------------------------------
Equitable Resources, Inc. 22,100 774,384
- ------------------------------------------------------------------------
MDU Resources Group, Inc. 31,000 800,110
- ------------------------------------------------------------------------
Mirant Corp.(a) 211,114 399,005
- ------------------------------------------------------------------------
Mirant Trust I-Series A, $3.13 Conv. Pfd. 34,300 569,380
- ------------------------------------------------------------------------
ONEOK, Inc. 41,000 787,200
- ------------------------------------------------------------------------
Reliant Resources, Inc.(a) 161,663 517,322
========================================================================
13,536,480
========================================================================
Total Domestic Stocks (Cost $125,475,755) 111,140,745
========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-17.92%
BRAZIL-0.74%
Companhia Paranaense de Energia-Copel-ADR
(Electric Utilities) 415,000 1,166,150
========================================================================
FRANCE-2.20%
Suez S.A. (Multi-Utilities & Unregulated
Power) 142,750 2,478,549
========================================================================
Total Fina Elf S.A. (Integrated Oil & Gas) 6,800 971,523
========================================================================
3,450,072
========================================================================
GERMANY-1.51%
E.ON A.G. (Electric Utilities) 58,880 2,376,567
========================================================================
GREECE-0.79%
Public Power Corp.-GDR (Electric Utilities)
(Acquired 12/10/01; Cost $1,008,054)(b)(c) 89,300 1,237,403
========================================================================
ITALY-3.44%
ACEA S.p.A. (Multi-Utilities & Unregulated
Power) (Acquired 07/12/99; Cost
$3,909,910)(b) 428,800 1,899,560
- ------------------------------------------------------------------------
Snam Rete Gas S.p.A. (Gas Utilities)
(Acquired 12/03/01; Cost $621,491)(b) 247,600 844,734
- ------------------------------------------------------------------------
Telecom Italia S.p.A. (Integrated
Telecommunication Services) 526,700 2,659,465
========================================================================
5,403,759
========================================================================
SPAIN-3.44%
Endesa, S.A. (Electric Utilities) 227,000 2,656,970
- ------------------------------------------------------------------------
Endesa, S.A.-ADR (Electric Utilities) 39,600 447,480
- ------------------------------------------------------------------------
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
SPAIN-(CONTINUED)
Telefonica, S.A. (Integrated
Telecommunication Services)(a) 255,743 $ 2,290,017
========================================================================
5,394,467
========================================================================
UNITED KINGDOM-5.80%
Kelda Group PLC (Water Utilities) 538,407 3,679,376
- ------------------------------------------------------------------------
National Grid Transco PLC (Multi-Utilities &
Unregulated Power) 202,526 1,490,113
- ------------------------------------------------------------------------
United Utilities PLC (Multi-Utilities &
Unregulated Power) 151,936 1,528,069
- ------------------------------------------------------------------------
Vodafone Group PLC (Wireless
Telecommunication Services) 1,034,218 1,887,765
- ------------------------------------------------------------------------
Vodafone Group PLC-ADR (Wireless
Telecommunication Services) 29,200 529,104
========================================================================
9,114,427
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $36,539,270) 28,142,845
========================================================================
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES-5.46%
BROADCASTING & CABLE TV-0.65%
TCI Communications, Inc., Sr. Unsec. Deb.,
7.88%, 02/15/26 $1,000,000 1,024,020
========================================================================
COMPUTER HARDWARE-0.16%
Candescent Technologies Corp., Sr. Conv.
Unsec. Sub. Gtd. Deb., 8.00%, 05/01/03
(Acquired 04/17/98-04/19/01; Cost
$4,556,330)(b)(c)(d) 4,866,000 257,898
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.42%
AT&T Broadband Corp., Unsec. Gtd. Notes,
8.38%, 03/15/13 1,961,000 2,226,696
========================================================================
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT VALUE
- ------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER-3.23%
National Grid Co. PLC (United Kingdom), Conv.
Bonds, 4.25%, 02/17/08 (Acquired 02/05/98;
Cost $4,574,700)(b)(e) GBP 2,760,000 $ 5,073,181
========================================================================
Total Bonds & Notes (Cost $12,105,548) 8,581,795
========================================================================
<Caption>
SHARES
MONEY MARKET FUNDS-6.00%
STIC Liquid Assets Portfolio(f) 4,714,847 4,714,847
- ------------------------------------------------------------------------
STIC Prime Portfolio(f) 4,714,847 4,714,847
========================================================================
Total Money Market Funds (Cost
$9,429,694) 9,429,694
========================================================================
TOTAL INVESTMENTS-100.13% (excluding
investments purchased with cash collateral
from securities loans) (Cost $183,550,267) 157,295,079
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANS
MONEY MARKET FUNDS-25.08%
STIC Liquid Assets Portfolio(f)(g) 19,697,198 19,697,198
- ------------------------------------------------------------------------
STIC Prime Portfolio(f)(g) 19,697,197 19,697,197
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loans)
(Cost $39,394,395) 39,394,395
========================================================================
TOTAL INVESTMENTS-125.21% (Cost $222,944,662) 196,689,474
========================================================================
OTHER ASSETS LESS LIABILITIES-(25.21%) (39,605,855)
========================================================================
NET ASSETS-100.00% $157,083,619
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
GBP - British Pound Sterling
GDR - Global Depositary Receipt
Gtd. - Guaranteed
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) 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. The aggregate market value of these
securities at 12/31/02 was $9,312,776, which represented 5.93% of the Fund's
net assets. The Fund has no rights to demand registration of these
securities. Of these securities, 3.39% of the Fund's net assets are
considered to be illiquid.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees and may be considered illiquid.
(d) Defaulted security. Currently, the issuer is in default with respect to
interest payments.
(e) Foreign denominated security. Par value is denominated in currency
indicated.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor.
(g) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
F-2
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
<Table>
ASSETS:
Investments, at market value (cost
$222,944,662)* $196,689,474
- -----------------------------------------------------------
Foreign currencies, at value (cost $432,129) 447,757
- -----------------------------------------------------------
Receivables for:
Investments sold 9,704,733
- -----------------------------------------------------------
Fund shares sold 120,592
- -----------------------------------------------------------
Dividends and interest 494,249
- -----------------------------------------------------------
Investment for deferred compensation plan 40,330
- -----------------------------------------------------------
Other assets 19,460
===========================================================
Total assets 207,516,595
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 10,021,194
- -----------------------------------------------------------
Fund shares reacquired 653,520
- -----------------------------------------------------------
Deferred compensation plan 40,330
- -----------------------------------------------------------
Collateral upon return of securities loaned 39,394,395
- -----------------------------------------------------------
Accrued distribution fees 134,145
- -----------------------------------------------------------
Accrued transfer agent fees 79,851
- -----------------------------------------------------------
Accrued operating expenses 109,541
===========================================================
Total liabilities 50,432,976
===========================================================
Net assets applicable to shares outstanding $157,083,619
___________________________________________________________
===========================================================
NET ASSETS:
Class A $106,962,173
___________________________________________________________
===========================================================
Class B $ 44,071,470
___________________________________________________________
===========================================================
Class C $ 6,049,976
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 9,534,470
___________________________________________________________
===========================================================
Class B 3,936,899
___________________________________________________________
===========================================================
Class C 540,662
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.22
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $11.22 divided
by 94.50%) $ 11.87
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 11.19
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 11.19
___________________________________________________________
===========================================================
</Table>
* At December 31, 2002, securities with an aggregate market value of $38,567,596
were on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2002
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax
of $119,530) $ 7,232,247
- -----------------------------------------------------------
Dividends from affiliated money market
funds 193,866
- -----------------------------------------------------------
Interest 891,292
- -----------------------------------------------------------
Security lending income 200,312
===========================================================
Total investment income 8,517,717
===========================================================
EXPENSES:
Advisory fees 1,212,142
- -----------------------------------------------------------
Administrative services fees 50,000
- -----------------------------------------------------------
Custodian fees 67,162
- -----------------------------------------------------------
Distribution fees -- Class A 329,368
- -----------------------------------------------------------
Distribution fees -- Class B 623,671
- -----------------------------------------------------------
Distribution fees -- Class C 83,143
- -----------------------------------------------------------
Transfer agent fees 680,690
- -----------------------------------------------------------
Trustees' fees 9,731
- -----------------------------------------------------------
Other 172,417
===========================================================
Total expenses 3,228,324
===========================================================
Less: Fees waived (10,747)
- -----------------------------------------------------------
Expenses paid indirectly (4,867)
===========================================================
Net expenses 3,212,710
===========================================================
Net investment income 5,305,007
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (40,821,250)
- -----------------------------------------------------------
Foreign currencies 89,267
- -----------------------------------------------------------
Option contracts written 519,873
===========================================================
(40,212,110)
===========================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (29,868,477)
- -----------------------------------------------------------
Foreign currencies 22,669
===========================================================
(29,845,808)
===========================================================
Net gain (loss) from investment securities,
foreign currencies and option contracts (70,057,918)
===========================================================
Net increase (decrease) in net assets
resulting from operations $(64,752,911)
___________________________________________________________
===========================================================
</Table>
See Notes to Financial Statements.
F-3
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2002 and 2001
<Table>
<Caption>
2002 2001
- --------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 5,305,007 $ 4,578,201
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (40,212,110) (26,958,931)
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (29,845,808) (100,097,424)
============================================================================================
Net increase (decrease) in net assets resulting from
operations (64,752,911) (122,478,154)
============================================================================================
Distributions to shareholders from net investment income:
Class A (3,815,987) (3,297,866)
- --------------------------------------------------------------------------------------------
Class B (1,247,649) (987,904)
- --------------------------------------------------------------------------------------------
Class C (170,081) (115,036)
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (1,890,557)
- --------------------------------------------------------------------------------------------
Class B -- (1,101,351)
- --------------------------------------------------------------------------------------------
Class C -- (130,115)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A (18,909,941) (18,046,172)
- --------------------------------------------------------------------------------------------
Class B (29,029,595) (19,327,801)
- --------------------------------------------------------------------------------------------
Class C (2,715,781) (646,339)
============================================================================================
Net increase (decrease) in net assets (120,641,945) (168,021,295)
============================================================================================
NET ASSETS:
Beginning of year 277,725,564 445,746,859
============================================================================================
End of year $ 157,083,619 $ 277,725,564
____________________________________________________________________________________________
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 251,890,975 $ 295,785,459
- --------------------------------------------------------------------------------------------
Undistributed net investment income 73,943 116,903
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and option contracts (68,649,680) (26,875,713)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (26,231,619) 8,698,915
============================================================================================
$ 157,083,619 $ 277,725,564
____________________________________________________________________________________________
============================================================================================
</Table>
See Notes to Financial Statements.
F-4
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Utilities Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware statutory trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of twelve separate portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers three different classes of shares: Class A shares, Class B
shares and Class C shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with a contingent deferred
sales charge ("CDSC"). Under some circumstances, Class A shares are subject to
CDSC charges. Generally, Class B shares will automatically convert to Class A
shares eight years after the end of the calendar month of purchase. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is to achieve a high total return. In the
Schedule of Investments each company is organized in the United States unless
otherwise noted.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued at the closing bid price furnished
by independent pricing services or market makers. Each security reported on
the NASDAQ National Market System is valued at the last sales price as of
the close of the customary trading session on the valuation date or absent
a last sales price, at the closing bid price. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, dividend rate,
yield, quality, type of issue, coupon rate, maturity, individual trading
characteristics and other market data. Securities for which market prices
are not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in
the case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value. For purposes of determining net asset value per share, futures and
option contracts generally will be valued 15 minutes after the close of the
customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the NYSE. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not be
reflected in the computation of the Fund's net asset value. If a
development/event is so significant that there is a reasonably high degree
of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer
reflect actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in
good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date. Premiums and
discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income are declared and paid quarterly
and are recorded on ex-dividend date. Distributions from net realized
capital gains, if any, are generally paid annually and recorded on
ex-dividend date. The Fund may elect to use a portion of the proceeds from
redemptions as distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to
F-5
shareholders. Therefore, no provision for federal income taxes is recorded
in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. The combined results of changes in foreign exchange rates
and the fluctuation of market prices on investments are included with the
net realized and unrealized gain or loss from investments in the statement
of operations.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. When the Fund
writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received. A risk in writing a
call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.
H. EXPENSES -- Distribution expenses directly attributable to a class of
shares are charged to the respective classes' operations. Transfer agency
fees and expenses and other shareholder recordkeeping fees and expenses are
charged to each class pursuant to a transfer agency and service agreement
adopted by the Fund with respect to such class. All other expenses are
allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at an annual rate of 0.60% on the first
$200 million of the Fund's average daily net assets, plus 0.50% on the next $300
million of the Fund's average daily net assets, plus 0.40% on the next $500
million of the Fund's average daily net assets, plus 0.30% on the Fund's average
daily net assets in excess of $1 billion. Effective September 23, 2002, AIM has
voluntarily agreed to waive advisory fees in the amount of 0.02% of average net
assets for one year. AIM has voluntarily agreed to waive advisory fees of the
Fund in the amount of 25% of the advisory fee AIM receives from the affiliated
money market funds in which the Fund has invested. For the year ended December
31, 2002, AIM waived fees of $10,747.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the year ended December 31, 2002, AIM was
paid $50,000 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 2002, AFS
retained $389,672 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges, that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the year ended December 31, 2002, the Class A, Class B and Class C
shares paid AIM Distributors $329,368, $623,671 and $83,143, respectively.
Front-end sales commissions and CDSCs are not expenses of the Fund. Front-end
sales commissions are deducted from proceeds from the sales of Fund shares prior
to investment in Class A shares of the Fund. CDSCs are deducted from redemption
proceeds prior to remittance to the shareholder. During the year ended December
31, 2002, AIM Distributors retained $22,958 in front-end sale commissions from
the sale of Class A shares and $505, $996 and $3,535 for Class A, Class B and
Class C shares, respectively, for CDSCs imposed upon redemptions by
shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and/or AIM Distributors.
During the year ended December 31, 2002, the Fund paid legal fees of $3,055
for services rendered by Kramer, Levin, Naftalis & Frankel LLP
F-6
as counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended December 31, 2002, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $3,280 and reductions in custodian
fees of $1,587 under expense offset arrangements which resulted in a reduction
of the Fund's total expenses of $4,867.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Trust. The Trustees deferring compensation have the option to
select various AIM Funds in which all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended December 31,
2002, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities. It is
the Fund's policy to obtain additional collateral from or return excess
collateral to the borrower by the end of the next business day. Therefore, the
value of the collateral may be temporarily less than the value of the securities
on loan.
At December 31, 2002, securities with an aggregate value of $38,567,596 were
on loan to brokers. The loans were secured by cash collateral of $39,394,395
received by the Fund and subsequently invested in affiliated money market funds
as follows: $19,697,198 in STIC Liquid Assets Portfolio and $19,697,197 in STIC
Prime Portfolio. For the year ended December 31, 2002, the Fund received fees of
$200,312 for securities lending.
NOTE 7--CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 2002 are
summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ----------------------------------------------------------
Beginning of year -- $ --
- ----------------------------------------------------------
Written 11,892 752,624
- ----------------------------------------------------------
Closed (544) (39,798)
- ----------------------------------------------------------
Exercised (2,545) (492,043)
- ----------------------------------------------------------
Expired (8,803) (220,783)
==========================================================
End of year -- $ --
__________________________________________________________
==========================================================
</Table>
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
Distributions to Shareholders:
The tax character of distributions paid during the years ended December 31, 2002
and 2001 were as follows:
<Table>
<Caption>
2002 2001
- --------------------------------------------------------------
Distributions paid from:
Ordinary income $5,233,717 $4,851,946
- --------------------------------------------------------------
Long-term capital gain -- 2,670,883
==============================================================
$5,233,717 $7,522,829
______________________________________________________________
==============================================================
</Table>
Tax Components of Beneficial Interest:
As of December 31, 2002, the components of beneficial interest on a tax basis
were as follows:
<Table>
Undistributed ordinary income $ 159,538
- -----------------------------------------------------------
Unrealized appreciation
(depreciation) -- investments (26,690,805)
- -----------------------------------------------------------
Temporary book/tax differences (64,050)
- -----------------------------------------------------------
Capital loss carryforward (68,212,039)
- -----------------------------------------------------------
Shares of beneficial interest 251,890,975
===========================================================
$157,083,619
___________________________________________________________
===========================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to the tax
deferral of losses on wash sales and the treatment of defaulted bonds. The
tax-basis unrealized appreciation (depreciation) on investments amount includes
appreciation on foreign currencies of $23,569.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of trustee deferral of compensation and
retirement plan expenses.
F-7
The Fund's capital loss carryforward expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ------------------------------------------------------
December 31, 2009 $18,490,169
- ------------------------------------------------------
December 31, 2010 49,721,870
======================================================
$68,212,039
______________________________________________________
======================================================
</Table>
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 2002 was
$105,168,075 and $140,596,552, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 2002 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 16,661,262
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (43,375,636)
===========================================================
Net unrealized appreciation (depreciation) of
investment securities $(26,714,374)
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $223,403,848.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions,
premium amortization, and the merger transaction on December 31, 2002,
undistributed net investment income was decreased by $114,250, undistributed net
realized gains (losses) decreased by $1,561,857 and shares of beneficial
interest increased by $1,676,107. This reclassification had no effect on the net
assets of the Fund.
NOTE 11--SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2002 and 2001
were as follows:
<Table>
<Caption>
2002 2001
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 949,587 $ 12,605,008 1,794,576 $ 34,716,035
- ----------------------------------------------------------------------------------------------------------------------
Class B 398,925 5,334,927 859,987 17,105,311
- ----------------------------------------------------------------------------------------------------------------------
Class C 613,148 9,024,735 226,533 4,463,280
======================================================================================================================
Issued as reinvestment of dividends:
Class A 280,719 3,433,259 283,142 4,686,155
- ----------------------------------------------------------------------------------------------------------------------
Class B 91,166 1,110,123 111,990 1,793,582
- ----------------------------------------------------------------------------------------------------------------------
Class C 12,269 149,446 12,912 207,366
======================================================================================================================
Issued in connection with acquisitions:*
Class A 609,422 6,380,412 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class B 448,140 4,682,205 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class C 15,466 161,591 -- --
======================================================================================================================
Conversion of Class B shares to Class A shares:**
Class A 950,791 12,830,006 -- --
- ----------------------------------------------------------------------------------------------------------------------
Class B (953,214) (12,830,006) -- --
======================================================================================================================
Reacquired:
Class A (4,216,515) (54,158,626) (3,018,253) (57,448,362)
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,113,600) (27,326,844) (2,091,008) (38,226,694)
- ----------------------------------------------------------------------------------------------------------------------
Class C (849,183) (12,051,553) (282,906) (5,316,985)
======================================================================================================================
(3,762,879) $(50,655,317) (2,103,027) $(38,020,312)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
* As of the close of business on September 20, 2002, the Fund acquired all the
net assets of AIM Global Infrastructure Fund pursuant to a plan of
reorganization approved by AIM Global Infrastructure Fund shareholders on
September 4, 2002. The acquisition was accomplished by a tax-free exchange of
1,073,028 shares of the Fund for 2,195,890 shares of AIM Global
Infrastructure Fund outstanding as of the close of business on September 20,
2002. AIM Global Infrastructure Fund's net assets at that date of $11,224,208
including $(5,084,726) of unrealized appreciation (depreciation), were
combined with those of the Fund. The aggregate net assets of the Fund
immediately before the acquisition were $144,339,163.
** Prior to the year ended December 31, 2002, conversion of Class B shares to
Class A shares were included in Class A shares sold and Class B shares
reacquired.
F-8
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.64 $ 22.45 $ 26.08 $ 21.01 $ 19.26
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.37(a) 0.29(a)(b) 0.33(a) 0.38(a) 0.48
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (4.40) (6.63) (1.00) 6.60 2.53
=================================================================================================================================
Total from investment operations (4.03) (6.34) (0.67) 6.98 3.01
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.39) (0.29) (0.28) (0.35) (0.46)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.18) (2.68) (1.56) (0.80)
=================================================================================================================================
Total distributions (0.39) (0.47) (2.96) (1.91) (1.26)
=================================================================================================================================
Net asset value, end of period $ 11.22 $ 15.64 $ 22.45 $ 26.08 $ 21.01
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (25.96)% (28.33)% (2.54)% 34.15% 16.01%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $106,962 $171,432 $267,200 $238,432 $196,665
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.33%(d) 1.12% 1.03% 1.10% 1.06%
=================================================================================================================================
Ratio of net investment income to average net assets 2.88%(d) 1.53%(b) 1.23% 1.69% 2.39%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 54% 19% 52% 37% 38%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) As required, effective January 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premiums on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been $0.30 and the ratio of net investment income to
average net assets would have been 1.57%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to January 1, 2001 have not been restated to
reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(d) Ratios are based on average daily net assets of $131,746,999.
F-9
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
2002 2001 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.60 $ 22.38 $ 26.03 $ 20.98 $ 19.24
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.28(a) 0.15(a)(b) 0.13(a) 0.21(a) 0.33
- -------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (4.41) (6.60) (1.01) 6.59 2.53
===============================================================================================================================
Total from investment operations (4.13) (6.45) (0.88) 6.80 2.86
===============================================================================================================================
Less distributions:
Dividends from net investment income (0.28) (0.15) (0.09) (0.19) (0.32)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.18) (2.68) (1.56) (0.80)
===============================================================================================================================
Total distributions (0.28) (0.33) (2.77) (1.75) (1.12)
===============================================================================================================================
Net asset value, end of period $ 11.19 $ 15.60 $ 22.38 $ 26.03 $ 20.98
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) (26.56)% (28.87)% (3.28)% 33.16% 15.14%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $44,071 $94,615 $160,820 $142,632 $111,866
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 2.08%(d) 1.88% 1.80% 1.84% 1.81%
===============================================================================================================================
Ratio of net investment income to average net assets 2.13%(d) 0.78%(b) 0.46% 0.95% 1.64%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 54% 19% 52% 37% 38%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) As required, effective January 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premiums on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been the same and the ratio of net investment income to
average net assets would have been 0.81%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to January 1, 2001 have not been restated to
reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include contingent
deferred sales charges.
(d) Ratios are based on average daily net assets of $62,367,097.
F-10
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.59 $ 22.37 $ 26.02 $20.97 $19.24
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.28(a) 0.15(a)(b) 0.13(a) 0.21(a) 0.33
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (4.40) (6.60) (1.01) 6.59 2.52
==========================================================================================================================
Total from investment operations (4.12) (6.45) (0.88) 6.80 2.85
==========================================================================================================================
Less distributions:
Dividends from net investment income (0.28) (0.15) (0.09) (0.19) (0.32)
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.18) (2.68) (1.56) (0.80)
==========================================================================================================================
Total distributions (0.28) (0.33) (2.77) (1.75) (1.12)
==========================================================================================================================
Net asset value, end of period $ 11.19 $ 15.59 $ 22.37 $26.02 $20.97
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(c) (26.52)% (28.88)% (3.28)% 33.18% 15.09%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 6,050 $11,679 $17,727 $6,702 $2,994
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets 2.08%(d) 1.88% 1.80% 1.84% 1.81%
==========================================================================================================================
Ratio of net investment income to average net assets 2.13%(d) 0.78%(b) 0.46% 0.95% 1.64%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate 54% 19% 52% 37% 38%
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) As required, effective January 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premiums on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been the same and the ratio of net investment income to
average net assets would have been 0.81%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to January 1, 2001 have not been restated to
reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include contingent
deferred sales charges.
(d) Ratios are based on average daily net assets of $8,314,308.
F-11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
AIM Global Utilities Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Global Utilities Fund (one
of the funds constituting AIM Funds Group; hereafter referred to as the "Fund")
at December 31, 2002, and the results of its operations for the year then ended,
and 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 the
three years 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 auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2002 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion. The financial highlights for each of the
periods ended on or before December 31, 1999 were audited by other independent
accountants whose report, dated February 14, 2000, expressed an unqualified
opinion thereon.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 14, 2003
F-12
OTHER INFORMATION
TRUSTEES AND OFFICERS
As of January 1, 2003
The address of each trustee and officer of AIM Funds Group is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046. Each trustee oversees 89 portfolios in the AIM
Funds complex. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
- ------------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1) -- 1946 1992 Director and Chairman, A I M Management None
Trustee, Chairman and President Group Inc. (financial services holding
company); and Director and Vice Chairman,
AMVESCAP PLC (parent of AIM and a global
investment management firm); formerly,
President and Chief Executive Officer, A
I M Management Group Inc.; Director,
Chairman and President, A I M Advisors,
Inc. (registered investment advisor);
Director and Chairman, A I M Capital
Management, Inc. (registered investment
advisor), A I M Distributors, Inc.
(registered broker dealer), A I M Fund
Services, Inc., (registered transfer
agent), and Fund Management Company
(registered broker dealer)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Director, Chairman, President and
Trustee Officer, A I M Management Group Inc. Chief Executive Officer, INVESCO
(financial services holding company); Bond Funds, Inc., INVESCO
Director, Chairman and President, A I M Combination Stock & Bond Funds,
Advisors, Inc. (registered investment Inc., INVESCO Counselor Series
advisor); Director, A I M Capital Funds, Inc., INVESCO Global and
Management, Inc. (registered investment International Funds, Inc., INVESCO
advisor) and A I M Distributors, Inc. Manager Series Funds, Inc.,
(registered broker dealer), Director and INVESCO Money Market Funds, Inc.,
Chairman, A I M Fund Services, Inc. INVESCO Sector Funds, Inc.,
(registered transfer agent), and Fund INVESCO Stock Funds, Inc., INVESCO
Management Company (registered broker Treasurer's Series Funds, Inc. and
dealer); and Chief Executive Officer, INVESCO Variable Investment Funds,
AMVESCAP PLC -- AIM Division (parent of Inc.
AIM and a global investment management
firm); formerly, Director, Chairman and
Chief Executive Officer, INVESCO Funds
Group, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 2001 Of Counsel, law firm of Baker & McKenzie Badgley Funds, Inc. (registered
Trustee investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 1987 Chairman, Crockett Technology Associates ACE Limited (insurance company);
Trustee (technology consulting company) and Captaris, Inc. (unified
messaging provider)
- ------------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2000 Director, Magellan Insurance Company; Cortland Trust, Inc. (registered
Trustee Member of Advisory Board of Rotary Power investment company)
International (designer, manufacturer,
and seller of rotary power engines); and
Director, The Boss Group (private equity
group); formerly, Director, President and
Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice
President, AB Volvo; and director of
various affiliated Volvo companies
- ------------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 1998 Formerly, Chairman, Mercantile Mortgage None
Trustee Corp.; President and Chief Operating
Officer, Mercantile-Safe Deposit & Trust
Co.; and President, Mercantile Bankshares
Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company) and Texana Timber LP
- ------------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 1993 Partner, law firm of Kramer Levin Cortland Trust, Inc. (registered
Trustee Naftalis and Frankel LLP investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 1998 Formerly, Chief Executive Officer, YWCA None
Trustee of the USA
- ------------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Louis S. Sklar -- 1939 1993 Executive Vice President, Development and None
Trustee Operations, Hines Interests Limited
Partnership (real estate development
company)
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(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.
TRUSTEES AND OFFICERS (CONTINUED)
As of January 1, 2003
The address of each trustee and officer of AIM Funds Group is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046. Each trustee oversees 89 portfolios in the AIM
Funds complex. Column two below includes length of time served with predecessor
entities, if any.
<Table>
<Caption>
TRUSTEE AND/
NAME, YEAR OF BIRTH AND OR OFFICER PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE DURING PAST 5 YEARS HELD BY TRUSTEE
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ---------------------------------------------------------------------------------------------------------------------------------
Gary T. Crum(3) -- 1947 1992 Director, Chairman and Director of N/A
Senior Vice President Investments, A I M Capital Management,
Inc.; Director and Executive Vice
President, A I M Management Group Inc.;
Director and Senior Vice President,
A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP
PLC; formerly, Chief Executive Officer
and President A I M Capital Management,
Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Carol F. Relihan -- 1954 1992 Director, Senior Vice President, General N/A
Senior Vice President and Counsel and Secretary, A I M Advisors,
Secretary Inc. and A I M Management Group Inc.;
Director, Vice President and General
Counsel, Fund Management Company; and
Vice President, A I M Fund Services,
Inc., A I M Capital Management, Inc. and
A I M Distributors, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Robert G. Alley -- 1948 1992 Managing Director and Chief Fixed Income N/A
Vice President Officer, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Stuart W. Coco -- 1955 1992 Managing Director and Chief Research N/A
Vice President Officer -- Fixed income, A I M Capital
Management, Inc.; and Vice President,
A I M Advisors, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Melville B. Cox -- 1943 1992 Vice President and Chief Compliance N/A
Vice President Officer, A I M Advisors, Inc. and A I M
Capital Management, Inc.; and Vice
President, A I M Fund Services, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Karen Dunn Kelley -- 1960 1992 Managing Director and Chief Cash N/A
Vice President Management Officer, A I M Capital
Management, Inc.; Director and
President, Fund Management Company; and
Vice President, A I M Advisors, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Edgar M. Larsen(3) -- 1940 1999 Vice President, A I M Advisors, Inc. and N/A
Vice President President, Chief Executive Officer and
Chief Investment Officer, A I M Capital
Management, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Dana R. Sutton -- 1959 1992 Vice President and Fund Treasurer, A I M N/A
Vice President and Treasurer Advisors, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
(3) Information is current as of January 10, 2003.
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available
upon request, without charge, by calling 1.800.347.4246.
</Table>
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. PricewaterhouseCoopers
Suite 100 11 Greenway Plaza 11 Greenway Plaza LLP
Houston, TX 77046 Suite 100 Suite 100 1201 Louisiana
Houston, TX 77046 Houston, TX 77046 Suite 2900
Houston, TX 77002
COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN
Ballard Spahr Kramer, Levin, Naftalis A I M Fund Services, State Street Bank and
Andrews & Ingersoll, LLP & Frankel LLP Inc. Trust Company
1735 Market Street 919 Third Avenue P.O. Box 4739 225 Franklin Street
Philadelphia, PA 19103 New York, NY 10022 Houston, TX 77210-4739 Boston, MA 02110
</Table>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of ordinary dividends paid to shareholders during the Fund's tax year ended
December 31, 2002, 100% is eligible for the dividends received deduction for
corporations.
================================================================================
[ARTWORK]
MORE AGGRESSIVE
SECTOR EQUITY
INTERNATIONAL/GLOBAL EQUITY
DOMESTIC EQUITY
FIXED INCOME
MORE CONSERVATIVE
================================================================================
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
MORE AGGRESSIVE MORE AGGRESSIVE TAXABLE
AIM Emerging Growth Fund AIM Developing Markets Fund MORE AGGRESSIVE
AIM Small Cap Growth Fund(1) AIM European Small Company Fund
AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund(2) AIM High Yield Fund II
AIM Opportunities I Fund(2)(3) AIM International Emerging Growth Fund AIM High Yield Fund
AIM Mid Cap Growth Fund AIM Global Aggressive Growth Fund AIM Strategic Income Fund
AIM Libra Fund AIM European Growth Fund(2) AIM Income Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund(2) AIM Global Income Fund
AIM Opportunities II Fund(2)(3) AIM Global Growth Fund AIM Total Return Bond Fund
AIM Constellation Fund AIM Worldwide Spectrum Fund AIM Intermediate Government Fund
AIM Large Cap Growth Fund AIM Global Trends Fund AIM Short Term Bond Fund
AIM Weingarten Fund AIM International Core Equity Fund(2) AIM Floating Rate Fund
AIM Opportunities III Fund(2)(3) AIM Limited Maturity Treasury Fund(4)(5)
AIM Small Cap Equity Fund MORE CONSERVATIVE AIM Money Market Fund
AIM Capital Development Fund
AIM Mid Cap Core Equity Fund(2) SECTOR EQUITY MORE CONSERVATIVE
AIM Select Equity Fund
AIM Premier Equity II Fund(2) MORE AGGRESSIVE TAX-FREE
AIM Premier Equity Fund(2)
AIM Blue Chip Fund AIM New Technology Fund MORE AGGRESSIVE
AIM Mid Cap Basic Value Fund AIM Global Science and Technology Fund(2)
AIM Large Cap Core Equity Fund AIM Global Energy Fund AIM High Income Municipal Fund
AIM Charter Fund AIM Global Financial Services Fund AIM Municipal Bond Fund
AIM Basic Value Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(4)(5)
AIM Large Cap Basic Value Fund AIM Global Utilities Fund AIM Tax-Exempt Cash Fund
AIM Balanced Fund* AIM Real Estate Fund More Conservative
AIM Basic Balanced Fund* MORE CONSERVATIVE
MORE CONSERVATIVE
MORE CONSERVATIVE
*Domestic equity and income fund
</Table>
Equity and fixed-income funds are shown from more aggressive to more
conservative. When assessing the degree of risk, qualitative and quantitative
factors considered included the funds' portfolio holdings, diversification
permitted within the fund, the funds' standard deviations for three, five, 10,
15, 20 and 25 years, R-squared and beta analysis relative to the style-specific
benchmarks, and the possibility of incorporating portfolio management tools such
as leverage, derivatives and short selling. Fund rankings are relative to one
another within The AIM Family of Funds--Registered Trademark-- and should not be
compared with other investments. There is no guarantee that any one AIM fund
will be less volatile than any other. This order is subject to change. (1)AIM
Small Cap Growth Fund was closed to most investors on March 18, 2002. For more
information on who may continue to invest in AIM Small Cap Growth Fund, please
contact your financial advisor. (2)The following fund name changes became
effective 7/1/02: AIM Asian Growth Fund renamed AIM Asia Pacific Growth Fund;
AIM European Development Fund renamed AIM European Growth Fund; AIM Global
Telecommunications and Technology Fund renamed AIM Global Science and Technology
Fund; AIM International Equity Fund renamed AIM International Growth Fund; AIM
International Value Fund renamed AIM International Core Equity Fund; AIM Large
Cap Opportunities Fund renamed AIM Opportunities III Fund; AIM Mid Cap Equity
Fund renamed AIM Mid Cap Core Equity Fund; AIM Mid Cap Opportunities Fund
renamed AIM Opportunities II Fund; AIM Small Cap Opportunities Fund renamed AIM
Opportunities I Fund; AIM Value Fund renamed AIM Premier Equity Fund; AIM Value
II Fund renamed AIM Premier Equity II Fund. (3)Effective Oct. 1, 2002, the fund
reopened to new investors. (4)Class A shares closed to new investors on Oct. 30,
2002. (5)Class A3 shares were first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges and
expenses, ask your financial advisor for a prospectus. Please read it carefully
before investing. This brochure is not authorized for distribution to
prospective investors unless preceded or accompanied by a currently effective
fund prospectus, which contains more complete information, including sales
charges and expenses. Please read it carefully before investing. If used after
April 20, 2003, this brochure must be accompanied by a fund Performance &
Commentary or by an AIM Quarterly Performance Review for the most recent
quarter-end. Mutual Funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the mutual fund industry
since 1976 and manages $124 billion in assets for approximately 9 million
shareholders, including individual investors, corporate clients and financial
institutions. The AIM Family of Funds--Registered Trademark-- is distributed
nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest
independent financial services companies with $333 billion in assets under
management.
As of 12/31/02.
<Table>
<Caption>
College Separately
Mutual Retirement Savings Managed Offshore Alternative Cash
Funds Products Annuities Plans Accounts Products Investments Management
</Table>
[AIM LOGO]
--Servicemark--
[INVEST WITH DISCIPLINE LOGO]
--Registered Trademark--
GLU-AR-1
AIMinvestments.com
APPENDIX IV
ANNUAL REPORT / OCTOBER 31, 2002
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND
[COVER IMAGE]
[AIM FUNDS LOGO]
--Registered Trademark--
AIMinvestments.com
================================================================================
[COVER IMAGE]
ACCENT IN PINK BY WASSILY KANDINSKY
BOTH AS AN ARTIST AND AS A THEORIST, KANDINSKY PLAYED A PIVOTAL ROLE IN THE
DEVELOPMENT OF ABSTRACT ART. HIS EXPLORATION OF THE POSSIBILITIES OF
ABSTRACTION MADE HIM ONE OF THE MOST IMPORTANT INNOVATORS IN MODERN ART. MANY
OF THE COMPANIES IN WHICH THIS FUND INVESTS ARE ON THE CUTTING EDGE OF
TELECOMMUNICATIONS AND TECHNOLOGY, MAKING THEM INNOVATORS AS WELL.
================================================================================
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY
INVESTING IN EQUITY SECURITIES OF COMPANIES THAT DESIGN, DEVELOP OR PROVIDE
PRODUCTS AND SERVICES IN THE SCIENCE OR TECHNOLOGY INDUSTRIES.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o Effective July 1, 2002, AIM Global Telecommunications and Technology Fund
was renamed AIM Global Science and Technology Fund.
o AIM Global Science and Technology Fund's performance figures are historical,
and they reflect the reinvestment of distributions and changes in net asset
value.
o Had the advisor not waived fees and/or absorbed fund expenses during the
reporting period, returns would have been lower.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class A, B and C shares will differ because of
different sales charge structures and class expenses.
o The fund may participate in the initial public offering market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the effect of IPO investments on the fund's total return.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required from non-U.S. companies.
o The value of the fund's shares is particularly vulnerable to factors
affecting the technology and science industries, such as substantial
government regulations and the need for governmental approvals, dependency
on consumer and business acceptance as new technologies evolve, and large
and rapid price movements resulting from, among other things, fierce
competition in these industries. Additional factors affecting the technology
and science industries and the value of fund shares include rapid
obsolescence of products and services, short product cycles, and aggressive
pricing. Many technology and science companies are small and at an early
state of development and, therefore, may be subject to risks such as limited
product lines, markets, and financial and managerial resources.
o Investing in a single-sector mutual fund involves greater risk and potential
return than investing in a more diversified fund.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than the
original investment.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o The unmanaged Pacific Stock Exchange Technology 100 Index (the PSE
Technology 100) is a price-weighted index of 100 listed and over-the-counter
technology stocks from 15 technology-related industries.
o The unmanaged Lipper Science and Technology Fund Index represents an average
of the performance of the 30 largest science and technology funds tracked by
Lipper, Inc., an independent mutual fund performance monitor.
An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses. Performance of a market
index does not.
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. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to shareholders or to persons who
have received a current prospectus of the fund.
TO OUR SHAREHOLDERS
================================================================================
THE FUND BEGAN TO FIND MORE SOLID
FOOTING LATE IN THE REPORTING PERIOD.
ROBERT H. GRAHAM
================================================================================
DEAR SHAREHOLDER:
[PHOTO OF All of us know how difficult the equity markets were during
ROBERT H. the fiscal year ended October 31, 2002. We are now in the
GRAHAM] unenviable position of being able to say we have been in a
deeper and longer market downturn than that of 1973-74. We
know from experience that these conditions do eventually
end, though no one can predict exactly when. We are
encouraged, however, by the fact that as I write this
letter, the U.S. equity market has had several positive
weeks in a row. Whether this is the start of a long-term
positive trend remains to be seen. In the meantime, let me
assure you that all of us at AIM continue to work hard on
your behalf.
In light of continuing market difficulties, I thought
you would appreciate detailed information on some of the
methods AIM uses to manage your money. This information is
presented in the two pages following this letter. I hope it will provide you
with a greater understanding of our investment process, and I encourage you to
read it carefully. One of our ongoing goals is to keep all of our shareholders
well-informed.
BACK TO BASICS
When market conditions are as trying as they have been during the fiscal year
covered by this report, it is well to keep some investing fundamentals in mind.
First, seek professional advice--it is more important now than ever. A financial
professional can help you:
o Understand your entire financial profile before selecting individual
investments so you can tailor your portfolio to specific goals and
timetables.
o Learn the characteristics of various asset classes. Recently, many investors
have been seeking safety in fixed-income investments. Unfortunately, many do
not understand that bond prices move in the opposite direction of interest
rates. Existing bonds have been rising in value as interest rates have
fallen, contributing to attractive total returns. But rates are now so low
the upside potential of bond prices is limited. Sooner or later, the economy
will expand more robustly, and interest rates will begin to rise. That will
lower bond values, reducing total returns. As ever, diversification is an
investing fundamental.
o Develop reasonable expectations. Historically, stocks have averaged about a
10% return per year, bonds less, facts many of us forgot during the 1990s.
YOUR FUND MANAGERS' OBSERVATIONS
In the following pages, your fund's portfolio managers discuss your fund's
performance during the fiscal year and the market conditions and investment
strategies that affected that performance. I hope you find their comments
helpful.
AIM Global Science and Technology Fund began to find more solid footing late
in the reporting period. The fund's Class A shares had a return of -34.01% at
net asset value for the fiscal year ending October 31, 2002. The fund's
performance was in line with that of similar funds in the Lipper Science and
Technology Fund Index, which returned -33.00% for the year. The S&P 500,
returned -15.10% for the fiscal year.
David P. Barnard, one of the portfolio managers on the management team for
AIM Global Science and Technology Fund, will be retiring on January 31, 2003.
Abel Garcia and Robert Lloyd will remain on the management team for your fund.
Timely information about your fund and the markets is always available on
our Web site, www.aiminvestments.com. Our Client Services Department can be
reached during regular business hours at 800-959-4246.
IMPORTANT NEWS ABOUT AIM
This report features AIM's new logo and Web address, which we have adopted to
better reflect our diverse line of investment products. We are well known for
our mutual funds, but we also offer solutions for many investment situations
through a broad array of products and services including retirement products for
employers and individuals, annuities, college savings plans, separately managed
accounts, and cash management for businesses.
I am also pleased to announce that Mark Williamson will become Chief
Executive Officer of A I M Management Group Inc., the parent company of your
fund's advisor and distributor, on January 1, 2003. I will remain Chairman of
AIM. Mark has had a long and distinguished career in the mutual fund industry
and I am looking forward to his joining the AIM team.
Thank you for investing with AIM. I look forward to reporting to you again
in six months.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
December 2, 2002
A SPECIAL MESSAGE TO OUR SHAREHOLDERS
INVESTMENT RESEARCH UPDATE FOR AIM CLIENTS
[EDGAR M. LARSEN PHOTO]
EDGAR M. LARSEN
CHIEF INVESTMENT OFFICER
[GARY T. CRUM PHOTO]
GARY T. CRUM
DIRECTOR OF INVESTMENTS
THE FINANCIAL MARKETS have been battered over the past year by a wave of
corporate scandals, accounting restatements, bankruptcies of high-profile
companies and, in a few cases, outright financial fraud. Many investors,
understandably, feel uncertain about whether their portfolios are positioned to
withstand such a prolonged and severe market downturn. Now seems to be an
appropriate time to step back and reiterate AIM's concern for the financial
well-being of all of our clients and AIM's commitment to competitive excellence
across all investment disciplines.
We at AIM are proud of our rigorous qualitative and quantitative analytical
processes, and we remain confident that we will preserve our long-term record of
success through uncompromising fundamental research. During this recent period
of market instability, we have placed even greater focus on meticulous research,
and we continually look for new ways to improve our process.
We have the resources and the people needed to seek out the best investment
opportunities that exist in any market. It should be emphasized that AIM's teams
have not changed their investment strategies; rather our disciplines have been
fine-tuned in order to better understand each portfolio holding and to optimize
each fund's overall structure.
Rigorous accounting analysis is at the forefront of our investment-research
efforts. AIM employs both internal and external accounting experts and
proprietary tools to screen our portfolios for high-risk situations and to look
for investment opportunities.
BEYOND THE BOTTOM LINE
By going beyond the reported bottom-line numbers, we strive to understand where
a company's growth is coming from and how sustainable it may be. Our discipline
takes us through an in-depth examination of the financial statements and
industry conditions, combined with an evaluation of management's style and
strategy.
AIM's portfolio managers have taken advantage of some unique valuations in
this unusual market environment by adding opportunistically to their portfolios.
In addition to strong financial fundamentals and attractively priced securities,
AIM's teams look for companies with experienced and credible management teams.
Sometimes this means not accepting the consensus view of a particular company.
AIM seeks independent thought, both from our own analysts and portfolio
managers, and from trusted Wall Street sources. Our goal is to cultivate an
ongoing dialogue with independent thinkers in every industry, whether they work
for one of our portfolio companies, on Wall Street, at an independent research
boutique, or right here within our own firm. To this end, we have long had a
collaborative environment where communication across investment teams is
encouraged.
For example, AIM's fixed-income and equity analysts attend the same meetings
================================================================================
RIGOROUS ACCOUNTING
ANALYSIS IS AT
THE FOREFRONT OF
OUR INVESTMENT-
RESEARCH EFFORTS.
================================================================================
2
with company managements, and thus analyze the company from two different
perspectives. Our international managers work with our domestic teams to cover
the more globally oriented companies. And the teams that manage AIM's
sector-specific funds share their industry expertise with the rest of our
investment teams. As our professional staff and resources have grown, so have
the direct contacts with company management teams. Last year, AIM's analysts and
portfolio managers had more than 4,000 meetings with the senior executives of
our portfolio companies.
EDUCATION AND TRAINING
Continuing education and training are important in the ever-changing world of
investment analysis. We invite experts from such fields as accounting,
derivatives and banking to AIM so that we remain informed about current
corporate-finance techniques, new accounting regulations and other shifts in the
landscape of American business.
Over the past five years, AIM has devoted substantial resources to our
research department's personnel. Today, 68 percent of our investment management
and research professionals have earned master's degrees in business or finance.
Sixty percent have earned the Chartered Financial Analyst (CFA) or Certified
Public Accountant (CPA) designations.
QUANTITATIVE EXPERTISE
AIM's team of quantitative analysts plays a large role in portfolio construction
and performance monitoring. Our state-of-the-art proprietary tools include the
means to optimize a portfolio's construction, which includes managing and
monitoring risk, analyzing performance, and conducting hypothetical trading
scenarios to see how they would affect the overall portfolio. These tools offer
our investment teams a more acute awareness of how their portfolios stack up
against their benchmarks and their peers.
Attribution tools allow us to monitor relative sector and industry
weightings, individual security weightings, and correlations across different
holdings. Our portfolio management teams aren't the only ones using these
customized risk-assessment tools. They also are used to generate detailed
reports that are reviewed by members of AIM's senior management. We have a
schedule of formalized periodic reviews to assess the construction and the
risk-adjusted performance of the funds, to offer guidance to the portfolio
managers, and to take corrective action when warranted.
DIVERSIFICATION OF AIM'S OFFERINGS
Even during the equity-market bubble of the late 1990s, AIM advocated a
diversified approach to portfolio management for its clients. As growth stocks
registered double-digit gains, we were taking a longer-term view of the markets
and actively diversified our product line across market styles and
capitalization ranges.
As the financial markets have changed over the past few years, so has AIM's
selection of fund offerings. In the past, AIM was recognized for investing in
the equities of U.S. growth companies. Today, AIM's three largest equity
funds--AIM Basic Value Fund, AIM Premier Equity Fund and AIM Constellation
Fund--represent three distinctly different investment disciplines: Value, Blend
and Growth. Complementing those funds are dozens more in all styles, market-cap
ranges, asset classes, and geographic regions.
AIM's clients can create diversified, all-weather portfolios by selecting
from our full spectrum of funds, whether they seek equity or fixed-income, value
or growth, domestic or international, aggressive or conservative, or any
combination in between. Over the course of any complete market cycle, we expect
a portfolio that is a blend of these quality funds will provide a prudent
approach to achieving one's long-term investment goals.
This period of market dislocation has been painful for all of us. But over
the long term, we are confident that tightened accounting regulations, an
increased level of governmental oversight, and the reallocation of resources
following the recent bubble will all result in a healthy resurgence of the
American financial system.
AIM's investment teams and processes continue to be honed and tested in
today's challenging environment. We believe that this prolonged bear market has
created some unparalleled opportunities to invest in leading companies that will
weather the market storm and recover their industry-leading positions when
global economic growth reaccelerates.
We are grateful for the trust our clients have placed in AIM, and we
reaffirm our commitment to excellence across all of our investment disciplines.
Sincerely,
/s/ GARY T. CRUM
Gary T. Crum
Director of Investments/AIM
/s/ EDGAR M. LARSEN
Edgar M. Larsen
Chief Investment Officer/AIM
================================================================================
... WE REAFFIRM OUR
COMMITMENT TO
EXCELLENCE ACROSS ALL
OF OUR INVESTMENT
DISCIPLINES.
================================================================================
3
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
TECHNOLOGY STOCKS AND FUND STAGE SMALL RALLY LATE IN FISCAL YEAR
HOW DID AIM GLOBAL SCIENCE AND TECHNOLOGY FUND PERFORM?
After struggling through the protracted bear market over the past two years, AIM
Global Science and Technology Fund began to find more solid footing late in the
reporting period.
The fund's Class A shares had returns of -34.01% for the fiscal year ending
October 31, 2002. Class B and Class C shares returned -34.48% for the year.
(Returns are at net asset value and do not include sales charges.)
The benchmark index, the S&P 500, returned -15.10% for the fiscal year. (The
S&P 500 is more diversified than the fund and is not specifically a technology
index.) Also, the Lipper Science & Technology Fund Index returned -33.00% for
the year, and the PSE Technology 100 Index returned -24.86% for the year. Like
the fund, all these indexes rebounded to positive ground in October 2002.
Net assets in the fund were $398.9 million, and the number of holdings was
63.
WHAT ECONOMIC TRENDS AFFECTED EQUITY MARKETS?
Stocks remained in the grip of a protracted bear market for most of the fiscal
year. Concerns about the accounting practices of a number of high-profile
companies, mixed economic signals, and anemic company earnings weighed heavily
on investors' minds for the final months of the reporting period.
Markets rebounded during the final weeks of the fiscal year, as several
major companies reported better-than-expected earnings, and there were
indications the Federal Reserve Board (the Fed) planned to cut the federal funds
rate, which stood at 1.75% on October 31, 2002--its lowest level since 1961.
WHAT HAPPENED TO TECHNOLOGY STOCKS DURING THE PERIOD?
The technology sector remained depressed for most of the fiscal year. However,
late in the fiscal year, many firms' earnings reports began to improve. They
lacked the negative, cautious tone of earlier quarters.
Not only were current earnings frequently on target, many companies also
provided upward projections for the next quarter and next year.
Most importantly, corporate spending on technology seemed headed toward a
modest recovery. While spending is nowhere near the record levels seen in 1999
and 2000, companies are beginning to resume or increase information technology
spending.
HOW DID YOU MANAGE THE PORTFOLIO IN THIS ENVIRONMENT?
Dominant economic trends were largely negative for much of the fiscal year.
Consumers still were fearful of a double-dip recession, while consumer spending
held up well, consumer
================================================================================
...CORPORATE SPENDING
ON TECHNOLOGY SEEMED
HEADED TOWARD A
MODEST RECOVERY.
================================================================================
PORTFOLIO COMPOSITION
AS OF 10/31/02, based on total net assets
<Table>
<Caption>
==================================================================================================================================
TOP COUNTRIES TOP 10 HOLDINGS TOP 10 INDUSTRIES
==================================================================================================================================
[PIE CHART] 1. Samsung Electronics Co., Ltd. 5.3% 1. Semiconductors 15.6%
OTHERS 1% 2. Nextel Communications, Inc.-Class A 4.2 2. Aerospace & Defense 9.8
SWITZERLAND 1% 3. L-3 Communications Holdings, Inc. 4.0 3. Semiconductor Equipment 7.4
CANADA 1% 4. Microchip Technology Inc. 3.7 4. Systems Software 7.3
SOUTH KOREA 5% 5. Texas Instruments Inc. 3.7 5. Application Software 7.0
U.S.A. 92% 6. Dell Computer Corp. 3.6 6. Biotechnology 6.7
7. Microsoft Corp. 3.4 7. Electronic Equipment & Instruments 5.3
8. Symantec Corp. 3.2 8. Wireless Telecommunication Services 5.2
9. Lockheed Martin Corp. 3.1 9. Computer Storage & Peripherals 4.6
10. Gilead Sciences, Inc. 2.8 10. Internet Software & Services 4.0
The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security.
===================================================================================================================================
</Table>
4
confidence was down heading into the fourth quarter and Christmas.
In this environment, our two best industries were wireless and defense.
Wireless rebounded as companies reduced debt and returned to profitability.
Defense continued to be a strong story as concerns about conflict in Iraq
continued, and the need for technologically advanced weapons systems
intensified.
CAN YOU DISCUSS SOME STOCK HOLDINGS?
o Microsoft, the world's top software company, provides a variety of products
and services, including its Windows operating systems and Office software
suite. The company has expanded into markets such as video game consoles,
interactive television, and Internet access. The firm has resolved its legal
problems, and its share price moved higher.
o Nextel has blossomed into a digital mobile phone operator. Already providing
business users with wireless phone service, two-way radio dispatch, paging,
and text messaging on one handset, Nextel has added wireless Internet access
and international roaming. The company continues to show improving cash
flows and earnings.
WHAT WERE CONDITIONS LIKE AT THE CLOSE OF THE PERIOD?
Economic and market conditions remained uncertain. Inflation and interest rates
were low. Preliminary figures indicated the nation's gross domestic product
(GDP) grew at an annualized rate of 4.0% in the third quarter of 2002 compared
to 1.3% in the second quarter of the year.
Healthy consumer spending, which accounts for about two-thirds of economic
activity, accounted for much of the third-quarter economic expansion.
However, a weak job market threatened consumer spending as companies were
reluctant to hire new employees amid concerns about the strength of the economy.
In this environment, the stock market remained volatile and its direction
unpredictable. While stock valuations were more attractive than in recent years,
investors continued to be cautious because of economic uncertainties, lackluster
corporate earnings, continued threats of terror attacks, and the prospects of
war with Iraq.
TECHNOLOGY EARNINGS AND REVENUES BEGINNING TO GROW AGAIN, COMMERCE SAYS
Fund managers believe there are tangible signs that prospects for technology
stocks are improving, according to a recent report from the U.S. Department of
Commerce. Revenue and earnings growth are beginning to turn positive after many
quarters of declining growth.
These diagrams show the average revenue and earnings change in the S&P 500
technology companies. Continued improvement should boost the attractiveness of
technology stocks as business spending on technology begins to grow again,
Investors Business Daily reported on October 21, 2002.
Driving fundamental changes are subtle changes in two key metrics.
Inventories of technology products are declining, indicating that companies are
trying to improve the efficiency of their businesses. New orders are stable, but
above the lows seen in September 2001. We believe our bottom up approach to
finding stocks for the fund is particularly helpful in this market.
================================================================================
AVERAGE REVENUE CHANGE OF S&P TECH FIRMS
[LINE CHART]
3/01 -40
6/01 -70
9/01 -75
12/01 -55
3/02 -30
6/02 0
9/02 15
================================================================================
================================================================================
AVERAGE EARNINGS CHANGE OF S&P TECH FIRMS
[LINE CHART]
3/01 4
6/01 -10
9/01 -16
12/01 -18
3/02 -13
6/02 -12
9/02 -2
Source: First Call Financial, Precursor Group
================================================================================
================================================================================
PORTFOLIO MANAGEMENT TEAM
AS OF 10/31/02
DAVID P. BARNARD, CO-MANAGER
ABEL GARCIA, CO-MANAGER
ROBERT LLOYD, CO-MANAGER
ASSISTED BY THE TECHNOLOGY TEAM
See important fund and index
disclosures inside front cover.
[GRAPHIC]
For More Information Visit
AIMinvestments.com
================================================================================
5
FUND PERFORMANCE
================================================================================
RESULTS OF A $10,000 INVESTMENT
1/27/92-10/31/02
DATE AIM GLOBAL SCIENCE S&P 500 INDEX
& TECHNOLOGY FUND
CLASS A SHARES
01/27/92 9525 10000
10/92 9300 10476
10/93 14284 12039
10/94 15286 12504
10/95 14848 15804
10/96 15887 19606
10/97 18702 25895
10/98 18110 31593
10/99 30357 39696
10/00 38713 42111
10/01 11166 31636
10/02 7367 26860
Source: Lipper Inc.
Past performance cannot guarantee comparable future results.
================================================================================
The chart compares AIM Global Science & Technology Fund Class A Shares to a
benchmark index. It is intended to give you a general idea of how your fund
performed compared to this index over the period 1/27/92-10/31/02. Please note:
Index performance is for the period 1/31/92-10/31/02. It is important to
understand the difference between your fund and an index. Market indexes, such
as the S&P 500 are not managed and incur no sales charges, expenses or fees. If
you could buy all the securities that make up a market index, you would incur
expenses that would affect your investment return.
Your fund's total return includes sales charges, expenses and management
fees. Performance of the fund's Class A, Class B and Class C shares will differ
due to different sales charge structures and class expenses. For fund
performance calculations and indexes used in this report, see the inside front
cover.
Performance shown in the chart does not reflect deduction of taxes a
shareholder would pay on fund distributions or sale of fund shares. Performance
for the index does not reflect the effects of taxes.
This growth chart uses a logarithmic scale, which means the price scale
(vertical axis) is structured so that a given distance always represents the
same percent change in price, rather than the same absolute change in price. For
example, the distance from one to 10 is the same as the distance from 10 to 100
on a logarithmic chart, but the latter distance is 10 times greater on a linear
chart. A logarithmic scale better illustrates performance in the fund's early
years before reinvested distributions and compounding create the potential for
the original investment to grow to very large numbers.
FUND RETURNS as of 10/31/02
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
including sales charges
CLASS A SHARES
Inception (1/27/92) -2.80%
10 Years -2.78
5 Years -17.80
1 Year -37.15
CLASS B SHARES
Inception (4/1/93) -4.23%
5 Years -17.67
1 Year -37.76
CLASS C SHARES
Inception (3/1/99) -26.98%
1 Year -35.14
In addition to returns as of the close of the reporting period, industry
regulations require us to provide average annual total returns (including sales
charges) as of 9/30/02, the most recent calendar quarter-end, which were: Class
A Shares, inception (1/27/92) -3.78%, 10 years, -3.53%, five years, -21.27%, one
year, -35.39%. Class B shares, inception (4/1/93) -5.32%, five years, -21.09%,
one year, -35.84%. Class C shares, inception (3/1/99) -29.60%, one year,
- -33.30%.
DUE TO RECENT SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY
MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR
FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE.
6
EDUCATION AND PLANNING
OLD BUT GOOD ADVICE--THINK LONG TERM AND STAY DIVERSIFIED
There have been a lot of bumps in the investing road since the stock market
peaked in 2000, and you may have been tempted to simply stay out of the markets.
Or you may have jumped around in the market, looking for hot funds. Both are bad
ideas. Stay invested and diversify.
MARKETS HAVE DELIVERED
Of the 10 calendar years ended December 31, 2001, only two have been negative
for the S&P 500 (and they were the first back-to-back negative years since the
1970s).
In fact, for the five years ended December 31--a period that includes a
two-year bear market, the worst one in a generation--the S&P 500 produced
double-digit average annual total returns. (Of course, past performance cannot
guarantee comparable future results.)
Long-term (1900 through 2001) the performance of the U.S. stock market is
excellent: 69 years with positive performance vs. 33 with negative performance.
In addition, when the market rises, it tends to rise more than it falls during
negative years. The average return for the market's 33 down years was -13.18%.
But for the 69 up years, its average return was 22.46%.*
IT'S TIME, NOT TIMING
Research shows that pulling out of the stock market even for a short period and
missing a few of its best days is likely to have a negative effect on your
long-term returns. Even when markets have been as volatile as they have been the
past few years, you were better off staying the course than trying to guess when
to get out and get back in.
DIVERSIFICATION MATTERS
Markets and sectors have always gone in and out of favor, and they always will.
Diversification is still the key to a strong portfolio in any market. The table
of year by year results below shows bonds as the best choice over the past two
years. That doesn't mean junk everything else and invest in bonds. It means stay
diversified. When domestic and foreign stocks rebound, be certain you're
invested in them.
DON'T TRAVEL ALONE
You are bound to meet more obstacles and detours before you reach your
investment destination. The road will feel a lot smoother if you travel with a
financial advisor, someone who knows your goals, how much risk you can take and
what investments will suit you best.
* Markets are represented by the Dow Jones Industrial Average from 1900
through 1927 and by the S&P 500 from 1928 through 2001.
PAST PERFORMANCE CANNOT GUARANTEE COMPARABLE FUTURE RESULTS. DUE TO RECENT
SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER
SUBSTANTIALLY FROM HISTORICAL PERFORMANCE.
Results are based on total returns and include reinvestment of dividends. An
investment cannot be made directly in an index. International investing presents
certain risks not associated with investing solely in the United States. These
include risks relating to fluctuations in the value of the U.S. dollar relative
to the values of other currencies, the custody arrangements made for the fund's
foreign holdings, differences in accounting, political risks and the lesser
degree of public information required to be provided by non-U.S. companies.
THE LONG AND SHORT OF INVESTING
================================================================================
THE PENALTY FOR MISSING THE MARKET
S&P 500 9/30/92-9/30/02
PERIOD AVERAGE ANNUAL GROWTH
OF INVESTMENT TOTAL RETURN OF $10,000
Staying the Course 9.00% $23,674
Miss the 10 Best Days 4.05 14,868
Miss the 20 Best Days -0.40 10,406
Miss the 30 Best Days -2.56 7,712
Miss the 40 Best Days -5.09 5,933
Miss the 60 Best Days -9.42 3,718
Sources: FactSet Research Systems, Lipper, Inc.
================================================================================
<Table>
<Caption>
================================================================================
YEAR BY YEAR RESULTS
Average total returns for three asset classes
U.S. Bonds
U.S. Stocks Foreign Stocks (Lehman Aggregate
Year (S&P 500) (MSCI EAFE--Registered Trademark-- Index) Bond Index)
1997 33.35% 1.78% 9.65%
1998 28.60 20.00 8.69
1999 21.03 26.96 -0.82
2000 -9.10 -14.17 11.63
2001 -11.88 -21.44 8.44
================================================================================
</Table>
The unmanaged Dow Jones Industrial Average (the Dow) is a price-weighted average
of 30 actively traded blue chip stocks. The unmanaged Standard & Poor's
Composite Index of 500 Stocks (the S&P 500) is an index of common stocks
frequently used as a general measure of U.S. stock-market performance. The
unmanaged MSCI Europe, Australasia and the Far East Index (the EAFE--Registered
Trademark--) is a group of foreign securities tracked by Morgan Stanley Capital
International. The unmanaged Lehman Aggregate Bond Index, which represents the
U.S. investment-grade fixed-rate bond market (including government and corporate
securities, mortgage pass-through securities and asset-backed securities), is
compiled by Lehman Brothers, a well-known global investment bank.
7
FINANCIALS
Schedule of Investments
October 31, 2002
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-94.38%
Aerospace & Defense-9.81%
Alliant Techsystems Inc.(a)(b) 174,300 $ 10,484,145
- ------------------------------------------------------------------------
L-3 Communications Holdings, Inc.(a) 342,800 16,111,600
- ------------------------------------------------------------------------
Lockheed Martin Corp. 216,200 12,517,980
========================================================================
39,113,725
========================================================================
Application Software-6.96%
Activision, Inc.(a) 282,900 5,799,450
- ------------------------------------------------------------------------
Cerner Corp.(a) 146,700 5,223,987
- ------------------------------------------------------------------------
Electronic Arts Inc.(a) 92,900 6,049,648
- ------------------------------------------------------------------------
Intuit Inc.(a) 104,400 5,420,448
- ------------------------------------------------------------------------
Mercury Interactive Corp.(a) 200,000 5,274,000
========================================================================
27,767,533
========================================================================
Auto Parts & Equipment-1.65%
Gentex Corp.(a) 223,200 6,579,936
========================================================================
Biotechnology-6.70%
Cephalon, Inc.(a) 77,800 3,908,672
- ------------------------------------------------------------------------
Chiron Corp.(a) 24,000 947,040
- ------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 326,200 11,332,188
- ------------------------------------------------------------------------
IDEC Pharmaceuticals Corp.(a) 170,000 7,823,400
- ------------------------------------------------------------------------
SangStat Medical Corp.(a) 146,200 2,728,092
========================================================================
26,739,392
========================================================================
Computer & Electronics Retail-2.01%
Best Buy Co., Inc.(a) 208,500 4,297,185
- ------------------------------------------------------------------------
CDW Computer Centers, Inc.(a) 70,000 3,711,400
========================================================================
8,008,585
========================================================================
Computer Hardware-3.59%
Dell Computer Corp.(a) 500,000 14,305,000
========================================================================
Computer Storage & Peripherals-4.64%
Imation Corp.(a) 56,200 2,299,704
- ------------------------------------------------------------------------
Lexmark International, Inc.(a) 35,500 2,109,410
- ------------------------------------------------------------------------
SanDisk Corp.(a) 268,500 5,308,245
- ------------------------------------------------------------------------
Storage Technology Corp.(a) 362,900 6,416,072
- ------------------------------------------------------------------------
Western Digital Corp.(a) 384,400 2,379,436
========================================================================
18,512,867
========================================================================
Electronic Equipment & Instruments-5.30%
Samsung Electronics Co., Ltd. (South Korea) 75,000 21,139,706
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
Health Care Distributors & Services-3.46%
DIANON Systems, Inc.(a) 87,500 $ 3,500,000
- ------------------------------------------------------------------------
Express Scripts, Inc.(a) 38,400 2,080,512
- ------------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 62,100 1,496,610
- ------------------------------------------------------------------------
Quest Diagnostics Inc.(a)(b) 105,300 6,721,299
========================================================================
13,798,421
========================================================================
Health Care Equipment-0.47%
Boston Scientific Corp.(a) 49,900 1,877,737
========================================================================
Health Care Facilities-0.52%
United Surgical Partners International,
Inc.(a) 105,200 2,089,272
========================================================================
Internet Retail-1.74%
eBay Inc.(a) 110,000 6,958,600
========================================================================
Internet Software & Services-3.99%
Expedia, Inc.-Class A(a) 51,900 3,511,554
- ------------------------------------------------------------------------
Hotels.com-Class A(a)(b) 50,500 3,148,170
- ------------------------------------------------------------------------
Overture Services, Inc.(a) 297,900 8,201,187
- ------------------------------------------------------------------------
PEC Solutions, Inc.(a) 30,000 1,039,500
========================================================================
15,900,411
========================================================================
IT Consulting & Services-3.10%
Affiliated Computer Services, Inc.-Class
A(a)(b) 144,000 6,631,200
- ------------------------------------------------------------------------
Computer Sciences Corp.(a) 178,100 5,750,849
========================================================================
12,382,049
========================================================================
Networking Equipment-1.47%
Cisco Systems, Inc.(a) 525,000 5,869,500
========================================================================
Pharmaceuticals-2.45%
Allergan, Inc. 25,000 1,361,250
- ------------------------------------------------------------------------
American Pharmaceutical Partners, Inc.(a) 10,000 200,000
- ------------------------------------------------------------------------
Biovail Corp. (Canada)(a) 170,000 5,380,500
- ------------------------------------------------------------------------
Forest Laboratories, Inc.(a)(b) 17,000 1,665,830
- ------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 15,000 1,161,450
========================================================================
9,769,030
========================================================================
Semiconductor Equipment-7.37%
Applied Materials, Inc.(a) 450,000 6,763,500
- ------------------------------------------------------------------------
KLA-Tencor Corp.(a) 120,000 4,275,600
- ------------------------------------------------------------------------
Lam Research Corp.(a) 475,000 5,980,250
- ------------------------------------------------------------------------
Novellus Systems, Inc.(a) 261,000 8,247,600
- ------------------------------------------------------------------------
Teradyne, Inc.(a) 92,000 1,114,120
- ------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(a) 125,900 2,998,938
========================================================================
29,380,008
========================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
Semiconductors-15.61%
Analog Devices, Inc.(a) 301,300 $ 8,074,840
- ------------------------------------------------------------------------
Fairchild Semiconductor Corp.-Class A(a) 331,800 3,948,420
- ------------------------------------------------------------------------
Intersil Corp.-Class A(a) 162,300 2,757,477
- ------------------------------------------------------------------------
LSI Logic Corp.(a) 570,000 3,363,000
- ------------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 85,300 1,382,713
- ------------------------------------------------------------------------
Microchip Technology Inc.(b) 600,000 14,640,000
- ------------------------------------------------------------------------
QLogic Corp.(a) 260,000 9,037,600
- ------------------------------------------------------------------------
STMicroelectronics N.V. (Netherlands) 225,000 4,465,235
- ------------------------------------------------------------------------
Texas Instruments Inc. 920,000 14,591,200
========================================================================
62,260,485
========================================================================
Systems Software-7.26%
Microsoft Corp.(a) 250,000 13,367,500
- ------------------------------------------------------------------------
Network Associates, Inc.(a) 174,900 2,779,161
- ------------------------------------------------------------------------
Symantec Corp. (a)(b) 320,000 12,800,000
========================================================================
28,946,661
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
Telecommunications Equipment-1.07%
UTStarcom, Inc.(a) 250,000 $ 4,270,000
========================================================================
Wireless Telecommunication Services-5.21%
Nextel Communications, Inc.-Class A (a)(b) 1,500,000 16,920,000
- ------------------------------------------------------------------------
United States Cellular Corp.(a) 140,000 3,864,000
========================================================================
20,784,000
========================================================================
Common Stocks & Other Equity Interests
(Cost $439,481,397) 376,452,918
========================================================================
MONEY MARKET FUNDS-3.47%
STIC Liquid Assets Portfolio(c) 6,914,345 6,914,345
- ------------------------------------------------------------------------
STIC Prime Portfolio(c) 6,914,345 6,914,345
========================================================================
Total Money Market Funds (Cost
$13,828,690) 13,828,690
========================================================================
TOTAL INVESTMENTS-97.85% (Cost $453,310,087) 390,281,608
========================================================================
OTHER ASSETS LESS LIABILITIES-2.15% 8,575,640
========================================================================
NET ASSETS-100.00% $398,857,248
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
F-2
Statement of Assets and Liabilities
October 31, 2002
<Table>
ASSETS:
Investments, at market value (cost
$453,310,087)* $390,281,608
- -------------------------------------------------------------
Foreign currencies, at value (cost $12,389,103) 12,389,282
- -------------------------------------------------------------
Receivables for:
Investments sold 625,320
- -------------------------------------------------------------
Fund shares sold 1,002,617
- -------------------------------------------------------------
Dividends 46,935
- -------------------------------------------------------------
Investment for deferred compensation plan 3,466
- -------------------------------------------------------------
Collateral for securities loaned 118,459,571
- -------------------------------------------------------------
Other assets 33,686
=============================================================
Total assets 522,842,485
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 1,998,280
- -------------------------------------------------------------
Fund shares reacquired 1,936,105
- -------------------------------------------------------------
Options written (premiums received $453,826) 489,863
- -------------------------------------------------------------
Deferred compensation plan 3,466
- -------------------------------------------------------------
Collateral upon return of securities loaned 118,459,571
- -------------------------------------------------------------
Accrued distribution fees 323,831
- -------------------------------------------------------------
Accrued trustees' fees 1,020
- -------------------------------------------------------------
Accrued transfer agent fees 492,886
- -------------------------------------------------------------
Accrued operating expenses 280,215
=============================================================
Total liabilities 123,985,237
=============================================================
Net assets applicable to shares outstanding $398,857,248
_____________________________________________________________
=============================================================
NET ASSETS:
Class A $280,426,370
_____________________________________________________________
=============================================================
Class B $102,469,882
_____________________________________________________________
=============================================================
Class C $ 15,960,996
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 57,390,013
_____________________________________________________________
=============================================================
Class B 22,452,284
_____________________________________________________________
=============================================================
Class C 3,497,045
_____________________________________________________________
=============================================================
Class A:
Net asset value per share $ 4.89
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $4.89 divided by
95.25%) $ 5.13
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per share $ 4.56
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per share $ 4.56
_____________________________________________________________
=============================================================
</Table>
Statement of Operations
For the year ended October 31, 2002
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$77,870) $ 515,038
- -------------------------------------------------------------
Dividends from affiliated money market funds 427,739
- -------------------------------------------------------------
Interest 3,454
- -------------------------------------------------------------
Security lending income 542,030
=============================================================
Total investment income 1,488,261
=============================================================
EXPENSES:
Advisory fees 5,944,573
- -------------------------------------------------------------
Administrative services fees 128,170
- -------------------------------------------------------------
Custodian fees 92,510
- -------------------------------------------------------------
Distribution fees -- Class A 1,965,401
- -------------------------------------------------------------
Distribution fees -- Class B 1,952,778
- -------------------------------------------------------------
Distribution fees -- Class C 242,286
- -------------------------------------------------------------
Transfer agent fees 5,431,147
- -------------------------------------------------------------
Trustees' fees 10,411
- -------------------------------------------------------------
Printing 848,229
- -------------------------------------------------------------
Other 149,120
=============================================================
Total expenses 16,764,625
=============================================================
Less: Fees waived (3,384,288)
- -------------------------------------------------------------
Expenses paid indirectly (12,084)
=============================================================
Net expenses 13,368,253
=============================================================
Net investment income (loss) (11,879,992)
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (245,567,272)
- -------------------------------------------------------------
Foreign currencies 273,984
- -------------------------------------------------------------
Option contracts written 4,324,492
=============================================================
(240,968,796)
=============================================================
Change in net unrealized appreciation of:
Investment securities 27,107,318
- -------------------------------------------------------------
Foreign currencies 34,077
- -------------------------------------------------------------
Option contracts written 395,431
=============================================================
27,536,826
=============================================================
Net gain (loss) from investment securities,
foreign currencies and option contracts (213,431,970)
=============================================================
Net increase (decrease) in net assets
resulting from operations $(225,311,962)
_____________________________________________________________
=============================================================
</Table>
* At October 31, 2002, securities with an aggregate market value of $115,759,188
were on loan to brokers.
See Notes to Financial Statements.
F-3
Statement of Changes in Net Assets
For the years ended October 31, 2002 and 2001
<Table>
<Caption>
2002 2001
- ------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (11,879,992) $ (25,069,378)
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (240,968,796) (1,198,211,906)
- ------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts 27,536,826 (872,582,166)
================================================================================================
Net increase (decrease) in net assets resulting from
operations (225,311,962) (2,095,863,450)
================================================================================================
Distributions to shareholders from net realized gains:
Class A -- (193,140,722)
- ------------------------------------------------------------------------------------------------
Class B -- (182,354,331)
- ------------------------------------------------------------------------------------------------
Class C -- (14,882,483)
- ------------------------------------------------------------------------------------------------
Share transactions-net:
Class A (5,159,028) 182,460,304
- ------------------------------------------------------------------------------------------------
Class B (122,002,616) 7,506,235
- ------------------------------------------------------------------------------------------------
Class C (3,417,367) 7,846,180
================================================================================================
Net increase (decrease) in net assets (355,890,973) (2,288,428,267)
================================================================================================
NET ASSETS:
Beginning of year 754,748,221 3,043,176,488
================================================================================================
End of year $ 398,857,248 $ 754,748,221
________________________________________________________________________________________________
================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 1,903,878,159 $ 2,046,057,315
- ------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (6,681) (816)
- ------------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and option contracts (1,441,949,989) (1,200,707,211)
- ------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and option contracts (63,064,241) (90,601,067)
================================================================================================
$ 398,857,248 $ 754,748,221
________________________________________________________________________________________________
================================================================================================
</Table>
See Notes to Financial Statements.
F-4
Notes to Financial Statements
October 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Science and Technology Fund (the "Fund"), formerly AIM Global
Telecommunications and Technology Fund, is a separate series of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of seven
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's investment objective is long-term growth of
capital.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued at the closing bid price furnished
by independent pricing services or market makers. Each security reported on
the NASDAQ National Market System is valued at the last sales price as of
the close of the customary trading session on the valuation date or absent
a last sales price, at the closing bid price. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, dividend rate,
yield, quality, type of issue, coupon rate, maturity, individual trading
characteristics and other market data. Securities for which market prices
are not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in
the case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value. For purposes of determining net asset value per share, futures and
option contracts generally will be valued 15 minutes after the close of the
customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the NYSE. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not be
reflected in the computation of the Fund's net asset value. If a
development/event is so significant that there is a reasonably high degree
of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer
reflect actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in
good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-
F-5
upon price at a future date. The Fund may enter into a foreign currency
contract to attempt to minimize the risk to the Fund from adverse changes
in the relationship between currencies. The Fund may also enter into a
foreign currency contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar
price of that security. The Fund could be exposed to risk if counterparties
to the contracts are unable to meet the terms of their contracts or if the
value of the foreign currency changes unfavorably.
G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. When the Fund
writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
H. EXPENSES -- Distribution expenses directly attributable to a class of
shares are charged to the respective classes' operations. Transfer agency
fees and expenses and other shareholder recordkeeping fees and expenses are
charged to each class pursuant to a transfer agency and service agreement
adopted by the Fund with respect to such class. All other expenses are
allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
The Fund pays AIM investment management and administration fees at an annual
rate of 0.975% on the first $500 million of the Fund's average daily net assets,
plus 0.95% on the next $500 million of the Fund's average daily net assets, plus
0.925% on the next $500 million of the Fund's average daily net assets, plus
0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has
contractually agreed to limit total annual operating expenses (excluding
interest, taxes, dividends on short sales, extraordinary items and increases in
expenses due to expense offset arrangements, if any) for Class A, Class B and
Class C shares to 2.00%, 2.50% and 2.50%, respectively. 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 fund of which the Fund has
invested. For the year ended October 31, 2002, AIM waived fees of $3,384,288.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the year ended October 31, 2002, AIM was
paid $128,170 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 2002, AFS
retained $3,594,899 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.50% 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 C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. 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
master distribution agreements, for the year ended October 31, 2002, the Class
A, Class B and Class C shares paid $1,965,401, $1,952,778 and $242,286,
respectively.
AIM Distributors retained commissions of $90,080 from sales of the Class A
shares of the Fund during the year ended October 31, 2002. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 2002,
AIM Distributors retained $35,193, $18 and $7,446 in contingent deferred sales
charges imposed on redemptions of Class A, Class B and Class C shares,
respectively.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended October 31, 2002, the Fund paid legal fees of $4,928 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended October 31, 2002, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $11,990 and reductions in
custodian fees of $94 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $12,084.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Trust. The Trustees deferring compensation have the option to
select various AIM Funds in which all or part of their deferral accounts shall
be deemed to be invested.
F-6
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended October 31,
2002, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities. It is
the Fund's policy to obtain additional collateral from or return excess
collateral to the borrower by the end of the next business day. Therefore, the
value of the collateral may be temporarily less than the value of the securities
on loan.
At October 31, 2002, securities with an aggregate value of $115,759,188 were
on loan to brokers. The loans were secured by cash collateral of $118,459,571
received by the Fund and invested in affiliated money market funds as follows:
$59,229,786 in STIC Liquid Assets Portfolio and $59,229,785 in STIC Prime
Portfolio. For the year ended October 31, 2002, the Fund received fees of
$542,030 for securities lending.
NOTE 7--CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 2002 are
summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- -------------------------------------------------------------
Beginning of year 10,095 $ 2,707,097
- -------------------------------------------------------------
Written 42,275 9,820,842
- -------------------------------------------------------------
Closed (34,928) (8,534,311)
- -------------------------------------------------------------
Exercised (12,185) (3,319,028)
- -------------------------------------------------------------
Expired (1,512) (220,774)
=============================================================
End of year 3,745 $ 453,826
_____________________________________________________________
=============================================================
</Table>
Open call option contracts written at October 31, 2002 were as follows:
<Table>
<Caption>
OCTOBER 31,
2002 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------
Affiliated Computer
Services, Inc.-Class
A Nov-02 $ 50 300 $ 42,599 $ 21,750 $ 20,849
- ----------------------------------------------------------------------------------------------------
Alliant Techsystems
Inc. Nov-02 65 175 23,974 17,063 6,911
- ----------------------------------------------------------------------------------------------------
Forrest Laboratories
Inc. Nov-02 100 20 4,840 3,550 1,290
- ----------------------------------------------------------------------------------------------------
Hotels.com-Class A Nov-02 65 100 11,325 16,250 (4,925)
- ----------------------------------------------------------------------------------------------------
Microchip Technology
Inc. Nov-02 25 900 142,952 101,250 41,702
- ----------------------------------------------------------------------------------------------------
Nextel
Communications,
Inc.-Class A Nov-02 10 1,500 145,495 221,250 (75,755)
- ----------------------------------------------------------------------------------------------------
Quest Diagnostics
Inc. Nov-02 65 100 21,699 17,750 3,949
- ----------------------------------------------------------------------------------------------------
Symantec Corp. Nov-02 40 650 60,942 91,000 (30,058)
====================================================================================================
3,745 $453,826 $489,863 $(36,037)
____________________________________________________________________________________________________
====================================================================================================
</Table>
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
Distributions to Shareholders:
The tax character of distributions paid during the years ended October 31, 2002
and 2001 were as follows:
<Table>
<Caption>
2002 2001
- ------------------------------------------------------------
Distributions paid from long-term
capital gain $-- $390,377,536
============================================================
</Table>
Tax Components of Beneficial Interest:
As of October 31, 2002, the components of beneficial interest on a tax basis
were as follows:
<Table>
Unrealized appreciation
(depreciation) -- investments $ (64,198,108)
- --------------------------------------------------------------
Temporary book/tax differences (6,681)
- --------------------------------------------------------------
Capital loss carryforward (1,440,816,122)
- --------------------------------------------------------------
Shares of beneficial interest 1,903,878,159
==============================================================
$ 398,857,248
______________________________________________________________
==============================================================
</Table>
The difference between book-basis and tax basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to the tax
deferral of losses on wash sales and other deferrals. Amount includes
appreciation (depreciation) on foreign currencies and options written of
$(35,761).
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the deferral of trustee compensation and
retirement plan expenses.
The Fund's capital loss carryforward expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- -------------------------------------------------------------
October 31, 2009 $1,181,366,577
- -------------------------------------------------------------
October 31, 2010 259,449,545
=============================================================
$1,440,816,122
_____________________________________________________________
=============================================================
</Table>
F-7
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 2002 was
$674,273,137 and $809,876,271, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2002 is as follows:
<Table>
Aggregate unrealized appreciation of
investment securities $ 31,046,576
- -------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (95,208,923)
=============================================================
Net unrealized appreciation (depreciation) of
investment securities $(64,162,347)
_____________________________________________________________
=============================================================
Cost of investments for tax purposes is $454,443,955.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions and
net operating losses, shares of beneficial interest was decreased by
$11,600,145, undistributed net investment income was increased by $11,874,127
and undistributed net realized gains was decreased by $273,982. This
reclassification had no effect on the net assets of the Fund.
NOTE 11--SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 2002 and 2001
were as follows:
<Table>
<Caption>
2002 2001
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 34,707,240* $ 227,772,981* 20,449,981 $ 233,919,662
- --------------------------------------------------------------------------------------------------------------------------
Class B 2,939,110 19,257,843 6,719,273 89,717,986
- --------------------------------------------------------------------------------------------------------------------------
Class C 1,050,513 6,971,729 1,715,379 22,049,203
==========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 8,804,839 178,558,019
- --------------------------------------------------------------------------------------------------------------------------
Class B -- -- 8,822,895 168,780,846
- --------------------------------------------------------------------------------------------------------------------------
Class C -- -- 739,056 14,130,718
==========================================================================================================================
Reacquired:
Class A (36,509,509) (232,932,009) (19,515,999) (230,017,377)
- --------------------------------------------------------------------------------------------------------------------------
Class B (21,786,550)* (141,260,459)* (22,756,386) (250,992,597)
- --------------------------------------------------------------------------------------------------------------------------
Class C (1,669,762) (10,389,096) (2,270,767) (28,333,741)
==========================================================================================================================
(21,268,958) $(130,579,011) 2,708,271 $ 197,812,719
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
* Includes automatic conversion of 9,000,274 shares of Class B shares in the
amount of $56,174,791 to 8,433,047 shares of Class A shares in the amount of
$56,174,791.
F-8
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 7.41 $ 30.61 $ 26.44 $ 16.28 $ 18.04
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12)(a) (0.20)(a) 0.06(a)(b) (0.25) (0.17)(a)
- -----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.40) (19.12) 7.23 10.97 (0.39)
=============================================================================================================================
Total from investment operations (2.52) (19.32) 7.29 10.72 (0.56)
=============================================================================================================================
Less distributions from net realized gains -- (3.88) (3.12) (0.56) (1.20)
=============================================================================================================================
Net asset value, end of period $ 4.89 $ 7.41 $ 30.61 $ 26.44 $ 16.28
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(c) (34.01)% (71.16)% 27.52% 67.63% (3.16)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $280,426 $438,702 $1,513,595 $1,023,124 $713,904
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.01%(d) 1.98% 1.63% 1.77% 1.88%
- -----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.56%(d) 2.03% 1.63% 1.77% 1.88%
=============================================================================================================================
Ratio of net investment income (loss) to average
net assets (1.76)%(d) (1.57)% 0.16% (1.11)% (0.93)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 115% 173% 111% 122% 75%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income per share reflects dividend income of $0.49 per
share recognized from the spin-off of Nortel Networks Corp. from BCE,
Inc.
(c) Includes adjustments in accordance with generally accepted accounting
principals and does not include sales charges.
(d) Ratios are based on average daily assets of $393,080,194.
F-9
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------
2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.96 $ 29.17 $ 25.43 $ 15.76 $ 17.58
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.25)(a) (0.11)(a)(b) (0.35) (0.25)(a)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.26) (18.08) 6.97 10.58 (0.37)
================================================================================================================================
Total from investment operations (2.40) (18.33) 6.86 10.23 (0.62)
================================================================================================================================
Less distributions from net realized gains -- (3.88) (3.12) (0.56) (1.20)
================================================================================================================================
Net asset value, end of period $ 4.56 $ 6.96 $ 29.17 $ 25.43 $ 15.76
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(c) (34.48)% (71.30)% 26.87% 66.84% (3.67)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $102,470 $287,394 $1,414,915 $898,400 $614,715
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.51%(d) 2.48% 2.13% 2.28% 2.38%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 3.06%(d) 2.53% 2.13% 2.28% 2.38%
================================================================================================================================
Ratio of net investment income (loss) to average
net assets (2.26)%(d) (2.07)% (0.34)% (1.62)% (1.43)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 115% 173% 111% 122% 75%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income per share reflects dividend income of $0.49 per
share recognized from the spin-off of Nortel Networks Corp. from BCE,
Inc.
(c) Includes adjustments in accordance with generally accepted accounting
principals and does not include contingent deferred sales charges.
(d) Ratios are based on average daily net assets of $195,277,846.
F-10
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
--------------------------------------------------------------
MARCH 1, 1999
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
--------------------------------------- OCTOBER 31,
2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.96 $ 29.16 $ 25.43 $ 19.23
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.25)(a) (0.11)(a)(b) (0.11)
- ------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (2.26) (18.07) 6.96 6.31
==================================================================================================================
Total from investment operations (2.40) (18.32) 6.85 6.20
==================================================================================================================
Less distributions from net realized gains -- (3.88) (3.12) --
==================================================================================================================
Net asset value, end of period $ 4.56 $ 6.96 $ 29.16 $ 25.43
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(c) (34.48)% (71.29)% 26.83% 32.24%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $15,961 $28,652 $114,667 $12,352
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.51%(d) 2.48% 2.13% 2.28%(e)
- ------------------------------------------------------------------------------------------------------------------
Without fee waivers 3.06%(d) 2.53% 2.13% 2.28%(e)
==================================================================================================================
Ratio of net investment income (loss) to average
net assets (2.26)%(d) (2.07)% (0.34)% (1.62)%(e)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate 115% 173% 111% 122%
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income per share reflects dividend income of $0.49 per
share recognized from the spin-off of Nortel Networks Corp. from BCE,
Inc.
(c) Includes adjustments in accordance with generally accepted accounting
principals and does not include contingent deferred sales charges and is
not annualized for periods less than one year.
(d) Ratios are based on average daily net assets of $24,228,588.
(e) Annualized.
F-11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders
of AIM Global Science and Technology Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Global Science and
Technology Fund (formerly known as AIM Global Telecommunications and Technology
Fund) (one of the funds constituting AIM Investment Funds; hereafter referred to
as the "Fund") at October 31, 2002, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2002 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
December 12, 2002
Houston, Texas
F-12
OTHER INFORMATION
Trustees and Officers
As of December 31, 2001
The address of each trustee and officer of AIM Investment Funds is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 86 portfolios in
the AIM Funds complex. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
Name, Year of Birth and Trustee and/ Principal Occupation(s) Other Directorship(s)
Position(s) Held with the Trust or Officer Since During Past 5 Years Held by Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham* -- 1946 1998 Chairman, President and Chief Executive None
Trustee, Chairman and Officer, A I M Management Group Inc.
President (financial services holding company);
Chairman and President, A I M Advisors,
Inc. (registered investment advisor);
Director and Senior Vice President,
A I M Capital Management, Inc.
(registered investment advisor);
Chairman, A I M Distributors, Inc.
(registered broker dealer), A I M Fund
Services, Inc. (registered transfer
agent), and Fund Management Company
(registered broker dealer); and
Director and Vice Chairman, AMVESCAP
PLC (parent of AIM and a global
investment management firm)
- -------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Of Counsel, law firm of Baker & Badgley Funds, Inc. (registered
Trustee McKenzie investment company)
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology ACE Limited (insurance
Trustee Associates (technology consulting company); and Captaris, Inc.
company) (unified messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Chairman, Cortland Trust, Inc. None
Trustee (registered investment company) and DHJ
Media, Inc.; Director, Magellan
Insurance Company; Member of Advisor
Board of Rotary Power International
(designer, manufacturer, and seller of
rotary power engines); formerly,
Director, President and CEO, Volvo
Group North America, Inc.; and director
of various affiliated Volvo companies
- -------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 2001 Formerly, Chairman, Mercantile Mortgage None
Trustee Corp.; Vice Chairman, President and
Chief Operating Officer,
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares
Corp.
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc.
Trustee Naftalis and Frankel LLP (registered investment company)
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly, Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Louis S. Sklar -- 1939 2001 Executive Vice President, Development None
Trustee and Operations, Hines Interests Limited
Partnership (real estate development
company)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Graham is considered an interested person of the fund because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
Trustees and Officers (continued)
As of December 31, 2001
The address of each trustee and officer of AIM Investment Funds is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 86 portfolios in
the AIM Funds complex. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
Name, Year of Birth and Trustee and/ Principal Occupation(s) Other Directorship(s)
Position(s) Held with the Trust or Officer Since During Past 5 Years Held by Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------------
Gary T. Crum -- 1947 1998 Director and President, A I M Capital N/A
Vice President Management, Inc.; Director and
Executive Vice President, A I M
Management Group Inc.; Director and
Senior Vice President, A I M Advisors,
Inc.; and Director, A I M Distributors,
Inc. and AMVESCAP PLC (parent of AIM
and a global investment management
firm)
- -------------------------------------------------------------------------------------------------------------------------------
Carol F. Relihan -- 1954 1998 Director, Senior Vice President, N/A
Senior Vice President and General Counsel and Secretary, A I M
Secretary Advisors, Inc. and A I M Management
Group Inc.; Director, Vice President
and General Counsel, Fund Management
Company; and Vice President, A I M Fund
Services, Inc., A I M Capital
Management, Inc. and A I M
Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Melville B. Cox -- 1943 1998 Vice President and Chief Compliance N/A
Vice President Officer, A I M Advisors, Inc. and A I M
Capital Management, Inc.; and Vice
President, A I M Fund Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Dana R. Sutton -- 1959 1998 Vice President and Fund Treasurer, N/A
Vice President and Treasurer A I M Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available
upon request, without charge, by calling 1.800.347.4246.
</Table>
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. PricewaterhouseCoopers LLP
Suite 100 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046 Suite 100 Suite 100 Suite 2900
Houston, TX 77046 Houston, TX 77046 Houston, TX 77002
COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN
Ballard Spahr Kramer, Levin, Naftalis & A I M Fund Services, Inc. State Street Bank and Trust
Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Company
1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103 New York, NY 10022 Boston, MA 02110
</Table>
THE AIM FAMILY OF FUNDS--REGISTERED TRADEMARK--
================================================================================
[ART]
MORE AGGRESSIVE
SECTOR EQUITY
INTERNATIONAL/GLOBAL EQUITY
DOMESTIC EQUITY
FIXED INCOME
MORE CONSERVATIVE
================================================================================
<Table>
<Caption>
FIXED INCOME
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY TAXABLE
MORE AGGRESSIVE MORE AGGRESSIVE MORE AGGRESSIVE
AIM Emerging Growth Fund AIM Developing Markets Fund AIM High Yield Fund II
AIM Small Cap Growth Fund(1) AIM European Small Company Fund AIM High Yield Fund
AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund(2) AIM Strategic Income Fund
AIM Opportunities I Fund(2),(3) AIM International Emerging Growth Fund AIM Income Fund
AIM Mid Cap Growth Fund AIM Global Aggressive Growth Fund AIM Global Income Fund
AIM Libra Fund AIM European Growth Fund(2) AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund(2) AIM Intermediate Government Fund
AIM Opportunities II Fund(2),(3) AIM Global Growth Fund AIM Short Term Bond Fund
AIM Constellation Fund AIM Worldwide Spectrum Fund AIM Floating Rate Fund
AIM Large Cap Growth Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(4),(5)
AIM Weingarten Fund AIM International Core Equity Fund(2) AIM Money Market Fund
AIM Opportunities III Fund(2),(3)
AIM Small Cap Equity Fund MORE CONSERVATIVE MORE CONSERVATIVE
AIM Capital Development Fund
AIM Mid Cap Core Equity Fund(2) SECTOR EQUITY TAX-FREE
AIM Select Equity Fund
AIM Premier Equity II Fund(2) MORE AGGRESSIVE MORE AGGRESSIVE
AIM Premier Equity Fund(2)
AIM Blue Chip Fund AIM New Technology Fund AIM High Income Municipal Fund
AIM Mid Cap Basic Value Fund AIM Global Science and Technology Fund(2) AIM Municipal Bond Fund
AIM Large Cap Core Equity Fund AIM Global Energy Fund AIM Tax-Free Intermediate Fund(4),(5)
AIM Charter Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Basic Value Fund AIM Global Health Care Fund
AIM Large Cap Basic Value Fund AIM Global Utilities Fund MORE CONSERVATIVE
AIM Balanced Fund* AIM Real Estate Fund
AIM Basic Balanced Fund* [AIM FUNDS LOGO]
MORE CONSERVATIVE --Registered Trademark--
MORE CONSERVATIVE
*Domestic equity and income fund
</Table>
Equity and fixed-income funds are shown from more aggressive to more
conservative. When assessing the degree of risk, qualitative and quantitative
factors considered included the funds' portfolio holdings, diversification
permitted within the fund, the funds' standard deviations for three, five, 10,
15, 20 and 25 years, R-squared and beta analysis relative to the style-specific
benchmarks, and the possibility of incorporating portfolio management tools such
as leverage, derivatives and short selling. Fund rankings are relative to one
another within The AIM Family of Funds--Registered Trademark-- and should not be
compared with other investments. There is no guarantee that any one AIM fund
will be less volatile than any other. This order is subject to change. (1) AIM
Small Cap Growth Fund was closed to most investors on March 18, 2002. For more
information on who may continue to invest in AIM Small Cap Growth Fund, please
contact your financial advisor. (2) The following fund name changes became
effective 7/1/02: AIM Asian Growth Fund renamed AIM Asia Pacific Growth Fund;
AIM European Development Fund renamed AIM European Growth Fund; AIM Global
Telecommunications and Technology Fund renamed AIM Global Science and Technology
Fund; AIM International Equity Fund renamed AIM International Growth Fund; AIM
International Value Fund renamed AIM International Core Equity Fund; AIM Large
Cap Opportunities Fund renamed AIM Opportunities III Fund; AIM Mid Cap Equity
Fund renamed AIM Mid Cap Core Equity Fund; AIM Mid Cap Opportunities Fund
renamed AIM Opportunities II Fund; AIM Small Cap Opportunities Fund renamed AIM
Opportunities I Fund; AIM Value Fund renamed AIM Premier Equity Fund; AIM Value
II Fund renamed AIM Premier Equity II Fund. (3) Effective Oct. 1, 2002, the fund
reopened to new investors. (4) Class A shares closed to new investors on Oct.
30, 2002. (5) Class A3 shares were first offered on October 31, 2002.
FOR MORE COMPLETE INFORMATION ABOUT ANY AIM FUND, INCLUDING SALES CHARGES
AND EXPENSES, ASK YOUR FINANCIAL ADVISOR FOR A PROSPECTUS. PLEASE READ IT
CAREFULLY BEFORE INVESTING. THIS BROCHURE IS NOT AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A CURRENTLY EFFECTIVE
FUND PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES
CHARGES AND EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING. If used after
Jan. 20, 2003, this brochure must be accompanied by a fund Performance &
Commentary or by an AIM Quarterly Performance Review for the most recent
quarter-end.
A I M Management Group Inc. has provided leadership in the mutual fund industry
since 1976 and manages $117 billion in assets for approximately 9 million
shareholders, including individual investors, corporate clients and financial
institutions. The AIM Family of Funds--Registered Trademark-- is distributed
nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest
independent financial services companies with $323 billion in assets under
management.
As of 9/30/02.
================================================================================
POSTAGE GRAPHIC
PRSRT STD
US POSTAGE
PAID
PERMIT NO. 1919
HOUSTON, TEXAS
================================================================================
INVEST WITH DISCIPLINE--Registered Trademark--
GST-AR-1
A I M Distributors, Inc.
APPENDIX V
SEMIANNUAL REPORT TO SHAREHOLDERS / APRIL 30, 2003
AIM GLOBAL SCIENCE AND TECHNOLOGY FUND
(COVER IMAGE)
(AIM INVESTMENTS LOGO APPEARS HERE)
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.--Servicemark--
AIM Global Science and Technology Fund seeks long-term
growth of capital. The fund invests in equity securities of
companies that design, develop or provide products and
services in the science or technology industry.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
This report may be distributed only to shareholders or to
persons who have received a current prospectus of the fund.
FUND DATA
================================================================================
INVESTMENT TYPE BREAKDOWN
As of 4/30/03
(PIE CHART)
COMMON STOCK INTERNATIONAL 11.41%
CASH AND OTHER ASSETS 6.53%
COMMON STOCK DOMESTIC 82.06%
TOTAL NUMBER OF HOLDINGS* 83
TOTAL NET ASSETS $390.8 MILLION
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 4/30/03, including sales charges
CLASS A SHARES
Inception (1/27/92) -2.40%
10 Years -3.97
5 Years -20.13
1 Year -28.87
CLASS B SHARES
Inception (4/1/93) -3.71%
10 Years -3.89
5 Years -20.01
1 Year -29.46
CLASS C SHARES
Inception (3/1/99) -23.64%
1 Year -26.49
In addition to returns as of the close of the fiscal year period, industry
regulations require us to provide average annual total returns (including sales
charges) as of 3/31/03, the most recent calendar quarter-end, which were: Class
A shares, inception (1/27/92), -3.19%; 10 years, -4.67%; five years, -21.42%;
one year, -41.89%. Class B shares, inception (4/1/93), -4.60%; 5 years, -21.28%;
one year, -42.25%. Class C shares, inception (3/1/99), -25.65%; one year,
- -39.82%.
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 10/31/02-4/30/03
excluding sales charges
CLASS A SHARES 3.27%
CLASS B SHARES 3.07
CLASS C SHARES 3.07
S&P 500 Index 4.47
(Broad Market Index)
PSE TECHNOLOGY 100 INDEX 7.67
(Style-specific Index)
LIPPER SCIENCE & Technology Fund Index 9.84
(Peer Group Index)
Past performance cannot guarantee comparable fund results. DUE TO SIGNIFICANT
MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY
FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR FOR MORE
CURRENT PERFORMANCE.
<Table>
<Caption>
===========================================================================================================================
TOP 10 INDUSTRIES* TOP 10 EQUITY HOLDINGS*
- ---------------------------------------------------------------------------------------------------------------------------
1. Semiconductors 17.6% 1. Microsoft Corp. 3.7%
2. Semiconductor Equipment 8.4 2. Dell Computer Corp, 3.5
3. Systems Software 8.3 3. Nextel Communications, Inc.-Class A 3.1
4. Application Software 6.7 4. Texas Instruments Inc. 3.1
5. Telecommunications Equipment 6.2 5. Gilead Sciences, Inc. 3.1
6. Wireless Telecommunication Services 6.0 6. Samsung Electronics Co., Ltd. (South Korea) 2.9
7. Biotechnology 4.6 7. eBay Inc. 2.6
8. Computer Storage & Peripherals 4.5 8. Analog Devices, Inc. 2.6
9. Computer Hardware 4.4 9. UTStarcom, Inc. 2.2
10. Internet Retail 4.4 10. Cisco Systems, Inc. 2.0
*Excludes money market fund holdings.
The fund's holdings are subject to change, and there is no assurance the fund will continue to hold particular security.
===========================================================================================================================
</Table>
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o Unless otherwise stated, information presented here is as of 4/30/03 and is
based on total net assets.
o Effective July 1, 2002, AIM Global Telecommunications and Technology Fund
was renamed AIM Global Science and Technology Fund.
o AIM Global Science and Technology Fund's performance figures are historical,
and they reflect the reinvestment of distributions and changes in net asset
value.
o Had the advisor not waived fees and/or absorbed fund expenses during the
reporting period, returns would have been lower.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's shares classes will differ because of
different sale charge structures and class expenses.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the effect of IPO investments on the fund's total return.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the value of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o Investing in a single-sector mutual fund involves greater risk and potential
return than investing in a more diversified fund.
o The fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original investment.
o In the Schedule of Investments in this report, the fund's portfolio holdings
are organized according to the Global Industry Classification Standard,
which was developed by and is the exclusive property and is a service mark
of Morgan Stanley Capital International Inc. and Standard & Poor's.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
o The unmanaged Pacific Stock Exchange Technology 100 Index (the PSE
Technology100) is a price-weighted index of 100 listed and over-the-counter
technology stocks from 15 technology-related industries.
o The unmanaged Lipper Science and Technology Fund Index represents and
average of the performance of the 30 largest science and technology funds
tracked by Lipper, Inc., an independent mutual fund performance monitor.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses.
Performance of a market index does not.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT aiminvestments.com.
TO OUR SHAREHOLDERS
Dear Shareholder:
[PHOTO OF This is the report on AIM Global Science and Technology Fund
ROBERT H. for the six months ended April 30, 2003. You will note that
GRAHAM] we have adopted a more concise format for our semiannual
reports. Important information such as top holdings and
performance as of the close of the reporting period appear
ON THE CURRENCY on the opposite page. This letter will provide an overview
FRONT, THE U.S. of the markets and your fund during the six months covered
DOLLAR WAS WEAK by this report. As always, timely information about your
COMPARED TO MANY fund and the markets in general is available at our Web
FOREIGN site, aiminvestments.com.
CURRENCIES.
MARKET CONDITIONS
ROBERT H. GRAHAM
In U.S. markets, positive performance during March and April
2003 enabled major stock market indexes to post gains for
the reporting period. For example, the unmanaged Standard &
Poor's Composite Index of 500 Stocks (the S&P 500), an index of common stocks
frequently used as a general measure of U.S. stock market performance, returned
4.47% for the six months ended April 30, 2003.
Year to date as of April 30, consumer discretionary, information technology
and financials were among the better-performing sectors of the S&P 500, while
telecommunications services was the worst.
Generally, mid- and small-cap stocks outperformed large-cap stocks, and the
value investment style outperformed the growth investment style during the
six-month reporting period.
International markets, as measured by the unmanaged MSCI Europe, Australasia
and the Far East Index (the EAFE--Registered Trademark--), a group of foreign
securities tracked by Morgan Stanley Capital International, produced negative
returns for the first quarter of 2003. International markets, however, rallied
in April. This rally helped push international market returns into positive
territory for the six-month reporting period.
European markets rallied toward the close of the reporting period, with the
MSCI (Morgan Stanley Capital International) Europe Index, often considered
representative of the European equity market, gaining 13.49% in April. In
European monetary affairs, the European Central Bank (ECB) cut its benchmark
interest rate 25 basis points to 2.50% in March. It remained at that level as
the reporting period closed.
As widely discussed, in Asia, the epidemic of severe acute respiratory
syndrome (SARS) dealt a blow to local economies. However, the MSCI All Country
(AC) Asia Pacific Free ex-Japan Index, a group of developed and emerging Asian
and Asia-Pacific markets (except Japan) covered by Morgan Stanley Capital
International, rallied in April and was positive for the six-month reporting
period.
On the currency front, the U.S. dollar was weak compared to many foreign
currencies. In particular, the euro showed strength as it appreciated nearly 13%
against the dollar during the reporting period. Other notable currencies that
gained ground on the dollar included the Australian dollar, Swiss franc, British
pound and Canadian dollar.
YOUR FUND
At net asset value AIM Global Science and Technology Fund turned in positive
performance for the six-month reporting period. The fund also generated positive
results at net asset value year-to-date and for the three-month and one-month
periods ended April 30, 2003. Fund manager Abel Garcia and senior analyst Warren
Tennant increased the total number of holdings during the reporting period from
63 to 83 to further diversify the portfolio.
In addition, fund managers have begun to reduce their holdings in industries
like aerospace and defense, as well as computer storage. They have added more
holdings in health care and networking equipment.
IN CLOSING
I thank you for your continued participation in AIM Global Science and
Technology Fund, and I look forward to reporting to you again in six months. If
you have any questions, please consult your financial advisor to help you with
your investment choices. As always, members of our award-winning Client Services
department are ready to help. They can be reached at 800-959-4246.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
April 30, 2003
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-82.06%
AEROSPACE & DEFENSE-0.54%
L-3 Communications Holdings, Inc.(a) 47,600 $ 2,113,440
==========================================================================
APPLICATION SOFTWARE-4.15%
Documentum, Inc.(a) 303,500 5,581,365
- --------------------------------------------------------------------------
FileNET Corp.(a) 108,700 1,672,893
- --------------------------------------------------------------------------
Intuit Inc.(a) 39,800 1,543,444
- --------------------------------------------------------------------------
Mercury Interactive Corp.(a) 192,200 6,523,268
- --------------------------------------------------------------------------
PeopleSoft, Inc.(a) 60,400 907,812
==========================================================================
16,228,782
==========================================================================
AUTO PARTS & EQUIPMENT-1.24%
Gentex Corp.(a) 159,800 4,825,960
==========================================================================
BIOTECHNOLOGY-4.64%
Amgen Inc.(a) 52,500 3,218,775
- --------------------------------------------------------------------------
Charles River Laboratories International,
Inc.(a) 45,500 1,235,325
- --------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 260,500 12,019,470
- --------------------------------------------------------------------------
IDEC Pharmaceuticals Corp.(a) 50,800 1,663,700
==========================================================================
18,137,270
==========================================================================
COMPUTER HARDWARE-4.35%
Dell Computer Corp.(a) 476,300 13,769,833
- --------------------------------------------------------------------------
Hewlett-Packard Co. 198,600 3,237,180
==========================================================================
17,007,013
==========================================================================
COMPUTER STORAGE & PERIPHERALS-4.46%
EMC Corp.(a) 401,400 3,648,726
- --------------------------------------------------------------------------
Hutchinson Technology Inc.(a) 90,700 2,144,148
- --------------------------------------------------------------------------
Imation Corp.(a) 56,200 1,927,660
- --------------------------------------------------------------------------
SanDisk Corp.(a) 171,100 4,140,620
- --------------------------------------------------------------------------
Storage Technology Corp.(a) 123,900 3,062,808
- --------------------------------------------------------------------------
Western Digital Corp.(a) 267,900 2,499,507
==========================================================================
17,423,469
==========================================================================
CONSUMER ELECTRONICS-0.81%
Harman International Industries, Inc. 47,500 3,163,025
==========================================================================
DATA PROCESSING SERVICES-0.80%
Paychex, Inc. 100,100 3,117,114
==========================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-1.24%
Trimble Navigation Ltd.(a) 192,100 4,850,525
==========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------
HEALTH CARE DISTRIBUTORS & SERVICES-1.65%
Cerner Corp.(a) 50,000 999,000
- --------------------------------------------------------------------------
Express Scripts, Inc.(a) 19,300 $ 1,137,928
- --------------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 68,400 2,015,064
- --------------------------------------------------------------------------
Quest Diagnostics Inc.(a) 38,500 2,300,375
==========================================================================
6,452,367
==========================================================================
HEALTH CARE EQUIPMENT-1.19%
Advanced Neuromodulation Systems, Inc.(a) 23,600 988,132
- --------------------------------------------------------------------------
Boston Scientific Corp.(a) 84,900 3,654,945
==========================================================================
4,643,077
==========================================================================
HEALTH CARE SUPPLIES-0.62%
Fisher Scientific International Inc.(a) 83,700 2,411,397
==========================================================================
INTERNET RETAIL-4.35%
Amazon.com, Inc.(a) 235,500 6,751,785
- --------------------------------------------------------------------------
eBay Inc.(a) 110,500 10,251,085
==========================================================================
17,002,870
==========================================================================
INTERNET SOFTWARE & SERVICES-2.44%
United Online, Inc.(a) 158,300 3,539,588
- --------------------------------------------------------------------------
Websense, Inc.(a) 125,100 1,785,177
- --------------------------------------------------------------------------
Yahoo! Inc.(a) 170,700 4,229,946
==========================================================================
9,554,711
==========================================================================
IT CONSULTING & SERVICES-3.27%
Affiliated Computer Services, Inc.-Class A(a) 142,200 6,782,940
- --------------------------------------------------------------------------
Anteon International Corp.(a) 158,800 3,760,384
- --------------------------------------------------------------------------
Cognizant Technology Solutions Corp.(a) 124,800 2,241,408
==========================================================================
12,784,732
==========================================================================
NETWORKING EQUIPMENT-4.15%
Cisco Systems, Inc.(a) 525,000 7,896,000
- --------------------------------------------------------------------------
McDATA Corp.-Class A(a) 235,000 2,486,300
- --------------------------------------------------------------------------
NetScreen Technologies, Inc.(a) 288,600 5,852,808
==========================================================================
16,235,108
==========================================================================
PHARMACEUTICALS-0.64%
Forest Laboratories, Inc.(a) 48,000 2,482,560
==========================================================================
SEMICONDUCTOR EQUIPMENT-8.37%
Applied Materials, Inc.(a) 355,700 5,193,220
- --------------------------------------------------------------------------
Axcelis Technologies, Inc.(a) 522,900 2,970,072
- --------------------------------------------------------------------------
Entegris Inc.(a) 230,300 2,641,541
- --------------------------------------------------------------------------
KLA-Tencor Corp.(a) 96,200 3,944,200
- --------------------------------------------------------------------------
Lam Research Corp.(a) 345,000 5,012,850
- --------------------------------------------------------------------------
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-(CONTINUED)
Novellus Systems, Inc.(a) 169,100 $ 4,741,564
- --------------------------------------------------------------------------
Teradyne, Inc.(a) 361,700 4,195,720
- --------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(a) 174,000 4,010,700
==========================================================================
32,709,867
==========================================================================
SEMICONDUCTORS-15.04%
Analog Devices, Inc.(a) 301,300 9,979,056
- --------------------------------------------------------------------------
Cree, Inc.(a) 89,700 1,789,515
- --------------------------------------------------------------------------
GlobespanVirata, Inc.(a) 430,000 2,610,100
- --------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 103,300 2,243,676
- --------------------------------------------------------------------------
Intel Corp. 327,100 6,018,640
- --------------------------------------------------------------------------
Maxim Integrated Products, Inc. 48,300 1,897,707
- --------------------------------------------------------------------------
Microchip Technology Inc. 302,200 6,282,738
- --------------------------------------------------------------------------
OmniVision Technologies, Inc.(a) 79,700 1,935,116
- --------------------------------------------------------------------------
QLogic Corp.(a) 63,000 2,771,370
- --------------------------------------------------------------------------
Silicon Laboratories Inc.(a) 242,400 6,896,280
- --------------------------------------------------------------------------
Texas Instruments Inc. 657,700 12,160,873
- --------------------------------------------------------------------------
Xilinx, Inc.(a) 155,300 4,203,971
==========================================================================
58,789,042
==========================================================================
SYSTEMS SOFTWARE-8.33%
Borland Software Corp.(a) 226,200 2,051,634
- --------------------------------------------------------------------------
Microsoft Corp. 560,000 14,319,200
- --------------------------------------------------------------------------
Oracle Corp.(a) 449,400 5,338,872
- --------------------------------------------------------------------------
Symantec Corp.(a) 165,800 7,286,910
- --------------------------------------------------------------------------
VERITAS Software Corp.(a) 161,500 3,554,615
==========================================================================
32,551,231
==========================================================================
TELECOMMUNICATIONS EQUIPMENT-4.53%
Advanced Fibre Communications, Inc.(a) 177,100 2,709,630
- --------------------------------------------------------------------------
QUALCOMM Inc. 206,100 6,572,529
- --------------------------------------------------------------------------
UTStarcom, Inc.(a) 387,400 8,434,085
==========================================================================
17,716,244
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-5.25%
AT&T Wireless Services Inc.(a) 700,400 4,524,584
- --------------------------------------------------------------------------
Nextel Communications, Inc.-Class A(a) 829,400 12,266,826
- --------------------------------------------------------------------------
United States Cellular Corp.(a) 154,500 3,715,725
==========================================================================
20,507,135
==========================================================================
Total Domestic Common Stocks (Cost
$304,846,797) 320,706,939
==========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-11.41%
BERMUDA-0.96%
Marvell Technology Group Ltd.
(Semiconductors)(a) 163,000 $ 3,761,877
==========================================================================
CANADA-0.57%
Cognos, Inc. (Application Software)(a) 81,700 2,217,338
==========================================================================
CAYMAN ISLANDS-0.47%
Garmin Ltd. (Consumer Electronics)(a) 43,100 1,826,578
==========================================================================
FINLAND-1.67%
Nokia Oyj-ADR (Telecommunications Equipment) 392,900 6,510,353
==========================================================================
GERMANY-0.94%
SAP A.G. (Application Software) 35,953 3,690,273
==========================================================================
ISRAEL-0.59%
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 49,600 2,316,320
==========================================================================
NETHERLANDS-0.51%
STMicroelectronics N.V. (Semiconductors) 96,215 1,992,344
==========================================================================
SOUTH KOREA-2.88%
Samsung Electronics Co., Ltd. (Electronic
Equipment & Instruments)(a) 44,800 11,250,721
==========================================================================
TAIWAN-1.09%
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Semiconductors)(a) 510,000 4,268,700
==========================================================================
UNITED KINGDOM-1.73%
Amdocs Ltd. (Application Software)(a) 223,000 3,938,180
- --------------------------------------------------------------------------
Vodafone Group PLC-ADR (Wireless
Telecommunication Services) 143,400 2,833,584
==========================================================================
6,771,764
==========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $41,130,657) 44,606,268
==========================================================================
MONEY MARKET FUNDS-6.81%
STIC Liquid Assets Portfolio(b) 13,310,011 13,310,011
- --------------------------------------------------------------------------
STIC Prime Portfolio(b) 13,310,011 13,310,011
==========================================================================
Total Money Market Funds (Cost
$26,620,022) 26,620,022
==========================================================================
TOTAL INVESTMENTS-100.28% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $372,597,476) 391,933,229
==========================================================================
</Table>
F-2
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-30.31%
STIC Liquid Assets Portfolio(b)(c) 59,230,865 $ 59,230,865
- --------------------------------------------------------------------------
STIC Prime Portfolio(b)(c) 59,230,866 59,230,866
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $118,461,731) 118,461,731
==========================================================================
TOTAL INVESTMENTS-130.59% (Cost $491,059,207) 510,394,960
==========================================================================
OTHER ASSETS LESS LIABILITIES-(30.59%) (119,550,987)
==========================================================================
NET ASSETS-100.00% $ 390,843,973
__________________________________________________________________________
==========================================================================
</Table>
Investment Abbreviations:
<Table>
<Caption>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
F-3
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$491,059,207)* $ 510,394,960
- ------------------------------------------------------------
Receivables for:
Investments sold 7,622,083
- ------------------------------------------------------------
Fund shares sold 783,357
- ------------------------------------------------------------
Dividends 49,555
- ------------------------------------------------------------
Investment for deferred compensation plan 5,988
- ------------------------------------------------------------
Other assets 28,301
============================================================
Total assets 518,884,244
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 7,707,258
- ------------------------------------------------------------
Fund shares reacquired 529,932
- ------------------------------------------------------------
Deferred compensation plan 5,988
- ------------------------------------------------------------
Collateral upon return of securities
loaned 118,461,731
- ------------------------------------------------------------
Accrued distribution fees 306,267
- ------------------------------------------------------------
Accrued trustees' fees 915
- ------------------------------------------------------------
Accrued transfer agent fees 769,145
- ------------------------------------------------------------
Accrued operating expenses 259,035
============================================================
Total liabilities 128,040,271
============================================================
Net assets applicable to shares outstanding $ 390,843,973
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 1,883,547,649
- ------------------------------------------------------------
Undistributed net investment income (loss) (3,341,523)
- ------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (1,508,697,888)
- ------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and option
contracts 19,335,735
============================================================
$ 390,843,973
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 281,962,711
____________________________________________________________
============================================================
Class B $ 92,434,635
____________________________________________________________
============================================================
Class C $ 16,446,627
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 55,831,611
____________________________________________________________
============================================================
Class B 19,645,773
____________________________________________________________
============================================================
Class C 3,495,549
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 5.05
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $5.05 divided by
95.25%) $ 5.30
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 4.71
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 4.71
____________________________________________________________
============================================================
</Table>
* At April 30, 2003, securities with an aggregate market value of $115,491,986
were on loan to brokers.
See Notes to Financial Statements.
F-4
STATEMENT OF OPERATIONS
For the six months ended April 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $56,014) $ 448,315
- --------------------------------------------------------------------------
Dividends from affiliated money market funds 122,470
- --------------------------------------------------------------------------
Interest 2,992
- --------------------------------------------------------------------------
Security lending income 187,694
==========================================================================
Total investment income 761,471
==========================================================================
EXPENSES:
Advisory fees 1,861,334
- --------------------------------------------------------------------------
Administrative services fees 51,781
- --------------------------------------------------------------------------
Custodian fees 29,072
- --------------------------------------------------------------------------
Distribution fees -- Class A 680,062
- --------------------------------------------------------------------------
Distribution fees -- Class B 470,959
- --------------------------------------------------------------------------
Distribution fees -- Class C 77,977
- --------------------------------------------------------------------------
Transfer agent fees 2,620,464
- --------------------------------------------------------------------------
Trustees' fees 5,240
- --------------------------------------------------------------------------
Other 282,399
==========================================================================
Total expenses 6,079,288
==========================================================================
Less: Fees waived, expenses reimbursed and expenses paid
indirectly (1,982,975)
==========================================================================
Net expenses 4,096,313
==========================================================================
Net investment income (loss) (3,334,842)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (67,607,777)
- --------------------------------------------------------------------------
Foreign currencies 113,763
- --------------------------------------------------------------------------
Option contracts written 746,115
==========================================================================
(66,747,899)
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 82,364,232
- --------------------------------------------------------------------------
Foreign currencies (293)
- --------------------------------------------------------------------------
Option contracts written 36,037
==========================================================================
82,399,976
==========================================================================
Net gain from investment securities, foreign currencies and
options contracts 15,652,077
==========================================================================
Net increase in net assets resulting from operations $ 12,317,235
__________________________________________________________________________
==========================================================================
</Table>
See Notes to Financial Statements.
F-5
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2003 and the year ended October 31, 2002
(Unaudited)
<Table>
<Caption>
APRIL 30, OCTOBER 31,
2003 2002
- --------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (3,334,842) $ (11,879,992)
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (66,747,899) (240,968,796)
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and option contracts 82,399,976 27,536,826
============================================================================================
Net increase (decrease) in net assets resulting from
operations 12,317,235 (225,311,962)
============================================================================================
Share transactions-net:
Class A (7,644,251) (5,159,028)
- --------------------------------------------------------------------------------------------
Class B (12,703,314) (122,002,616)
- --------------------------------------------------------------------------------------------
Class C 17,055 (3,417,367)
============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (20,330,510) (130,579,011)
============================================================================================
Net increase (decrease) in net assets (8,013,275) (355,890,973)
============================================================================================
NET ASSETS:
Beginning of period 398,857,248 754,748,221
============================================================================================
End of period $ 390,843,973 $ 398,857,248
____________________________________________________________________________________________
============================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
April 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Science and Technology Fund, (the "Fund") is a separate series of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware statutory
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of seven separate series portfolios, each having an unlimited number of shares
of beneficial interest. The Fund currently offers multiple classes of shares.
Matters affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital. Each company
listed in the Schedule of Investments is organized in the United States unless
otherwise noted.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued at the basis of prices furnished
by independent pricing services or market makers. Each security reported on
the NASDAQ National Market System is valued at the NASDAQ Official Closing
Price ("NOCP") as of the close of the customary trading session on the
valuation date or absent a NOCP, at the closing bid price. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may
be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, dividend rate,
yield, quality, type of issue, coupon rate, maturity, individual trading
characteristics and other market data. Securities for which market prices
are not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in
the case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value. For purposes of
F-6
determining net asset value per share, futures and option contracts
generally will be valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the NYSE. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not be
reflected in the computation of the Fund's net asset value. If a
development/event is so significant that there is a reasonably high degree
of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer
reflect actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in
good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. The combined results of changes in foreign exchange rates
and the fluctuation of market prices on investments are included with the
net realized and unrealized gain or loss from investments in the Statement
of Operations.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. When the Fund
writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received. A risk in writing a
call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to such class. All other expenses are allocated among the
classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
The Fund pays AIM investment management and administration fees at an annual
rate of 0.975% on the first $500 million of the Fund's average daily net assets,
plus 0.95% on the next $500 million of the Fund's average daily net assets, plus
0.925% on the next $500 million of the Fund's average daily net assets, plus
0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has
contractually agreed to limit total annual operating expenses (excluding
interest, taxes, dividends on short sales, extraordinary items and increases in
expenses due to expense offset arrangements, if any) for Class A, Class B and
Class C shares to 2.00%, 2.50% and 2.50%, respectively. To the extent that the
annualized expense ratio does not exceed the contractual expense limitation, AIM
will retain the ability to be reimbursed for such fee waivers or reimbursements
prior to the end of
F-7
the committed period. Further, AIM has voluntarily agreed to waive advisory fees
of the Fund in the amount of 25% of the advisory fee AIM receives from the
affiliated money market funds in which the Fund has invested (excluding
investments made in affiliated money market funds with cash collateral from
securities loaned by the Fund). For the six months ended April 30, 2003, AIM
waived fees of $1,861,334 and reimbursed expenses of $117,798.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended April 30, 2003, AIM
was paid $51,781 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended April 30, 2003,
AFS retained $1,445,915 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.50% 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 C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended April 30, 2003, the Class A, Class B and Class C
shares paid $680,062, $470,959 and $77,977, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During six months ended April 30, 2003, AIM
Distributors retained $26,268 in front-end sales commissions from the sale of
Class A shares and $21,338, $82 and $822 for Class A, Class B and Class C
shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended April 30, 2003, the Fund paid legal fees of
$1,601 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended April 30, 2003, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) of $3,480 and reductions in
custodian fees of $363 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $3,843.
NOTE 4--BORROWINGS
AIM has established an interfund lending facility 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.
During the reporting period, the Fund was a participant in a committed line
of credit facility with a syndicate administered by Citibank, N.A. The Fund
could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. The Fund and other funds advised by AIM which were
parties to the line of credit could borrow on a first come, first served basis.
The funds which were party to the line of credit were charged a commitment fee
of 0.09% on the unused balance of the committed line. The commitment fee was
allocated among the funds based on their respective average net assets for the
period. The committed line of credit facility expired May 20, 2003.
During the six months ended April 30, 2003, the Fund did not borrow under
the interfund lending or the committed line of credit facility.
NOTE 5--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities. It is
the Fund's policy to obtain additional collateral from or return excess
collateral to the borrower by the end of the next business day. Therefore, the
value of the collateral may be temporarily less than the value of the securities
on loan.
At April 30, 2003, securities with an aggregate value of $115,491,986 were
on loan to brokers. The loans were secured by cash collateral of $118,461,731
received by the Fund and invested in affiliated money market funds. For the six
months ended April 30, 2003, the Fund received fees of $187,694 for securities
lending.
F-8
NOTE 6--CALL OPTION CONTRACTS
Transactions in call options written during the six months ended April 30, 2003
are summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- --------------------------------------------------------------------------------
Beginning of period 3,745 $ 453,826
- --------------------------------------------------------------------------------
Written 1,855 588,893
- --------------------------------------------------------------------------------
Closed (2,975) (670,083)
- --------------------------------------------------------------------------------
Exercised (1,630) (163,226)
- --------------------------------------------------------------------------------
Expired (995) (209,410)
================================================================================
End of period -- $ --
________________________________________________________________________________
================================================================================
</Table>
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 distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ---------------------------------------------------------------------------------
October 31, 2009 $1,181,366,577
- ---------------------------------------------------------------------------------
October 31, 2010 259,449,545
=================================================================================
Total capital loss carryforward $1,440,816,122
_________________________________________________________________________________
=================================================================================
</Table>
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended April 30, 2003 was $223,539,005 and $249,271,801, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of April 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment securities $ 49,100,060
- ---------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (29,976,637)
=================================================================================
Net unrealized appreciation of investment securities $ 19,123,423
_________________________________________________________________________________
=================================================================================
Cost of investments for tax purposes is $491,271,537.
</Table>
NOTE 9--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares,
Class B shares and Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended April 30, 2003 and the year ended October 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 16,788,636 $ 79,964,191 26,274,193 $ 171,598,190
- -------------------------------------------------------------------------------------------------------------------------
Class B 1,963,349 8,873,751 2,939,110 19,257,843
- -------------------------------------------------------------------------------------------------------------------------
Class C 643,027 2,902,247 1,050,513 6,971,729
=========================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 1,676,512 8,228,998 8,433,047 56,174,791
- -------------------------------------------------------------------------------------------------------------------------
Class B (1,797,104) (8,228,998) (9,000,274) (56,174,791)
=========================================================================================================================
Reacquired:
Class A (20,023,550) (95,837,440) (36,509,509) (232,932,009)
- -------------------------------------------------------------------------------------------------------------------------
Class B (2,972,756) (13,348,067) (12,786,276) (85,085,668)
- -------------------------------------------------------------------------------------------------------------------------
Class C (644,523) (2,885,192) (1,669,762) (10,389,096)
=========================================================================================================================
(4,366,409) $(20,330,510) (21,268,958) $(130,579,011)
_________________________________________________________________________________________________________________________
=========================================================================================================================
</Table>
F-9
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.89 $ 7.41 $ 30.61 $ 26.44 $ 16.28 $ 18.04
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.12)(a) (0.20)(a) 0.06(a)(b) (0.25) (0.17)(a)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.20 (2.40) (19.12) 7.23 10.97 (0.39)
================================================================================================================================
Total from investment operations 0.16 (2.52) (19.32) 7.29 10.72 (0.56)
================================================================================================================================
Less distributions from net realized
gains -- -- (3.88) (3.12) (0.56) (1.20)
================================================================================================================================
Net asset value, end of period $ 5.05 $ 4.89 $ 7.41 $ 30.61 $ 26.44 $ 16.28
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(c) 3.27% (34.01)% (71.16)% 27.52% 67.63% (3.16)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $281,963 $280,426 $438,702 $1,513,595 $1,023,124 $713,904
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense
reimbursements 2.00%(d) 2.01% 1.98% 1.63% 1.77% 1.88%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense
reimbursements 3.04%(d) 2.56% 2.03% 1.63% 1.77% 1.88%
================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.60)%(d) (1.76)% (1.57)% 0.16% (1.11)% (0.93)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate(e) 61% 115% 173% 111% 122% 75%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income per share reflects dividend income of $0.49 per
share recognized from the spin-off of Nortel Networks Corp. from BCE,
Inc.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily assets of $274,279,177.
(e) Not annualized for periods less than one year.
<Table>
<Caption>
CLASS B
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.56 $ 6.96 $ 29.17 $ 25.43 $ 15.76 $ 17.58
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.14)(a) (0.25)(a) (0.11)(a)(b) (0.35) (0.25)(a)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.20 (2.26) (18.08) 6.97 10.58 (0.37)
================================================================================================================================
Total from investment operations 0.15 (2.40) (18.33) 6.86 10.23 (0.62)
================================================================================================================================
Less distributions from net realized
gains -- -- (3.88) (3.12) (0.56) (1.20)
================================================================================================================================
Net asset value, end of period $ 4.71 $ 4.56 $ 6.96 $ 29.17 $ 25.43 $ 15.76
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(c) 3.29% (34.48)% (71.30)% 26.87% 66.84% (3.67)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $92,435 $102,470 $287,394 $1,414,915 $898,400 $614,715
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense
reimbursements 2.50%(d) 2.51% 2.48% 2.13% 2.28% 2.38%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense
reimbursements 3.54%(d) 3.06% 2.53% 2.13% 2.28% 2.38%
================================================================================================================================
Ratio of net investment income (loss) to
average net assets (2.10)%(d) (2.26)% (2.07)% (0.34)% (1.62)% (1.43)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate(e) 61% 115% 173% 111% 122% 75%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income per share reflects dividend income of $0.49 per
share recognized from the spin-off of Nortel Networks Corp. from BCE,
Inc.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily assets of $94,972,441.
(e) Not annualized for periods less than one year.
F-10
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
---------------------------------------------------------------------------
MARCH 1, 1999
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ------------------------------------ OCTOBER 31,
2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.56 $ 6.96 $ 29.16 $ 25.43 $ 19.23
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.14)(a) (0.25)(a) (0.11)(a)(b) (0.11)
- ---------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.20 (2.26) (18.07) 6.96 6.31
=====================================================================================================================
Total from investment operations 0.15 (2.40) (18.32) 6.85 6.20
=====================================================================================================================
Less distributions from net realized
gains -- -- (3.88) (3.12) --
=====================================================================================================================
Net asset value, end of period $ 4.71 $ 4.56 $ 6.96 $ 29.16 $ 25.43
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(c) 3.29% (34.48)% (71.29)% 26.83% 32.24%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $16,447 $15,961 $28,652 $114,667 $12,352
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense
reimbursements 2.50%(d) 2.51% 2.48% 2.13% 2.28%(e)
- ---------------------------------------------------------------------------------------------------------------------
Without fee waivers and expense
reimbursements 3.54%(d) 3.06% 2.53% 2.13% 2.28%(e)
=====================================================================================================================
Ratio of net investment income (loss) to
average net assets (2.10)%(d) (2.26)% (2.07)% (0.34)% (1.62)%(e)
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate(f) 61% 115% 173% 111% 122%
_____________________________________________________________________________________________________________________
=====================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income per share reflects dividend income of $0.49 per
share recognized from the spin-off of Nortel Networks Corp. from BCE,
Inc.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily assets of $15,724,705.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 11--SUBSEQUENT EVENT
The Board of Trustees of AIM Investment Funds ("Seller") unanimously approved,
on June 11, 2003, an Agreement and Plan of Reorganization (the "Plan") pursuant
to which AIM Global Science and Technology Fund ("Selling Fund"), a series of
Seller, would transfer all of its assets to INVESCO Technology Fund ("Buying
Fund"), a series of INVESCO Sector Funds, Inc. ("the Reorganization"). As a
result of the Reorganization, shareholders of Selling Fund would receive shares
of Buying Fund in exchange for their shares of Selling Fund, and Selling Fund
would cease operations.
The Plan requires approval of Selling Fund shareholders and will be submitted
to the shareholders for their consideration at a meeting to be held on or around
September 25, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
Effective on or about October 1, 2003, it is anticipated that Selling Fund
will be closed to new investors.
F-11
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Robert H. Graham Robert H. Graham 11 Greenway Plaza
Chairman and President Suite 100
Mark H. Williamson Houston, TX 77046
Mark H. Williamson
Frank S. Bayley Executive Vice President INVESTMENT ADVISOR
Bruce L. Crockett Kevin M. Carome A I M Advisors, Inc.
Senior Vice President 11 Greenway Plaza
Albert R. Dowden Suite 100
Gary T. Crum Houston, TX 77046
Edward K. Dunn Jr. Senior Vice President
TRANSFER AGENT
Jack M. Fields Dana R. Sutton
Vice President and Treasurer A I M Fund Services, Inc.
Carl Frischling P.O. Box 4739
Stuart W. Coco Houston, TX 77210-4739
Prema Mathai-Davis Vice President
CUSTODIAN
Lewis F. Pennock Melville B. Cox
Vice President State Street Bank and Trust Company
Ruth H. Quigley 225 Franklin Street
Edgar M. Larsen Boston, MA 02110
Louis S. Sklar Vice President
COUNSEL TO THE FUND
Nancy L. Martin
Secretary Ballard Spahr
Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103
COUNSEL TO THE TRUSTEES
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
TAXABLE
AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund(2)
AIM Balanced Fund* AIM Developing Markets Fund
AIM Basic Balanced Fund* AIM European Growth Fund(2) AIM Floating Rate Fund
AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund
AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund
AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund
AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(6,7)
AIM Constellation Fund AIM Global Value Fund(5) AIM Money Market Fund
AIM Dent Demographic Trends Fund AIM International Core Equity Fund(2) AIM Short-Term Bond Fund
AIM Diversified Dividend Fund(1) AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Emerging Growth Fund AIM International Growth Fund(2)
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund
AIM Libra Fund TAX-FREE
AIM Mid Cap Basic Value Fund SECTOR EQUITY
AIM Mid Cap Core Equity Fund(2)
AIM Mid Cap Growth Fund
AIM Opportunities I Fund(2,3) AIM High Income Municipal Fund
AIM Opportunities II Fund(2,3) AIM Global Energy Fund AIM Municipal Bond Fund
AIM Opportunities III Fund(2,3) AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Premier Equity Fund(2) AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(6,7)
AIM Premier Equity II Fund(2) AIM Global Science and Technology Fund(2)
AIM Select Equity Fund AIM Global Utilities Fund
AIM Small Cap Equity Fund AIM New Technology Fund
AIM Small Cap Growth Fund(4) AIM Real Estate Fund
AIM Weingarten Fund
</Table>
*Domestic equity and income fund
YOUR GOALS. OUR SOLUTIONS.--Servicemark--
<Table>
College Separately
Mutual Retirement Annuities Savings Managed Offshore Alternative Cash
Funds Products Plans Accounts Products Investments Management
</Table>
(AIM INVESTMENTS LOGO APPEARS HERE)
--Servicemark--
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) The following fund name changes became effective
July 1, 2002: AIM Asian Growth Fund renamed AIM Asia Pacific Growth Fund; AIM
European Development Fund renamed AIM European Growth Fund; AIM Global
Telecommunications and Technology Fund renamed AIM Global Science and Technology
Fund; AIM International Equity Fund renamed AIM International Growth Fund; AIM
International Value Fund renamed AIM International Core Equity Fund; AIM Large
Cap Opportunities Fund renamed AIM Opportunities III Fund; AIM Mid Cap Equity
Fund renamed AIM Mid Cap Core Equity Fund; AIM Mid Cap Opportunities Fund
renamed AIM Opportunities II Fund; AIM Small Cap Opportunities Fund renamed AIM
Opportunities I Fund; AIM Value Fund renamed AIM Premier Equity Fund; AIM Value
II Fund renamed AIM Premier Equity II Fund. (3) Effective October 1, 2002, the
fund was reopened to new investors. (4) AIM Small Cap Growth Fund was closed to
most investors on March 18, 2002. For information on who may continue to invest
in AIM Small Cap Growth Fund, please contact your financial advisor. (5)
Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global
Value Fund. (6) Class A shares closed to new investors on October 30, 2002.
(7)Class A3 shares were first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. This brochure is not authorized for distribution to
prospective investors unless preceded or accompanied by a currently effective
fund prospectus, which contains more complete information, including sales
charges and expenses. Please read it carefully before investing. If used after
July 20, 2003, this brochure must be accompanied by a fund Performance &
Commentary or by an AIM Quarterly Performance Review for the most recent
quarter-end. Mutual Funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the investment management
industry since 1976 and manages $115 billion in assets for approximately 9
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $319 billion in assets
under management. Data as of March 31, 2003.
GST-SAR-1
AIMinvestments.com
APPENDIX VI
ANNUAL REPORT / OCTOBER 31, 2002
AIM GLOBAL FINANCIAL SERVICES FUND
[COVER IMAGE]
[AIM FUNDS LOGO]
--Registered Trademark--
AIMinvestments.com
================================================================================
[COVER IMAGE]
THE BANKER AND HIS WIFE BY QUENTIN METSYS
THE WORLD'S EARLIEST BANKS CAME ABOUT WHEN PEOPLE PRESENTED THEIR FORTUNES FOR
SAFEKEEPING TO THOSE THEY COULD TRUST, USUALLY GOLDSMITHS. THE GOLDSMITHS WOULD
ISSUE A NOTE THAT OFFERED TO PAY THE BEARER THE VALUE OF THE COINS DEPOSITED.
THESE NOTES WERE OFTEN EXCHANGED AND CIRCULATED, RATHER THAN CASHED IN, AND THE
GOLDSMITHS PROFITED BY CHARGING INTEREST ON THE LOANS THEY GRANTED USING THE
GOLD AND SILVER IN THEIR POSSESSION.
================================================================================
AIM GLOBAL FINANCIAL SERVICES FUND IS FOR SHAREHOLDERS SEEKING LONG-TERM GROWTH
OF CAPITAL BY INVESTING PRIMARILY IN THE EQUITY SECURITIES OF DOMESTIC AND
FOREIGN FINANCIAL SERVICES COMPANIES.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Global Financial Services Fund's performance figures are historical, and
they reflect fund expenses, the reinvestment of distributions and changes in
net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class A, Class B and Class C shares will
differ due to different sales charge structures and class expenses.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. Because of the fund's small asset base, any investment the
fund may make in IPOs may significantly affect the fund's total return. As
the fund's assets grow, the impact of IPO investments will decline, which
may reduce the effect of IPO investments on the fund's total return.
o Investing in a single-sector mutual fund may involve greater risk and
potential reward than investing in a more diversified fund.
The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their original
cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged MSCI All Country (AC) World Free Index tracks the performance
of approximately 50 developed and emerging countries covered by Morgan
Stanley Capital International. The "free" index represents actual buyable
opportunities for global investors.
o The unmanaged Standard & Poor's Composite Index of 500 stocks (the S&P 500)
is an index of common stocks frequently used as a general measure of U.S.
stock market performance.
An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not include sales charges or
fund expenses.
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. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to shareholders or to persons who have
received a current prospectus of the fund.
TO OUR SHAREHOLDERS
DEAR SHAREHOLDER:
[PHOTO OF All of us know how difficult the equity markets were during
ROBERT H. the fiscal year ended October 31, 2002. We are now in the
GRAHAM] unenviable position of being able to say we have been in a
deeper and longer market downturn than that of 1973-74. We
know from experience that these conditions do eventually
end, though no one can predict exactly when.
We are encouraged, however, by the fact that as I write
this letter, the U.S. equity market has had several positive
weeks in a row. Whether this is the start of a long-term
positive trend remains to be seen. In the meantime, let me
assure you that all of us at AIM continue to work hard on
your behalf.
In light of continuing market difficulties, I thought
you would appreciate detailed information on some of the
methods AIM uses to manage your money. This information is presented in the two
pages following this letter. I hope it will provide you with a greater
understanding of our investment process, and I encourage you to read it
carefully. One of our ongoing goals is to keep all of our shareholders
well-informed.
BACK TO BASICS
When market conditions are as trying as they have been during the fiscal year
covered by this report, it is well to keep some investing fundamentals in mind.
First, seek professional advice-it is more important now than ever. A financial
professional can help you:
o Understand your entire financial profile before selecting individual
investments so you can tailor your portfolio to specific goals and
timetables.
o Learn the characteristics of various asset classes. Recently, many
investors have been seeking safety in fixed-income investments.
Unfortunately, many do not understand that bond prices move in the
opposite direction of interest rates. Existing bonds have been rising in
value as interest rates have fallen, contributing to attractive total
returns. But rates are now so low the upside potential of bond prices is
limited. Sooner or later, the economy will expand more robustly, and
interest rates will begin to rise. That will lower bond values, reducing
total returns. As ever, diversification is an investing fundamental.
o Develop reasonable expectations. Historically, stocks have averaged
about a 10% return per year, bonds less, facts many of us forgot during
the 1990s.
YOUR FUND MANAGERS' OBSERVATIONS
In the following pages, your fund's portfolio managers discuss your fund's
performance during the fiscal year and the market conditions and investment
strategies that affected that performance. I hope you find their comments
helpful.
Although most world markets declined in 2002, a favorable interest rate
environment, particularly in the U.S., helped financial services stocks minimize
losses. Given this environment, AIM Global Financial Services Fund Class A
shares returned -7.55% for the fiscal year ended October 31, 2002. The fund
outperformed its benchmark, the MSCI All Country (AC) World Free Index, which
returned -13.57% over the same period.
Timely information about your fund and the markets is always available on
our Web site, aiminvestments.com. Our Client Services Department can be reached
during regular business hours at 800-959-4246.
IMPORTANT NEWS ABOUT AIM
This report features AIM's new logo and Web address, which we have adopted to
better reflect our diverse line of investment products. We are well known for
our mutual funds, but we also offer solutions for many investment situations
through a broad array of products and services including retirement products for
employers and individuals, annuities, college savings plans, separately managed
accounts, and cash management for businesses.
I am also pleased to announce that Mark Williamson will become Chief
Executive Officer of A I M Management Group Inc., the parent company of your
fund's advisor and distributor, on January 1, 2003. I will remain Chairman of
AIM. Mark has had a long and distinguished career in the mutual fund industry
and I am looking forward to his joining the AIM team.
Thank you for investing with AIM. I look forward to reporting to you again
in six months.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
December 2, 2002
================================================================================
. . . A FAVORABLE INTEREST RATE
ENVIRONMENT, PARTICULARLY IN THE U.S.,
HELPED FINANCIAL SERVICES STOCKS
MINIMIZE LOSSES.
ROBERT H. GRAHAM
================================================================================
A SPECIAL MESSAGE TO OUR SHAREHOLDERS
INVESTMENT RESEARCH UPDATE FOR AIM CLIENTS
[EDGAR M. LARSEN PHOTO]
EDGAR M. LARSEN
CHIEF INVESTMENT OFFICER
[GARY T. CRUM PHOTO]
GARY T. CRUM
DIRECTOR OF INVESTMENTS
THE FINANCIAL MARKETS have been battered over the past year by a wave of
corporate scandals, accounting restatements, bankruptcies of high-profile
companies and, in a few cases, outright financial fraud. Many investors,
understandably, feel uncertain about whether their portfolios are positioned to
withstand such a prolonged and severe market downturn. Now seems to be an
appropriate time to step back and reiterate AIM's concern for the financial
well-being of all of our clients and AIM's commitment to competitive excellence
across all investment disciplines.
We at AIM are proud of our rigorous qualitative and quantitative analytical
processes, and we remain confident that we will preserve our long-term record of
success through uncompromising fundamental research. During this recent period
of market instability, we have placed even greater focus on meticulous research,
and we continually look for new ways to improve our process.
We have the resources and the people needed to seek out the best investment
opportunities that exist in any market. It should be emphasized that AIM's teams
have not changed their investment strategies; rather our disciplines have been
fine-tuned in order to better understand each portfolio holding and to optimize
each fund's overall structure.
Rigorous accounting analysis is at the forefront of our investment-research
efforts. AIM employs both internal and external accounting experts and
proprietary tools to screen our portfolios for high-risk situations and to look
for investment opportunities.
BEYOND THE BOTTOM LINE
By going beyond the reported bottom-line numbers, we strive to understand where
a company's growth is coming from and how sustainable it may be. Our discipline
takes us through an in-depth examination of the financial statements and
industry conditions, combined with an evaluation of management's style and
strategy.
AIM's portfolio managers have taken advantage of some unique valuations in
this unusual market environment by adding opportunistically to their portfolios.
In addition to strong financial fundamentals and attractively priced securities,
AIM's teams look for companies with experienced and credible management teams.
Sometimes this means not accepting the consensus view of a particular company.
AIM seeks independent thought, both from our own analysts and portfolio
managers, and from trusted Wall Street sources. Our goal is to cultivate an
ongoing dialogue with independent thinkers in every industry, whether they work
for one of our portfolio companies, on Wall Street, at an independent research
boutique, or right here within our own firm. To this end, we have long had a
collaborative environment where communication across investment teams is
encouraged.
For example, AIM's fixed-income and equity analysts attend the same meetings
================================================================================
RIGOROUS ACCOUNTING
ANALYSIS IS AT
THE FOREFRONT OF
OUR INVESTMENT-
RESEARCH EFFORTS.
================================================================================
2
with company managements, and thus analyze the company from two different
perspectives. Our international managers work with our domestic teams to cover
the more globally oriented companies. And the teams that manage AIM's
sector-specific funds share their industry expertise with the rest of our
investment teams. As our professional staff and resources have grown, so have
the direct contacts with company management teams. Last year, AIM's analysts and
portfolio managers had more than 4,000 meetings with the senior executives of
our portfolio companies.
EDUCATION AND TRAINING
Continuing education and training are important in the ever-changing world of
investment analysis. We invite experts from such fields as accounting,
derivatives and banking to AIM so that we remain informed about current
corporate-finance techniques, new accounting regulations and other shifts in the
landscape of American business.
Over the past five years, AIM has devoted substantial resources to our
research department's personnel. Today, 68 percent of our investment management
and research professionals have earned master's degrees in business or finance.
Sixty percent have earned the Chartered Financial Analyst (CFA) or Certified
Public Accountant (CPA) designations.
QUANTITATIVE EXPERTISE
AIM's team of quantitative analysts plays a large role in portfolio construction
and performance monitoring. Our state-of-the-art proprietary tools include the
means to optimize a portfolio's construction, which includes managing and
monitoring risk, analyzing performance, and conducting hypothetical trading
scenarios to see how they would affect the overall portfolio. These tools offer
our investment teams a more acute awareness of how their portfolios stack up
against their benchmarks and their peers.
Attribution tools allow us to monitor relative sector and industry
weightings, individual security weightings, and correlations across different
holdings. Our portfolio management teams aren't the only ones using these
customized risk-assessment tools. They also are used to generate detailed
reports that are reviewed by members of AIM's senior management. We have a
schedule of formalized periodic reviews to assess the construction and the
risk-adjusted performance of the funds, to offer guidance to the portfolio
managers, and to take corrective action when warranted.
DIVERSIFICATION OF AIM'S OFFERINGS
Even during the equity-market bubble of the late 1990s, AIM advocated a
diversified approach to portfolio management for its clients. As growth stocks
registered double-digit gains, we were taking a longer-term view of the markets
and actively diversified our product line across market styles and
capitalization ranges.
As the financial markets have changed over the past few years, so has AIM's
selection of fund offerings. In the past, AIM was recognized for investing in
the equities of U.S. growth companies. Today, AIM's three largest equity
funds--AIM Basic Value Fund, AIM Premier Equity Fund and AIM Constellation
Fund--represent three distinctly different investment disciplines: Value, Blend
and Growth. Complementing those funds are dozens more in all styles, market-cap
ranges, asset classes, and geographic regions.
AIM's clients can create diversified, all-weather portfolios by selecting
from our full spectrum of funds, whether they seek equity or fixed-income, value
or growth, domestic or international, aggressive or conservative, or any
combination in between. Over the course of any complete market cycle, we expect
a portfolio that is a blend of these quality funds will provide a prudent
approach to achieving one's long-term investment goals.
This period of market dislocation has been painful for all of us. But over
the long term, we are confident that tightened accounting regulations, an
increased level of governmental oversight, and the reallocation of resources
following the recent bubble will all result in a healthy resurgence of the
American financial system.
AIM's investment teams and processes continue to be honed and tested in
today's challenging environment. We believe that this prolonged bear market has
created some unparalleled opportunities to invest in leading companies that will
weather the market storm and recover their industry-leading positions when
global economic growth reaccelerates.
We are grateful for the trust our clients have placed in AIM, and we
reaffirm our commitment to excellence across all of our investment disciplines.
Sincerely,
/s/ GARY T. CRUM
Gary T. Crum
Director of Investments/AIM
/s/ EDGAR M. LARSEN
Edgar M. Larsen
Chief Investment Officer/AIM
================================================================================
... WE REAFFIRM OUR
COMMITMENT TO
EXCELLENCE ACROSS ALL
OF OUR INVESTMENT
DISCIPLINES.
================================================================================
3
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
LOW INTEREST RATE ENVIRONMENT CUSHIONS MARKET VOLATILITY
HOW DID AIM GLOBAL FINANCIAL SERVICES FUND PERFORM DURING THE FISCAL YEAR?
Most major markets, both in the U.S. and abroad, declined in 2002. Favorable
interest rate conditions, however, helped financial services shares minimize
losses and outperform the broad market. Given this environment, for the fiscal
year ended October 31, 2002, AIM Global Financial Services Fund returned -7.55%
for Class A shares and -8.02% for Class B shares and Class C shares, excluding
sales charges. The fund bettered its broad market benchmark, the MSCI All
Country (AC) World Free Index, which returned -13.57%. By comparison, the fund
also outperformed the S&P 500 Index, frequently used as a general measure of
U.S. stock market performance, which returned -15.10%.
WHAT WERE SOME OF THE MAJOR TRENDS IN THE STOCK MARKET?
Markets moved lower as concerns about accounting irregularities, anemic
corporate earnings, and a possible conflict with Iraq dampened investor
enthusiasm for stocks worldwide. Except for several short-lived rallies, U.S.
markets reached some of their lowest levels in nearly five years. International
market returns varied greatly by region but were, for the most part, lower in
2002.
World markets rebounded, however, in October, as several major companies
reported better-than-expected earnings and there were also indications that the
Federal Reserve (the Fed) might reduce the federal funds rate which stood at
1.75% at the close of the reporting period--its lowest level in years.
HOW DID FINANCIAL SERVICES STOCKS FARE DURING THE REPORTING PERIOD?
Slow but positive economic growth, relatively contained inflation, and low
interest rates provided a positive environment for the financial services
sector. Sub-sector and industry performance, however, varied considerably. As in
the broad market, there were large volatile swings within the financial services
sector.
Large financial conglomerates suffered from highly publicized accounts of
alleged conflicts of interest between their investment banking and research
divisions. Citigroup, a fund holding, announced plans to split off its equity
research and private client brokerage operations from its investment banking and
underwriting businesses in an effort to stem criticism about analysts' conflict
of interest.
Against a backdrop of low and declining interest rates, banks, however, were
able to capitalize on a favorable lending market. The spread between short and
long-term rates helped banks take advantage of paying low rates to depositors,
while lending at higher rates.
Low rates also encouraged new home ownership and mortgage refinancing, which
benefited consumer finance companies. In this environment, fund holding
Countrywide Financial Corp.--the largest independent residential mortgage
lending firm in the United States--reported strong earnings.
The insurance industry--hit by billions of dollars in losses from last
year's terrorist attacks--found an improved pricing environment. However, weak
equity markets and an increase in loss costs drove down stocks in the industry.
PORTFOLIO COMPOSITION
as of 10/31/02, based on total net assets
<Table>
<Caption>
====================================================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES TOP COUNTRIES
- ------------------------------------------------------------------------------------------------------------------------------------
1. Bank of America Corp. 4.2% 1. BANKS 40.4% UNITED STATES 76.2%
2. Citigroup Inc. 3.6 2. DIVERSIFIED FINANCIAL SERVICES 30.1 IRELAND 3.9%
3. Lehman Brothers Holdings Inc. 3.5 3. PROPERTY & CASUALTY INSURANCE 7.7 ITALY 2.5%
4. Legg Mason, Inc. 3.1 4. MULTI-LINE INSURANCE 4.4 UNITED KINGDOM 2.4%
5. American International Group, Inc. 2.9 5. LIFE & HEALTH INSURANCE 4.3 BERMUDA 2.1%
6. Merrill Lynch & Co., Inc. 2.8 6. CONSUMER FINANCE 2.6 [PIE CHART]
7. Goldman Sachs Group, Inc. (The) 2.6 7. REINSURANCE 2.4 FRANCE 1.8%
8. Anglo Irish Bank Corp. PLC (Ireland) 2.5 8. DATA PROCESSING SERVICES 1.7 SPAIN 1.7%
9. Wells Fargo & Co. 2.5 9. IT CONSULTING & SERVICES 1.1 CANADA 1.5%
10. Cullen/Frost Bankers, Inc. 2.3 10. INSURANCE BROKERS 0.9 CAYMAN ISLANDS 1.6%
HONG KONG 1.4%
OTHER 4.9%
The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security.
====================================================================================================================================
</Table>
4
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
We continue to adhere to our growth at a reasonable price, or GARP, selection
process to identify attractive stocks. Overall, we continue to seek
opportunities the same way we always have, with an eye on earnings and
valuations, using our own models to evaluate companies. The fund is
well-diversified by sub-sector, industry and name.
Our relative overweight in bank stocks over the past few years has benefited
the fund. Low interest rates and relatively strong earnings have helped the
industry. However, our move out of consumer lending and into commercial lending
was a bit premature. Nonetheless, our research supports potential upside
movement in the commercial lending industry.
While the majority of the fund's holdings are in North American stocks, we
also hold about 14% of the fund's assets in European shares. Our holdings in
smaller European names have done well. The balance of the fund's country
exposure is in Asian, Latin American and Bermuda reinsurance stocks.
CAN YOU DISCUSS SOME PARTICULAR HOLDINGS?
o Anglo Irish Bank was the best-performing stock for the fund year-to-date
through October. This Irish bank provides financial services primarily to
small and mid-size companies in the UK and Ireland. The stock has benefited
both from the fast-growing Irish economy as well as from a superior business
model, which has allowed it to gain market share on a regular basis for
several years.
o FleetBoston Financial Corp, one of the largest banks in the United States,
operates 250 offices in 25 countries with a significant presence in Latin
America. The stock has detracted from fund performance recently as the
company's earnings were hurt by its exposure to volatile Latin American
markets. We still find it and the banking industry as a whole, however,
attractive.
WHAT WERE CONDITIONS LIKE AT THE CLOSE OF THE REPORTING PERIOD?
Interest rates were low. The nation's gross domestic product (GDP) grew at an
annualized rate of 4.0% in the third quarter of 2002 compared to 1.3% in the
second quarter of the same year. Healthy consumer spending accounted for much of
the third-quarter economic expansion.
Many investors look to the financial services sector as an indicator of the
overall health of the economy and to assess commercial and consumer patterns.
However, industries within the financial services sector do not trade
homogeneously. While life insurance and thrift stocks are highly-correlated with
interest rates, economic recovery is the main driver for much of the sector.
Therefore, improving economic conditions should prove a boon, not only to the
general market, but also to financial services stocks.
================================================================================
HISTORY SHOWS THAT BEAR MARKETS NEVER LAST ...
U. S. STOCK MARKET AS REPRESENTED BY S&P 500
[LINE CHART]
<Table>
9/30/52 24 3/31/61 65 9/30/69 93 3/31/78 89 9/30/86 231 3/31/95 500
12/31/52 26 6/30/61 64 12/31/69 92 6/30/78 95 12/31/86 242 6/30/95 544
3/31/53 25 9/29/61 66 3/31/70 89 9/29/78 102 3/31/87 291 9/29/95 584
6/30/53 24 12/29/61 71 6/30/70 72 12/29/78 96 6/30/87 304 12/29/95 615
9/30/53 23 3/30/62 69 9/30/70 84 3/30/79 101 9/30/87 321 3/29/96 645
12/31/53 24 6/29/62 54 12/31/70 92 6/29/79 102 12/31/87 247 6/28/96 670
3/31/54 26 9/28/62 56 3/31/71 100 9/28/79 109 3/31/88 258 9/30/96 687
6/30/54 29 12/31/62 63 6/30/71 99 12/31/79 107 6/30/88 273 12/31/96 740
9/30/54 32 3/29/63 66 9/30/71 98 3/31/80 102 9/30/88 271 3/31/97 757
12/31/54 35 6/28/63 69 12/31/71 102 6/30/80 114 12/30/88 277 6/30/97 885
3/31/55 36 9/30/63 71 3/31/72 107 9/30/80 125 3/31/89 294 9/30/97 947
6/30/55 41 12/31/63 75 6/30/72 107 12/31/80 135 6/30/89 317 12/31/97 970
9/30/55 43 3/31/64 78 9/29/72 110 3/31/81 136 9/29/89 349 3/31/98 1101
12/30/55 45 6/30/64 81 12/29/72 118 6/30/81 131 12/29/89 353 6/30/98 1133
3/30/56 48 9/30/64 84 3/30/73 111 9/30/81 116 3/30/90 339 9/30/98 1017
6/29/56 46 12/31/64 84 6/29/73 104 12/31/81 122 6/29/90 358 12/31/98 1229
9/28/56 45 3/31/65 86 9/28/73 108 3/31/82 111 9/28/90 306 3/31/99 1286
12/31/56 46 6/30/65 84 12/31/73 97 6/30/82 109 12/31/90 330 6/30/99 1372
3/29/57 44 9/30/65 89 3/29/74 93 9/30/82 120 3/29/91 375 9/30/99 1282
6/28/57 47 12/31/65 92 6/28/74 86 12/31/82 140 6/28/91 371 12/31/99 1469
9/30/57 42 3/31/66 89 9/30/74 63 3/31/83 152 9/30/91 387 3/31/00 1498
12/31/57 39 6/30/66 84 12/31/74 68 6/30/83 168 12/31/91 417 6/30/00 1454
3/31/58 42 9/30/66 76 3/31/75 83 9/30/83 166 3/31/92 403 9/29/00 1436
6/30/58 45 12/30/66 80 6/30/75 95 12/30/83 164 6/30/92 408 12/29/00 1320
9/30/58 50 3/31/67 90 9/30/75 83 3/30/84 159 9/30/92 417 3/30/01 1160
12/31/58 55 6/30/67 90 12/31/75 90 6/29/84 153 12/31/92 435 6/29/01 1224
3/31/59 55 9/29/67 96 3/31/76 102 9/28/84 166 3/31/93 451 9/28/01 1040
6/30/59 58 12/29/67 96 6/30/76 104 12/31/84 167 6/30/93 450 12/31/01 1148
9/30/59 56 3/29/68 90 9/30/76 105 3/29/85 180 9/30/93 458 3/29/02 1147
12/31/59 59 6/28/68 99 12/31/76 107 6/28/85 191 12/31/93 466 6/28/02 989
3/31/60 55 9/30/68 102 3/31/77 98 9/30/85 182 3/31/94 445 9/30/02 815
6/30/60 56 12/31/68 103 6/30/77 100 12/31/85 211 6/30/94 444
9/30/60 53 3/31/69 101 9/30/77 96 3/31/86 238 9/30/94 462
12/30/60 58 6/30/69 97 12/30/77 95 6/30/86 250 12/30/94 459
Source: Bloomberg LP
====================================================================================================================================
</Table>
The last 2 1/2 years have been challenging for equity mutual fund investors. The
S&P 500, considered representative of U.S. stock market performance, has
declined significantly since hitting an all-time high in early 2000.
The colored bars on the chart represent bear markets, typically defined as a
20% decline in the stock market. As the chart shows, the 2000-2002 bear market
has been more severe and more prolonged than any other in the last 50 years. But
it shows that market declines have always ended--and that the stock market has
risen over time. While past performance cannot guarantee comparable future
results, and while no one can say precisely when the current decline will end,
history shows that bear markets never last.
That is why AIM urges all investors to maintain a long-term investment
discipline.
================================================================================
PORTFOLIO MANAGEMENT TEAM
AS OF 10/31/02
MEGGAN M. WALSH, LEAD MANAGER
CLAS G. OLSSON
BARRETT K. SIDES
ASSISTED BY THE BALANCED TEAM
See important fund and index
disclosures inside front cover.
[GRAPHIC]
For More Information Visit
AIMinvestments.com
================================================================================
5
FUND PERFORMANCE
================================================================================
RESULTS OF A $10,000 INVESTMENT
5/31/94-10/31/02
[MOUNTAIN CHART]
<Table>
<Caption>
AIM GLOBAL FINANCIAL AIM GLOBAL FINANCIAL
SERVICES FUND SERVICES FUND MSCI AC WORLD
DATE CLASS A SHARES CLASS B SHARES WORLD FREE INDEX
05/31/94 9525 10000 10000
7/94 9508 9974 10171
10/94 9682 10149 10549
1/95 8824 9231 9920
4/95 8583 8969 10867
7/95 9850 10281 11521
10/95 9933 10350 11386
1/96 11007 11458 12368
4/96 11410 11863 12918
7/96 10999 11430 12516
10/96 11943 12400 13190
1/97 13026 13498 13924
4/97 13424 13885 14276
7/97 16121 16662 16621
10/97 15517 16009 15309
1/98 15892 16383 16094
4/98 18821 19376 18097
7/98 19037 19572 18078
10/98 15909 16345 17303
1/99 19328 19834 19596
4/99 22321 22872 20826
7/99 20730 21214 21005
10/99 21730 22213 21804
1/00 22178 22635 23042
4/00 23134 23587 23533
7/00 25217 25671 23001
10/00 28267 28742 21975
1/01 28882 29324 21490
4/01 27214 27600 19694
7/01 27354 27709 18581
10/01 23458 23726 16450
1/02 25621 25882 17131
4/02 26094 26328 17193
7/02 22793 23002 14792
10/02 21678 21877 14218
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
</Table>
The chart compares AIM Global Financial Services Fund Class A & B shares to a
benchmark index. It is intended to give you a general idea of how your fund
performed compared to this index over the period 5/31/94-10/31/02. It is
important to understand the difference between your fund and an index. A market
index, such as the MSCI All Country (AC) World Free Index is not managed and
incurs no sales charges, expenses or fees. If you could buy all securities that
make up a market index, you would incur expenses that would affect your
investment return. Your fund's total return includes sales charges, expenses and
management fees. Results for B shares are calculated as if a hypothetical
shareholder had liquidated his entire investment in the fund at the close of the
reporting period and paid the applicable contingent deferred sales charges.
Performance of the fund's Class A, B and C shares will differ due to
different sales charge structures and class expenses. For fund performance
calculations and indexes used in this report, please see the inside front cover.
Performance shown in the chart and table does not reflect deduction of taxes
a shareholder would pay on fund distributions or sale of fund shares.
Performance for the index does not reflect the effects of taxes.
This growth chart uses a logarithmic scale, which means the price scale
(vertical axis) is structured so that a given distance always represents the
same percent change in price, rather than the same absolute change in price. For
example, the distance from one to 10 is the same as the distance from 10 to 100
on a logarithmic chart, but the latter distance is 10 times greater on a linear
chart. A logarithmic scale better illustrates performance in the fund's early
years before reinvested distributions and compounding create the potential for
the original investment to grow to very large numbers.
================================================================================
FUND RETURNS
as of 10/31/02
FUND VS. INDEX
AVERAGE ANNUAL TOTAL RETURNS
5/31/94-10/31/02, excluding sales charges
================================================================================
[BAR CHART]
AIM GLOBAL FINANCIAL SERVICES
FUND CLASS A SHARES 10.26%*
MSCI AC WORLD FREE INDEX 4.27%
Performance of the fund's Class A, B and C shares will differ due to different
sales charge structures and class expenses.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
including sales charges
CLASS A SHARES
Inception (5/31/94) 9.63%
5 Years 5.88
1 Year -11.95
CLASS B SHARES
Inception (5/31/94) 9.74%
5 Years 6.08
1 year -12.61
CLASS C SHARES
Inception (3/1/99) 3.58%
1 Year -8.94
In addition to returns as of the close of the reporting period, industry
regulations require us to provide average annual total returns (including sales
charges) as of 9/30/02, the most recent calendar quarter-end, which were: Class
A shares, inception (5/31/94), 8.83%; five years, 3.14%; one year, -18.06%.
Class B shares, inception (5/31/94), 8.95%; five years, 3.30%; one year,
- -18.64%. Class C shares, inception (3/1/99), 1.72%; one year, -15.21%.
DUE TO RECENT SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE
TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR
FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE.
================================================================================
6
EDUCATION AND PLANNING
OLD BUT GOOD ADVICE--THINK LONG TERM AND STAY DIVERSIFIED
There have been a lot of bumps in the investing road since the stock market
peaked in 2000, and you may have been tempted to simply stay out of the markets.
Or you may have jumped around in the market, looking for hot funds. Both are bad
ideas. Stay invested and diversify.
MARKETS HAVE DELIVERED
Of the 10 calendar years ended December 31, 2001, only two were negative for the
S&P 500 (and they were the first back-to-back negative years since the 1970s).
In fact, for the five years ended December 31--a period that includes a
two-year bear market, the worst one in a generation--the S&P 500 produced
double-digit average annual total returns. (Of course, past performance cannot
guarantee comparable future results.)
Long-term (1900 through 2001) the performance of the U.S. stock market is
excellent: 69 years with positive performance vs. 33 with negative performance.
In addition, when the market rises, it tends to rise more than it falls during
negative years. The average return for the market's 33 down years was -13.18%.
But for the 69 up years, its average return was 22.46%.*
IT'S TIME, NOT TIMING
Research shows that pulling out of the stock market even for a short period and
missing a few of its best days is likely to have a negative effect on your
long-term returns. Even when markets have been as volatile as they have been the
past few years, you were better off staying the course than trying to guess when
to get out and get back in.
DIVERSIFICATION MATTERS
Markets and sectors have always gone in and out of favor, and they always will.
Diversification is still the key to a strong portfolio in any market. The table
of year-by- year results below shows bonds as the best choice over the past two
years. That doesn't mean junk everything else and invest in bonds. It means stay
diversified. When domestic and foreign stocks rebound, be certain you're
invested in them.
DON'T TRAVEL ALONE
You are bound to meet more obstacles and detours before you reach your
investment destination. The road will feel a lot smoother if you travel with a
financial advisor, someone who knows your goals, how much risk you can take and
what investments will suit you best.
* Markets are represented by the Dow Jones Industrial Average from 1900
through 1927 and by the S&P 500 from 1928 through 2001.
PAST PERFORMANCE CANNOT GUARANTEE COMPARABLE FUTURE RESULTS. DUE TO RECENT
SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER
SUBSTANTIALLY FROM HISTORICAL PERFORMANCE.
Results are based on total returns and include reinvestment of dividends. An
investment cannot be made directly in an index. International investing presents
certain risks not associated with investing solely in the United States. These
include risks relating to fluctuations in the value of the U.S. dollar relative
to the values of other currencies, the custody arrangements made for the fund's
foreign holdings, differences in accounting, political risks and the lesser
degree of public information required to be provided by non-U.S. companies.
================================================================================
THE LONG AND SHORT OF INVESTING
THE PENALTY FOR MISSING THE MARKET
S&P 500 9/30/92-9/30/02
<Table>
<Caption>
PERIOD AVERAGE ANNUAL GROWTH
OF INVESTMENT TOTAL RETURN OF $10,000
Staying the Course 9.00% $23,674
Miss the 10 Best Days 4.05 14,868
Miss the 20 Best Days -0.40 10,406
Miss the 30 Best Days -2.56 7,712
Miss the 40 Best Days -5.09 5,933
Miss the 60 Best Days -9.42 3,718
</Table>
Sources: FactSet Research Systems, Lipper, Inc.
================================================================================
YEAR BY YEAR RESULTS
Average total returns for three asset classes
<Table>
<Caption>
FOREIGN STOCKS U.S. BONDS
U.S. STOCKS (MSCI EAFE--Registered (LEHMAN AGGREGATE
YEAR (S&P 500) Trademark-- INDEX) BOND INDEX)
1997 33.35% 1.78% 9.65%
1998 28.60 20.00 8.69
1999 21.03 26.96 -0.82
2000 -9.10 -14.17 11.63
2001 -11.88 -21.44 8.44
</Table>
The unmanaged Dow Jones Industrial Average (the Dow) is a price-weighted average
of 30 actively traded blue chip stocks. The unmanaged Standard & Poor's
Composite Index of 500 Stocks (the S&P 500) is an index of common stocks
frequently used as a general measure of U.S. stock-market performance. The
unmanaged MSCI Europe, Australasia and the Far East Index (the EAFE--Registered
Trademark--) is a group of foreign securities tracked by Morgan Stanley Capital
International. The unmanaged Lehman Aggregate Bond Index, which represents the
U.S. investment-grade fixed-rate bond market (including government and corporate
securities, mortgage pass-through securities and asset-backed securities), is
compiled by Lehman Brothers, a well-known global investment bank.
================================================================================
7
FINANCIALS
Schedule of Investments
October 31, 2002
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-72.36%
Banks-23.38%
Bank of America Corp. 137,000 $ 9,562,600
- ------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 91,000 2,366,000
- ------------------------------------------------------------------------
Charter One Financial, Inc. 87,150 2,638,902
- ------------------------------------------------------------------------
Comerica Inc. 102,000 4,453,320
- ------------------------------------------------------------------------
Cullen/Frost Bankers, Inc. 148,000 5,125,240
- ------------------------------------------------------------------------
FleetBoston Financial Corp. 218,900 5,120,071
- ------------------------------------------------------------------------
M&T Bank Corp. 15,000 1,228,800
- ------------------------------------------------------------------------
Mellon Financial Corp. 125,003 3,536,335
- ------------------------------------------------------------------------
Northern Trust Corp. 58,000 2,019,560
- ------------------------------------------------------------------------
Synovus Financial Corp. 141,000 2,889,090
- ------------------------------------------------------------------------
U.S. Bancorp. 70,000 1,476,300
- ------------------------------------------------------------------------
Wachovia Corp. 71,500 2,487,485
- ------------------------------------------------------------------------
Wells Fargo & Co. 112,500 5,677,875
- ------------------------------------------------------------------------
Zions Bancorp. 107,500 4,322,575
========================================================================
52,904,153
========================================================================
Consumer Finance-2.63%
Countrywide Financial Corp. 28,000 1,408,680
- ------------------------------------------------------------------------
MBNA Corp. 223,500 4,539,285
========================================================================
5,947,965
========================================================================
Data Processing Services-1.68%
DST Systems, Inc.(a) 124,000 3,813,000
========================================================================
Diversified Financial Services-28.38%
Alliance Capital Management Holding L.P. 63,000 1,833,930
- ------------------------------------------------------------------------
American Express Co. 109,500 3,982,515
- ------------------------------------------------------------------------
CIT Group Inc. 61,000 1,086,410
- ------------------------------------------------------------------------
Citigroup Inc. 219,501 8,110,562
- ------------------------------------------------------------------------
Eaton Vance Corp. 82,000 2,354,220
- ------------------------------------------------------------------------
Fannie Mae 33,500 2,239,810
- ------------------------------------------------------------------------
Federated Investors, Inc.-Class B 110,000 2,948,000
- ------------------------------------------------------------------------
Freddie Mac 61,000 3,756,380
- ------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 81,300 5,821,080
- ------------------------------------------------------------------------
Investors Financial Services Corp. 79,600 2,441,332
- ------------------------------------------------------------------------
Legg Mason, Inc. 151,500 7,038,690
- ------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 148,200 7,894,614
- ------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 165,300 6,273,135
- ------------------------------------------------------------------------
Morgan Stanley 52,700 2,051,084
- ------------------------------------------------------------------------
Principal Financial Group, Inc. 121,000 3,394,050
- ------------------------------------------------------------------------
State Street Corp. 72,000 2,978,640
========================================================================
64,204,452
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
Insurance Brokers-0.86%
Marsh & McLennan Cos., Inc. 41,600 $ 1,943,136
========================================================================
IT Consulting & Services-1.08%
SunGard Data Systems Inc.(a) 110,000 2,438,700
========================================================================
Life & Health Insurance-3.84%
Nationwide Financial Services, Inc.-Class A 156,200 4,326,740
- ------------------------------------------------------------------------
Prudential Financial, Inc.(a) 38,800 1,132,960
- ------------------------------------------------------------------------
StanCorp Financial Group, Inc. 60,000 3,240,000
========================================================================
8,699,700
========================================================================
Multi-Line Insurance-4.39%
American International Group, Inc. 104,450 6,533,347
- ------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 86,300 3,408,850
========================================================================
9,942,197
========================================================================
Property & Casualty Insurance-6.12%
Allstate Corp. (The) 43,000 1,710,540
- ------------------------------------------------------------------------
Ambac Financial Group, Inc. 33,000 2,039,400
- ------------------------------------------------------------------------
MGIC Investment Corp. 39,000 1,636,440
- ------------------------------------------------------------------------
PMI Group, Inc. (The) 82,000 2,443,600
- ------------------------------------------------------------------------
Radian Group Inc. 82,000 2,892,140
- ------------------------------------------------------------------------
St. Paul Cos., Inc. (The) 58,000 1,902,400
- ------------------------------------------------------------------------
Travelers Property Casualty Corp.-Class B(a) 90,000 1,216,800
========================================================================
13,841,320
========================================================================
Total Domestic Common Stocks (Cost
$175,248,160) 163,734,623
========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-23.10%
Australia-0.88%
St. George Bank Ltd. (Banks) 202,000 1,992,015
========================================================================
Bermuda-2.07%
Everest Re Group, Ltd. (Reinsurance) 80,700 4,682,214
========================================================================
Cayman Islands-1.58%
ACE Ltd. (Property & Casualty Insurance) 116,000 3,567,000
========================================================================
Canada-1.49%
Bank of Nova Scotia (Banks) 25,000 736,153
- ------------------------------------------------------------------------
Royal Bank of Canada (Banks) 46,500 1,623,814
- ------------------------------------------------------------------------
Sun Life Financial Services of Canada Inc.
(Life & Health Insurance) 60,400 1,014,872
========================================================================
3,374,839
========================================================================
France-1.77%
BNP Paribas S.A. (Banks) 60,200 2,398,931
- ------------------------------------------------------------------------
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
France-(Continued)
Credit Agricole S.A. (Banks) 98,650 $ 1,613,075
========================================================================
4,012,006
========================================================================
Germany-0.32%
Muenchener Rueckversicherungs-Gesellschaft
A.G. (Reinsurance) 5,680 725,584
========================================================================
Hong Kong-1.41%
Dah Sing Financial Group (Banks) 686,000 3,184,009
========================================================================
Ireland-3.91%
Anglo Irish Bank Corp. PLC (Banks) 858,800 5,737,772
- ------------------------------------------------------------------------
Bank of Ireland (Banks) 281,200 3,117,316
========================================================================
8,855,088
========================================================================
Italy-2.47%
Banco Popolare di Verona e Novara Scrl
(Banks) 253,000 3,030,075
- ------------------------------------------------------------------------
UniCredito Italiano S.p.A. (Banks) 681,800 2,564,413
========================================================================
5,594,488
========================================================================
Japan-0.32%
Nomura Holdings Inc. (Diversified Financial
Services) 62,000 713,749
========================================================================
Mexico-0.83%
Grupo Financiero BBVA Bancomer, S.A. de C.V.-
Class B (Banks)(a) 2,392,900 1,876,968
========================================================================
Netherlands-0.74%
Van der Moolen Holding N.V. (Diversified
Financial Services) 75,000 1,673,999
========================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------
South Korea-0.68%
Kookmin Bank-ADR (Banks) 47,300 $ 1,530,155
========================================================================
Spain-1.70%
Banco Popular Espanol S.A. (Banks) 90,100 3,856,186
========================================================================
Sweden-0.49%
Skandinaviska Enskilda Banken AB-Class A
(Banks)(a) 127,000 1,103,455
========================================================================
United Kingdom-2.44%
Man Group PLC (Diversified Financial
Services) 96,300 1,434,846
- ------------------------------------------------------------------------
Northern Rock PLC (Banks) 108,100 1,142,014
- ------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (Banks) 125,100 2,944,742
========================================================================
5,521,602
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $50,267,220) 52,263,357
========================================================================
MONEY MARKET FUNDS-3.87%
STIC Liquid Assets Portfolio(b) 4,376,765 4,376,765
- ------------------------------------------------------------------------
STIC Prime Portfolio(b) 4,376,765 4,376,765
========================================================================
Total Money Market Funds (Cost
$8,753,530) 8,753,530
========================================================================
TOTAL INVESTMENTS-99.33% (Cost $234,268,910) 224,751,510
========================================================================
OTHER ASSETS LESS LIABILITIES-0.67% 1,517,132
========================================================================
NET ASSETS-100.00% $226,268,642
________________________________________________________________________
========================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
F-2
Statement of Assets and Liabilities
October 31, 2002
<Table>
ASSETS:
Investments, at market value (cost
$234,268,910)* $224,751,510
- -------------------------------------------------------------
Foreign currencies, at value (cost $323,133) 324,957
- -------------------------------------------------------------
Receivables for:
Investments sold 3,751,853
- -------------------------------------------------------------
Fund shares sold 236,477
- -------------------------------------------------------------
Dividends 173,494
- -------------------------------------------------------------
Investment for deferred compensation plan 2,855
- -------------------------------------------------------------
Collateral for securities loaned 19,774,354
- -------------------------------------------------------------
Other assets 22,933
=============================================================
Total assets 249,038,433
_____________________________________________________________
=============================================================
LIABILITIES:
Payables for:
Investments purchased 1,895,773
- -------------------------------------------------------------
Fund shares reacquired 707,633
- -------------------------------------------------------------
Deferred compensation plan 2,855
- -------------------------------------------------------------
Collateral upon return of securities loaned 19,774,354
- -------------------------------------------------------------
Accrued distribution fees 212,806
- -------------------------------------------------------------
Accrued trustees' fees 665
- -------------------------------------------------------------
Accrued transfer agent fees 86,716
- -------------------------------------------------------------
Accrued operating expenses 88,989
=============================================================
Total liabilities 22,769,791
=============================================================
Net assets applicable to shares outstanding $226,268,642
_____________________________________________________________
=============================================================
NET ASSETS:
Class A $108,191,449
_____________________________________________________________
=============================================================
Class B $ 90,838,169
_____________________________________________________________
=============================================================
Class C $ 27,239,024
_____________________________________________________________
=============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 5,736,947
_____________________________________________________________
=============================================================
Class B 5,010,164
_____________________________________________________________
=============================================================
Class C 1,502,434
_____________________________________________________________
=============================================================
Class A:
Net asset value per share $ 18.86
- -------------------------------------------------------------
Offering price per share:
(Net asset value of $18.86 divided by
95.25%) $ 19.80
_____________________________________________________________
=============================================================
Class B:
Net asset value and offering price per
share $ 18.13
_____________________________________________________________
=============================================================
Class C:
Net asset value and offering price per
share $ 18.13
_____________________________________________________________
=============================================================
</Table>
* At October 31, 2002, securities with an aggregate market value of $19,118,335
were on loan to brokers.
Statement of Operations
For the year ended October 31, 2002
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$122,904) $ 4,387,225
- -------------------------------------------------------------
Dividends from affiliated money market funds 293,858
- -------------------------------------------------------------
Interest 540
- -------------------------------------------------------------
Security lending income 59,671
=============================================================
Total investment income 4,741,294
=============================================================
EXPENSES:
Advisory fees 2,792,762
- -------------------------------------------------------------
Administrative services fees 77,287
- -------------------------------------------------------------
Custodian fees 72,841
- -------------------------------------------------------------
Distribution fees -- Class A 668,896
- -------------------------------------------------------------
Distribution fees -- Class B 1,181,058
- -------------------------------------------------------------
Distribution fees -- Class C 345,522
- -------------------------------------------------------------
Transfer agent fees 973,918
- -------------------------------------------------------------
Trustees' fees 10,504
- -------------------------------------------------------------
Other 271,701
=============================================================
Total expenses 6,394,489
=============================================================
Less: Fees waived (3,254)
- -------------------------------------------------------------
Expenses paid indirectly (4,705)
=============================================================
Net expenses 6,386,530
=============================================================
Net investment income (loss) (1,645,236)
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (16,876,997)
- -------------------------------------------------------------
Foreign currencies 19,594
- -------------------------------------------------------------
Option contracts written 950,411
=============================================================
(15,906,992)
=============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (3,665,896)
- -------------------------------------------------------------
Foreign currencies 1,680
=============================================================
(3,664,216)
=============================================================
Net gain (loss) from investment securities,
foreign currencies and option contracts (19,571,208)
=============================================================
Net increase (decrease) in net assets
resulting from operations $(21,216,444)
_____________________________________________________________
=============================================================
</Table>
See Notes to Financial Statements.
F-3
Statement of Changes in Net Assets
For the years ended October 31, 2002 and 2001
<Table>
<Caption>
2002 2001
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (1,645,236) $ (1,479,394)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (15,906,992) (702,041)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (3,664,216) (55,478,909)
==========================================================================================
Net increase (decrease) in net assets resulting from
operations (21,216,444) (57,660,344)
==========================================================================================
Distributions to shareholders from net realized gains:
Class A -- (1,093,601)
- ------------------------------------------------------------------------------------------
Class B -- (1,042,912)
- ------------------------------------------------------------------------------------------
Class C -- (251,528)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A (9,235,195) 58,836,610
- ------------------------------------------------------------------------------------------
Class B (15,032,506) 48,052,092
- ------------------------------------------------------------------------------------------
Class C (2,205,504) 18,437,773
==========================================================================================
Net increase (decrease) in net assets (47,689,649) 65,278,090
==========================================================================================
NET ASSETS:
Beginning of year 273,958,291 208,680,201
==========================================================================================
End of year $226,268,642 $273,958,291
__________________________________________________________________________________________
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $252,308,562 $280,430,611
- ------------------------------------------------------------------------------------------
Undistributed net investment income 137,610 87,996
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and option contracts (16,661,676) (708,678)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (9,515,854) (5,851,638)
==========================================================================================
$226,268,642 $273,958,291
__________________________________________________________________________________________
==========================================================================================
</Table>
See Notes to Financial Statements.
F-4
Notes to Financial Statements
October 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Financial Services Fund (the "Fund") is a separate series of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware statutory
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of seven separate series portfolios, each having an unlimited number of shares
of beneficial interest. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund.
The Fund's investment objective is long-term growth of capital.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued at the closing bid price furnished
by independent pricing services or market makers. Each security reported on
the NASDAQ National Market System is valued at the last sales price as of
the close of the customary trading session on the valuation date or absent
a last sales price, at the closing bid price. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, dividend rate,
yield, quality, type of issue, coupon rate, maturity, individual trading
characteristics and other market data. Securities for which market prices
are not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in
the case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value. For purposes of determining net asset value per share, futures and
option contracts generally will be valued 15 minutes after the close of the
customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the NYSE. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not be
reflected in the computation of the Fund's net asset value. If a
development/event is so significant that there is a reasonably high degree
of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer
reflect actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in
good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-
F-5
upon price at a future date. The Fund may enter into a foreign currency
contract to attempt to minimize the risk to the Fund from adverse changes
in the relationship between currencies. The Fund may also enter into a
foreign currency contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar
price of that security. The Fund could be exposed to risk if counterparties
to the contracts are unable to meet the terms of their contracts or if the
value of the foreign currency changes unfavorably.
G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. When the Fund
writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
H. EXPENSES -- Distribution expenses directly attributable to a class of
shares are charged to the respective classes' operations. Transfer agency
fees and expenses and other shareholder recordkeeping fees and expenses are
charged to each class pursuant to a transfer agency and service agreement
adopted by the Fund with respect to such class. All other expenses are
allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
The Fund pays AIM investment management and administration fees at an annual
rate of 0.975% on the first $500 million of the Fund's average daily net assets,
plus 0.95% on the next $500 million of the Fund's average daily net assets, plus
0.925% on the next $500 million of the Fund's average daily net assets, plus
0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has
voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of
the advisory fee AIM receives from the affiliated money market fund of which the
Fund has invested. For the year ended October 31, 2002, AIM waived fees of
$3,254.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the year ended October 31, 2002, AIM was
paid $77,287 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 2002, AFS
retained $540,705 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.50% 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 C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. 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
master distribution agreements, for the year ended October 31, 2002, the Class
A, Class B and Class C shares paid $668,896, $1,181,058 and $345,522,
respectively.
AIM Distributors retained commissions of $76,053 from sales of the Class A
shares of the Fund during the year ended October 31, 2002. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 2002,
AIM Distributors retained $6,413, $621 and $9,102 in contingent deferred sales
charges imposed on redemptions of Class A, Class B and Class C shares,
respectively.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended October 31, 2002, the Fund paid legal fees of $4,141 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended October 31, 2002, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $4,442 and reductions in custodian
fees of $263 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $4,705.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Trust. The Trustees deferring compensation have the option to
select various AIM Funds in which all or part of their deferral accounts shall
be deemed to be invested.
F-6
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended October 31,
2002, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities. It is
the Fund's policy to obtain additional collateral from or return excess
collateral to the borrower by the end of the next business day. Therefore, the
value of the collateral may be temporarily less than the value of the securities
on loan.
At October 31, 2002, securities with an aggregate value of $19,118,335 were on
loan to brokers. The loans were secured by cash collateral of $19,774,354
received by the Fund and invested in affiliated money market funds as follows:
$9,887,177 in STIC Liquid Assets Portfolio and $9,887,177 in STIC Prime
Portfolio. For the year ended October 31, 2002, the Fund received fees of
$59,671 for securities lending.
NOTE 7--CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 2002 are
summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ------------------------------------------------------------
Beginning of year -- $ --
- ------------------------------------------------------------
Written 10,527 1,306,996
- ------------------------------------------------------------
Closed (7,470) (956,513)
- ------------------------------------------------------------
Exercised (556) (84,220)
- ------------------------------------------------------------
Expired (2,501) (266,263)
============================================================
End of year -- $ --
____________________________________________________________
============================================================
</Table>
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
Distributions to Shareholders:
The tax character of distributions paid during the years ended October 31, 2002
and 2001 were as follows:
<Table>
<Caption>
2002 2001
- ------------------------------------------------------------
Distributions paid from long-term
capital gains $ -- $2,388,041
____________________________________________________________
============================================================
</Table>
Tax Components of Beneficial Interest:
As of October 31, 2002, the components of beneficial interest on a tax basis
were as follows:
<Table>
Unrealized appreciation -- investments $ (9,583,365)
- -------------------------------------------------------------
Temporary book/tax differences (4,734)
- -------------------------------------------------------------
Capital loss carryforward (16,451,821)
- -------------------------------------------------------------
Shares of beneficial interest 252,308,562
=============================================================
$226,268,642
_____________________________________________________________
=============================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains,
losses and income on investments for tax and book purposes. The Fund's
unrealized appreciation (depreciation) is attributable primarily to the tax
deferral of losses on wash sales and the tax recognition of partnership income.
Amount includes appreciation on foreign currencies of $1,546.
The temporary book/tax differences are primarily a result of timing
differences between book and tax recognition of income and/or expenses. The
Fund's temporary book/tax differences are the result of the deferral of trustee
compensation and retirement plan expenses.
The Fund's capital loss carryforward expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- -----------------------------------------------------------
October 31, 2009 $ 259,675
- -----------------------------------------------------------
October 31, 2010 16,192,146
===========================================================
$16,451,821
___________________________________________________________
===========================================================
</Table>
F-7
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 2002 was
$137,661,362 and $159,332,982, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2002 is as follows:
<Table>
Aggregate unrealized appreciation of investment
securities $ 14,557,279
- -------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (24,142,190)
=============================================================
Net unrealized appreciation (depreciation) of
investment securities $ (9,584,911)
_____________________________________________________________
=============================================================
Cost of investments for tax purposes is $234,336,421.
</Table>
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions,
net operating loss reclassifications, partnership income, and other items, on
October 31, 2002, undistributed net investment income was increased by
$1,694,850, undistributed net realized gains decreased by $46,006 and shares of
beneficial interest decreased by $1,648,844. This reclassification had no effect
on the net assets of the Fund.
NOTE 11--SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 2002 and 2001
were as follows:
<Table>
<Caption>
2002 2001
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,922,009* $62,717,219* 5,052,621 $119,437,397
- ----------------------------------------------------------------------------------------------------------------------
Class B 1,253,533 26,379,817 3,478,790 79,898,444
- ----------------------------------------------------------------------------------------------------------------------
Class C 727,708 14,583,074 1,195,608 27,610,451
======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 43,536 1,037,039
- ----------------------------------------------------------------------------------------------------------------------
Class B -- -- 42,175 974,682
- ----------------------------------------------------------------------------------------------------------------------
Class C -- -- 10,376 239,794
======================================================================================================================
Reacquired:
Class A (3,401,742) (71,952,414) (2,718,336) (61,637,826)
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,070,585)* (41,412,323)* (1,519,609) (32,821,034)
- ----------------------------------------------------------------------------------------------------------------------
Class C (863,759) (16,788,578) (435,228) (9,412,472)
======================================================================================================================
(1,432,836) $(26,473,205) 5,149,933 $125,326,475
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
* Includes automatic conversion of 355,226 shares of Class B shares in the
amount of $7,336,625 to 339,373 shares of Class A shares in the amount of
$7,336,625.
F-8
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
----------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------
2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.40 $ 24.85 $ 23.23 $ 17.05 $ 17.22
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.06)(a) (0.07)(a) (0.02)(a) 0.07(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (1.47) (4.13) 5.87 6.25 0.37
=================================================================================================================================
Total from investment operations (1.54) (4.19) 5.80 6.23 0.44
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.25) (0.02) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.26) (3.93) (0.03) (0.60)
=================================================================================================================================
Total distributions -- (0.26) (4.18) (0.05) (0.61)
=================================================================================================================================
Net asset value, end of period $ 18.86 $ 20.40 $ 24.85 $ 23.23 $ 17.05
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (7.55)% (17.03)% 30.06% 36.62% 2.53%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $108,191 $126,816 $95,393 $30,987 $28,433
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.97%(c) 1.85% 2.00% 1.99% 1.97%
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.97%(c) 1.85% 2.00% 2.12% 1.99%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.31)%(c) (0.26)% (0.33)% (0.08)% 0.37%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 51% 53% 41% 107% 111%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles and does not include sales charges.
(c) Ratios are based on average daily net assets of $133,779,148.
F-9
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------
2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.71 $ 24.14 $ 22.67 $ 16.71 $ 16.97
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.17)(a) (0.17)(a) (0.18)(a) (0.12)(a) (0.02)(a)
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (1.41) (4.00) 5.72 6.11 0.37
================================================================================================================================
Total from investment operations (1.58) (4.17) 5.54 5.99 0.35
================================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.14) -- (0.01)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.26) (3.93) (0.03) (0.60)
================================================================================================================================
Total distributions -- (0.26) (4.07) (0.03) (0.61)
================================================================================================================================
Net asset value, end of period $ 18.13 $ 19.71 $ 24.14 $ 22.67 $ 16.71
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (8.02)% (17.45)% 29.40% 35.91% 2.08%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $90,838 $114,852 $92,343 $49,619 $48,785
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.47%(c) 2.35% 2.50% 2.49% 2.47%
- --------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.47%(c) 2.35% 2.50% 2.62% 2.49%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.81)%(c) (0.76)% (0.83)% (0.58)% (0.13)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 51% 53% 41% 107% 111%
________________________________________________________________________________________________________________________________
================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles and does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $118,105,820.
F-10
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
-----------------------------------------------------------
MARCH 1, 1999
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
-------------------------------------- OCTOBER 31,
2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.71 $ 24.14 $ 22.67 $ 19.58
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.17)(a) (0.17)(a) (0.18)(a) (0.08)(a)
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (1.41) (4.00) 5.72 3.17
===========================================================================================================================
Total from investment operations (1.58) (4.17) 5.54 3.09
===========================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.14) --
- ---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.26) (3.93) --
===========================================================================================================================
Total distributions -- (0.26) (4.07) --
===========================================================================================================================
Net asset value, end of period $ 18.13 $ 19.71 $ 24.14 $ 22.67
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) (8.02)% (17.45)% 29.40% 15.78%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $27,239 $32,290 $20,944 $ 605
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.47%(c) 2.35% 2.50% 2.49%(d)
- ---------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.47%(c) 2.35% 2.50% 2.62%(d)
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.81)%(c) (0.76)% (0.83)% (0.58)%(d)
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 51% 53% 41% 107%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles, does not include contingent deferred sales charges and is
not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $34,552,185.
(d) Annualized.
F-11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of AIM Global Financial Services Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Global Financial Services
Fund (one of the funds constituting AIM Investment Funds; hereafter referred to
as the "Fund") at October 31, 2002, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2002 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
December 12, 2002
Houston, Texas
F-12
OTHER INFORMATION
Trustees and Officers
As of December 31, 2001
The address of each trustee and officer of AIM Investment Funds is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 86 portfolios in
the AIM Funds complex. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
Name, Year of Birth and Trustee and/ Principal Occupation(s) Other Directorship(s)
Position(s) Held with the Trust or Officer Since During Past 5 Years Held by Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham* -- 1946 1998 Chairman, President and Chief Executive None
Trustee, Chairman and Officer, A I M Management Group Inc.
President (financial services holding company);
Chairman and President, A I M Advisors,
Inc. (registered investment advisor);
Director and Senior Vice President,
A I M Capital Management, Inc.
(registered investment advisor);
Chairman, A I M Distributors, Inc.
(registered broker dealer), A I M Fund
Services, Inc. (registered transfer
agent), and Fund Management Company
(registered broker dealer); and
Director and Vice Chairman, AMVESCAP
PLC (parent of AIM and a global
investment management firm)
- -------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Of Counsel, law firm of Baker & Badgley Funds, Inc. (registered
Trustee McKenzie investment company)
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology ACE Limited (insurance
Trustee Associates (technology consulting company); and Captaris, Inc.
company) (unified messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Chairman, Cortland Trust, Inc. None
Trustee (registered investment company) and DHJ
Media, Inc.; Director, Magellan
Insurance Company; Member of Advisor
Board of Rotary Power International
(designer, manufacturer, and seller of
rotary power engines); formerly,
Director, President and CEO, Volvo
Group North America, Inc.; and director
of various affiliated Volvo companies
- -------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 2001 Formerly, Chairman, Mercantile Mortgage None
Trustee Corp.; Vice Chairman, President and
Chief Operating Officer,
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares
Corp.
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc.
Trustee Naftalis and Frankel LLP (registered investment company)
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly, Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Louis S. Sklar -- 1939 2001 Executive Vice President, Development None
Trustee and Operations, Hines Interests Limited
Partnership (real estate development
company)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Graham is considered an interested person of the fund because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
Trustees and Officers (continued)
As of December 31, 2001
The address of each trustee and officer of AIM Investment Funds is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 86 portfolios in
the AIM Funds complex. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
Name, Year of Birth and Trustee and/ Principal Occupation(s) Other Directorship(s)
Position(s) Held with the Trust or Officer Since During Past 5 Years Held by Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------------
Gary T. Crum -- 1947 1998 Director and President, A I M Capital N/A
Vice President Management, Inc.; Director and
Executive Vice President, A I M
Management Group Inc.; Director and
Senior Vice President, A I M Advisors,
Inc.; and Director, A I M Distributors,
Inc. and AMVESCAP PLC (parent of AIM
and a global investment management
firm)
- -------------------------------------------------------------------------------------------------------------------------------
Carol F. Relihan -- 1954 1998 Director, Senior Vice President, N/A
Senior Vice President and General Counsel and Secretary, A I M
Secretary Advisors, Inc. and A I M Management
Group Inc.; Director, Vice President
and General Counsel, Fund Management
Company; and Vice President, A I M Fund
Services, Inc., A I M Capital
Management, Inc. and A I M
Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Melville B. Cox -- 1943 1998 Vice President and Chief Compliance N/A
Vice President Officer, A I M Advisors, Inc. and A I M
Capital Management, Inc.; and Vice
President, A I M Fund Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Dana R. Sutton -- 1959 1998 Vice President and Fund Treasurer, N/A
Vice President and Treasurer A I M Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available
upon request, without charge, by calling 1.800.347.4246.
</Table>
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. PricewaterhouseCoopers LLP
Suite 100 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046 Suite 100 Suite 100 Suite 2900
Houston, TX 77046 Houston, TX 77046 Houston, TX 77002
COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN
Ballard Spahr Kramer, Levin, Naftalis A I M Fund Services, Inc. State Street Bank and
Andrews & Ingersoll, LLP & Frankel LLP P.O. Box 4739 Trust Company
1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103 New York, NY 10022 Boston, MA 02110
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
================================================================================
[COVER IMAGE]
MORE AGGRESSIVE
SECTOR EQUITY
INTERNATIONAL/GLOBAL EQUITY
DOMESTIC EQUITY
FIXED INCOME
MORE CONSERVATIVE
================================================================================
<Table>
====================================================================================================================================
FIXED INCOME
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY TAXABLE
MORE AGGRESSIVE MORE AGGRESSIVE MORE AGGRESSIVE
AIM Emerging Growth Fund AIM Developing Markets Fund AIM High Yield Fund II
AIM Small Cap Growth Fund(1) AIM European Small Company Fund AIM High Yield Fund
AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund(2) AIM Strategic Income Fund
AIM Opportunities I Fund(2,3) AIM International Emerging Growth Fund AIM Income Fund
AIM Mid Cap Growth Fund AIM Global Aggressive Growth Fund AIM Global Income Fund
AIM Libra Fund AIM European Growth Fund(2) AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund(2) AIM Intermediate Government Fund
AIM Opportunities II Fund(2,3) AIM Global Growth Fund AIM Short Term Bond Fund
AIM Constellation Fund AIM Worldwide Spectrum Fund AIM Floating Rate Fund
AIM Large Cap Growth Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(4,5)
AIM Weingarten Fund AIM International Core Equity Fund(2) AIM Money Market Fund
AIM Opportunities III Fund(2,3)
AIM Small Cap Equity Fund MORE CONSERVATIVE MORE CONSERVATIVE
AIM Capital Development Fund
AIM Mid Cap Core Equity Fund(2) SECTOR EQUITY TAX-FREE
AIM Select Equity Fund
AIM Premier Equity II Fund(2) MORE AGGRESSIVE MORE AGGRESSIVE
AIM Premier Equity Fund(2)
AIM Blue Chip Fund AIM New Technology Fund AIM High Income Municipal Fund
AIM Mid Cap Basic Value Fund AIM Global Science and Technology Fund(2) AIM Municipal Bond Fund
AIM Large Cap Core Equity Fund AIM Global Energy Fund AIM Tax-Free Intermediate Fund(4,5)
AIM Charter Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Basic Value Fund AIM Global Health Care Fund
AIM Large Cap Basic Value Fund AIM Global Utilities Fund MORE CONSERVATIVE
AIM Balanced Fund* AIM Real Estate Fund
AIM Basic Balanced Fund* [AIM FUNDS LOGO]
MORE CONSERVATIVE --Registered Trademark--
MORE CONSERVATIVE
*Domestic equity and income fund
====================================================================================================================================
</Table>
Equity and fixed-income funds are shown from more aggressive to more
conservative. When assessing the degree of risk, qualitative and quantitative
factors considered included the funds' portfolio holdings, diversification
permitted within the fund, the funds' standard deviations for three, five, 10,
15, 20 and 25 years, R-squared and beta analysis relative to the style-specific
benchmarks, and the possibility of incorporating portfolio management tools such
as leverage, derivatives and short selling. Fund rankings are relative to one
another within The AIM Family of Funds--Registered Trademark-- and should not be
compared with other investments. There is no guarantee that any one AIM fund
will be less volatile than any other. This order is subject to change. (1) AIM
Small Cap Growth Fund was closed to most investors on March 18, 2002. For more
information on who may continue to invest in AIM Small Cap Growth Fund, please
contact your financial advisor. (2) The following fund name changes became
effective 7/1/02: AIM Asian Growth Fund renamed AIM Asia Pacific Growth Fund;
AIM European Development Fund renamed AIM European Growth Fund; AIM Global
Telecommunications and Technology Fund renamed AIM Global Science and Technology
Fund; AIM International Equity Fund renamed AIM International Growth Fund; AIM
International Value Fund renamed AIM International Core Equity Fund; AIM Large
Cap Opportunities Fund renamed AIM Opportunities III Fund; AIM Mid Cap Equity
Fund renamed AIM Mid Cap Core Equity Fund; AIM Mid Cap Opportunities Fund
renamed AIM Opportunities II Fund; AIM Small Cap Opportunities Fund renamed AIM
Opportunities I Fund; AIM Value Fund renamed AIM Premier Equity Fund; AIM Value
II Fund renamed AIM Premier Equity II Fund. (3) Effective Oct. 1, 2002, the fund
reopened to new investors. (4) Class A shares closed to new investors on Oct.
30, 2002. (5) Class A3 shares were first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. This brochure is not authorized for distribution to
prospective investors unless preceded or accompanied by a currently effective
fund prospectus, which contains more complete information, including sales
charges and expenses. Please read it carefully before investing. If used after
Jan. 20, 2003, this brochure must be accompanied by a fund Performance &
Commentary or by an AIM Quarterly Performance Review for the most recent
quarter-end.
A I M Management Group Inc. has provided leadership in the mutual fund industry
since 1976 and manages $117 billion in assets for approximately 9 million
shareholders, including individual investors, corporate clients and financial
institutions. The AIM Family of Funds--Registered Trademark-- is distributed
nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest
independent financial services companies with $323 billion in assets under
management.
As of 9/30/02.
INVEST WITH DISCIPLINE--Registered Trademark--
A I M Distributors, Inc. GFS-AR-1
APPENDIX VII
SEMIANNUAL REPORT TO SHAREHOLDERS / APRIL 30, 2003
AIM GLOBAL FINANCIAL SERVICES FUND
(COVER IMAGE)
(AIM INVESTMENTS LOGO APPEARS HERE)
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.--Servicemark--
AIM Global Financial Services Fund seeks long-term growth
of capital by investing normally in the equity securities of
domestic and foreign financial services companies.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
This report may be distributed only to shareholders or to
persons who have received a current prospectus of the fund.
FUND DATA
================================================================================
TOP INDUSTRIES
As of April 30, 2003
- --------------------------------------------------------------------------------
(PIE CHART)
OTHER 6.6%
CONSUMER FINANCE 0.5%
IT CONSULTING SERVICES 1.1%
DATA PROCESSING SERVICES 1.3%
REINSURANCE 2.0%
INSURANCE BROKERS 2.8%
LIFE & HEALTH INSURANCE 2.9%
MULTI-LINE INSURANCE 4.3%
PROPERTY & CASUALTY INSURANCE 10.0%
DIVERSIFIED FINANCIAL SERVICES 29.0%
BANKS 39.5%
TOTAL NUMBER OF HOLDINGS* 66
TOTAL NET ASSETS $208.3 BILLION
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 4/30/03, including sales charges
CLASS A SHARES
Inception (5/31/94) 9.58%
5 Years 2.73
1 Year -17.42
CLASS B SHARES
Inception (5/31/94) 9.69%
5 Years 2.88
1 Year -18.07
CLASS C SHARES
Inception (3/1/99) 4.13%
1 Year -14.63
In addition to returns as of the close of the reporting period, industry
regulations require us to provide average annual total returns (including sales
charges) as of 3/31/03, the most recent calendar quarter-end, which were: Class
A shares, inception (5/31/94), 8.41%; five years, 1.17%; one year, -27.67%.
Class B shares, inception (5/31/94), 8.52%; 5 years, 1.32%; one year, -28.19%.
Class C shares, inception (3/1/99), 1.64%; one year, -25.17%.
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 10/31/02-4/30/03,
excluding sales charges
CLASS A SHARES 4.29%
CLASS B SHARES 4.03
CLASS C SHARES 4.03
MSCI ALL COUNTRY (AC) WORLD FREE INDEX 3.70
(Broad Market Index)
NYSE FINANCE INDEX 4.85
(Style-specific Index)
LIPPER FINANCIAL SERVICES FUND INDEX 3.29
(Peer Group Index)
SOURCE: LIPPER, INC.
Past performance cannot guarantee comparable future results. DUE TO RECENT
SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER
SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR
FOR MORE CURRENT PERFORMANCE.
================================================================================
<Table>
<Caption>
================================================================================
TOP 10 EQUITY HOLDINGS* TOP 10 COUNTRIES*
- --------------------------------------------------------------------------------
1. Bank of America Corp. 3.8% 1. United States 73.2%
2. Merrill Lynch & Co., Inc. 3.3 2. Ireland 4.6
3. Citigroup Inc. 3.2 3. Bermuda 3.5
4. Anglo Irish Bank Corp. PLC (Ireland) 3.1 4. United Kingdom 2.3
5. Legg Mason, Inc. 2.8 5. Italy 2.0
6. Lehman Brothers Holdings Inc. 2.5 6. Spain 1.9
7. Wells Fargo & Co. 2.5 7. Australia 1.2
8. Morgan Stanley 2.3 8. Cayman Islands 1.2
9. Cullen/Frost Bankers, Inc. 2.3 9. Mexico 1.0
10. American International Group, Inc. 2.2 10. Canada 1.0
*Excludes money market fund holdings.
The fund's holdings are subject to change, and there is no assurance the fund
will continue to hold any particular security.
================================================================================
</Table>
ABOUT FUND INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information presented here is as of 4/30/03 and is
based on total net assets.
o AIM Global Financial Services Fund's performance figures are historical,
and they reflect the reinvestment of distributions and changes in net asset
value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales-charge structure and class expenses.
o The fund may participate in the initial public offering market in some
market cycles. Because of the fund's small asset base, any investment in
IPOs may significantly increase the fund's total return. As the fund's
assets grow, the impact of IPO investments will decline, which may reduce
the effect of IPO investments on the fund's total return.
o Had the advisor not waived fees and/or absorbed fund expenses, returns would
have been lower.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information to
be provided by non-U.S. companies.
o Investing in a single-sector mutual fund involves greater risk and potential
return than investing in a more diversified fund.
o The funds investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original investment.
o In the Schedule of Investments in this report, the fund's portfolio holdings
are organized according to the Global Industry Classification Standard,
which was developed by and is the exclusive property and a service mark of
Morgan Stanley Capital International, Inc. and Standard & Poor's.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged MSCI All Country (AC) World Free Index tracks the performance
of approximately 50 developed and emerging countries covered by Morgan
Stanley Capital International. The "free" index represents actual buyable
opportunities for global purchases.
o The unmanaged Lipper Financial Services Fund Index represents an average of
the 10 largest financial-services funds tracked by Lipper, Inc., an
independent mutual fund performance monitor.
o The NYSE Finance Index is a capitalization-weighted index of financial
stocks designed to measure the performance of the financial sector of the
New York Stock Exchange.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses.
Performance of a market index does not.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMINVESTMENTS.COM.
TO OUR SHAREHOLDERS
DEAR SHAREHOLDER:
[PHOTO OF This is the report on AIM Global Financial Services Fund for
ROBERT H. the six months ended April 30, 2003. You will note that we
GRAHAM] have adopted a more concise format for our semiannual
reports. Important information such as top holdings and
performance as of the close of the reporting period appear
on the opposite page. This letter will provide an overview
of the markets and your fund during the six months covered
by this report. As always, timely information about your
fund and the markets in general is available at our Web
site, aiminvestments.com.
MARKET CONDITIONS
In U.S. markets, positive performance during March and April
2003 enabled major stock market indexes to post gains for
the reporting period. For example, the unmanaged Standard &
Poor's Composite Index of 500 Stocks (the S&P 500), an index of common stocks
frequently used as a general measure of U.S. stock market performance, returned
4.47% for the six months ended April 30, 2003.
Year to date as of April 30, consumer discretionary, information technology
and financials were among the better-performing sectors of the S&P 500, while
telecommunications services was the worst.
Generally, mid- and small-cap stocks outperformed large-cap stocks, and the
value investment style outperformed the growth investment style during the
six-month reporting period.
International markets, as measured by the unmanaged MSCI Europe, Australasia
and the Far East Index (the EAFE--Registered Trademark--), a group of foreign
securities tracked by Morgan Stanley Capital International, produced negative
returns for the first quarter of 2003. International markets, however, rallied
in April. This rally helped push international market returns into positive
territory for the six-month reporting period.
European markets rallied toward the close of the reporting period, with the
MSCI (Morgan Stanley Capital International) Europe Index, often considered
representative of the European equity market, gaining 13.49% in April. In
European monetary affairs, the European Central Bank (ECB) cut its benchmark
interest rate 25 basis points to 2.50% in March. It remained at that level as
the reporting period closed.
As widely discussed, in Asia, the epidemic of severe acute respiratory
syndrome (SARS) dealt a blow to local economies. However, the MSCI All Country
(AC) Asia Pacific Free ex-Japan Index, a group of developed and emerging Asian
and Asia-Pacific markets (except Japan) covered by Morgan Stanley Capital
International, rallied in April and was positive for the six-month reporting
period.
On the currency front, the U.S. dollar was weak compared to many foreign
currencies. In particular, the euro showed strength as it appreciated nearly 13%
against the dollar during the reporting period. Other notable currencies that
gained ground on the dollar included the Australian dollar, Swiss franc, British
pound and Canadian dollar.
YOUR FUND
At net asset value, AIM Global Financial Services Fund achieved positive results
for all three share classes for the six months ended April 30, 2003.
Fund managers Meggan M. Walsh, Clas G. Olsson and Barrett K Sides have
positioned banks as the largest industry among the fund's holdings.
During the reporting period, the fund has increased its presence in North
America, Latin America, Asia and the South Pacific. Holdings in Europe were
scaled back.
IN CLOSING
I thank you for your continued participation in AIM Global Financial Services
Fund, and I look forward to reporting to you again in six months. If you have
questions, please consult your financial advisor to help you with your
investment choices. As always, members of our award-winning Client Services
department are ready to help. They can be reached at 800-959-4246.
Sincerely,
/s/ Robert H. Graham
Robert H. Graham
Chairman
April 30, 2003
================================================================================
ON THE CURRENCY FRONT, THE U.S.
DOLLAR WAS WEAK COMPARED TO
MANY FOREIGN CURRENCIES.
ROBERT H. GRAHAM
================================================================================
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- -------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-73.22%
BANKS-24.63%
Bank of America Corp. 107,600 $ 7,967,780
- -------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 76,300 2,018,135
- -------------------------------------------------------------------------
Bank One Corp. 42,000 1,514,100
- -------------------------------------------------------------------------
Charter One Financial, Inc. 69,150 2,008,807
- -------------------------------------------------------------------------
Comerica Inc. 61,200 2,662,812
- -------------------------------------------------------------------------
Cullen/Frost Bankers, Inc. 143,600 4,708,644
- -------------------------------------------------------------------------
FleetBoston Financial Corp. 124,200 3,293,784
- -------------------------------------------------------------------------
KeyCorp 139,400 3,360,934
- -------------------------------------------------------------------------
M&T Bank Corp.(a) 30,600 2,584,782
- -------------------------------------------------------------------------
Mellon Financial Corp. 44,403 1,174,459
- -------------------------------------------------------------------------
Synovus Financial Corp. 159,000 3,095,730
- -------------------------------------------------------------------------
U.S. Bancorp 208,300 4,613,845
- -------------------------------------------------------------------------
Wachovia Corp. 82,000 3,133,220
- -------------------------------------------------------------------------
Wells Fargo & Co. 107,500 5,187,950
- -------------------------------------------------------------------------
Zions Bancorp. 80,700 3,976,089
=========================================================================
51,301,071
=========================================================================
CONSUMER FINANCE-0.53%
MBNA Corp. 58,700 1,109,430
=========================================================================
DATA PROCESSING SERVICES-1.26%
DST Systems, Inc.(b) 85,200 2,615,640
=========================================================================
DIVERSIFIED FINANCIAL SERVICES-28.37%
American Express Co. 112,400 4,255,464
- -------------------------------------------------------------------------
Charles Schwab Corp. (The) 127,000 1,096,010
- -------------------------------------------------------------------------
Citigroup Inc. 170,101 6,676,464
- -------------------------------------------------------------------------
Fannie Mae 40,100 2,902,839
- -------------------------------------------------------------------------
Federated Investors, Inc.-Class B 53,500 1,460,015
- -------------------------------------------------------------------------
Freddie Mac 65,200 3,775,080
- -------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The)(a) 61,300 4,652,670
- -------------------------------------------------------------------------
Investors Financial Services Corp. 45,200 985,812
- -------------------------------------------------------------------------
J.P. Morgan Chase & Co. 130,800 3,838,980
- -------------------------------------------------------------------------
Legg Mason, Inc. 108,200 5,875,260
- -------------------------------------------------------------------------
Lehman Brothers Holdings Inc. 84,100 5,295,777
- -------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 165,300 6,785,565
- -------------------------------------------------------------------------
Morgan Stanley 105,700 4,730,075
- -------------------------------------------------------------------------
Neuberger Berman Inc. 37,000 1,135,900
- -------------------------------------------------------------------------
Principal Financial Group, Inc. 121,000 3,521,100
- -------------------------------------------------------------------------
State Street Corp. 60,200 2,108,806
=========================================================================
59,095,817
=========================================================================
</Table>
<Table>
MARKET
SHARES VALUE
- -------------------------------------------------------------------------
<Caption>
INSURANCE BROKERS-1.28%
Marsh & McLennan Cos., Inc. 55,700 $ 2,655,776
=========================================================================
IT CONSULTING & SERVICES-1.14%
SunGard Data Systems Inc.(b) 110,000 2,365,000
=========================================================================
LIFE & HEALTH INSURANCE-2.91%
Nationwide Financial Services, Inc.-Class A 98,100 2,761,515
- -------------------------------------------------------------------------
Prudential Financial, Inc. 38,800 1,240,436
- -------------------------------------------------------------------------
StanCorp Financial Group, Inc. 38,500 2,067,450
=========================================================================
6,069,401
=========================================================================
MULTI-LINE INSURANCE-4.31%
American International Group, Inc. 80,650 4,673,668
- -------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 69,200 2,820,592
- -------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 54,000 1,485,000
=========================================================================
8,979,260
=========================================================================
PROPERTY & CASUALTY INSURANCE-8.79%
Ambac Financial Group, Inc. 56,600 3,302,610
- -------------------------------------------------------------------------
Chubb Corp. (The) 30,000 1,586,700
- -------------------------------------------------------------------------
MBIA Inc. 28,000 1,251,600
- -------------------------------------------------------------------------
MGIC Investment Corp. 54,000 2,454,840
- -------------------------------------------------------------------------
PMI Group, Inc. (The) 82,000 2,527,240
- -------------------------------------------------------------------------
Radian Group Inc. 82,000 3,255,400
- -------------------------------------------------------------------------
St. Paul Cos., Inc. (The) 60,800 2,087,872
- -------------------------------------------------------------------------
Travelers Property Casualty Corp.-Class B 113,800 1,849,250
=========================================================================
18,315,512
=========================================================================
Total Domestic Common Stocks (Cost
$150,476,543) 152,506,907
=========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-20.24%
AUSTRALIA-1.20%
St. George Bank Ltd. (Banks) 202,000 2,505,949
=========================================================================
BERMUDA-3.52%
Everest Re Group, Ltd. (Reinsurance) 61,000 4,248,650
- -------------------------------------------------------------------------
Willis Group Holdings Ltd. (Insurance
Brokers) 98,500 3,072,215
=========================================================================
7,320,865
=========================================================================
CANADA-0.99%
Royal Bank of Canada (Banks) 49,500 2,064,802
=========================================================================
CAYMAN ISLANDS-1.17%
ACE Ltd. (Property & Casualty Insurance) 73,900 2,444,612
=========================================================================
FRANCE-0.72%
BNP Paribas S.A. (Banks) 31,800 1,495,468
=========================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- -------------------------------------------------------------------------
HONG KONG-0.95%
Dah Sing Financial Group (Banks) 434,000 $ 1,981,062
=========================================================================
IRELAND-4.56%
Allied Irish Banks PLC (Banks) 78,900 1,212,999
- -------------------------------------------------------------------------
Anglo Irish Bank Corp. PLC (Banks) 858,800 6,471,912
- -------------------------------------------------------------------------
Bank of Ireland (Banks) 148,200 1,814,441
=========================================================================
9,499,352
=========================================================================
ITALY-1.96%
Banco Popolare di Verona e Novara Scrl
(Banks) 146,310 1,990,881
- -------------------------------------------------------------------------
UniCredito Italiano S.p.A. (Banks) 477,400 2,092,421
=========================================================================
4,083,302
=========================================================================
MEXICO-1.00%
Grupo Financiero BBVA Bancomer, S.A. de C.V.-
Class B (Banks)(b) 2,392,900 2,086,459
=========================================================================
SPAIN-1.92%
Banco Popular Espanol S.A. (Banks) 82,400 4,002,190
=========================================================================
UNITED KINGDOM-2.25%
Man Group PLC (Diversified Financial
Services) 81,700 1,378,967
- -------------------------------------------------------------------------
Northern Rock PLC (Banks) 56,950 651,902
- -------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (Banks) 101,000 2,651,607
=========================================================================
4,682,476
=========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $32,391,176) 42,166,537
=========================================================================
</Table>
<Table>
MARKET
SHARES VALUE
- -------------------------------------------------------------------------
<Caption>
MONEY MARKET FUNDS-6.93%
STIC Liquid Assets Portfolio(c) 7,217,621 $ 7,217,621
- -------------------------------------------------------------------------
STIC Prime Portfolio(c) 7,217,621 7,217,621
=========================================================================
Total Money Market Funds (Cost
$14,435,242) 14,435,242
=========================================================================
TOTAL INVESTMENTS-100.39% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $197,302,961) 209,108,686
=========================================================================
INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED
MONEY MARKET FUNDS-4.03%
STIC Liquid Assets Portfolio(c)(d) 4,200,701 4,200,701
- -------------------------------------------------------------------------
STIC Prime Portfolio(c)(d) 4,200,701 4,200,701
=========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $8,401,402) 8,401,402
=========================================================================
TOTAL INVESTMENTS-104.42% (Cost $205,704,363) 217,510,088
=========================================================================
OTHER ASSETS LESS LIABILITIES-(4.42%) (9,209,196)
=========================================================================
NET ASSETS-100.00% $208,300,892
_________________________________________________________________________
=========================================================================
</Table>
Notes to Schedule of Investments:
(a) A portion of this security is subject to call options written. See Note 1
section G and Note 7.
(b) Non-income producing security.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
(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 Notes to Financial Statements.
F-2
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$205,704,363)* $217,510,088
- -----------------------------------------------------------
Foreign currencies, at value (cost $61,087) 61,451
- -----------------------------------------------------------
Receivables for:
Investments sold 1,902,503
- -----------------------------------------------------------
Fund shares sold 214,155
- -----------------------------------------------------------
Dividends 191,402
- -----------------------------------------------------------
Investment for deferred compensation plan 5,119
- -----------------------------------------------------------
Other assets 21,550
===========================================================
Total assets 219,906,268
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 2,167,811
- -----------------------------------------------------------
Fund shares reacquired 569,849
- -----------------------------------------------------------
Options written (premiums received $43,216) 31,733
- -----------------------------------------------------------
Deferred compensation plan 5,119
- -----------------------------------------------------------
Collateral upon return of securities loaned 8,401,402
- -----------------------------------------------------------
Accrued distribution fees 185,908
- -----------------------------------------------------------
Accrued trustees' fees 719
- -----------------------------------------------------------
Accrued transfer agent fees 141,310
- -----------------------------------------------------------
Accrued operating expenses 101,525
===========================================================
Total liabilities 11,605,376
===========================================================
Net assets applicable to shares outstanding $208,300,892
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $226,977,793
- -----------------------------------------------------------
Undistributed net investment income (loss) (168,454)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (30,330,843)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and option
contracts 11,822,396
===========================================================
$208,300,892
___________________________________________________________
===========================================================
NET ASSETS:
Class A $100,200,654
___________________________________________________________
===========================================================
Class B $ 83,105,760
___________________________________________________________
===========================================================
Class C $ 24,994,478
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 5,094,314
___________________________________________________________
===========================================================
Class B 4,405,688
___________________________________________________________
===========================================================
Class C 1,325,107
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 19.67
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $19.67 divided by
94.50%) $ 20.81
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 18.86
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 18.86
___________________________________________________________
===========================================================
</Table>
* At April 30, 2003, securities with an aggregate market value of $8,293,483
were on loan to brokers.
See Notes to Financial Statements.
F-3
STATEMENT OF OPERATIONS
For the six months ended April 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $40,488) $ 1,981,496
- --------------------------------------------------------------------------
Dividends from affiliated money market funds 69,018
- --------------------------------------------------------------------------
Interest 138
- --------------------------------------------------------------------------
Security lending income 31,566
==========================================================================
Total investment income 2,082,218
==========================================================================
EXPENSES:
Advisory fees 1,029,178
- --------------------------------------------------------------------------
Administrative services fees 24,795
- --------------------------------------------------------------------------
Custodian fees 27,718
- --------------------------------------------------------------------------
Distribution fees -- Class A 253,488
- --------------------------------------------------------------------------
Distribution fees -- Class B 422,367
- --------------------------------------------------------------------------
Distribution fees -- Class C 126,224
- --------------------------------------------------------------------------
Transfer agent fees 476,961
- --------------------------------------------------------------------------
Trustees' fees 4,886
- --------------------------------------------------------------------------
Other 107,626
==========================================================================
Total expenses 2,473,243
==========================================================================
Less: Fees waived and expenses paid indirectly (84,961)
==========================================================================
Net expenses 2,388,282
==========================================================================
Net investment income (loss) (306,064)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (14,161,647)
- --------------------------------------------------------------------------
Foreign currencies 28,328
- --------------------------------------------------------------------------
Option contracts written 464,152
==========================================================================
(13,669,167)
==========================================================================
Change in net unrealized appreciation of:
Investment securities 21,323,126
- --------------------------------------------------------------------------
Foreign currencies 3,641
- --------------------------------------------------------------------------
Option contracts written 11,483
==========================================================================
21,338,250
==========================================================================
Net gain from investment securities, foreign currencies and
option contracts 7,669,083
==========================================================================
Net increase in net assets resulting from operations $ 7,363,019
__________________________________________________________________________
==========================================================================
</Table>
See Notes to Financial Statements.
F-4
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2003 and the year ended October 31, 2002
(Unaudited)
<Table>
<Caption>
APRIL 30, OCTOBER 31,
2003 2002
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (306,064) $ (1,645,236)
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts (13,669,167) (15,906,992)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts 21,338,250 (3,664,216)
==========================================================================================
Net increase (decrease) in net assets resulting from
operations 7,363,019 (21,216,444)
==========================================================================================
Share transactions-net:
Class A (11,574,963) (9,235,195)
- ------------------------------------------------------------------------------------------
Class B (10,637,219) (15,032,506)
- ------------------------------------------------------------------------------------------
Class C (3,118,587) (2,205,504)
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (25,330,769) (26,473,205)
==========================================================================================
Net increase (decrease) in net assets (17,967,750) (47,689,649)
==========================================================================================
NET ASSETS:
Beginning of period 226,268,642 273,958,291
==========================================================================================
End of period $208,300,892 $226,268,642
__________________________________________________________________________________________
==========================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
April 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Financial Services Fund (the "Fund") is a separate series of AIM
Investment Funds (the "Trust"). The Trust is organized as a Delaware statutory
trust and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company consisting
of seven separate series portfolios, each having an unlimited number of shares
of beneficial interest. The Fund currently offers multiple classes of shares.
Matters affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital. Each company
listed in the Schedule of Investments is organized in the United States unless
otherwise noted.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued at the basis of prices furnished
by independent pricing services or market makers. Each security reported on
the NASDAQ National Market System is valued at the NASDAQ Official Closing
Price ("NOCP") as of the close of the customary trading session on the
valuation date or absent a NOCP, at the closing bid price. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may
be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, dividend rate,
yield, quality, type of issue, coupon rate, maturity, individual trading
characteristics and other market data. Securities for which market prices
are not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in
the case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value. For purposes of
F-5
determining net asset value per share, futures and option contracts
generally will be valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the NYSE. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not be
reflected in the computation of the Fund's net asset value. If a
development/event is so significant that there is a reasonably high degree
of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer
reflect actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in
good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. The combined results of changes in foreign exchange rates
and the fluctuation of market prices on investments are included with the
net realized and unrealized gain or loss from investments in the Statement
of Operations.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. When the Fund
writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received. A risk in writing a
call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to such class. All other expenses are allocated among the
classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
The Fund pays AIM investment management and administration fees at an annual
rate of 0.975% on the first $500 million of the Fund's average daily net assets,
plus 0.95% on the next $500 million of the Fund's average daily net assets, plus
0.925% on the next $500 million of the Fund's average daily net assets, plus
0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has
voluntarily agreed to limit total annual operating expenses (excluding interest,
taxes, dividends on short sales, extraordinary items and increases in expenses
due to expense offset arrangements, if any) for Class A, Class B and Class C
shares to 2.00%, 2.50% and 2.50%, respectively. Voluntary expense limitations
may be rescinded, terminated or modified at any time without further notice to
investors. During periods of voluntary waivers or reimbursements to the extent
the annualized
F-6
expense ratio does not exceed the voluntary limit for the period committed, AIM
will retain its ability to be reimbursed for such fee waivers or reimbursements
prior to the end of the fiscal year. Further, AIM has voluntarily agreed to
waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM
receives from the affiliated money market funds in which the Fund has invested
(excluding investments made in affiliated money market funds with cash
collateral from securities loaned by the Fund). For the six months ended April
30, 2003, AIM waived fees of $83,361.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended April 30, 2003, AIM
was paid $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended April 30, 2003,
AFS retained $248,855 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.50% 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 C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended April 30, 2003, the Class A, Class B and Class C
shares paid $253,488, $422,367 and $126,224, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During the six months ended April 30, 2003, AIM
Distributors retained $11,047 in front-end sales commissions from the sale of
Class A shares and $42, $710 and $1,926 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended April 30, 2003, the Fund paid legal fees of
$1,435 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended April 30, 2003, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) of $1,556 and reductions in
custodian fees of $44 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $1,600.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Trust. The Trustees deferring compensation have the option to
select various AIM Funds in which all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
During the reporting period, the Fund was a participant in a committed line
of credit facility with a syndicate administered by Citibank, N.A. The Fund
could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. The Fund and other funds advised by AIM, which were
parties to the line of credit could borrow on a first come, first served basis.
The funds, which were party to the line of credit, were charged a commitment fee
of 0.09% on the unused balance of the committed line. The commitment fee was
allocated among the funds based on their respective average net assets for the
period. The committed line of credit facility expired May 20, 2003.
During the six months ended April 30, 2003, the Fund did not borrow under
the interfund lending or the committed line of credit facility.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities. It is
the Fund's policy to obtain additional collateral from or return excess
collateral to the borrower by the end of the next business day. Therefore, the
value of the collateral may be temporarily less than the value of the securities
on loan.
At April 30, 2003, securities with an aggregate value of $8,293,483 were on
loan to brokers. The loans were secured by cash collateral of $8,401,402
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended April 30, 2003 the Fund received fees of $31,566 for
securities lending.
F-7
NOTE 7--CALL OPTION CONTRACTS
Transactions in call options written during the six months ended April 30, 2003
are summarized as follows:
<Table>
<Caption>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ------------------------------------------------------------------------------------
Beginning of period -- $ --
- ------------------------------------------------------------------------------------
Written 7,239 769,151
- ------------------------------------------------------------------------------------
Closed (4,691) (515,012)
- ------------------------------------------------------------------------------------
Exercised (1,490) (113,776)
- ------------------------------------------------------------------------------------
Expired (770) (97,147)
====================================================================================
End of period 288 $ 43,216
____________________________________________________________________________________
====================================================================================
</Table>
Open call option contracts written at April 30, 2003 were as follows:
<Table>
<Caption>
APRIL 30,
2003 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. May-03 $75 81 $17,981 $18,023 $ (42)
- ---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. May-03 80 82 5,986 2,460 3,526
- ---------------------------------------------------------------------------------------------------------------------------------
M&T Bank Corp. May-03 85 125 19,249 11,250 7,999
=================================================================================================================================
288 $43,216 $31,733 $11,483
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
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 distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------------------------
October 31, 2009 $ 259,675
- ----------------------------------------------------------------------------
October 31, 2010 16,192,146
============================================================================
Total capital loss carryforward $16,451,821
____________________________________________________________________________
============================================================================
</Table>
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended April 30, 2003 was $40,446,577 and $68,970,615, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of April 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment securities $ 22,485,777
- ----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (10,889,907)
============================================================================
Net unrealized appreciation of investment securities $ 11,595,870
____________________________________________________________________________
============================================================================
Cost of investments for tax purposes is $205,914,218.
</Table>
F-8
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares,
Class B shares and Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended April 30, 2003 and the year ended October 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 692,525 $ 12,933,828 2,582,636 $ 55,380,594
- ----------------------------------------------------------------------------------------------------------------------
Class B 226,360 4,121,188 1,253,533 26,379,817
- ----------------------------------------------------------------------------------------------------------------------
Class C 209,853 3,785,883 727,708 14,583,074
======================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 102,650 1,938,708 339,373 7,336,625
- ----------------------------------------------------------------------------------------------------------------------
Class B (106,896) (1,938,708) (355,226) (7,336,625)
======================================================================================================================
Reacquired:
Class A (1,437,808) (26,447,499) (3,401,742) (71,952,414)
- ----------------------------------------------------------------------------------------------------------------------
Class B (723,940) (12,819,699) (1,715,359) (34,075,698)
- ----------------------------------------------------------------------------------------------------------------------
Class C (387,180) (6,904,470) (863,759) (16,788,578)
======================================================================================================================
(1,424,436) $(25,330,769) (1,432,836) $(26,473,205)
______________________________________________________________________________________________________________________
======================================================================================================================
</Table>
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.86 $ 20.40 $ 24.85 $ 23.23 $ 17.05 $ 17.22
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) (0.07)(a) (0.06)(a) (0.07)(a) (0.02)(a) 0.07(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.81 (1.47) (4.13) 5.87 6.25 0.37
============================================================================================================================
Total from investment operations 0.81 (1.54) (4.19) 5.80 6.23 0.44
============================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.25) (0.02) (0.01)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.26) (3.93) (0.03) (0.60)
============================================================================================================================
Total distributions -- -- (0.26) (4.18) (0.05) (0.61)
============================================================================================================================
Net asset value, end of period $ 19.67 $ 18.86 $ 20.40 $ 24.85 $ 23.23 $ 17.05
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 4.29% (7.55)% (17.03)% 30.06% 36.62% 2.53%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $100,201 $108,191 $126,816 $95,393 $30,987 $28,433
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(c) 1.97% 1.85% 2.00% 1.99% 1.97%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.08%(c) 1.97% 1.85% 2.00% 2.12% 1.99%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.03)%(c) (0.31)% (0.26)% (0.33)% (0.08)% 0.37%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 20% 51% 53% 41% 107% 111%
____________________________________________________________________________________________________________________________
============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$102,235,506.
(d) Not annualized for periods less than one year.
F-9
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.13 $ 19.71 $ 24.14 $ 22.67 $ 16.71 $ 16.97
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.17)(a) (0.17)(a) (0.18)(a) (0.12)(a) (0.02)(a)
- ---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.78 (1.41) (4.00) 5.72 6.11 0.37
===========================================================================================================================
Total from investment operations 0.73 (1.58) (4.17) 5.54 5.99 0.35
===========================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.14) -- (0.01)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.26) (3.93) (0.03) (0.60)
===========================================================================================================================
Total distributions -- -- (0.26) (4.07) (0.03) (0.61)
===========================================================================================================================
Net asset value, end of period $ 18.86 $ 18.13 $ 19.71 $ 24.14 $ 22.67 $ 16.71
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 4.03% (8.02)% (17.45)% 29.40% 35.91% 2.08%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $83,106 $90,838 $114,852 $92,343 $49,619 $48,785
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.50%(c) 2.47% 2.35% 2.50% 2.49% 2.47%
- ---------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.58%(c) 2.47% 2.35% 2.50% 2.62% 2.49%
===========================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.53)%(c) (0.81)% (0.76)% (0.83)% (0.58)% (0.13)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(d) 20% 51% 53% 41% 107% 111%
___________________________________________________________________________________________________________________________
===========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$85,173,383.
(d) Not annualized for periods less than one year.
F-10
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
------------------------------------------------------------------------
MARCH 1, 1999
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ----------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.13 $ 19.71 $ 24.14 $ 22.67 $19.58
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.17)(a) (0.17)(a) (0.18)(a) (0.08)(a)
- ------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.78 (1.41) (4.00) 5.72 3.17
==================================================================================================================
Total from investment operations 0.73 (1.58) (4.17) 5.54 3.09
==================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.14) --
- ------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.26) (3.93) --
==================================================================================================================
Total distributions -- -- (0.26) (4.07) --
==================================================================================================================
Net asset value, end of period $ 18.86 $ 18.13 $ 19.71 $ 24.14 $22.67
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 4.03% (8.02)% (17.45)% 29.40% 15.78%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $24,994 $27,239 $32,290 $20,944 $ 605
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.50%(c) 2.47% 2.35% 2.50% 2.49%(d)
- ------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.58%(c) 2.47% 2.35% 2.50% 2.62%(d)
==================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.53)%(c) (0.81)% (0.76)% (0.83)% (0.58)%(d)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(e) 20% 51% 53% 41% 107%
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$25,454,089.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 12--SUBSEQUENT EVENT
The Board of Trustees of AIM Investment Funds ("Seller") unanimously approved,
on June 11, 2003, an Agreement and Plan of Reorganization (the "Plan") pursuant
to which AIM Global Financial Services Fund ("Selling Fund"), a series of
Seller, would transfer all of its assets to INVESCO Financial Services Fund
("Buying Fund"), a series of INVESCO Sector Funds, Inc. ("the Reorganization")
As a result of the Reorganization, shareholders of Selling Fund would receive
shares of Buying Fund in exchange for their shares of Selling Fund, and Selling
Fund would cease operations.
The Plan requires approval of Selling Fund shareholders and will be submitted
to the shareholders for their consideration at a meeting to be held on or around
September 25, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
Effective on or about October 1, 2003, it is anticipated that Selling Fund
will be closed to new investors.
F-11
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
<Caption>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Robert H. Graham Robert H. Graham 11 Greenway Plaza
Chairman and President Suite 100
Mark H. Williamson Houston, TX 77046
Mark H. Williamson
Frank S. Bayley Executive Vice President INVESTMENT ADVISOR
Bruce L. Crockett Kevin M. Carome A I M Advisors, Inc.
Senior Vice President 11 Greenway Plaza
Albert R. Dowden Suite 100
Gary T. Crum Houston, TX 77046
Edward K. Dunn Jr. Senior Vice President
TRANSFER AGENT
Jack M. Fields Dana R. Sutton
Vice President and Treasurer A I M Fund Services, Inc.
Carl Frischling P.O. Box 4739
Stuart W. Coco Houston, TX 77210-4739
Prema Mathai-Davis Vice President
CUSTODIAN
Lewis F. Pennock Melville B. Cox
Vice President State Street Bank and Trust Company
Ruth H. Quigley 225 Franklin Street
Edgar M. Larsen Boston, MA 02110
Louis S. Sklar Vice President
COUNSEL TO THE FUND
Nancy L. Martin
Secretary Ballard Spahr
Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103
COUNSEL TO THE TRUSTEES
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
FIXED INCOME
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY TAXABLE
AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund(2) AIM Floating Rate Fund
AIM Balanced Fund* AIM Developing Markets Fund AIM High Yield Fund
AIM Basic Balanced Fund* AIM European Growth Fund(2) AIM Income Fund
AIM Basic Value Fund AIM European Small Company Fund AIM Intermediate Government Fund
AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Limited Maturity Treasury Fund(6,7)
AIM Capital Development Fund AIM Global Growth Fund AIM Money Market Fund
AIM Charter Fund AIM Global Trends Fund AIM Short-Term Bond Fund
AIM Constellation Fund AIM Global Value Fund(5) AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Core Equity Fund(2)
AIM Diversified Dividend Fund(1) AIM International Emerging Growth Fund TAX-FREE
AIM Emerging Growth Fund AIM International Growth Fund(2)
AIM Large Cap Basic Value Fund AIM High Income Municipal Fund
AIM Large Cap Growth Fund AIM Municipal Bond Fund
AIM Libra Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Basic Value Fund SECTOR EQUITY AIM Tax-Free Intermediate Fund(6,7)
AIM Mid Cap Core Equity Fund(2)
AIM Mid Cap Growth Fund AIM Global Energy Fund
AIM Opportunities I Fund(2,3) AIM Global Financial Services Fund
AIM Opportunities II Fund(2,3) AIM Global Health Care Fund
AIM Opportunities III Fund(2,3) AIM Global Science and Technology Fund(2)
AIM Premier Equity Fund(2) AIM Global Utilities Fund
AIM Premier Equity II Fund(2) AIM New Technology Fund
AIM Select Equity Fund AIM Real Estate Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(4)
AIM Weingarten Fund
</Table>
*Domestic equity and income fund
YOUR GOALS. OUR SOLUTIONS.--Servicemark--
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
(AIM INVESTMENTS LOGO APPEARS HERE)
--Servicemark--
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) The following fund name changes became effective
July 1, 2002: AIM Asian Growth Fund renamed AIM Asia Pacific Growth Fund; AIM
European Development Fund renamed AIM European Growth Fund; AIM Global
Telecommunications and Technology Fund renamed AIM Global Science and Technology
Fund; AIM International Equity Fund renamed AIM International Growth Fund; AIM
International Value Fund renamed AIM International Core Equity Fund; AIM Large
Cap Opportunities Fund renamed AIM Opportunities III Fund; AIM Mid Cap Equity
Fund renamed AIM Mid Cap Core Equity Fund; AIM Mid Cap Opportunities Fund
renamed AIM Opportunities II Fund; AIM Small Cap Opportunities Fund renamed AIM
Opportunities I Fund; AIM Value Fund renamed AIM Premier Equity Fund; AIM Value
II Fund renamed AIM Premier Equity II Fund. (3) Effective October 1, 2002, the
fund was reopened to new investors. (4) AIM Small Cap Growth Fund was closed to
most investors on March 18, 2002. For information on who may continue to invest
in AIM Small Cap Growth Fund, please contact your financial advisor. (5)
Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global
Value Fund. (6) Class A shares closed to new investors on October 30, 2002. (7)
Class A3 shares were first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges and
expenses, ask your financial advisor for a prospectus. Please read it carefully
before investing. This brochure is not authorized for distribution to
prospective investors unless preceded or accompanied by a currently effective
fund prospectus, which contains more complete information, including sales
charges and expenses. Please read it carefully before investing. If used after
July 20, 2003, this brochure must be accompanied by a fund Performance &
Commentary or by an AIM Quarterly Performance Review for the most recent
quarter-end. Mutual Funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the investment management
industry since 1976 and manages $115 billion in assets for approximately 9
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $319 billion in assets
under management. Data as of March 31, 2003.
AIMinvestments.com GFS-SAR-1
APPENDIX VIII
ANNUAL REPORT / OCTOBER 31, 2002
AIM GLOBAL ENERGY FUND
[COVER IMAGE]
[AIM FUNDS LOGO]
--Registered Trademark--
AIMinvestments.com
================================================================================
[COVER IMAGE]
OLIVE TREES: YELLOW SKY WITH SUN BY VINCENT VAN GOGH
PEOPLE HAVE ALWAYS DEPENDED ON THE EARTH'S RESOURCES
FOR OUR SURVIVAL AND WELL-BEING. FROM OLIVE TREES TO
OIL FIELDS, THE WORLD'S RICHES ARE BEING EXPLORED AND
DEVELOPED AS NEVER BEFORE. NOW TRADING IN A
GLOBAL MARKET, ENERGY FROM EVERY PART OF THE WORLD
CONTINUES TO POWER MODERN SOCIETIES.
================================================================================
AIM GLOBAL ENERGY FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY
IN COMMON STOCKS OF ENERGY SECTOR COMPANIES.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Global Energy Fund's performance figures are historical, and they
reflect fund expenses, the reinvestment of distributions and changes in net
asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class A, Class B and Class C shares will
differ due to different sales charge structures and class expenses.
o Had the advisor not waived fees and/or absorbed expenses, returns would have
been lower.
o Investing in emerging markets may involve greater risk and potential reward
than investing in more established markets.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o Investing in a single-sector or single-region mutual fund may involve
greater risk and potential reward than investing in a more diversified fund.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. A significant portion of the fund's returns during certain
periods was attributable to its investments in IPOs. These investments have
a magnified impact when the fund's assets base is relatively small. As the
fund's assets grow, the impact of IPO investments will decline, which may
reduce the effect of IPO investments on the fund's total return. For
additional information regarding the impact of IPO investments on the fund's
performance, please see the fund's prospectus.
o The fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged MSCI All Country (AC) World Free Index tracks the performance
of approximately 50 developed and emerging countries covered by Morgan
Stanley Capital International. The "free" index represents actual buyable
opportunities for global investors.
o The MSCI AC World Free Energy Index is designed to measure actual buyable
opportunities in the global energy market. This index measures the
performance of energy stocks of both developed and emerging markets.
o The unmanaged Lipper Natural Resources Fund Index represents an average of
the 10 largest natural resources funds tracked by Lipper, Inc., an
independent mutual fund performance monitor, and is considered
representative of natural resources stocks.
o The S&P 500 Energy Index represents an average of the performance of the 23
energy stocks in the unmanaged Standard & Poor's Composite Index of 500
Stocks (the S&P 500), which is an index of common stocks frequently used as
a general measure of U.S. stock market performance.
An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses. Performance of a
market index does not.
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. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to shareholders or to persons who have
received a current prospectus of the fund.
TO OUR SHAREHOLDERS
DEAR SHAREHOLDER:
[PHOTO OF All of us know how difficult the equity markets were during
ROBERT H. the fiscal year ended October 31, 2002. We are now in the
GRAHAM] unenviable position of being able to say we have been in a
deeper and longer market downturn than that of 1973-74. We
know from experience that these conditions do eventually
end, though no one can predict exactly when.
We are encouraged, however, by the fact that as I write
this letter, the U.S. equity market has had several positive
weeks in a row. Whether this is the start of a long-term
positive trend remains to be seen. In the meantime, let me
assure you that all of us at AIM continue to work hard on
your behalf.
In light of continuing market difficulties, I thought
you would appreciate detailed information on some of the
methods AIM uses to manage your money. This information is presented in the two
pages following this letter. I hope it will provide you with a greater
understanding of our investment process, and I encourage you to read it
carefully. One of our ongoing goals is to keep all of our shareholders
well-informed.
BACK TO BASICS
When market conditions are as trying as they have been during the fiscal year
covered by this report, it is well to keep some investing fundamentals in mind.
First, seek professional advice--it is more important now than ever. A financial
professional can help you:
o Understand your entire financial profile before selecting individual
investments so you can tailor your portfolio to specific goals and
timetables.
o Learn the characteristics of various asset classes. Recently, many
investors have been seeking safety in fixed-income investments.
Unfortunately, many do not understand that bond prices move in the
opposite direction of interest rates. Existing bonds have been rising in
value as interest rates have fallen, contributing to attractive total
returns. But rates are now so low the upside potential of bond prices is
limited. Sooner or later, the economy will expand more robustly, and
interest rates will begin to rise. That will lower bond values, reducing
total returns. As ever, diversification is an investing fundamental.
o Develop reasonable expectations. Historically, stocks have averaged
about a 10% return per year, bonds less, facts many of us forgot during
the 1990s.
YOUR FUND MANAGERS' OBSERVATIONS
In the following pages, your fund's portfolio managers discuss your fund's
performance during the fiscal year and the market conditions and investment
strategies that affected that performance. I hope you find their comments
helpful.
During the fiscal year covered by this report, Class A shares of the AIM
Global Energy Fund returned 5.56% at net asset value. We are pleased to report
its solid, positive return in an environment that resulted in negative returns
for its benchmark index as well as several other comparison indexes.
Timely information about your fund and the markets is always available on
our Web site, aiminvestments.com. Our Client Services Department can be reached
during regular business hours at 800-959-4246.
IMPORTANT NEWS ABOUT AIM
This report features AIM's new logo and Web address, which we have adopted to
better reflect our diverse line of investment products. We are well known for
our mutual funds, but we also offer solutions for many investment situations
through a broad array of products and services including retirement products for
employers and individuals, annuities, college savings plans, separately managed
accounts, and cash management for businesses.
I am also pleased to announce that Mark Williamson will become Chief
Executive Officer of A I M Management Group Inc., the parent company of your
fund's advisor and distributor, on January 1, 2003. I will remain Chairman of
AIM. Mark has had a long and distinguished career in the mutual fund industry
and I am looking forward to his joining the AIM team.
Thank you for investing with AIM. I look forward to reporting to you again
in six months.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
December 2, 2002
================================================================================
WE ARE PLEASED TO REPORT
AIM GLOBAL ENERGY FUND'S
SOLID, POSITIVE RETURN ...
ROBERT H. GRAHAM
================================================================================
A SPECIAL MESSAGE TO OUR SHAREHOLDERS
INVESTMENT RESEARCH UPDATE FOR AIM CLIENTS
[EDGAR M. LARSEN PHOTO]
EDGAR M. LARSEN
CHIEF INVESTMENT OFFICER
[GARY T. CRUM PHOTO]
GARY T. CRUM
DIRECTOR OF INVESTMENTS
THE FINANCIAL MARKETS have been battered over the past year by a wave of
corporate scandals, accounting restatements, bankruptcies of high-profile
companies and, in a few cases, outright financial fraud. Many investors,
understandably, feel uncertain about whether their portfolios are positioned to
withstand such a prolonged and severe market downturn. Now seems to be an
appropriate time to step back and reiterate AIM's concern for the financial
well-being of all of our clients and AIM's commitment to competitive excellence
across all investment disciplines.
We at AIM are proud of our rigorous qualitative and quantitative analytical
processes, and we remain confident that we will preserve our long-term record of
success through uncompromising fundamental research. During this recent period
of market instability, we have placed even greater focus on meticulous research,
and we continually look for new ways to improve our process.
We have the resources and the people needed to seek out the best investment
opportunities that exist in any market. It should be emphasized that AIM's teams
have not changed their investment strategies; rather our disciplines have been
fine-tuned in order to better understand each portfolio holding and to optimize
each fund's overall structure.
Rigorous accounting analysis is at the forefront of our investment-research
efforts. AIM employs both internal and external accounting experts and
proprietary tools to screen our portfolios for high-risk situations and to look
for investment opportunities.
BEYOND THE BOTTOM LINE
By going beyond the reported bottom-line numbers, we strive to understand where
a company's growth is coming from and how sustainable it may be. Our discipline
takes us through an in-depth examination of the financial statements and
industry conditions, combined with an evaluation of management's style and
strategy.
AIM's portfolio managers have taken advantage of some unique valuations in
this unusual market environment by adding opportunistically to their portfolios.
In addition to strong financial fundamentals and attractively priced securities,
AIM's teams look for companies with experienced and credible management teams.
Sometimes this means not accepting the consensus view of a particular company.
AIM seeks independent thought, both from our own analysts and portfolio
managers, and from trusted Wall Street sources. Our goal is to cultivate an
ongoing dialogue with independent thinkers in every industry, whether they work
for one of our portfolio companies, on Wall Street, at an independent research
boutique, or right here within our own firm. To this end, we have long had a
collaborative environment where communication across investment teams is
encouraged.
For example, AIM's fixed-income and equity analysts attend the same meetings
================================================================================
RIGOROUS ACCOUNTING
ANALYSIS IS AT
THE FOREFRONT OF
OUR INVESTMENT-
RESEARCH EFFORTS.
================================================================================
2
with company managements, and thus analyze the company from two different
perspectives. Our international managers work with our domestic teams to cover
the more globally oriented companies. And the teams that manage AIM's
sector-specific funds share their industry expertise with the rest of our
investment teams. As our professional staff and resources have grown, so have
the direct contacts with company management teams. Last year, AIM's analysts and
portfolio managers had more than 4,000 meetings with the senior executives of
our portfolio companies.
EDUCATION AND TRAINING
Continuing education and training are important in the ever-changing world of
investment analysis. We invite experts from such fields as accounting,
derivatives and banking to AIM so that we remain informed about current
corporate-finance techniques, new accounting regulations and other shifts in
the landscape of American business.
Over the past five years, AIM has devoted substantial resources to our
research department's personnel. Today, 68 percent of our investment management
and research professionals have earned master's degrees in business or finance.
Sixty percent have earned the Chartered Financial Analyst (CFA) or Certified
Public Accountant (CPA) designations.
QUANTITATIVE EXPERTISE
AIM's team of quantitative analysts plays a large role in portfolio construction
and performance monitoring. Our state-of-the-art proprietary tools include the
means to optimize a portfolio's construction, which includes managing and
monitoring risk, analyzing performance, and conducting hypothetical trading
scenarios to see how they would affect the overall portfolio. These tools offer
our investment teams a more acute awareness of how their portfolios stack up
against their benchmarks and their peers.
Attribution tools allow us to monitor relative sector and industry
weightings, individual security weightings, and correlations across different
holdings. Our portfolio management teams aren't the only ones using these
customized risk-assessment tools. They also are used to generate detailed
reports that are reviewed by members of AIM's senior management. We have a
schedule of formalized periodic reviews to assess the construction and the
risk-adjusted performance of the funds, to offer guidance to the portfolio
managers, and to take corrective action when warranted.
DIVERSIFICATION OF AIM'S OFFERINGS
Even during the equity-market bubble of the late 1990s, AIM advocated a
diversified approach to portfolio management for its clients. As growth stocks
registered double-digit gains, we were taking a longer-term view of the markets
and actively diversified our product line across market styles and
capitalization ranges.
As the financial markets have changed over the past few years, so has AIM's
selection of fund offerings. In the past, AIM was recognized for investing in
the equities of U.S. growth companies. Today, AIM's three largest equity
funds--AIM Basic Value Fund, AIM Premier Equity Fund and AIM Constellation
Fund--represent three distinctly different investment disciplines: Value, Blend
and Growth. Complementing those funds are dozens more in all styles, market-cap
ranges, asset classes, and geographic regions.
AIM's clients can create diversified, all-weather portfolios by selecting
from our full spectrum of funds, whether they seek equity or fixed-income, value
or growth, domestic or international, aggressive or conservative, or any
combination in between. Over the course of any complete market cycle, we expect
a portfolio that is a blend of these quality funds will provide a prudent
approach to achieving one's long-term investment goals.
This period of market dislocation has been painful for all of us. But over
the long term, we are confident that tightened accounting regulations, an
increased level of governmental oversight, and the reallocation of resources
following the recent bubble will all result in a healthy resurgence of the
American financial system.
AIM's investment teams and processes continue to be honed and tested in
today's challenging environment. We believe that this prolonged bear market has
created some unparalleled opportunities to invest in leading companies that will
weather the market storm and recover their industry-leading positions when
global economic growth reaccelerates.
We are grateful for the trust our clients have placed in AIM, and we
reaffirm our commitment to excellence across all of our investment disciplines.
Sincerely,
/s/ GARY T. CRUM
Gary T. Crum
Director of Investments/AIM
/s/ EDGAR M. LARSEN
Edgar M. Larsen
Chief Investment Officer/AIM
================================================================================
... WE REAFFIRM OUR
COMMITMENT TO
EXCELLENCE ACROSS ALL
OF OUR INVESTMENT
DISCIPLINES.
================================================================================
3
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
SHIFT TO MORE AGGRESSIVE PORTFOLIO LEADS TO POSITIVE RETURNS
HOW DID THE FUND PERFORM OVER THE FISCAL YEAR?
During the fiscal year ended October 31, 2002, AIM Global Energy Fund's Class A,
Class B and Class C shares returned 5.56%, 4.99%, and 4.98%, respectively. These
figures are at net asset value, which does not include sales charges.
WHAT ARE THE BENCHMARKS THE FUND IS MEASURED AGAINST, AND HOW DID IT PERFORM IN
COMPARISON?
The fund's benchmark index, the MSCI All Country (AC) World Free Index returned
- -13.57% for the year ended October 31, 2002. The MSCI AC World Free Energy Index
returned -12.0% for the same time period. The Lipper Natural Resources Fund
Index returned -7.38%. The S&P 500 Energy Index returned -13.55%. The AIM Global
Energy Fund handily outperformed all four of these indexes. (See bar chart on
opposite page.)
WHAT HAPPENED IN THE FINANCIAL MARKETS DURING THE FISCAL YEAR?
During the year that this report encompasses, the fund's fiscal year ending
October 31, 2002, the bear market continued, and the disappointments affected
almost all investors. The equity market experienced continued volatility and
considerable losses. Equities in every market capitalization have been
affected--small-cap, mid-cap, and large-cap stocks. Toward the end of the fiscal
year, the U.S. consumer--long the strongest element of our economy--displayed a
loss of confidence, resulting in further negative effects on the financial
markets. During the last month covered by this report, the markets had several
positive weeks in a row, but it is still not clear whether the prolonged bear
market has ended.
WHAT CONDITIONS HAVE AFFECTED THE ENERGY MARKET?
The volatility in the market as a whole has carried over into the energy market.
The threat of war in the Middle East--the concern regarding the possible
disruption in the oil supply--has caused oil prices to escalate. The price of
oil increased 13.5% during the third calendar quarter of 2002. Because of the
high price of crude oil, oil companies that derive earnings from refining have
posted lower earnings due to reduced profit margins on their refined product.
Oil companies have also been hurt by the slow economy, high industry
inventories, and weak demand for some refined petroleum products, including jet
fuel and gasoline. Also, uncertain world conditions and mixed signals regarding
the growth of the U.S. economy were reflected within the energy sector itself.
Substantial disparity in performance existed among the various industries within
the sector.
================================================================================
THESE CHANGES REFLECT
OUR MOVE AWAY FROM
OUR EARLIER DEFENSIVE
POSITIONING AND TOWARD
A SOMEWHAT MORE
AGGRESSIVE PORTFOLIO ...
================================================================================
PORTFOLIO COMPOSITION
as of 10/31/02, based on total net assets
<Table>
<Caption>
===================================================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES INVESTMENT TYPE/COUNTRY BREAKDOWN
- -----------------------------------------------------------------------------------------------------------------------------------
1. Clean Power Income Fund 4.3% 1. Oil & Gas Exploration & Production 38.7% COMMON STOCK, CANADA 45.4%
2. Crescent Point Energy Ltd.-Class A 4.3 2. Oil & Gas Drilling 21.1 CASH AND OTHER ASSETS, 6.0%
3. Patterson-UTI Energy, Inc. 4.0 3. Oil & Gas Equipment & Services 15.7 [PIE CHART]
4. Peyto Exploration & Development 4. Electric Utilities 4.9 COMMON STOCK, FRANCE 1.9%
Corp. 3.9
5. Murphy Oil Corp. 3.8 5. Integrated Oil & Gas 3.8 COMMON STOCK, U.S.A. 46.7%
6. BJ Services Co. 3.8 6. Diversified Metals & Mining 2.4
7. Key Energy Services, Inc. 3.7 7. Oil & Gas Refining, Marketing &
Transportation 2.1
8. Precision Drilling Corp. 3.7 8. Industrial Gases 1.9
9. XTO Energy, Inc. 3.3 9. Gold 1.9
10. Ensign Resource Service Group, Inc. 3.3 10. Forest Products 0.8
The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular security.
===================================================================================================================================
</Table>
4
HOW HAVE YOU MANAGED THE FUND?
We have decreased our exposure to Europe, reducing or eliminating holdings of
larger integrated stocks in Great Britain and the Netherlands. We have increased
our North American holdings, and we have increased our exposure to smaller-cap
names. These changes reflect our move away from our earlier defensive
positioning and toward a somewhat more aggressive portfolio. We feel that this
move is appropriate, given the current economic and market environment.
CAN YOU DISCUSS A FEW STOCKS IN PARTICULAR THAT IMPACTED THE FUND?
We've recently found the best returns in trusts--entities that receive income
based on oil production in certain areas. British Petroleum Prudhoe Bay Royalty
Trust, which receives income from the North Slope of Alaska, is an example of a
trust that has benefited the portfolio. Ownership of the stocks of smaller
Canadian oil exploration companies has also helped the portfolio. Crescent Point
Energy Ltd. and PEYTO Exploration and Development are two such exploration
companies.
Oil service stocks had a negative impact on the portfolio. Oil services, as
measured by the Oil Services Index (OSX), fell heavily during the most recent
calendar quarter of 2002. Most of this can be attributed to analysts decreasing
their earnings outlook for the stocks in this industry because of the weak
growth in the economy. The recent decline in the stock price of BJ Services, a
corporation providing pressure pumping and other oilfield services worldwide,
has hurt the portfolio of late, but we remain convinced of the merits of this
holding for the long term.
WHAT WERE CONDITIONS LIKE AT THE CLOSE OF THE FISCAL YEAR?
Energy prices rose for most of the year, but considerable uncertainty exists
about the short-term direction of energy prices. Contributors to this
uncertainty include:
o Disagreement about the pace and sustainability of U.S. economic recovery
o Declining international oil inventories
o OPEC's decision to leave production quotas unchanged
o The threat of war with Iraq
For the long-term, natural gas will be an increasingly important resource which
will command higher prices. Most of the stores of this resource have been
identified, and supply will eventually decline if new stores are not found. Over
the shorter term, however, demand may decline if the economy weakens.
We have built a well-diversified portfolio within the global energy
sector--a portfolio we believe is well-positioned to take advantage of trends in
the energy sector.
================================================================================
PORTFOLIO MANAGEMENT TEAM
AS OF 10/31/02
ROGER J. MORTIMER, LEAD MANAGER
GLEN HILTON
See important fund and index
disclosures inside front cover.
[GRAPHIC]
For More Information Visit
AIMinvestments.com
================================================================================
FUND PERFORMANCE
================================================================================
TOTAL RETURNS
10/31/01-10/31/02, excluding sales charges
[BAR CHART]
AIM GLOBAL ENERGY FUND, CLASS A SHARES 5.56%
MSCI ALL COUNTRY AC WORLD FREE INDEX -13.57%
MSCI AC WORLD FREE ENERGY INDEX -12.0%
LIPPER NATURAL RESOURCES FUND INDEX -7.38%
S&P 500 ENERGY INDEX -13.55%
Performance of Class A, B, and C shares will differ due to different sales
charge structures and class expenses.
================================================================================
5
FUND PERFORMANCE
================================================================================
[MOUNTAIN CHART]
RESULTS OF A $10,000 INVESTMENT
5/31/94-10/31/02
<Table>
<Caption>
DATE AIM GLOBAL ENERGY AIM GLOBAL ENERGY MSCI AC WORLD
FUND CLASS A SHARES FUND CLASS B SHARES FREE INDEX
05/31/94 9525 10000 10000
7/94 9659 10132 10171
10/94 10342 10831 10549
1/95 9099 9512 9920
4/95 9441 9861 10867
7/95 10143 10580 11521
10/95 9558 9957 11386
1/96 10879 11324 12368
4/96 13237 13754 12918
7/96 12581 13071 12516
10/96 14627 15176 13190
1/97 15375 15922 13924
4/97 12370 12795 14276
7/97 15123 15619 16621
10/97 17938 18508 15309
1/98 13069 13459 16094
4/98 14015 14429 18097
7/98 10845 11140 18078
10/98 9863 10133 17303
1/99 9493 9737 19596
4/99 11348 11622 20826
7/99 11384 11651 21005
10/99 10926 11162 21804
1/00 11143 11369 23042
4/00 10936 11143 23533
7/00 10558 10746 23001
10/00 11009 11200 21975
1/01 11253 11426 21490
4/01 12507 12680 19694
7/01 10272 10407 18581
10/01 9532 9644 16450
1/02 9409 9503 17131
4/02 11095 11199 17193
7/02 9804 9897 14792
10/02 10058 10153 14218
Source: Lipper, Inc.
Past performance does not guarantee comparable future results.
==========================================================================================
</Table>
The chart compares AIM Global Energy Fund's Class A shares and Class B shares to
a benchmark index. It is intended to give you a general idea of how your fund
performed compared to these indexes over the period 5/31/94-10/31/02. It is
important to understand the difference between your fund and an index. Market
indexes, such as the MSCI AC World Free Index, are not managed and incur no
sales charges, expenses or fees. If you could buy all securities that make up a
market index, you would incur expenses that would affect your investment return.
Your fund's total return includes sales charges, expenses and management
fees. Results for Class B shares are calculated as if a hypothetical shareholder
had liquidated his entire investment in the fund at the close of the reporting
period and paid the applicable contingent deferred sales charges.
Performance of Class A, B and C shares will differ due to different sales
charge structures and class expenses. For fund performance calculations and
indexes used in this report, please see the inside front cover.
Performance shown in the chart does not reflect deduction of taxes a
shareholder would pay on fund distributions or sale of fund shares. Performance
for the index does not reflect the effects of taxes.
This growth chart uses a logarithmic scale, which means the price scale
(vertical axis) is structured so that a given distance always represents the
same percent change in price, rather than the same absolute change in price. For
example, the distance from one to 10 is the same as the distance from 10 to 100
on a logarithmic chart, but the latter distance is 10 times greater on a linear
chart. A logarithmic scale better illustrates performance in the fund's early
years before reinvested distributions and compounding create the potential for
the original investment to grow to very large numbers.
FUND RETURNS
as of 10/31/02
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
including sales charges
CLASS A SHARES
Inception (5/31/94) 0.07%
5 Years -11.79
1 Year 0.52
CLASS B SHARES
Inception (5/31/94) 0.18%
5 Years -11.71
1 Year -0.01
CLASS C SHARES
Inception (3/01/99) 1.99%
1 Year 3.98
In addition to returns as of the close of the reporting period, industry
regulations require us to provide average annual total returns (including sales
charges) as of September 30, 2002, the most recent calendar quarter-end, which
were: Class A shares, inception (5/31/94), -0.34%, five years, -12.42%, one
year, 4.20%; Class B shares, inception (5/31/94), -0.22%, five years, -12.35%,
one year, 3.69%; and Class C shares, inception (3/01/99), 1.07%, one year,
7.68%.
DUE TO RECENT SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY
MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR
FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE.
================================================================================
6
EDUCATION AND PLANNING
WANT TO BE A LONG-TERM INVESTOR?
THESE FOUR TIPS CAN HELP
================================================================================
SUCCESSFUL INVESTING
REQUIRES DISCIPLINE AND
TIME. MOST OF US CLAIM TO
BE LONG-TERM INVESTORS--
BUT OUR DISCIPLINE CAN BE
SORELY TESTED DURING PERIODS
OF MARKET VOLATILITY OR
MARKET DECLINES. HERE ARE
FOUR TIPS THAT CAN HELP YOU
MAINTAIN A LONG-TERM
PERSPECTIVE WHEN MARKETS
BECOME UNCERTAIN.
================================================================================
1 DON'T TRY TO TIME THE MARKET
Markets rise and fall, and even the most experienced investment professionals
can't consistently predict when market trends will change. That's why most
investment professionals remain invested for the long term, regardless of
short-term market fluctuations.
Some individual investors, however, exit the market at the first sign of
volatility. History shows that by doing so they risk lowering their long-term
investment returns.
Historically, stocks have provided higher average annual total returns than
other asset classes. The S&P 500--considered representative of the U.S. stock
market as a whole--boasts an average annual total return of 11.10% for the 50
years ended September 30, 2002. During those five decades, America experienced
boom and bust, war and peace--but long-term investors were rewarded for their
discipline and patience.
Markets have always been subject to sharp and sudden declines--and equally
sharp and sudden gains. Investors who exit the market at the first sign of a
decline risk missing out on significant one-day gains. The table below compares
the returns earned by a hypothetical long-term investor who remained in the
market to returns earned by other investors who missed just a few days of market
gains.
2 SET REASONABLE EXPECTATIONS
While stocks have outperformed other investments over the last half century,
they are subject to much higher or much lower returns in a given year or over
relatively short investment periods. The 1990s saw much higher-than-average
annual returns, but returns for 2000 were much lower than the historical
averages. Like many other things, investment returns are subject to significant
volatility over the short term--but they average out over time.
Take a look at how returns for the S&P 500 compare over the short term and
the long term. When markets become difficult, as they have been for the last two
years, it's natural to long for the "good old days" of the 1990s
THE LONG AND SHORT OF INVESTING
================================================================================
REWARDS OF LONG-TERM INVESTING
S&P 500 Index: For the 10 years ended September 30, 2002(1)
AVERAGE ANNUAL
TIME PERIOD TOTAL RETURN
Fully invested 9.00%
Miss the 10 best days 4.05
Miss the 20 best days 0.40
Miss the 30 best days -2.56
Source: FactSet Research Systems
================================================================================
================================================================================
ONE YEAR RETURNS CAN VARY WIDELY, BUT THEY AVERAGE OUT OVER TIME
S&P 500 Index(1)
AVERAGE HIGHEST LOWEST
TIME PERIOD RETURN RETURN RETURN
1971-1980 8.48% -- --
1975 -- 37.23% --
1974 -- -- -26.47%
1981-1990 13.92 -- --
1985 -- 31.73 --
1981 -- -- -4.92
1991-2000 17.44 -- --
1995 -- 37.53 --
2000 -- -- -9.10
30-year average (1971-2000): 13.22 -- --
Source: Lipper, Inc.
================================================================================
7
when markets rose 20% or more, year after year. Long-term investors, of course,
realize that the 1990s were as much an aberration as are the double-digit
declines we've seen more recently. Long-term investors look past short-term
declines and keep reasonable long-term expectations.
Remember, on average, a 20% market decline occurs every five years, and 10
20% corrections occurred in the 54-year period from 1946 to 1999. The market
declines of 2000 and 2001 are nothing new to long-term investors.
3 PRACTICE DOLLAR-COST AVERAGING(2)
Saving and investing for long-term goals, such as retirement, is a lifelong
process--something we need to do year after year, regardless of temporary market
conditions.
Dollar-cost averaging can take the guesswork out of investing and can help
you achieve your long-term investment goals. When you practice dollar-cost
averaging, you invest a fixed amount of money at regular intervals regardless of
market conditions. You can decide how much and how often to invest.
There are several advantages to dollar-cost averaging:
o Regular investing helps you make the most of market swings. By investing a
fixed amount on a regular basis, you automatically buy more shares when
prices are low and fewer shares when prices are high.
o Your average cost per share is less than your average price per share. (The
chart below illustrates how dollar-cost averaging works.) The only time this
would not occur is if share prices remain constant.
o This strategy is especially appropriate for long-term investments, such as
retirement plans. This is because the longer you maintain a regular
investment program, the more likely it is that you will buy shares at a wide
variety of prices.
o You will be less tempted to make decisions based on short-term events or
market conditions. Dollar-cost averaging helps take the emotion out of the
investment process.
4 TALK WITH YOUR FINANCIAL ADVISOR
Any time of uncertainty is a good time to speak with your financial advisor.
Your financial advisor can help you maintain a long-term investment
perspective. He or she is familiar with your unique financial situation and
financial goals. He or she can work with you to ensure that your investments are
still appropriate to achieve your long-term financial goals--or can recommend
changes to your investments based on changing market conditions or your changing
needs.
Your financial advisor can help you remain committed to your long-term
financial goals and can explain how a disciplined approach to investing can be
beneficial over the long term. Also, your financial advisor can ensure that your
investments are diversified across various asset classes and investment styles
to manage risk.
(1) The unmanaged Standard and Poor's Composite Index of 500 Stocks (S&P 500) is
an index of common stocks frequently used as a general measure of U.S.
stock-market performance. Results assume the reinvestment of dividends. An
investment cannot be made directly in an index.
(2) No investment technique can assure a profit or protect against losses in
declining markets. Because dollar-cost averaging involves investing
continuously regardless of fluctuating securities prices, you should
consider your ability to continue making purchases during periods of low
price levels.
Source: Ibbotson, Associates
================================================================================
DOLLAR-COST AVERAGING CAN BENEFIT LONG-TERM INVESTORS(2)
AMOUNT SHARE SHARES
MONTH INVESTED PRICE PURCHASED
January $200.00 $24.00 8.333
February 200.00 20.00 10.000
March 200.00 14.00 14.286
April 200.00 18.00 11.111
May 200.00 22.00 9.091
June 200.00 24.00 8.333
Total invested: $1,200.00
Average price per share: 20.33
Total shares purchased: 61.154
Average cost per share: 19.62
[COVER ART]
This is a hypothetical example demonstrating how dollar-cost averaging works. It
does not reflect the performance of any particular investment.
================================================================================
8
FINANCIALS
Schedule of Investments
October 31, 2002
<Table>
<Caption>
MARKET
SHARES VALUE
- -------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-46.68%
Integrated Oil & Gas-3.84%
Murphy Oil Corp. 13,700 $ 1,148,471
=========================================================================
Multi-Utilities & Unregulated Power-0.50%
Equitable Resources, Inc. 4,200 149,520
=========================================================================
Oil & Gas Drilling-14.13%
Grey Wolf, Inc.(a) 229,600 918,400
- -------------------------------------------------------------------------
Parker Drilling Co.(a) 350,000 815,500
- -------------------------------------------------------------------------
Patterson-UTI Energy, Inc.(a) 41,000 1,185,720
- -------------------------------------------------------------------------
Pride International, Inc.(a) 50,300 698,164
- -------------------------------------------------------------------------
Rowan Cos., Inc.(a) 29,700 605,583
=========================================================================
4,223,367
=========================================================================
Oil & Gas Equipment & Services-10.30%
BJ Services Co.(a) 37,700 1,143,441
- -------------------------------------------------------------------------
Key Energy Services, Inc.(a) 124,800 1,114,464
- -------------------------------------------------------------------------
Oceaneering International, Inc.(a) 11,200 310,240
- -------------------------------------------------------------------------
Smith International, Inc.(a) 16,400 512,664
=========================================================================
3,080,809
=========================================================================
Oil & Gas Exploration & Production-15.79%
Apache Corp. 17,800 962,268
- -------------------------------------------------------------------------
BP Prudhoe Bay Royalty Trust 68,400 899,460
- -------------------------------------------------------------------------
Burlington Resources Inc. 6,800 280,160
- -------------------------------------------------------------------------
Devon Energy Corp. 10,600 535,300
- -------------------------------------------------------------------------
Quicksilver Resources Inc.(a) 23,900 525,800
- -------------------------------------------------------------------------
Spinnaker Exploration Co.(a) 27,100 521,675
- -------------------------------------------------------------------------
XTO Energy, Inc. 41,400 995,670
=========================================================================
4,720,333
=========================================================================
Oil & Gas Refining, Marketing &
Transportation-2.12%
Premcor Inc.(a) 5,500 110,275
- -------------------------------------------------------------------------
Valero Energy Corp. 14,900 524,629
=========================================================================
634,904
=========================================================================
Total Domestic Common Stocks (Cost
$15,066,044) 13,957,404
=========================================================================
FOREIGN STOCKS & OTHER EQUITY INTERESTS-47.38%
Canada-45.45%
Canadian Oil Sands Trust (Oil & Gas Exploration &
Production) 29,300 687,321
- -------------------------------------------------------------------------
CE Franklin Ltd. (Oil & Gas Equipment &
Services)(a) 128,800 307,832
- -------------------------------------------------------------------------
CHC Helicopter Corp.-Class A (Oil & Gas Equipment
& Services) 38,800 744,324
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- -------------------------------------------------------------------------
Canada-(Continued)
Clean Power Income Fund (Electric Utilities) 196,500 $ 1,291,419
- -------------------------------------------------------------------------
Crescent Point Energy Ltd.-Class A (Oil & Gas
Exploration & Production)(a) 600,000 1,290,033
- -------------------------------------------------------------------------
Energy Savings Income Fund-Receipts (Electric
Utilities) 16,400 172,094
- -------------------------------------------------------------------------
Ensign Resource Service Group, Inc. (Oil & Gas
Drilling) 97,700 983,208
- -------------------------------------------------------------------------
Gabriel Resources Ltd. (Diversified Metals &
Mining)(a) 175,000 460,497
- -------------------------------------------------------------------------
Ketch Resources Ltd. (Integrated Oil & Gas)(a) 1 1
- -------------------------------------------------------------------------
LionOre Mining International Ltd. (Diversified
Metals & Mining)(a) 93,700 249,570
- -------------------------------------------------------------------------
Oiltec Resources Ltd. (Oil & Gas Exploration &
Production)(a) 200,000 282,395
- -------------------------------------------------------------------------
Olympia Energy Inc. (Oil & Gas Exploration &
Production)(a) 201,400 445,947
- -------------------------------------------------------------------------
PEYTO Exploration & Development Corp. (Oil & Gas
Exploration & Production)(a) 202,600 1,179,374
- -------------------------------------------------------------------------
Placer Dome Inc. (Gold) 64,400 564,187
- -------------------------------------------------------------------------
Precision Drilling Corp. (Oil & Gas Drilling)(a) 32,000 1,093,229
- -------------------------------------------------------------------------
Progress Energy Ltd. (Oil & Gas Exploration &
Production)(a) 169,600 685,758
- -------------------------------------------------------------------------
Provident Energy Trust (Oil & Gas Exploration &
Production) 112,581 769,519
- -------------------------------------------------------------------------
SFK Pulp Fund (Forest Products) (Acquired
07/26/02; Cost $206,145)(b) 32,400 235,872
- -------------------------------------------------------------------------
ShawCor Ltd. (Oil & Gas Equipment & Services) 65,100 568,231
- -------------------------------------------------------------------------
Stuart Energy Systems Corp. (Electrical Components
& Equipment)(a) 38,300 58,995
- -------------------------------------------------------------------------
Talisman Energy Inc. (Oil & Gas Exploration &
Production) 19,300 707,910
- -------------------------------------------------------------------------
Zargon Oil & Gas Ltd. (Oil & Gas Exploration &
Production)(a) 158,600 809,236
=========================================================================
13,586,952
=========================================================================
France-1.93%
L'Air Liquide S.A. (Industrial Gases) 4,503 576,745
=========================================================================
Total Foreign Stocks & Other Equity Interests
(Cost $13,530,630) 14,163,697
=========================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- -------------------------------------------------------------------------
MONEY MARKET FUNDS-3.38%
STIC Liquid Assets Portfolio(c) 504,632 $ 504,632
- -------------------------------------------------------------------------
STIC Prime Portfolio(c) 504,632 504,632
=========================================================================
Total Money Market Funds (Cost $1,009,264) 1,009,264
=========================================================================
TOTAL INVESTMENTS-97.44% (Cost $29,605,938) 29,130,365
=========================================================================
OTHER ASSETS LESS LIABILITIES-2.56% 766,790
=========================================================================
NET ASSETS-100.00% $29,897,155
_________________________________________________________________________
=========================================================================
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) 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 market value of this security at 10/31/02 represented 0.79% of
the Fund's net assets. The Fund has no rights to demand registration of
these securities.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
F-2
Statement of Assets and Liabilities
October 31, 2002
<Table>
ASSETS:
Investments, at market value (cost
$29,605,938)* $29,130,365
- ------------------------------------------------------------
Foreign currencies, at value (cost $5,064) 5,090
- ------------------------------------------------------------
Receivables for:
Investments sold 3,498,034
- ------------------------------------------------------------
Fund shares sold 35,009
- ------------------------------------------------------------
Dividends 31,122
- ------------------------------------------------------------
Investment for deferred compensation plan 2,482
- ------------------------------------------------------------
Collateral for securities loaned 3,621,821
- ------------------------------------------------------------
Other assets 18,148
============================================================
Total assets 36,342,071
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 2,632,395
- ------------------------------------------------------------
Fund shares reacquired 103,301
- ------------------------------------------------------------
Deferred compensation plan 2,482
- ------------------------------------------------------------
Collateral upon return of securities loaned 3,621,821
- ------------------------------------------------------------
Accrued distribution fees 26,075
- ------------------------------------------------------------
Accrued trustees' fees 795
- ------------------------------------------------------------
Accrued transfer agent fees 15,561
- ------------------------------------------------------------
Accrued operating expenses 42,486
============================================================
Total liabilities 6,444,916
============================================================
Net assets applicable to shares outstanding $29,897,155
____________________________________________________________
============================================================
NET ASSETS:
Class A $18,075,730
____________________________________________________________
============================================================
Class B $10,510,485
____________________________________________________________
============================================================
Class C $ 1,310,940
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 1,629,154
____________________________________________________________
============================================================
Class B 978,993
____________________________________________________________
============================================================
Class C 121,997
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 11.10
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $11.10 divided by
95.25%) $ 11.65
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per share $ 10.74
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per share $ 10.75
____________________________________________________________
============================================================
</Table>
* At October 31, 2002, securities with an aggregate market value of $3,531,838
were on loan to brokers.
Statement of Operations
For the year ended October 31, 2002
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$47,024) $ 489,603
- -------------------------------------------------------------
Dividends from affiliated money market funds 30,325
- -------------------------------------------------------------
Interest 369
- -------------------------------------------------------------
Security lending income 32,792
=============================================================
Total investment income 553,089
=============================================================
EXPENSES:
Advisory fees 288,354
- -------------------------------------------------------------
Administrative services fees 50,000
- -------------------------------------------------------------
Custodian fees 22,084
- -------------------------------------------------------------
Distribution fees -- Class A 80,639
- -------------------------------------------------------------
Distribution fees -- Class B 121,290
- -------------------------------------------------------------
Distribution fees -- Class C 13,180
- -------------------------------------------------------------
Transfer agent fees 154,093
- -------------------------------------------------------------
Trustees' fees 8,427
- -------------------------------------------------------------
Printing 55,879
- -------------------------------------------------------------
Professional fees 43,909
- -------------------------------------------------------------
Other 44,731
=============================================================
Total expenses 882,586
=============================================================
Less: Fees waived (223,074)
- -------------------------------------------------------------
Expenses paid indirectly (572)
=============================================================
Net expenses 658,940
=============================================================
Net investment income (loss) (105,851)
=============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (4,122,316)
- -------------------------------------------------------------
Foreign currencies (2,485)
=============================================================
(4,124,801)
=============================================================
Change in net unrealized appreciation of:
Investment securities 4,563,717
- -------------------------------------------------------------
Foreign currencies 4,368
=============================================================
4,568,085
=============================================================
Net gain from investment securities and foreign
currencies 443,284
=============================================================
Net increase in net assets resulting from
operations $ 337,433
_____________________________________________________________
=============================================================
</Table>
See Notes to Financial Statements.
F-3
Statement of Changes in Net Assets
For the years ended October 31, 2002 and 2001
<Table>
<Caption>
2002 2001
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (105,851) $ 50,642
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (4,124,801) 1,679,569
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 4,568,085 (6,590,217)
==========================================================================================
Net increase (decrease) in net assets resulting from
operations 337,433 (4,860,006)
==========================================================================================
Distributions to shareholders from net investment income:
Class A (71,556) --
- ------------------------------------------------------------------------------------------
Class B (220) --
- ------------------------------------------------------------------------------------------
Class C (16) --
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 5,662,718 1,813,664
- ------------------------------------------------------------------------------------------
Class B (1,624,200) 691,805
- ------------------------------------------------------------------------------------------
Class C 421,819 725,619
==========================================================================================
Net increase (decrease) in net assets 4,725,978 (1,628,918)
==========================================================================================
NET ASSETS:
Beginning of year 25,171,177 26,800,095
==========================================================================================
End of year $ 29,897,155 $ 25,171,177
__________________________________________________________________________________________
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 56,355,950 $ 52,082,179
- ------------------------------------------------------------------------------------------
Undistributed net investment income 137,264 42,839
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (26,123,996) (21,913,693)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (472,063) (5,040,148)
==========================================================================================
$ 29,897,155 $ 25,171,177
__________________________________________________________________________________________
==========================================================================================
</Table>
See Notes to Financial Statements.
F-4
Notes to Financial Statements
October 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Energy Fund (the "Fund") is a separate series of AIM Investment Funds
(the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of seven
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund.
The Fund's investment objective is long-term growth of capital.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued at the closing bid price furnished
by independent pricing services or market makers. Each security reported on
the NASDAQ National Market System is valued at the last sales price as of
the close of the customary trading session on the valuation date or absent
a last sales price, at the closing bid price. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, dividend rate,
yield, quality, type of issue, coupon rate, maturity, individual trading
characteristics and other market data. Securities for which market prices
are not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in
the case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity and
commercial paper are valued at amortized cost which approximates market
value. For purposes of determining net asset value per share, futures and
option contracts generally will be valued 15 minutes after the close of the
customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the NYSE. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not be
reflected in the computation of the Fund's net asset value. If a
development/event is so significant that there is a reasonably high degree
of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer
reflect actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in
good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-
F-5
upon price at a future date. The Fund may enter into a foreign currency
contract to attempt to minimize the risk to the Fund from adverse changes
in the relationship between currencies. The Fund may also enter into a
foreign currency contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar
price of that security. The Fund could be exposed to risk if counterparties
to the contracts are unable to meet the terms of their contracts or if the
value of the foreign currency changes unfavorably.
G. EXPENSES -- Distribution expenses directly attributable to a class of
shares are charged to the respective classes' operations. Transfer agency
fees and expenses and other shareholder recordkeeping fees and expenses are
charged to each class pursuant to a transfer agency and service agreement
adopted by the Fund with respect to such class. All other expenses are
allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
The Fund pays AIM investment management and administration fees at an annual
rate of 0.975% on the first $500 million of the Fund's average daily net assets,
plus 0.95% on the next $500 million of the Fund's average daily net assets, plus
0.925% on the next $500 million of the Fund's average daily net assets, plus
0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has
contractually agreed to limit total annual operating expenses (excluding
interest, taxes, dividends on short sales, extraordinary items and increases in
expenses due to expense offset arrangements, if any) for Class A, Class B and
Class C shares to 2.00%, 2.50% and 2.50%, respectively. 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 fund of which the Fund has
invested. During the year ended October 31, 2002, AIM waived fees of $233,074.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the year ended October 31, 2002, AIM was
paid $50,000 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended October 31, 2002, AFS
retained $93,933 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.50% 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 C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid any class of shares of the Fund. Pursuant to the master
distribution agreements, for the year ended October 31, 2002, the Class A, Class
B and Class C shares paid $80,639, $121,290 and $13,180, respectively.
AIM Distributors retained commissions of $9,416 from sales of the Class A
shares of the Fund during the year ended October 31, 2002. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 2002,
AIM Distributors retained $31, $0 and $5,091 in contingent deferred sales
charges imposed on redemptions of Class A, Class B and Class C shares,
respectively.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended October 31, 2002, the Fund paid legal fees of $2,776 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended October 31, 2002, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $504 and reductions in custodian
fees of $68 under expense offset arrangements which resulted in a reduction of
the Fund's total expenses of $572.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Trust. The Trustees deferring compensation have the option to
select various AIM Funds in which all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended October 31,
2002, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and
F-6
the borrower fails to return the securities. It is the Fund's policy to obtain
additional collateral from or return excess collateral to the borrower by the
end of the next business day. Therefore, the value of the collateral may be
temporarily less than the value of the securities on loan.
At October 31, 2002, securities with an aggregate value of $3,531,838 were on
loan to brokers. The loans were secured by cash collateral of $3,621,821
received by the Fund and invested in affiliated money market funds as follows:
$1,810,911 in STIC Liquid Assets Portfolio and $1,810,910 in STIC Prime
Portfolio. For the year ended October 31, 2002, the Fund received fees of
$32,792 for securities lending.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
Distributions to Shareholders:
The tax character of distributions paid during the years ended October 31, 2002
and 2001 were as follows:
<Table>
<Caption>
2002 2001
- ------------------------------------------------------------
Distributions paid from ordinary Income $71,792 $ --
____________________________________________________________
============================================================
</Table>
Tax Components of Beneficial Interest:
As of October 31, 2002, the components of beneficial interest on a tax basis
were as follows:
<Table>
Undistributed ordinary income $ 140,605
- -------------------------------------------------------------
Unrealized appreciation
(depreciation) -- investments (572,088)
- -------------------------------------------------------------
Temporary book/tax differences (3,340)
- -------------------------------------------------------------
Capital loss carryforward (26,023,972)
- -------------------------------------------------------------
Shares of beneficial interest 56,355,950
=============================================================
$ 29,897,155
_____________________________________________________________
=============================================================
</Table>
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to the tax
deferral of losses on wash sales, tax treatment of partnership items and other
deferrals. Amount includes appreciation on foreign currencies of $3,510.
The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the deferral of trustee compensation.
The Fund's capital loss carryforward expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- ----------------------------------------------------------
October 31, 2006 $20,054,017
- ----------------------------------------------------------
October 31, 2007 1,450,461
- ----------------------------------------------------------
October 31, 2008 338,540
- ----------------------------------------------------------
October 31, 2010 4,180,954
==========================================================
$26,023,972
__________________________________________________________
==========================================================
</Table>
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 2002 was
$47,215,023 and $42,397,984, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 2002 is as follows:
<Table>
Aggregate unrealized appreciation of investment
securities $ 1,603,253
- -------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (2,178,851)
=============================================================
Net unrealized appreciation (depreciation) of
investment securities $ (575,598)
_____________________________________________________________
=============================================================
Cost of investments for tax purposes is $29,705,963.
</Table>
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions,
net operating loss, and other items, on October 31, 2002, undistributed net
investment income was increased by $272,068, undistributed net realized gains
decreased by $85,502 and shares of beneficial interest decreased by $186,566.
This reclassification had no effect on the net assets of the Fund.
F-7
NOTE 10--SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 2002 and 2001
were as follows:
<Table>
<Caption>
2002 2001
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,372,711* $15,660,046* 737,964 $ 9,417,339
- ------------------------------------------------------------------------------------------------------------------
Class B 505,919 5,786,626 548,545 6,880,493
- ------------------------------------------------------------------------------------------------------------------
Class C 308,554 3,384,904 111,491 1,402,897
==================================================================================================================
Issued as reinvestment of dividends:
Class A 6,136 62,830 -- --
- ------------------------------------------------------------------------------------------------------------------
Class B 18 180 -- --
- ------------------------------------------------------------------------------------------------------------------
Class C 1 12 -- --
==================================================================================================================
Reacquired:
Class A (905,005) (10,060,158) (616,551) (7,603,675)
- ------------------------------------------------------------------------------------------------------------------
Class B (701,012)* (7,411,006)* (528,940) (6,188,688)
- ------------------------------------------------------------------------------------------------------------------
Class C (278,055) (2,963,097) (58,126) (677,278)
==================================================================================================================
309,267 $ 4,460,337 194,383 $ 3,231,088
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
* Includes automatic conversion of 127,313 shares of Class B shares in the
amount of $1,378,868 to 123,071 shares of Class A shares in the amount of
$1,378,868.
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.58 $ 12.22 $ 12.12 $ 10.95 $ 20.65
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) 0.05(a) 0.02(a) 0.02(a) (0.11)(a)
- -----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.59 (1.69) 0.08 1.15 (8.91)
=============================================================================================================================
Total from investment operations 0.58 (1.64) 0.10 1.17 (9.02)
=============================================================================================================================
Less distributions:
Dividends from net investment income (0.06) -- -- -- (0.19)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.49)
=============================================================================================================================
Total distributions (0.06) -- -- -- (0.68)
=============================================================================================================================
Net asset value, end of period $ 11.10 $ 10.58 $ 12.22 $ 12.12 $ 10.95
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 5.56% (13.42)% 0.74% 10.68% (45.02)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $18,076 $12,224 $12,638 $15,664 $19,463
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(c) 2.00% 2.00% 2.00% 1.98%
- -----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.76%(c) 2.84% 2.80% 2.30% 2.29%
=============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.13)%(c) 0.45% 0.18% 0.19% (0.75)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 152% 189% 105% 123% 201%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles and does not include sales charges.
(c) Ratios are based on average daily net assets of $16,127,732.
F-8
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
2002 2001 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.23 $ 11.88 $ 11.84 $ 10.75 $ 20.37
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.01)(a) (0.04)(a) (0.04)(a) (0.18)(a)
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.58 (1.64) 0.08 1.13 (8.76)
===================================================================================================================
Total from investment operations 0.51 (1.65) 0.04 1.09 (8.94)
===================================================================================================================
Less distributions:
Dividends from net investment income (0.00) -- -- -- (0.19)
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.49)
===================================================================================================================
Total distributions (0.00) -- -- -- (0.68)
===================================================================================================================
Net asset value, end of period $ 10.74 $ 10.23 $ 11.88 $ 11.84 $ 10.75
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) 4.99% (13.89)% 0.34% 10.14% (45.25)%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $10,510 $12,010 $13,710 $20,019 $28,996
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.50%(c) 2.50% 2.50% 2.50% 2.48%
- -------------------------------------------------------------------------------------------------------------------
Without fee waivers 3.26%(c) 3.34% 3.30% 2.80% 2.79%
===================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.63)%(c) (0.05)% (0.32)% (0.31)% (1.25)%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 152% 189% 105% 123% 201%
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles and does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $12,129,059.
F-9
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
-------------------------------------------------------
MARCH 1, 1999
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
----------------------------------- OCTOBER 31,
2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.24 $ 11.88 $ 11.84 $10.00
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.01)(a) (0.04)(a) (0.03)(a)
- ---------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.58 (1.63) 0.08 1.87
=====================================================================================================================
Total from investment operations 0.51 (1.64) 0.04 1.84
=====================================================================================================================
Less dividends from net investment income (0.00) -- -- --
=====================================================================================================================
Net asset value, end of period $ 10.75 $ 10.24 $ 11.88 $11.84
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) 4.98% (13.80)% 0.34% 18.40%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,311 $ 937 $ 453 $ 41
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.50%(c) 2.50% 2.50% 2.50%(d)
- ---------------------------------------------------------------------------------------------------------------------
Without fee waivers 3.26%(c) 3.34% 3.30% 2.80%(d)
=====================================================================================================================
Ratio of net investment income (loss) to average net assets (0.63)%(c) (0.05)% (0.32)% (0.31)%(d)
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate 152% 189% 105% 123%
_____________________________________________________________________________________________________________________
=====================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles, does not include contingent deferred sales charges and is
not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $1,317,975.
(d) Annualized.
F-10
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of AIM Global Energy Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Global Energy Fund (one of
the funds constituting AIM Investment Funds; hereafter referred to as the
"Fund") at October 31, 2002, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for the periods indicated, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2002 by correspondence with the
custodian, provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
December 12, 2002
Houston, Texas
F-11
OTHER INFORMATION
Trustees and Officers
As of December 31, 2001
The address of each trustee and officer of AIM Investment Funds is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 86 portfolios in
the AIM Funds complex. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
Name, Year of Birth and Trustee and/ Principal Occupation(s) Other Directorship(s)
Position(s) Held with the Trust or Officer Since During Past 5 Years Held by Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Interested Persons
- -------------------------------------------------------------------------------------------------------------------------------
Robert H. Graham* -- 1946 1998 Chairman, President and Chief Executive None
Trustee, Chairman and Officer, A I M Management Group Inc.
President (financial services holding company);
Chairman and President, A I M Advisors,
Inc. (registered investment advisor);
Director and Senior Vice President,
A I M Capital Management, Inc.
(registered investment advisor);
Chairman, A I M Distributors, Inc.
(registered broker dealer), A I M Fund
Services, Inc. (registered transfer
agent), and Fund Management Company
(registered broker dealer); and
Director and Vice Chairman, AMVESCAP
PLC (parent of AIM and a global
investment management firm)
- -------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1987 Of Counsel, law firm of Baker & Badgley Funds, Inc. (registered
Trustee McKenzie investment company)
- -------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology ACE Limited (insurance
Trustee Associates (technology consulting company); and Captaris, Inc.
company) (unified messaging provider)
- -------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Chairman, Cortland Trust, Inc. None
Trustee (registered investment company) and DHJ
Media, Inc.; Director, Magellan
Insurance Company; Member of Advisor
Board of Rotary Power International
(designer, manufacturer, and seller of
rotary power engines); formerly,
Director, President and CEO, Volvo
Group North America, Inc.; and director
of various affiliated Volvo companies
- -------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 2001 Formerly, Chairman, Mercantile Mortgage None
Trustee Corp.; Vice Chairman, President and
Chief Operating Officer,
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares
Corp.
- -------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company)
- -------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Cortland Trust, Inc.
Trustee Naftalis and Frankel LLP (registered investment company)
- -------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly, Chief Executive Officer, YWCA None
Trustee of the USA
- -------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Louis S. Sklar -- 1939 2001 Executive Vice President, Development None
Trustee and Operations, Hines Interests Limited
Partnership (real estate development
company)
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Graham is considered an interested person of the fund because he is an
officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.
Trustees and Officers (continued)
As of December 31, 2001
The address of each trustee and officer of AIM Investment Funds is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 86 portfolios in
the AIM Funds complex. Column two below includes length of time served with
predecessor entities, if any.
<Table>
<Caption>
Name, Year of Birth and Trustee and/ Principal Occupation(s) Other Directorship(s)
Position(s) Held with the Trust or Officer Since During Past 5 Years Held by Trustee
- -------------------------------------------------------------------------------------------------------------------------------
Other Officers
- -------------------------------------------------------------------------------------------------------------------------------
Gary T. Crum -- 1947 1998 Director and President, A I M Capital N/A
Vice President Management, Inc.; Director and
Executive Vice President, A I M
Management Group Inc.; Director and
Senior Vice President, A I M Advisors,
Inc.; and Director, A I M Distributors,
Inc. and AMVESCAP PLC (parent of AIM
and a global investment management
firm)
- -------------------------------------------------------------------------------------------------------------------------------
Carol F. Relihan -- 1954 1998 Director, Senior Vice President, N/A
Senior Vice President and General Counsel and Secretary, A I M
Secretary Advisors, Inc. and A I M Management
Group Inc.; Director, Vice President
and General Counsel, Fund Management
Company; and Vice President, A I M Fund
Services, Inc., A I M Capital
Management, Inc. and A I M
Distributors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Melville B. Cox -- 1943 1998 Vice President and Chief Compliance N/A
Vice President Officer, A I M Advisors, Inc. and A I M
Capital Management, Inc.; and Vice
President, A I M Fund Services, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Dana R. Sutton -- 1959 1998 Vice President and Fund Treasurer, N/A
Vice President and Treasurer A I M Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information of the Trust includes additional information about the Fund's Trustees and is available
upon request, without charge, by calling 1.800.347.4246.
</Table>
<Table>
OFFICE OF THE FUND INVESTMENT ADVISOR DISTRIBUTOR AUDITORS
11 Greenway Plaza A I M Advisors, Inc. A I M Distributors, Inc. PricewaterhouseCoopers LLP
Suite 100 11 Greenway Plaza 11 Greenway Plaza 1201 Louisiana Street
Houston, TX 77046 Suite 100 Suite 100 Suite 2900
Houston, TX 77046 Houston, TX 77046 Houston, TX 77002
COUNSEL TO THE FUND COUNSEL TO THE TRUSTEES TRANSFER AGENT CUSTODIAN
Ballard Spahr Kramer, Levin, Naftalis & A I M Fund Services, Inc. State Street Bank and Trust
Andrews & Ingersoll, LLP Frankel LLP P.O. Box 4739 Company
1735 Market Street 919 Third Avenue Houston, TX 77210-4739 225 Franklin Street
Philadelphia, PA 19103 New York, NY 10022 Boston, MA 02110
</Table>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Of ordinary dividends paid to shareholders during the Fund's tax year ended
October 31, 2002, 99.92% is eligible for the dividends received deduction for
corporations.
THE AIM FAMILY OF FUNDS--Registered Trademark--
================================================================================
[COVER IMAGE]
MORE AGGRESSIVE
SECTOR EQUITY
INTERNATIONAL/GLOBAL EQUITY
DOMESTIC EQUITY
FIXED INCOME
MORE CONSERVATIVE
================================================================================
<Table>
====================================================================================================================================
FIXED INCOME
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY TAXABLE
MORE AGGRESSIVE MORE AGGRESSIVE MORE AGGRESSIVE
AIM Emerging Growth Fund AIM Developing Markets Fund AIM High Yield Fund II
AIM Small Cap Growth Fund(1) AIM European Small Company Fund AIM High Yield Fund
AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund(2) AIM Strategic Income Fund
AIM Opportunities I Fund(2,3) AIM International Emerging Growth Fund AIM Income Fund
AIM Mid Cap Growth Fund AIM Global Aggressive Growth Fund AIM Global Income Fund
AIM Libra Fund AIM European Growth Fund(2) AIM Total Return Bond Fund
AIM Dent Demographic Trends Fund AIM International Growth Fund(2) AIM Intermediate Government Fund
AIM Opportunities II Fund(2,3) AIM Global Growth Fund AIM Short Term Bond Fund
AIM Constellation Fund AIM Worldwide Spectrum Fund AIM Floating Rate Fund
AIM Large Cap Growth Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(4,5)
AIM Weingarten Fund AIM International Core Equity Fund(2) AIM Money Market Fund
AIM Opportunities III Fund(2,3)
AIM Small Cap Equity Fund MORE CONSERVATIVE MORE CONSERVATIVE
AIM Capital Development Fund
AIM Mid Cap Core Equity Fund(2) SECTOR EQUITY TAX-FREE
AIM Select Equity Fund
AIM Premier Equity II Fund(2) MORE AGGRESSIVE MORE AGGRESSIVE
AIM Premier Equity Fund(2)
AIM Blue Chip Fund AIM New Technology Fund AIM High Income Municipal Fund
AIM Mid Cap Basic Value Fund AIM Global Science and Technology Fund(2) AIM Municipal Bond Fund
AIM Large Cap Core Equity Fund AIM Global Energy Fund AIM Tax-Free Intermediate Fund(4,5)
AIM Charter Fund AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Basic Value Fund AIM Global Health Care Fund
AIM Large Cap Basic Value Fund AIM Global Utilities Fund MORE CONSERVATIVE
AIM Balanced Fund* AIM Real Estate Fund
AIM Basic Balanced Fund* [AIM FUNDS LOGO]
MORE CONSERVATIVE --Registered Trademark--
MORE CONSERVATIVE
* Domestic equity and income fund
====================================================================================================================================
</Table>
Equity and fixed-income funds are shown from more aggressive to more
conservative. When assessing the degree of risk, qualitative and quantitative
factors considered included the funds' portfolio holdings, diversification
permitted within the fund, the funds' standard deviations for three, five, 10,
15, 20 and 25 years, R-squared and beta analysis relative to the style-specific
benchmarks, and the possibility of incorporating portfolio management tools such
as leverage, derivatives and short selling. Fund rankings are relative to one
another within The AIM Family of Funds--Registered Trademark-- and should not be
compared with other investments. There is no guarantee that any one AIM fund
will be less volatile than any other. This order is subject to change. (1) AIM
Small Cap Growth Fund was closed to most investors on March 18, 2002. For more
information on who may continue to invest in AIM Small Cap Growth Fund, please
contact your financial advisor. (2) The following fund name changes became
effective 7/1/02: AIM Asian Growth Fund renamed AIM Asia Pacific Growth Fund;
AIM European Development Fund renamed AIM European Growth Fund; AIM Global
Telecommunications and Technology Fund renamed AIM Global Science and Technology
Fund; AIM International Equity Fund renamed AIM International Growth Fund; AIM
International Value Fund renamed AIM International Core Equity Fund; AIM Large
Cap Opportunities Fund renamed AIM Opportunities III Fund; AIM Mid Cap Equity
Fund renamed AIM Mid Cap Core Equity Fund; AIM Mid Cap Opportunities Fund
renamed AIM Opportunities II Fund; AIM Small Cap Opportunities Fund renamed AIM
Opportunities I Fund; AIM Value Fund renamed AIM Premier Equity Fund; AIM Value
II Fund renamed AIM Premier Equity II Fund. (3) Effective Oct. 1, 2002, the fund
reopened to new investors. (4) Class A shares closed to new investors on Oct.
30, 2002. (5) Class A3 shares opened to new investors on Oct. 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. This brochure is not authorized for distribution to
prospective investors unless preceded or accompanied by a currently effective
fund prospectus, which contains more complete information, including sales
charges and expenses. Please read it carefully before investing. If used after
Jan. 20, 2003, this brochure must be accompanied by a fund Performance &
Commentary or by an AIM Quarterly Performance Review for the most recent
quarter-end.
A I M Management Group Inc. has provided leadership in the mutual fund industry
since 1976 and manages $117 billion in assets for approximately 9 million
shareholders, including individual investors, corporate clients and financial
institutions. The AIM Family of Funds--Registered Trademark-- is distributed
nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's largest
independent financial services companies with $323 billion in assets under
management.
As of 9/30/02.
INVEST WITH DISCIPLINE--Registered Trademark--
A I M Distributors, Inc. GEN-AR-1
APPENDIX IX
SEMIANNUAL REPORT TO SHAREHOLDERS / APRIL 30, 2003
AIM GLOBAL ENERGY FUND
(COVER IMAGE)
(AIM INVESTMENTS LOGO APPEARS HERE)
--Servicemark--
YOUR GOALS. OUR SOLUTIONS.--Servicemark--
AIM Global Energy Fund seeks to provide long-term growth
of capital. The fund seeks to meet this objective
by investing, normally, at least 80% of its assets
in securities of energy-sector companies.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
This report may be distributed only to shareholders or to
persons who have received a current prospectus of the fund.
FUND DATA
================================================================================
PORTFOLIO COMPOSITION BY COUNTRY
As of 4/30/03
- --------------------------------------------------------------------------------
(PIE CHART)
CANADA 38.3%
ALL OTHERS COMBINED 15.7%
UNITED STATES 46.0%
TOTAL NUMBER OF HOLDINGS* 43
TOTAL NET ASSETS $41.7 million
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 4/30/03, including sales charges
CLASS A SHARES
Inception (5/31/94) 0.76%
5 Years -6.18
1 Year -8.11
CLASS B SHARES
Inception (5/31/94) 0.87%
5 Years -6.11
1 Year -8.87
CLASS C SHARES
Inception (3/01/99) 3.21%
1 Year -4.95
In addition to fund returns as of the close of the reporting period, industry
regulations require us to provide average annual total returns (including sales
charges) for periods ended 3/31/03, the most recent calendar quarter end, which
were as follows. Class A shares, inception (5/31/94), 0.78%; five years, -5.86%;
one year, -6.28%. Class B shares, inception (5/31/94), 0.88%; five
years, -5.80%; one year, -6.98%. Class C shares, inception (3/01/99), 3.30%; one
year, -3.07%.
================================================================================
================================================================================
FUND VS. INDEXES
Total Returns 10/31/02-4/30/03
excluding sales charges
CLASS A SHARES 6.37%
CLASS B SHARES 6.11
CLASS C SHARES 6.10
MSCI WORLD INDEX 3.62
(Broad Market Index)
MSCI AC WORLD FREE ENERGY INDEX 1.74
(Style-specific Index)
LIPPER NATURAL RESOURCES FUND INDEX 4.05
(Peer Group Index)
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results. DUE TO SIGNIFICANT
MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY
FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR FINANCIAL ADVISOR FOR MORE
CURRENT PERFORMANCE.
================================================================================
<Table>
<Caption>
========================================================================================================================
TOP 10 EQUITY HOLDINGS* INDUSTRY BREAKDOWN*
- ------------------------------------------------------------------------------------------------------------------------
1. Patterson-UTI Energy, Inc. 4.5% 1. Oil & Gas Exploration & Production 46.5%
2. Talisman Energy Inc. 4.4 2. Oil & Gas Drilling 17.1
3. Suncor Energy, Inc. 4.2 3. Oil & Gas Equipment & Services 13.4
4. BJ Services Co. 4.0 4. Integrated Oil & Gas 11.2
5. Clean Power Income Fund 3.8 5. Electric Utilities 5.2
6. Cimarex Energy Co. 3.6 6. Precious Metals & Minerals 2.1
7. Apache Corp. 3.6 7. Electrical Components & Equipment 0.5
8. Bonavista Petroleum Ltd. 3.4
9. Burlington Resources Inc. 3.3
10. EOG Resources, Inc. 3.2
*Excludes money market fund holdings.
The fund's holdings are subject to change, and there is no assurance that the fund will continue to hold any particular
security.
========================================================================================================================
</Table>
ABOUT FUND INFORMATION THROUGHOUT THIS REPORT:
o Unless otherwise stated, information presented here is as of 4/30/03 and is
based on total net assets.
o AIM Global Energy Fund's performance figures are historical, and they
reflect fund expenses, the reinvestment of distributions and changes in net
asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's share classes will differ due to different
sales charge structures and class expenses.
o Had the advisor not waived fees and/or reimbursed expenses, returns would
have been lower.
o The fund may participate in the initial public offering (IPO) market in some
market cycles. A significant portion of the fund's returns during certain
periods was attributable to its investments in IPOs. These investments have
a magnified impact when the fund's asset base is relatively small. As the
fund's assets grow, the impact of IPO investments will decline, which may
reduce the effect of IPO investments on the fund's total return. For
additional information regarding the impact of IPO investments on the fund's
performance, please see the fund's prospectus.
o The fund's investment return and principal value will fluctuate, so an
investor's shares (when redeemed) may be worth more or less than the
original cost.
o Investing in emerging markets may involve greater risk and potential reward
than investing in more established markets.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o Investing in a single-sector or single-region mutual fund may involve
greater risk and potential reward than investing in a more diversified fund.
o In the Schedule of Investments in this report, the fund's portfolio holdings
are organized according to the Global Industry Classification Standard,
which was developed by and is the exclusive property and a service mark of
Morgan Stanley Capital International Inc. and Standard & Poor's.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged MSCI World Index is a group of global securities tracked by
Morgan Stanley Capital International.
o The MSCI AC World Free Energy Index is designed to measure actual buyable
opportunities in the global energy market. This index measures the
performance of energy stocks of both developed and emerging markets.
o The unmanaged Lipper Natural Resources Fund Index represents an average of
the 10 largest natural resources funds tracked by Lipper, Inc., an
independent mutual fund performance monitor, and is considered
representative of natural resources stocks.
o A direct investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends, and they do not reflect sales
charges. Performance of an index of funds reflects fund expenses.
Performance of a market index does not.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by calling 800-959-4246, or on the AIM Web site,
aiminvestments.com.
FOR MORE INFORMATION, PLEASE VISIT AIMinvestments.com.
TO OUR SHAREHOLDERS
DEAR SHAREHOLDER:
[PHOTO OF This is the report on AIM Global Energy Fund for the six
ROBERT H. months ended April 30, 2003. You will note that we have
GRAHAM] adopted a more concise format for our semiannual reports.
Important information such as top holdings and performance
as of the close of the reporting period appear on the
opposite page. This letter will provide an overview of the
markets and your fund during the six months covered by this
report. As always, timely information about your fund and
the markets in general is available at our Web site,
aiminvestments.com.
MARKET CONDITIONS
In U.S. markets, positive performance during March and April
2003 enabled major stock market indexes to post gains for
the reporting period. For example, the unmanaged Standard &
Poor's Composite Index of 500 Stocks (the S&P 500), an index of common stocks
frequently used as a general measure of U.S. stock market performance, returned
4.47% for the six months ended April 30, 2003.
Year to date as of April 30, consumer discretionary, information technology
and financials were among the better-performing sectors of the S&P 500, while
telecommunications services was the worst.
Generally, mid- and small-cap stocks outperformed large-cap stocks, and the
value investment style outperformed the growth investment style during the
six-month reporting period.
International markets, as measured by the unmanaged MSCI Europe, Australasia
and the Far East Index (the EAFE--Registered Trademark--), a group of foreign
securities tracked by Morgan Stanley Capital International, produced negative
returns for the first quarter of 2003. International markets, however, rallied
in April. This rally helped push international market returns into positive
territory for the six-month reporting period.
European markets rallied toward the close of the reporting period, with the
MSCI (Morgan Stanley Capital International) Europe Index, often considered
representative of the European equity market, gaining 13.49% in April. In
European monetary affairs, the European Central Bank (ECB) cut its benchmark
interest rate 25 basis points to 2.50% in March. It remained at that level as
the reporting period closed.
On the currency front, the U.S. dollar was weak compared to many foreign
currencies. In particular, the euro showed strength as it appreciated nearly 13%
against the dollar during the reporting period. Other notable currencies that
gained ground on the dollar included the Australian dollar, Swiss franc, British
pound and Canadian dollar.
YOUR FUND
For the six-month period on which this report focuses, all three share
classes of the AIM Global Energy Fund posted positive returns at net asset
value, exceeding their benchmark indexes by two to four percentage points.
Portfolio managers Roger Mortimer and Glen Hilton have been pleased with the
performance of the fund.
Additionally, there has been a 28% increase in the fund's assets. On October
31, 2002, at the end of the previous reporting period, the net assets of the
fund stood at $29.9 million. At the end of this reporting period, on April 30,
2003, net assets were $41.7 million.
Geopolitical events coincided with oil price volatility during the period.
The price of oil had risen prior to the conflict in Iraq, but a few days prior
to the start of hostilities, oil prices began to drop. The decline continued
throughout the rest of March. Prices rose again in April. Portfolio manager
Roger Mortimer attributes the performance of the fund in this highly volatile
environment to the fund's defensive investment strategy.
IN CLOSING
I thank you for your continued participation in AIM Global Energy Fund, and I
look forward to reporting to you again in six months. If you have any questions,
please consult your financial advisor to help you with your investment choices.
As always, members of our award-winning Client Services department are ready to
help. They can be reached at 800-959-4246.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
Chairman
April 30, 2003
================================================================================
IN U.S. MARKETS, POSITIVE
PERFORMANCE DURING MARCH AND APRIL
2003 ENABLED MAJOR STOCK MARKET
INDEXES TO POST GAINS FOR THE
REPORTING PERIOD.
ROBERT H. GRAHAM
================================================================================
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2003
(Unaudited)
<Table>
<Caption>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-45.96%
INTEGRATED OIL & GAS-3.15%
Murphy Oil Corp. 31,600 $ 1,316,140
======================================================================
OIL & GAS DRILLING-8.83%
Grey Wolf, Inc.(a) 156,400 633,420
- ----------------------------------------------------------------------
Patterson-UTI Energy, Inc.(a) 56,200 1,859,658
- ----------------------------------------------------------------------
Rowan Cos., Inc.(a) 58,000 1,189,000
======================================================================
3,682,078
======================================================================
OIL & GAS EQUIPMENT & SERVICES-11.73%
BJ Services Co.(a) 45,500 1,661,205
- ----------------------------------------------------------------------
Cooper Cameron Corp.(a) 12,600 603,036
- ----------------------------------------------------------------------
Halliburton Co. 41,100 879,951
- ----------------------------------------------------------------------
Key Energy Services, Inc.(a) 128,300 1,291,981
- ----------------------------------------------------------------------
Smith International, Inc.(a) 12,800 455,168
======================================================================
4,891,341
======================================================================
OIL & GAS EXPLORATION & PRODUCTION-22.25%
Anadarko Petroleum Corp. 15,000 666,000
- ----------------------------------------------------------------------
Apache Corp. 26,360 1,509,110
- ----------------------------------------------------------------------
BP Prudhoe Bay Royalty Trust 73,700 1,085,601
- ----------------------------------------------------------------------
Burlington Resources Inc. 29,900 1,384,669
- ----------------------------------------------------------------------
Cimarex Energy Co.(a) 76,700 1,510,990
- ----------------------------------------------------------------------
EOG Resources, Inc. 36,200 1,353,156
- ----------------------------------------------------------------------
Evergreen Resources, Inc.(a) 19,100 908,205
- ----------------------------------------------------------------------
XTO Energy, Inc. 44,333 864,493
======================================================================
9,282,224
======================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $18,347,355) 19,171,783
======================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-50.15%
BERMUDA-3.71%
Nabors Industries, Ltd. (Oil & Gas
Drilling)(a) 27,900 1,093,680
- ----------------------------------------------------------------------
Weatherford International Ltd. (Oil & Gas
Equipment & Services)(a) 11,300 454,599
======================================================================
1,548,279
======================================================================
CANADA-38.26%
Algonquin Power Income Fund (Electric
Utilities) 94,200 572,323
- ----------------------------------------------------------------------
Bonavista Petroleum Ltd. (Oil & Gas
Exploration & Production)(a) 60,500 1,417,969
- ----------------------------------------------------------------------
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------
CANADA-(CONTINUED)
Canadian Oil Sands Trust (Oil & Gas
Exploration & Production) (Acquired
02/21/03; Cost $295,290)(a)(b)(c) 12,700 $ 303,503
- ----------------------------------------------------------------------
Canadian Superior Energy, Inc. (Oil & Gas
Exploration & Production)(a) 716,000 739,174
- ----------------------------------------------------------------------
CE Franklin Ltd. (Oil & Gas Equipment &
Services)(a) 117,200 246,120
- ----------------------------------------------------------------------
Cequel Energy Inc. (Oil & Gas Exploration &
Production)(a) 250,000 1,098,633
- ----------------------------------------------------------------------
Clean Power Income Fund (Electric Utilities) 252,500 1,602,783
- ----------------------------------------------------------------------
Compton Petroleum Corp. (Oil & Gas
Exploration & Production)(a) 320,900 1,197,555
- ----------------------------------------------------------------------
Defiant Energy Corp. (Oil & Gas Exploration &
Production)(a) 146,700 245,591
- ----------------------------------------------------------------------
Ensign Resource Service Group, Inc. (Oil &
Gas Drilling) 42,600 546,466
- ----------------------------------------------------------------------
Minefinders Corp., Ltd. (Precious Metals &
Minerals)(a) 67,600 367,801
- ----------------------------------------------------------------------
Nexen Inc. (Oil & Gas Exploration &
Production) 30,100 598,389
- ----------------------------------------------------------------------
Oiltec Resources Ltd. (Oil & Gas Exploration
& Production)(a) 126,700 106,055
- ----------------------------------------------------------------------
Penn West Petroleum Ltd. (Oil & Gas
Exploration & Production)(a) 50,000 1,334,054
- ----------------------------------------------------------------------
Southwestern Resources Corp. (Precious Metals
& Minerals)(a) 58,900 525,893
- ----------------------------------------------------------------------
Stuart Energy Systems Corp. (Electrical
Components & Equipment)(a) 97,200 202,726
- ----------------------------------------------------------------------
Suncor Energy, Inc. (Integrated Oil & Gas) 107,300 1,765,630
- ----------------------------------------------------------------------
Talisman Energy Inc. (Oil & Gas Exploration &
Production) 45,700 1,824,366
- ----------------------------------------------------------------------
Western Oil Sands Inc.-Class A (Oil & Gas
Exploration & Production)(a) 62,300 1,073,389
- ----------------------------------------------------------------------
Zargon Oil & Gas Ltd. (Oil & Gas Exploration
& Production)(a) 29,000 189,139
======================================================================
15,957,559
======================================================================
CAYMAN ISLANDS-4.36%
Noble Corp. (Oil & Gas Drilling)(a) 31,300 968,735
- ----------------------------------------------------------------------
Transocean Inc. (Oil & Gas Drilling) 44,700 851,535
======================================================================
1,820,270
======================================================================
FRANCE-2.55%
Total S.A. (Integrated Oil & Gas) 8,104 1,064,677
======================================================================
</Table>
F-1
<Table>
<Caption>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------
UNITED KINGDOM-1.27%
BP PLC (Integrated Oil & Gas) 83,230 $ 527,962
======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $20,688,851) 20,918,747
======================================================================
MONEY MARKET FUNDS-3.37%
STIC Liquid Assets Portfolio(d) 703,341 703,341
- ----------------------------------------------------------------------
STIC Prime Portfolio(d) 703,341 703,341
======================================================================
Total Money Market Funds (Cost
$1,406,682) 1,406,682
======================================================================
TOTAL INVESTMENTS-99.48% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $40,442,888) 41,497,212
______________________________________________________________________
======================================================================
</Table>
<Table>
<Caption>
MARKET
SHARES VALUE
- ----------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-5.43%
STIC Liquid Assets Portfolio(d)(e) 1,133,285 $ 1,133,285
- ----------------------------------------------------------------------
STIC Prime Portfolio(d)(e) 1,133,286 1,133,286
======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $2,266,571) 2,266,571
======================================================================
TOTAL INVESTMENTS-104.91% (Cost $42,709,459) 43,763,783
======================================================================
OTHER ASSETS LESS LIABILITIES-(4.91%) (2,049,604)
======================================================================
NET ASSETS-100.00% $41,714,179
______________________________________________________________________
======================================================================
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) 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 this security. The
market value of this security at 04/30/03 represented 0.73% of the Fund's
net assets. This security is considered to be illiquid.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(e) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
F-2
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2003
(Unaudited)
<Table>
ASSETS:
Investments, at market value (cost
$42,709,459)* $43,763,783
- -----------------------------------------------------------
Foreign currencies, at value (cost $88,535) 89,261
- -----------------------------------------------------------
Receivables for:
Investments sold 218,601
- -----------------------------------------------------------
Fund shares sold 94,102
- -----------------------------------------------------------
Dividends 20,887
- -----------------------------------------------------------
Due from advisor 29,078
- -----------------------------------------------------------
Investment for deferred compensation plan 4,471
- -----------------------------------------------------------
Other assets 19,042
===========================================================
Total assets 44,239,225
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 149,419
- -----------------------------------------------------------
Deferred compensation plan 4,471
- -----------------------------------------------------------
Collateral upon return of securities loaned 2,266,571
- -----------------------------------------------------------
Accrued distribution fees 34,695
- -----------------------------------------------------------
Accrued trustees' fees 704
- -----------------------------------------------------------
Accrued transfer agent fees 26,332
- -----------------------------------------------------------
Accrued operating expenses 42,854
===========================================================
Total liabilities 2,525,046
===========================================================
Net assets applicable to shares outstanding $41,714,179
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $66,818,832
- -----------------------------------------------------------
Undistributed net investment income (loss) (81,607)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currencies (26,080,981)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 1,057,935
===========================================================
$41,714,179
___________________________________________________________
===========================================================
NET ASSETS:
Class A $26,839,248
___________________________________________________________
===========================================================
Class B $12,733,031
___________________________________________________________
===========================================================
Class C $ 2,141,900
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 2,288,672
___________________________________________________________
===========================================================
Class B 1,119,136
___________________________________________________________
===========================================================
Class C 188,099
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.73
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $11.73 divided by
95.25%) $ 12.31
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 11.38
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 11.39
___________________________________________________________
===========================================================
* At April 30, 2003, securities with an aggregate market
value of $2,232,860 were on loan to brokers.
</Table>
See Notes to Financial Statements.
F-3
STATEMENT OF OPERATIONS
For the six months ended April 30, 2003
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $21,269) $ 298,819
- ------------------------------------------------------------------------
Dividends from affiliated money market funds 12,498
- ------------------------------------------------------------------------
Interest 312
- ------------------------------------------------------------------------
Security lending income 2,652
========================================================================
Total investment income 314,281
========================================================================
EXPENSES:
Advisory fees 175,228
- ------------------------------------------------------------------------
Administrative services fees 24,795
- ------------------------------------------------------------------------
Custodian fees 17,398
- ------------------------------------------------------------------------
Distribution fees -- Class A 56,487
- ------------------------------------------------------------------------
Distribution fees -- Class B 57,755
- ------------------------------------------------------------------------
Distribution fees -- Class C 8,992
- ------------------------------------------------------------------------
Transfer agent fees 91,212
- ------------------------------------------------------------------------
Trustees' fees 4,178
- ------------------------------------------------------------------------
Professional fees 52,271
- ------------------------------------------------------------------------
Other 36,796
========================================================================
Total expenses 525,112
========================================================================
Less: Fees waived and expenses paid indirectly (133,008)
========================================================================
Net expenses 392,104
========================================================================
Net investment income (loss) (77,823)
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 82,539
- ------------------------------------------------------------------------
Foreign currencies (39,524)
========================================================================
43,015
========================================================================
Change in net unrealized appreciation of:
Investment securities 1,529,898
- ------------------------------------------------------------------------
Foreign currencies 100
========================================================================
1,529,998
========================================================================
Net gain from investment securities and foreign currencies 1,573,013
========================================================================
Net increase in net assets resulting from operations $1,495,190
________________________________________________________________________
========================================================================
</Table>
See Notes to Financial Statements.
F-4
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2003 and the year ended October 31, 2002
(Unaudited)
<Table>
<Caption>
APRIL 30, OCTOBER 31,
2003 2002
- ----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (77,823) $ (105,851)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 43,015 (4,124,801)
- ----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 1,529,998 4,568,085
========================================================================================
Net increase in net assets resulting from operations 1,495,190 337,433
========================================================================================
Distributions to shareholders from net investment income:
Class A (123,777) (71,556)
- ----------------------------------------------------------------------------------------
Class B (14,961) (220)
- ----------------------------------------------------------------------------------------
Class C (2,310) (16)
========================================================================================
Net increase (decrease) in net assets resulting from
distributions (141,048) (71,792)
========================================================================================
Share transactions-net:
Class A 8,136,179 5,662,718
- ----------------------------------------------------------------------------------------
Class B 1,586,734 (1,624,200)
- ----------------------------------------------------------------------------------------
Class C 739,969 421,819
========================================================================================
Net increase in net assets resulting from share
transactions 10,462,882 4,460,337
========================================================================================
Net increase in net assets 11,817,024 4,725,978
========================================================================================
NET ASSETS:
Beginning of period 29,897,155 25,171,177
========================================================================================
End of period $41,714,179 $29,897,155
________________________________________________________________________________________
========================================================================================
</Table>
NOTES TO FINANCIAL STATEMENTS
April 30, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Energy Fund (the "Fund") is a separate series of AIM Investment Funds
(the "Trust"). The Trust is organized as a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of seven
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund currently offers multiple classes of shares.
Matters affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital. Companies
are listed in the Schedule of Investments based on the country in which they are
organized.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy. A security listed or traded on an
exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the
security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the
NASDAQ National Market System) is valued at the basis of prices furnished
by independent pricing services or market makers. Each security reported on
the NASDAQ National Market System is valued at the NASDAQ Official Closing
Price ("NOCP") as of the close of the customary trading session on the
valuation date or absent a NOCP, at the closing bid price. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may
be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, developments related to special securities, dividend rate,
yield, quality, type of issue, coupon rate,
F-5
maturity, individual trading characteristics and other market data.
Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and
are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked
prices. Securities for which market quotations are not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Trust's officers in a manner specifically
authorized by the Board of Trustees. Short-term obligations having 60 days
or less to maturity and commercial paper are valued at amortized cost which
approximates market value. For purposes of determining net asset value per
share, futures and option contracts generally will be valued 15 minutes
after the close of the customary trading session of the New York Stock
Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the NYSE. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of the close of the respective
markets. Events affecting the values of such foreign securities may occur
between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not be
reflected in the computation of the Fund's net asset value. If a
development/event is so significant that there is a reasonably high degree
of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer
reflect actual value, the closing prices, as determined at the close of the
applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in
good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. The combined results of changes in foreign exchange rates
and the fluctuation of market prices on investments are included with the
net realized and unrealized gain or loss from investments in the Statement
of Operations.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. Transfer agency fees and expenses
and other shareholder recordkeeping fees and expenses are charged to each
class pursuant to a transfer agency and service agreement adopted by the
Fund with respect to such class. All other expenses are allocated among the
classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
The Fund pays AIM investment management and administration fees at an annual
rate of 0.975% on the first $500 million of the Fund's average daily net assets,
plus 0.95% on the next $500 million of the Fund's average daily net assets, plus
0.925% on the next $500 million of the Fund's average daily net assets, plus
0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has
contractually agreed to limit total annual operating expenses (excluding
interest, taxes, dividends on short sales, extraordinary items and increases in
expenses due to expense offset arrangements, if any) for Class A, Class B and
Class C shares to 2.00%, 2.50% and 2.50%, respectively. To the extent that the
annualized expense ratio does not exceed the contractual expense limitation AIM
will retain the ability to be reimbursed for such fee waivers or reimbursements
prior to the end of each committed period. Further, AIM has voluntarily agreed
to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM
receives from the affiliated money market funds in which the Fund has invested
(excluding investments made in affiliated money market funds with cash
collateral from securities loaned by the Fund). During the six months ended
April 30, 2003, AIM waived fees of $132,729.
F-6
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the six months ended April 30, 2003, AIM
was paid $24,795 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended April 30, 2003,
AFS retained $50,034 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.50% 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 C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. NASD Rules
also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by any class of shares of the Fund. Pursuant to the
Plans, for the six months ended April 30, 2003, the Class A, Class B and Class C
shares paid $56,487, $57,755 and $8,992, respectively.
Front-end sales commissions and contingent deferred sales charges
(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. Contingent deferred
sales charges ("CDSCs") are deducted from redemption proceeds prior to
remittance to the shareholder. During the six months ended April 30, 2003, AIM
Distributors retained $4,291 in front-end sales commissions from the sale of
Class A shares and $500, $0 and $653 for Class A, Class B and Class C shares,
respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AFS and/or AIM Distributors.
During the six months ended April 30, 2003, the Fund paid legal fees of
$1,241 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel
to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended April 30, 2003, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) of $265 and reductions in
custodian fees of $14 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $279.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Trust. The Trustees deferring compensation have the option to
select various AIM Funds in which all or part of their deferral accounts shall
be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility 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.
During the reporting period, the Fund was a participant in a committed line
of credit facility with a syndicate administered by Citibank, N.A. The Fund
could borrow up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. The Fund and other funds advised by AIM, which were
parties to the line of credit could borrow on a first come, first served basis.
The funds, which were party to the line of credit, were charged a commitment fee
of 0.09% on the unused balance of the committed line. The commitment fee was
allocated among the funds based on their respective average net assets for the
period. The committed line of credit facility expired May 20, 2003.
During the six months ended April 30, 2003, the Fund did not borrow under
the interfund lending or the committed line of credit facility.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's
total assets. Such loans are secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. Cash collateral pursuant to these loans is invested in short-term
money market instruments or affiliated money market funds. Lending securities
entails a risk of loss to the Fund if and to the extent that the market value of
the securities loaned were to increase and the borrower did not increase the
collateral accordingly, and the borrower fails to return the securities. It is
the Fund's policy to obtain additional collateral from or return excess
collateral to the borrower by the end of the next business day. Therefore, the
value of the collateral may be temporarily less than the value of the securities
on loan.
At April 30, 2003, securities with an aggregate value of $2,232,860 were on
loan to brokers. The loans were secured by cash collateral of $2,266,571
received by the Portfolio and subsequently invested in affiliated money market
funds. For the six months ended April 30, 2003 the Fund received fees of $2,652
for securities lending.
F-7
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 distributable
earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as
follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD
- --------------------------------------------------------------------------------
October 31, 2006 $20,054,017
- --------------------------------------------------------------------------------
October 31, 2007 1,450,461
- --------------------------------------------------------------------------------
October 31, 2008 338,540
- --------------------------------------------------------------------------------
October 31, 2010 4,180,954
================================================================================
Total capital loss carryforward $26,023,972
________________________________________________________________________________
================================================================================
</Table>
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended April 30, 2003 was $70,858,512 and $60,501,520, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of April 30, 2003 is as follows:
<Table>
Aggregate unrealized appreciation of investment securities $1,724,265
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (808,233)
===============================================================================
Net unrealized appreciation of investment securities $ 916,032
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $42,847,751.
</Table>
NOTE 9--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares,
Class B shares and Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with a CDSC. Under some
circumstances, Class A shares are subject to CDSCs. 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 during the six months
ended April 30, 2003 and the year ended October 31, 2002 were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,509,454 $ 17,980,865 1,249,640 $ 14,281,178
- --------------------------------------------------------------------------------------------------------------------
Class B 397,760 4,487,974 505,919 5,786,626
- --------------------------------------------------------------------------------------------------------------------
Class C 123,554 1,381,944 308,554 3,384,904
====================================================================================================================
Issued as reinvestment of dividends:
Class A 10,183 117,614 6,136 62,830
- --------------------------------------------------------------------------------------------------------------------
Class B 1,175 13,197 18 180
- --------------------------------------------------------------------------------------------------------------------
Class C 184 2,070 1 12
====================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 42,059 507,816 123,071 1,378,868
- --------------------------------------------------------------------------------------------------------------------
Class B (46,106) (507,816) (127,313) (1,378,868)
====================================================================================================================
Reacquired:
Class A (902,178) (10,470,116) (905,005) (10,060,158)
- --------------------------------------------------------------------------------------------------------------------
Class B (212,686) (2,406,621) (573,699) (6,032,138)
- --------------------------------------------------------------------------------------------------------------------
Class C (57,636) (644,045) (278,055) (2,963,097)
====================================================================================================================
865,763 $ 10,462,882 309,267 $ 4,460,337
____________________________________________________________________________________________________________________
====================================================================================================================
</Table>
F-8
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.10 $ 10.58 $ 12.22 $ 12.12 $ 10.95 $ 20.65
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.01)(a) 0.05(a) 0.02(a) 0.02(a) (0.11)(a)
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.72 0.59 (1.69) 0.08 1.15 (8.91)
==========================================================================================================================
Total from investment operations 0.71 0.58 (1.64) 0.10 1.17 (9.02)
==========================================================================================================================
Less distributions:
Dividends from net investment income (0.08) (0.06) -- -- -- (0.19)
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- -- (0.49)
==========================================================================================================================
Total distributions (0.08) (0.06) -- -- -- (0.68)
==========================================================================================================================
Net asset value, end of period $ 11.73 $ 11.10 $ 10.58 $ 12.22 $ 12.12 $ 10.95
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 6.37% 5.56% (13.42)% 0.74% 10.68% (45.02)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $26,839 $18,076 $12,224 $12,638 $15,664 $19,463
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(c) 2.00% 2.00% 2.00% 2.00% 1.98%
- --------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.74%(c) 2.76% 2.84% 2.80% 2.30% 2.29%
==========================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.25)%(c) (0.13)% 0.45% 0.18% 0.19% (0.75)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(d) 179% 152% 189% 105% 123% 201%
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$22,782,060.
(d) Not annualized for periods less than one year.
F-9
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS B
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.74 $ 10.23 $ 11.88 $ 11.84 $ 10.75 $ 20.37
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.07)(a) (0.01)(a) (0.04)(a) (0.04)(a) (0.18)(a)
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.70 0.58 (1.64) 0.08 1.13 (8.76)
==========================================================================================================================
Total from investment operations 0.66 0.51 (1.65) 0.04 1.09 (8.94)
==========================================================================================================================
Less distributions:
Dividends from net investment income (0.02) (0.00) -- -- -- (0.19)
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- -- (0.49)
==========================================================================================================================
Total distributions (0.02) (0.00) -- -- -- (0.68)
==========================================================================================================================
Net asset value, end of period $ 11.38 $ 10.74 $ 10.23 $ 11.88 $ 11.84 $ 10.75
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 6.11% 4.99% (13.89)% 0.34% 10.14% (45.25)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $12,733 $10,510 $12,010 $13,710 $20,019 $28,996
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.50%(c) 2.50% 2.50% 2.50% 2.50% 2.48%
- --------------------------------------------------------------------------------------------------------------------------
Without fee waivers 3.24%(c) 3.26% 3.34% 3.30% 2.80% 2.79%
==========================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.75)%(c) (0.63)% (0.05)% (0.32)% (0.31)% (1.25)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(d) 179% 152% 189% 105% 123% 201%
__________________________________________________________________________________________________________________________
==========================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$11,646,727.
(d) Not annualized for periods less than one year.
F-10
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
CLASS C
----------------------------------------------------------------------
MARCH 1, 1999
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, --------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.75 $10.24 $ 11.88 $11.84 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) (0.07)(a) (0.01)(a) (0.04)(a) (0.03)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.70 0.58 (1.63) 0.08 1.87
=================================================================================================================================
Total from investment operations 0.66 0.51 (1.64) 0.04 1.84
=================================================================================================================================
Less dividends from net investment income (0.02) (0.00) -- -- --
=================================================================================================================================
Net asset value, end of period $11.39 $10.75 $ 10.24 $11.88 $11.84
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 6.10% 4.98% (13.80)% 0.34% 18.40%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,142 $1,311 $ 937 $ 453 $ 41
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.50%(c) 2.50% 2.50% 2.50% 2.50%(d)
- ---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 3.24%(c) 3.26% 3.34% 3.30% 2.80%(d)
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.75)%(c) (0.63)% (0.05)% (0.32)% (0.31)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate()(e) 179% 152% 189% 105% 123%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,813,351.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 11--SUBSEQUENT EVENT
The Board of Trustees of AIM Investment Funds ("Seller") unanimously approved,
on June 11, 2003, an Agreement and Plan of Reorganization (the "Plan") pursuant
to which AIM Global Energy Fund ("Selling Fund"), a series of Seller, would
transfer all of its assets to INVESCO Energy Fund ("Buying Fund"), a series of
INVESCO Sector Funds, Inc. ("the Reorganization"). As a result of the
Reorganization, shareholders of Selling Fund would receive shares of Buying Fund
in exchange for their shares of Selling Fund, and Selling Fund would cease
operations.
The Plan requires approval of Selling Fund shareholders and will be submitted
to the shareholders for their consideration at a meeting to be held on or around
September 25, 2003. If the Plan is approved by shareholders of Selling Fund and
certain conditions required by the Plan are satisfied, the transaction is
expected to become effective shortly thereafter.
Effective on or about October 1, 2003, it is anticipated that Selling Fund
will be closed to new investors.
F-11
OTHER INFORMATION
TRUSTEES AND OFFICERS
<Table>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Robert H. Graham Robert H. Graham 11 Greenway Plaza
Chairman and President Suite 100
Mark H. Williamson Houston, TX 77046
Mark H. Williamson
Frank S. Bayley Executive Vice President INVESTMENT ADVISOR
Bruce L. Crockett Kevin M. Carome A I M Advisors, Inc.
Senior Vice President 11 Greenway Plaza
Albert R. Dowden Suite 100
Gary T. Crum Houston, TX 77046
Edward K. Dunn Jr. Senior Vice President
TRANSFER AGENT
Jack M. Fields Dana R. Sutton
Vice President and Treasurer A I M Fund Services, Inc.
Carl Frischling P.O. Box 4739
Stuart W. Coco Houston, TX 77210-4739
Prema Mathai-Davis Vice President
CUSTODIAN
Lewis F. Pennock Melville B. Cox
Vice President State Street Bank and Trust Company
Ruth H. Quigley 225 Franklin Street
Edgar M. Larsen Boston, MA 02110
Louis S. Sklar Vice President
COUNSEL TO THE FUND
Nancy L. Martin
Secretary Ballard Spahr
Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, PA 19103
COUNSEL TO THE TRUSTEES
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
</Table>
THE AIM FAMILY OF FUNDS--Registered Trademark--
<Table>
DOMESTIC EQUITY INTERNATIONAL/GLOBAL EQUITY FIXED INCOME
AIM Aggressive Growth Fund AIM Asia Pacific Growth Fund(2) TAXABLE
AIM Balanced Fund* AIM Developing Markets Fund
AIM Basic Balanced Fund* AIM European Growth Fund(2) AIM Floating Rate Fund
AIM Basic Value Fund AIM European Small Company Fund AIM High Yield Fund
AIM Blue Chip Fund AIM Global Aggressive Growth Fund AIM Income Fund
AIM Capital Development Fund AIM Global Growth Fund AIM Intermediate Government Fund
AIM Charter Fund AIM Global Trends Fund AIM Limited Maturity Treasury Fund(6,7)
AIM Constellation Fund AIM Global Value Fund(5) AIM Money Market Fund
AIM Dent Demographic Trends Fund AIM International Core Equity Fund(2) AIM Short-Term Bond Fund
AIM Diversified Dividend Fund(1) AIM International Emerging Growth Fund AIM Total Return Bond Fund
AIM Emerging Growth Fund AIM International Growth Fund(2)
AIM Large Cap Basic Value Fund TAX-FREE
AIM Large Cap Growth Fund SECTOR EQUITY
AIM Libra Fund AIM High Income Municipal Fund
AIM Mid Cap Basic Value Fund AIM Global Energy Fund AIM Municipal Bond Fund
AIM Mid Cap Core Equity Fund(2) AIM Global Financial Services Fund AIM Tax-Exempt Cash Fund
AIM Mid Cap Growth Fund AIM Global Health Care Fund AIM Tax-Free Intermediate Fund(6,7)
AIM Opportunities I Fund(2,3) AIM Global Science and Technology Fund(2)
AIM Opportunities II Fund(2,3) AIM Global Utilities Fund
AIM Opportunities III Fund(2,3) AIM New Technology Fund
AIM Premier Equity Fund(2) AIM Real Estate Fund
AIM Premier Equity II Fund(2)
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund(4)
AIM Weingarten Fund
</Table>
*Domestic equity and income fund
YOUR GOALS. OUR SOLUTIONS.--Servicemark--
<Table>
Mutual Retirement Annuities College Separately Offshore Alternative Cash
Funds Products Savings Managed Products Investments Management
Plans Accounts
</Table>
(AIM INVESTMENTS LOGO APPEARS HERE)
--Servicemark--
(1) Effective May 2, 2003, AIM Large Cap Core Equity Fund was renamed AIM
Diversified Dividend Fund. (2) The following fund name changes became effective
July 1, 2002: AIM Asian Growth Fund renamed AIM Asia Pacific Growth Fund; AIM
European Development Fund renamed AIM European Growth Fund; AIM Global
Telecommunications and Technology Fund renamed AIM Global Science and Technology
Fund; AIM International Equity Fund renamed AIM International Growth Fund; AIM
International Value Fund renamed AIM International Core Equity Fund; AIM Large
Cap Opportunities Fund renamed AIM Opportunities III Fund; AIM Mid Cap Equity
Fund renamed AIM Mid Cap Core Equity Fund; AIM Mid Cap Opportunities Fund
renamed AIM Opportunities II Fund; AIM Small Cap Opportunities Fund renamed AIM
Opportunities I Fund; AIM Value Fund renamed AIM Premier Equity Fund; AIM Value
II Fund renamed AIM Premier Equity II Fund. (3) Effective October 1, 2002, the
fund was reopened to new investors. (4) AIM Small Cap Growth Fund was closed to
most investors on March 18, 2002. For information on who may continue to invest
in AIM Small Cap Growth Fund, please contact your financial advisor. (5)
Effective April 30, 2003, AIM Worldwide Spectrum Fund was renamed AIM Global
Value Fund. (6) Class A shares closed to new investors on October 30, 2002. (7)
Class A3 shares were first offered on October 31, 2002.
For more complete information about any AIM fund, including sales charges
and expenses, ask your financial advisor for a prospectus. Please read it
carefully before investing. This brochure is not authorized for distribution to
prospective investors unless preceded or accompanied by a currently effective
fund prospectus, which contains more complete information, including sales
charges and expenses. Please read it carefully before investing. If used after
July 20, 2003, this brochure must be accompanied by a fund Performance &
Commentary or by an AIM Quarterly Performance Review for the most recent
quarter-end. Mutual Funds distributed by A I M Distributors, Inc.
A I M Management Group Inc. has provided leadership in the investment management
industry since 1976 and manages $115 billion in assets for approximately 9
million shareholders, including individual investors, corporate clients and
financial institutions. The AIM Family of Funds--Registered Trademark-- is
distributed nationwide. AIM is a subsidiary of AMVESCAP PLC, one of the world's
largest independent financial services companies with $319 billion in assets
under management. Data as of March 31, 2003.
GEN-SAR-1
AIMinvestments.com
APPENDIX X
MARCH 31, 2003
ANNUAL REPORT
INVESCO SECTOR FUNDS, INC.
ENERGY FUND
FINANCIAL SERVICES FUND
GOLD & PRECIOUS METALS FUND
HEALTH SCIENCES FUND
LEISURE FUND
REAL ESTATE OPPORTUNITY FUND
TECHNOLOGY FUND
TELECOMMUNICATIONS FUND
UTILITIES FUND
"OVERALL, DEMAND FOR HEALTH CARE SERVICES AND PRODUCTS REMAINS HIGH."
SEE PAGE 11
[INVESCO ICON] INVESCO(R)
FELLOW SHAREHOLDER:
[PHOTGRAPH OF RAYMOND R. CUNNINGHAM OMMITTED]
LESSONS LEARNED
After an auspicious start to 2003 during which the Dow Jones Industrials gained
5% in the first three days of trading, the stock market backed down amid war
worries. Once again, what had seemed like the beginning of a sustained rebound
turned out to be a false start. You could almost hear the collective groan from
investors, and, admittedly, I joined in.
But then I stepped back for a view of the big picture. Has the market's behavior
over the past year been frustrating? Undeniably. However, it's also been
instructive, and I believe that those of us who pay attention to the downturn's
lessons will come out ahead in the long run.
The first lesson the bear market has reinforced is the importance of defining
and maintaining an investment plan. This plan should accommodate your risk
tolerance, time horizon, and long-term goals -- and it should be built to last.
That's not to say it doesn't need fine-tuning now and again. The lesson of
diversification always deserves review. As we've seen this past decade, a
variety of investments -- from Treasuries to aggressive growth stocks --
constantly vie for leadership, and there's never just one winner over time. The
last few years have also reinforced the lesson that adequate diversification
requires occasional rebalancing. Many investors made the mistake of letting
portfolios become overly stock-heavy during the late 1990s, and then came to
regret this lapse when bonds surged ahead in the new millennium.
Similarly, history says it would be a mistake to neglect stocks now. Don't
forget that, while the past few years have been tough on equities, they still
deserve a place in every long-term investor's portfolio. After all, stocks have
historically outpaced inflation by a far greater margin than bonds. For example,
in surveying the 50-year period ended December 31, 2002, stock returns exceeded
inflation by 7.16%, compared with 2.37% for bonds.*
Perhaps one of the greatest lessons we can learn from the current downturn is
that it's tough to go it alone. Now more than ever, it helps to have a trusted
financial advisor to turn to for advice and assistance. It's not enough to
recognize history's lessons -- we also need to put them to good use so we're
better prepared to meet tomorrow's challenges.
Sincerely,
/s/Raymond R. Cunningham
- ------------------------
Ray Cunningham
President and CEO, INVESCO Funds Group, Inc.
*PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. SOURCES: STANDARD &
POOR'S(R); FEDERAL RESERVE. STOCKS ARE REPRESENTED BY THE TOTAL RETURNS OF THE
S&P 500 INDEX(R), AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS (IN TERMS
OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET; BONDS BY LONG-TERM TREASURIES (10+
YEARS); INFLATION BY THE CONSUMER PRICE INDEX. TREASURY BILLS ARE GUARANTEED BY
THE FULL FAITH CREDIT OF THE U.S. GOVERNMENT AS TO THE TIMELY PAYMENT OF
PRINCIPAL AND INTEREST. STOCKS ARE NOT GUARANTEED. INVESTORS CANNOT INVEST
DIRECTLY IN ANY MARKET INDEX. INDEXES ARE UNMANAGED; THEREFORE, THEIR
PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED WITH
MUTUAL FUND INVESTING.
INVESCO SECTOR FUNDS, INC. TOTAL RETURN, PERIODS ENDED 3/31/03
Manager's
Cumulative 10 years+ or Report
Fund (Inception) 6 Months 1 year 5 years+ Since Inceptiono Page #
- ----------------------------------------------------------------------------------------------------------------------------------
ENERGY FUND - CLASS A (4/02) WITH SALES CHARGE 2.93% (17.32%) N/A (17.32%)o^ 3
ENERGY FUND - CLASS B (4/02) WITH CDSC 3.51% (18.24%) N/A (18.24%)o^ 3
ENERGY FUND - CLASS C (2/00) WITH CDSC 7.44% (14.33%) N/A 7.26%o+ 3
ENERGY FUND - CLASS K (12/00) 8.74% (13.52%) N/A (3.16%)o+ 3
ENERGY FUND - INVESTOR CLASS (1/84) 8.80% (12.72%) 5.35% 8.93% 3
FINANCIAL SERVICES FUND - CLASS A (4/02) WITH SALES CHARGE (5.88%) (26.62%) N/A (26.62%)o^ 5
FINANCIAL SERVICES FUND - CLASS B (4/02) WITH CDSC (5.75%) (27.48%) N/A (27.48%)o^ 5
FINANCIAL SERVICES FUND - CLASS C (2/00) WITH CDSC (1.96%) (24.22%) N/A 0.18%o+ 5
FINANCIAL SERVICES FUND - CLASS K (12/00) (0.48%) (22.62%) N/A (9.90%)o+ 5
FINANCIAL SERVICES FUND - INVESTOR CLASS (6/86) (0.45%) (22.39%) (1.20%) 10.38% 5
GOLD & PRECIOUS METALS FUND - CLASS A (4/02) WITH SALES CHARGE (9.13%) (1.24%) N/A (1.24%)o^ 8
GOLD & PRECIOUS METALS FUND - CLASS B (4/02) WITH CDSC (8.63%) (0.63%) N/A (0.63%)o^ 8
GOLD & PRECIOUS METALS FUND - CLASS C (2/00) WITH CDSC (4.82%) 3.13% N/A 13.72%o+ 8
GOLD & PRECIOUS METALS FUND - INVESTOR CLASS (1/84) (3.61%) 4.80% (0.95%) (3.25%) 8
HEALTH SCIENCES FUND - CLASS A (4/02) WITH SALES CHARGE (8.86%) (23.39%) N/A (23.39%)o^ 10
HEALTH SCIENCES FUND - CLASS B (4/02) WITH CDSC (8.84%) (24.39%) N/A (24.39%)o^ 10
HEALTH SCIENCES FUND - CLASS C (2/00) WITH CDSC (5.24%) (21.16%) N/A (10.81%)o+ 10
HEALTH SCIENCES FUND - CLASS K (12/00) (3.94%) (19.50%) N/A (15.39%)o+ 10
HEALTH SCIENCES FUND - INVESTOR CLASS (1/84) (3.58%) (18.99%) 0.15% 11.34% 10
LEISURE FUND - CLASS A (4/02) WITH SALES CHARGE (4.01%) (25.10%) N/A (25.10%)o^ 13
LEISURE FUND - CLASS B (4/02) WITH CDSC (3.78%) (26.33%) N/A (26.33%)o^ 13
LEISURE FUND - CLASS C (2/00) WITH CDSC 0.01% (22.65%) N/A (6.91%)o+ 13
LEISURE FUND - CLASS K (12/01) 1.18% (21.14%) N/A (11.75%)o^ 13
LEISURE FUND - INVESTOR CLASS (1/84) 1.51% (20.87%) 7.87% 12.29% 13
REAL ESTATE OPPORTUNITY FUND - CLASS A (4/02) WITH SALES CHARGE (3.80%) (6.88%) N/A (6.88%)o^ 15
REAL ESTATE OPPORTUNITY FUND - CLASS B (4/02) WITH CDSC (3.45%) (6.94%) N/A (6.94%)o^ 15
REAL ESTATE OPPORTUNITY FUND - CLASS C (2/00) WITH CDSC 0.48% (2.81%) N/A 7.56%o+ 15
REAL ESTATE OPPORTUNITY FUND - INVESTOR CLASS (1/97) 1.83% (1.12%) (1.15%) 2.20%o+ 15
TECHNOLOGY FUND - CLASS A (4/02) WITH SALES CHARGE 6.93% (47.23%) N/A (47.23%)o^ 17
TECHNOLOGY FUND - CLASS B (4/02) WITH CDSC 7.64% (49.62%) N/A (49.62%)o^ 17
TECHNOLOGY FUND - CLASS C (2/00) WITH CDSC 11.65% (45.87%) N/A (42.30%)o+ 17
TECHNOLOGY FUND - CLASS K (12/00) 12.62% (44.47%) N/A (42.11%)o+ 17
TECHNOLOGY FUND - INSTITITUTIONAL CLASS (12/98) 13.33% (43.94%) N/A (12.43%)o+ 17
TECHNOLOGY FUND - INVESTOR CLASS (1/84) 12.82% (44.43%) (9.05%) 5.72% 17
TELECOMMUNICATIONS FUND - CLASS A (4/02) WITH SALES CHARGE 0.64% (39.45%) N/A (39.45%)o^ 20
TELECOMMUNICATIONS FUND - CLASS B (4/02) WITH CDSC 1.62% (41.17%) N/A (41.17%)o^ 20
TELECOMMUNICATIONS FUND - CLASS C (2/00) WITH CDSC 5.63% (37.20%) N/A (47.24%)o+ 20
TELECOMMUNICATIONS FUND - CLASS K (12/00) 7.05% (35.77%) N/A (48.09%)o+ 20
TELECOMMUNICATIONS FUND - INVESTOR CLASS (8/94) 7.13% (35.60%) (15.09%) 1.36%o+ 20
UTILITIES FUND - CLASS A (4/02) WITH SALES CHARGE (1.91%) (25.39%) N/A (25.39%)o^ 23
UTILITIES FUND - CLASS B (4/02) WITH CDSC (1.63%) (26.67%) N/A (26.67%)o^ 23
UTILITIES FUND - CLASS C (2/00) WITH CDSC 1.98% (22.85%) N/A (22.75%)o+ 23
UTILITIES FUND - INVESTOR CLASS (6/86) 3.75% (20.99%) (7.64%) 3.07% 23
*PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL VARY SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY BE
WORTH MORE OR LESS THAN WHEN PURCHASED. THE FUNDS' CLASS A PERFORMANCE REFLECTS
THE MAXIMUM SALES CHARGE OF 5.50%. THE FUNDS' CLASS B AND CLASS C PERFORMANCE
REFLECTS THE DEDUCTION OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE (CDSC)
FOR THE PERIODS SHOWN. THE CDSC ON CLASS B SHARES DECLINES FROM 5% BEGINNING AT
THE TIME OF PURCHASE TO 0% AT THE BEGINNING OF THE SEVENTH YEAR. THE CDSC OF
CLASS C SHARES IS 1% FOR THE FIRST 13 MONTHS AFTER PURCHASE. THE PERFORMANCE OF
THE FUND'S INVESTOR CLASS, INSTITUTIONAL CLASS, CLASS A, CLASS B, CLASS C AND
CLASS K SHARES WILL DIFFER DUE TO THE DIFFERENT SALES CHARGE STRUCTURES AND
EXPENSES. INVESTOR CLASS SHARES ARE CLOSED TO NEW INVESTORS AND ARE OFFERED TO
GRANDFATHERED INVESTORS AS OF APRIL 1, 2002.
PERFORMANCE INFORMATION PROVIDED IN THIS REPORT DOES NOT REFLECT THE DEDUCTION
OF TAXES SHAREHOLDERS PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND
SHARES.
+AVERAGE ANNUALIZED
^NOT ANNUALIZED
oFOR FUNDS OR SHARE CLASSES INTRODUCED MORE RECENTLY
SECTOR FUNDS MAY EXPERIENCE GREATER SHORT-TERM PRICE VOLATILITY THAN MORE
DIVERSIFIED EQUITY FUNDS, AND ARE MOST SUITABLE FOR THE AGGRESSIVE PORTION OF
YOUR PORTFOLIO.
THE INDUSTRIES AND/OR SECTORS USED FOR PORTFOLIO SECURITIES CLASSIFICATION THAT
MAY BE USED THROUGHOUT THIS REPORT ARE THE GLOBAL INDUSTRY CLASSIFICATION
STANDARD WHICH WAS DEVELOPED BY AND IS THE EXCLUSIVE PROPERTY AND SERVICE MARK
OF MORGAN STANLEY CAPITAL INTERNATIONAL INC. AND STANDARD & POOR'S.(R)
TABLE OF CONTENTS
LETTER FROM THE PRESIDENT AND CEO............1
FUND REPORTS.................................3
AN INTERVIEW WITH TOM WALD..................25
MARKET HEADLINES............................27
INVESTMENT HOLDINGS.........................28
FINANCIAL STATEMENTS........................51
NOTES TO FINANCIAL STATEMENTS...............75
FINANCIAL HIGHLIGHTS........................86
OTHER INFORMATION..........................120
YOUR FUND'S REPORT
ENERGY FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
The annual reporting period ended March 31, 2003, was characterized by a
sluggish economy, concerns over corporate accounting practices, and uncertainty
stemming from the tense geopolitical climate -- factors which weighed on stocks
from all sectors of the market, including energy. Against this backdrop, the
value of Energy Fund-Investor Class shares lost 12.72%. However, this return
significantly outperformed the S&P 500 Index,(R) which declined 24.75% during
that same period. (Of course, past performance is not a guarantee of future
results.)(1),(2) For performance of other share classes, please see page 2.
- --------------------------------------------------------------------------------
ENERGY FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Murphy Oil......................................5.27%
BP PLC Sponsored ADR Representing 6 Ord Shrs....4.23%
Nabors Industries Ltd...........................4.12%
Pioneer Natural Resources.......................4.04%
Talisman Energy.................................3.66%
Apache Corp.....................................3.56%
Conoco Phillips.................................3.52%
Enbridge Energy International LLC...............3.48%
Weatherford International Ltd...................3.45%
TotalFinaElf Sponsored ADR
Representing 1/2 Ord Shr........................3.45%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
FUNDAMENTALS STILL KEY TO LONG-TERM GROWTH
Over the course of the fiscal year, commodity prices soared, increasing by about
50% during the reporting period. This was partially the result of worries
regarding the situation in Iraq, as well as disruptions in oil output due to
strikes in Venezuela, and, later in the period, an outbreak of violence in
Nigeria. Meanwhile, a cold winter made for strong demand for natural gas.
LINE GRAPH: INVESCO ENERGY FUND - INVESTOR CLASS GROWTH OF $10,000(1)
This line graph compares the value of a $10,000 investment in INVESCO Energy
Fund - Investor Class to the value of a $10,000 investment in the S&P 500
Index(R)(2), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO ENERGY FUND - INVESTOR CLASS S&P 500 INDEX(R)(2)
3/93 $10,000 $10,000
3/94 $ 9,506 $10,146
3/95 $ 9,364 $11,723
3/96 $11,524 $15,482
3/97 $14,717 $18,551
3/98 $18,128 $27,448
3/99 $14,642 $32,523
3/00 $22,427 $38,354
3/01 $27,606 $30,043
3/02 $26,948 $30,115
3/03 $23,520 $22,661
Yet even as commodity prices rose, energy stocks declined for the year --
further proof that the two are not necessarily as correlated as some investors
would believe. In fact, we view short-term moves in commodity prices as
relatively inconsequential. Over the past five years, the average
price-per-barrel for crude oil has been in the neighborhood of $23 (versus $17
to $18 throughout the majority of the 1990s), and we expect it to level off
around $25 once the war is over and investors realize that Iraq, which is
capable of producing only 2.8 million barrels per day, is not likely to flood
the market.
More important, we believe, are the compelling underlying fundamentals at work
in the energy sector. Driven by ever-growing demand, oil inventories continued
to move lower this past year, reaching below-normal levels as of March 31.
Indeed, the U.S. economy's reliance on inexpensive and dependable energy sources
for future economic expansion has shown no signs of abating. Just 15 years ago,
the world consumed 58 million barrels of crude oil per day. So far in 2003, we
are using an average of nearly 78 million barrels per day -- more than ever
before. Furthermore, excess capacity (100% of which is in OPEC countries) is
currently at a 4% level versus 25% 15 years ago. Unlike the many sectors facing
overcapacity problems, we are now faced with the challenge of building up
capacity in the energy sector, given the tight supply/demand fundamentals for
oil. This challenge defines a long-term trend that we expect to see for some
time in the oil business.
Fundamentals in the natural gas industry worked to the fund's advantage over the
annual period. Prices increased as a result of production declines that seem to
be deepening due to increasing depletion rates, and we finished the winter
months with some of the lowest natural gas inventories in history. There simply
has not been enough capital spending on drilling to keep up with demand, given
that consumption of natural gas in the U.S. has risen sharply over the past
decade. And because 95% of new electrical plants are fueled by natural gas, we
believe that the demand for it will only increase as the country takes steps to
expand electrical capacity.
STRONG STOCK SELECTION BENEFITS PERFORMANCE
A number of key holdings in the fund outperformed the broad market for the
annual period. For example, the fund's largest position and a longtime holding,
Murphy Oil, enjoyed a solid gain. During the first half of the year, the company
was recognized for a major new oil discovery in Malaysia. This discovery only
enhanced our already high opinion of Murphy, a company that we believe can
succeed in almost any market environment. We think it's telling that Murphy's
production growth is already locked in place for every year of this decade
except one (and that year is expected to be locked in place soon), and are also
pleased to report that, as of March 31, 2003, the firm was providing a dividend
yield of approximately 2%.
GROWTH IN CONSUMPTION
As the strikes in Venezuela and problems in Nigeria proved this past year,
inventories are so tight, any disruption in output is enough to remind investors
of how important it is to build energy capacity. Furthermore, we're seeing
incredible growth of consumption in developing areas -- namely China, a nation
where automobile usage has been trending markedly higher in recent years.
The underlying dynamics driving energy prices and industry earnings worldwide
are as favorable as ever, and in an expanding economy this will become even more
evident. Consequently, we believe that the energy industry is entering a
multiyear cycle of capacity expansion -- one that will provide ample
opportunities for a variety of firms going forward.
LINE GRAPH: INVESCO ENERGY FUND - CLASS A & B GROWTH OF $10,000(1)
This line graph compares the value of a $10,000 investment in INVESCO Energy
Fund - Class A and the value of a $10,000 investment in INVESCO Energy Fund -
Class B to the value of a $10,000 investment in the S&P 500 Index(R)(2),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the cases of INVESCO Energy Fund - Class A and Class B,
inclusion of front-end sales charge and contingent deferred sales charge,
respectively, for the period since inception (4/02) through 3/31/03.
INVESCO ENERGY FUND - CLASS A INVESCO ENERGY FUND - CLASS B S&P 500 INDEX(R)(2)
4/02 $10,000 $10,000 $10,000
3/03 $ 8,268 $ 8,176 $ 7,525
LINE GRAPH: INVESCO ENERGY FUND - CLASS C GROWTH OF $10,000(1)
This line graph compares the value of a $10,000 investment in INVESCO Energy
Fund - Class C to the value of a $10,000 investment in the S&P 500 Index(R)(2),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the case of INVESCO Energy Fund - Class C, inclusion of
contingent deferred sales charge, for the period since inception (2/00) through
3/31/03.
INVESCO ENERGY FUND - CLASS C S&P 500 INDEX(2)
2/00 $10,000 $10,000
3/00 $12,112 $10,978
3/01 $14,818 $ 8,599
3/02 $14,364 $ 8,620
3/03 $12,449 $ 6,486
LINE GRAPH: INVESCO ENERGY FUND - CLASS K GROWTH OF $10,000(1)
This line graph compares the value of a $10,000 investment in INVESCO Energy
Fund - Class K to the value of a $10,000 investment in the S&P 500 Index(R)(2),
assuming in each case reinvestment of all dividends and capital gain
distributions, for the period since inception (12/00) through 3/31/03.
INVESCO ENERGY FUND - CLASS K S&P 500 INDEX(R)(2)
12/00 $10,000 $10,000
3/01 $11,706 $ 8,858
3/02 $10,728 $ 8,879
3/03 $ 9,278 $ 6,682
(1)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEX DOES NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED ITS PERFORMANCE.
(2)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE INDEX IS NOT MANAGED; THEREFORE,
ITS PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED
WITH THE FUND INCLUDING FRONT-END SALES CHARGES AND CDSC. INVESTORS CANNOT
INVEST DIRECTLY IN ANY MARKET INDEX.
PIE CHART: ENERGY FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Oil & Gas Equipment & Services......28.73%
Integrated Oil & Gas................25.06%
Oil & Gas Exploration, Production
& Transportation....................21.65%
Oil & Gas Drilling..................11.09%
Oil & Gas Refining & Marketing.......5.71%
Natural Gas Pipelines................3.48%
Gas Utilities........................0.60%
Net Cash & Cash Equivalents......... 3.68%
FUND MANAGEMENT
[PHOTOGRAPH OF JOHN S. SEGNER OMITTED]
JOHN S. SEGNER
JOHN SEGNER IS A SENIOR VICE PRESIDENT OF INVESCO FUNDS GROUP. HE RECEIVED A BS
FROM THE UNIVERSITY OF ALABAMA AND AN MBA FROM THE UNIVERSITY OF TEXAS AT
AUSTIN. BEFORE JOINING INVESCO IN 1997, JOHN SERVED AS MANAGING DIRECTOR AND
PRINCIPAL FOR THE MITCHELL GROUP. HE ALSO PREVIOUSLY HELD ENGINEERING
RESPONSIBILITIES WITH TEXACO INC., AND FINANCIAL RESPONSIBILITIES WITH AMERADA
HESS CORP. AND FIRST TENNESSEE NATIONAL CORP. JOHN BEGAN HIS INVESTMENT CAREER
IN 1980.
YOUR FUND'S REPORT
FINANCIAL SERVICES FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
Market conditions for stocks were punishing during the annual period ended March
31, 2003, as evidenced by double-digit losses for the major stock indexes.
Corporate accounting fraud was the dominant theme in the first part of the
period, with news of earnings inflation perpetrated by WorldCom (not a fund
holding) and other high-profile companies deepening investors' distrust of
corporate America. Although these headlines faded somewhat as summer came to an
end, the economy's progress remained slow through fall and winter, as a host of
geopolitical concerns kept investors on edge. Particularly influential was the
uncertainty surrounding the situation with Iraq, which by mid-March culminated
in war.
In this unfavorable climate, all sectors -- including financial services --
retreated. As a result, Financial Services Fund-Investor Class shares lost
22.39% during the one-year period ended March 31, 2003. Although the fund
outperformed the broader S&P 500 Index,(R) which lost 24.75%, it slightly lagged
the S&P 500 Financials Index,(R) which declined by 21.71% during that same
period. (Of course, past performance is not a guarantee of future
results.)(3),(4) For performance of other share classes, please see page 2.
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Bank of America..............................................6.14%
Wells Fargo & Co.............................................5.45%
Citigroup Inc................................................5.37%
Merrill Lynch & Co...........................................5.08%
American International Group.................................4.80%
Wachovia Corp................................................3.79%
Lehman Brothers Holdings.....................................3.10%
Fifth Third Bancorp..........................................2.81%
American Express.............................................2.71%
Ambac Financial Group........................................2.68%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
REGIONAL BANKS, INSURERS OUTPERFORM ON RELATIVE BASIS
Although all financial industry groups were down for the year, regional banks,
property/casualty insurers, and reinsurers fared the best on a relative basis.
Some stocks representing these areas managed gains despite the difficult
conditions. For example, Bank of America, the fund's largest holding as of
3/31/03, advanced over the course of the year. The company is a successful
turnaround story, as it has moved from an acquisition-oriented approach to a
strategy centered on internal growth and strong customer service. During the
annual period, the company's core businesses of consumer and commercial banking
(constituting two-thirds of profits) contributed to solid earnings growth in a
challenging environment. Furthermore, we believe that Bank of America's more
market-sensitive businesses, such as asset management, equity investments, and
global corporate investment banking, are positioned to perform well once the
economy finally stabilizes.
On the other hand, despite strong fundamentals, fund holding Fifth Third Bancorp
underperformed its banking industry peers this past year due to regulatory
scrutiny. This past March, Fifth Third announced that it had entered into a
written agreement with the Federal Reserve aimed at strengthening internal
controls and risk management processes. Given that the fundamentals of the
company remain strong, the agreement does not impair Fifth Third's day-to-day
operations, and the agreement does not restrict dividends and buy-backs, we
remain shareholders.
In the property/casualty insurance and reinsurance industries, a combination of
significant price increases and a low level of catastrophes during the fund's
fiscal year helped a number of holdings. An especially strong stock for the fund
was reinsurance company RenaissanceRe Holdings Ltd, which delivered earnings
growth well ahead of expectations. In addition, the company has been
capitalizing on the turmoil in the marketplace to grow new lines of business.
The fund also benefited from our opportunistic purchase of St Paul in the summer
when the company's valuation was attractive due to concerns over asbestos claims
and their capital position.
LINE GRAPH: INVESCO FINANCIAL SERVICES FUND - INVESTOR CLASS, GROWTH OF
$10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Financial
Services Fund - Investor Class to the value of a $10,000 investment in the S&P
500 Index(R)(4), and to the value of a $10,000 investment in the S&P Financials
Index(R)(4), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO FINANCIAL SERVICES S&P 500 INDEX(R)(4) S&P FINANCIALS INDEX(R)(4)
FUND - INVESTOR CLASS
3/93 $10,000 $10,000 $10,000
3/94 $ 9,766 $10,146 $ 9,636
3/95 $10,467 $11,723 $10,945
3/96 $14,873 $15,482 $16,230
3/97 $18,105 $18,551 $21,144
3/98 $28,526 $27,448 $33,668
3/99 $30,208 $32,523 $35,880
3/00 $29,955 $38,354 $35,593
3/01 $33,326 $30,043 $39,494
3/02 $34,598 $30,115 $41,168
3/03 $26,850 $22,661 $32,230
LINE GRAPH: INVESCO FINANCIAL SERVICES FUND - CLASS A & B, GROWTH OF $10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Financial
Services Fund - Class A and the value of a $10,000 investment in INVESCO
Financial Services Fund - Class B to the value of a $10,000 investment in the
S&P 500 Index(R)(4), and to the value of a $10,000 investment in the S&P
Financials Index(R)(4) assuming in each case reinvestment of all dividends and
capital gain distributions, and in the cases of INVESCO Financial Services Fund
- - Class A and Class B inclusion of front-end sales charge and contingent
deferred sales charge, respectively, for the period since inception (4/02)
through 3/31/03.
INVESCO FINANCIAL INVESCO FINANCIAL S&P 500 INDEX(R)(4) S&P FINANCIALS INDEX(R)(4)
SERVICES FUND - CLASS A SERVICES FUND - CLASS B
4/02 $10,000 $10,000 $10,000 $10,000
3/03 $ 7,338 $ 7,252 $ 7,525 $ 7,829
LINE GRAPH: INVESCO FINANCIAL SERVICES FUND - CLASS C, GROWTH OF $10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Financial
Services Fund - Class C to the value of a $10,000 investment in the S&P 500
Index(R)(4), and to the value of a $10,000 investment in the S&P Financials
Index(R)(4), assuming in each case reinvestment of all dividends and capital
gain distributions, and in the case of INVESCO Financial Services Fund - Class
C, inclusion of contingent deferred sales charge, for the period since inception
(2/00) through 3/31/03.
INVESCO FINANCIAL SERVICES S&P 500 INDEX(R)(4) S&P FINANCIALS INDEX(R)(4)
FUND - CLASS C
2/00 $10,000 $10,000 $10,000
3/00 $11,472 $10,978 $11,855
3/01 $12,718 $ 8,599 $13,154
3/02 $13,098 $ 8,620 $13,712
3/03 $10,056 $ 6,471 $10,776
Select holdings within financial services bolstered the fund's performance as
well. One key positive contributor was SLM Corp (Sallie Mae), which posted a
double-digit gain for the year on strong earnings and sound fundamentals in the
non-cyclical student lending industry.
MARKET-SENSITIVE FINANCIALS ENCOUNTER FUNDAMENTAL AND REGULATORY ROADBLOCKS
During the year, heightened regulatory scrutiny and investor skepticism took a
toll on a variety of companies across the sector. The companies most affected
were those involved with the investment banking and brokerage businesses.
However, even better performing groups like insurers encountered increased
pressure from rating agencies, and commercial banking and consumer finance
companies also faced more stringent regulatory standards. Throughout the period,
anemic capital markets also pressured firms with market-sensitive revenues.
Indeed, year-over-year global equity issuance as of March 31, 2003, was down by
40%, mergers and acquisition activity fell off by 25%, and broad equity market
indexes, such as the S&P 500(R) and the Nasdaq Composite Index, were down over
20%.
Meanwhile, political and regulatory problems presented a host of obstacles.
Investigations by the Securities and Exchange Commission (SEC) and New York
Attorney General -- as well as a Congressional inquiry last July related to
investment banks' research practices and their involvement in companies like
Enron and WorldCom (not fund holdings) -- created bad publicity for investment
banks.
PIE CHART: FINANCIAL SERVICES FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Banks.........................................39.50%
Diversified Financial Services................14.19%
Investment Adviser/Broker
Dealer Services...............................13.55%
Multi-Line Insurance...........................6.78%
Property & Casualty Insurance..................5.79%
Consumer Finance...............................5.17%
Reinsurance....................................4.58%
Life & Health Insurance........................2.88%
Insurance Brokers..............................2.23%
Real Estate Investment Trusts..................1.67%
Data Processing Services.......................0.17%
Net Cash & Cash Equivalents....................3.49%
FUND MANAGEMENT
[PHOTOGRAPH OF JOSEPH W. SKORNICKA OMITTED]
JOSEPH W. SKORNICKA, CFA
JOE SKORNICKA IS A VICE PRESIDENT OF INVESCO FUNDS GROUP. PRIOR TO JOINING
INVESCO, JOE WAS A SENIOR EQUITY ANALYST AND FUND MANAGER WITH MUNDER CAPITAL
MANAGEMENT AND AN ASSISTANT VICE PRESIDENT FOR COMERICA INCORPORATED. HE IS A
CHARTERED FINANCIAL ANALYST CHARTERHOLDER, AND HOLDS AN MBA FROM THE UNIVERSITY
OF MICHIGAN AND A BA FROM MICHIGAN STATE UNIVERSITY.
Although some progress has been made in resolving these troubles, holdings like
Merrill Lynch & Co and Citigroup Inc weighed on the fund's performance during
the period. Merrill was subjected to its share of bad press as the New York
Attorney General singled it out in his campaign to reform investment banks. As
for Citigroup, its diversity worked against it. Almost every negative headline
seemed to have some relevance to Citigroup, since the company operates such a
wide array of financial businesses. Nevertheless, we opted to stay invested in
these companies, since we believe that they are strong enough to prosper over
time.
FINANCIALS STILL APPEAR ATTRACTIVE
We still believe the financial services sector remains attractive for three
primary reasons: demographics, consolidation and valuation. On demographics, the
aging of the Baby Boomers is well known. We believe this trend will continue to
benefit many industries within the sector including asset management, investment
banking and brokerage, life insurance, and commercial banking. As for
consolidation, after seeing a slowing in 2001 and 2002 due to economic and
market weakness, as well as corporate scandals, we have seen an increase in
activity over the past six months. This includes Household International selling
to HSBC Holdings PLC, Skandia AB selling its U.S. annuity business to Prudential
Financial Inc, Credit Suisse Group selling its clearing business to the Bank of
New York, and two regional bank acquisitions by BB&T Corp and Mercantile
Bankshares (not fund holdings). As the economy stabilizes, we believe
consolidation will accelerate in the sector, as the benefits of scale are just
too important. Finally, on valuation, despite the fund outperforming the S&P 500
Index(R) for the trailing 1-, 5- and 10-year periods as of 3/31/03, financials
still sold at a significant discount on a forward price-earnings basis to the
S&P 500.(R)
LINE GRAPH: INVESCO FINANCIAL SERVICES FUND - CLASS K, GROWTH OF $10,000(3)
This line graph compares the value of a $10,000 investment in INVESCO Financial
Services Fund - Class K to the value of a $10,000 investment in the S&P 500
Index(R)(4), and to the value of a $10,000 investment in the S&P Financials
Index(R)(4), assuming in each case reinvestment of all dividends and capital
gain distributions, for the period since inception (12/00) through 3/31/03.
INVESCO FINANCIAL SERVICES S&P 500 INDEX(R)(4) S&P FINANCIALS INDEX(R)(4)
FUND - CLASS K
12/00 $10,000 $10,000 $10,000
3/01 $ 9,803 $ 8,858 $ 9,853
3/02 $10,135 $ 8,879 $10,271
3/03 $ 7,842 $ 6,682 $ 8,041
DIVERSIFICATION AND A LONG-TERM FOCUS CRUCIAL IN AN UNCERTAIN MARKET
Although we believe the economy will gradually strengthen once the conflict with
Iraq is resolved, we are exercising caution. Above all else, we remain committed
to maintaining our focus on long-term corporate fundamentals. Industry
diversification is an important part of our strategy as well. While we will
overweight and underweight industries based on our bottom-up individual company
research and top-down industry views, we will also stay diversified across the
major industries within the sector. As we see more sure signs of an economic
recovery, we may choose to position the fund more aggressively into the sector's
more market- and economically-sensitive industries.
(3)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEXES DO NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED THEIR PERFORMANCE.
(4)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE S&P 500 FINANCIALS INDEX(R)
REFLECTS THE FINANCIAL SERVICES SECTOR OF THE S&P 500 Index(R). THE INDEXES ARE
NOT MANAGED; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND
OTHER EXPENSES ASSOCIATED WITH THE FUND INCLUDING FRONT-END SALES CHARGES AND
CDSC. INVESTORS CANNOT INVEST DIRECTLY IN ANY MARKET INDEX.
YOUR FUND'S REPORT
GOLD & PRECIOUS METALS FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
Although gold stocks fell prey to profit-taking during the first quarter of
2003, they finished the fund's fiscal year with a solid gain. Consequently, the
value of Gold & Precious Metals Fund-Investor Class shares advanced 4.80% for
the annual period ended March 31, 2003, significantly outpacing the S&P 500
Index,(R) which declined 24.75%. (Of course, past performance is not a guarantee
of future results.)(5),(6) For performance of other share classes, please see
page 2.
GOLD DEEMED A SAFE HAVEN IN A VOLATILE YEAR
A number of factors combined to push gold prices higher during the period.
First, with equity markets weak for the majority of the period, questions
lingering over the health of the economy, and geopolitical concerns
intensifying, investors turned to the gold sector as a relatively safe haven.
Indeed, due to gold's strong performance throughout the equity market downturn,
more and more investors have sought gold as an effective diversification tool.
Second, the weakening U.S. dollar has benefited gold. More than a decade ago,
the U.S. dollar replaced gold as the standard in foreign currency markets.
During the past year, however, the dollar softened. While it remains a strong
currency, the dollar is now sharing with gold the role of back-up for foreign
local currencies.
Another catalyst for gold prices was the behavior of many major producers in the
industry, who reduced their hedging -- or short selling -- and in so doing
curtailed the gold supply. When gold producers hedge against future production,
rather than simply set a contract to buy at a future price (as you see with
other commodities, such as natural gas and crude oil), they complete a forward
sale. This in turn spurs the bullion bank to hedge its position by borrowing
gold from the central bank and selling it to invest the proceeds for a specific
period of time. The forward sale price is then equal to the interest rate
differential over that period. With the low interest rates that prevailed this
year, however, there was little for producers to gain by hedging, since the
current price and the forward price were similar.
FUND BENEFITS FROM LARGE POSITIONS IN GOLD SECTOR LEADERS
Throughout the period, we maintained a weighting in gold bullion. We did so
because bullion tends to be less volatile -- to the upside or the downside --
than the stocks of gold producers. Therefore, we feel that bullion exposure can
help cushion downturns or turbulence in gold prices over time. However, toward
the end of the period when gold prices retreated somewhat, we reduced our gold
bullion weighting to approximately 5%. This decision was based on our opinion
that gold stocks had reached historically attractive valuations at the end of
the first quarter of 2003, and, therefore, currently possess more upside
potential than gold bullion heading into the second quarter of 2003.
- --------------------------------------------------------------------------------
GOLD & PRECIOUS METALS FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Glamis Gold Ltd.....................7.90%
Agnico-Eagle Mines Ltd..............5.06%
IAMGOLD Corp........................4.99%
Newmont Mining......................4.87%
Placer Dome.........................4.73%
Barrick Gold........................4.68%
Gold Fields Ltd Sponsored ADR
Representing Ord Shrs...............4.51%
Meridian Gold.......................4.51%
Kinross Gold........................4.11%
Aber Diamond........................4.08%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
LINE GRAPH: INVESCO GOLD & PRECIOUS METALS FUND - INVESTOR CLASS, GROWTH OF
$10,000(5)
This line graph compares the value of a $10,000 investment in INVESCO Gold &
Precious Metals Fund - Investor Class to the value of a $10,000 investment in
the S&P 500 Index(R)(6), assuming in each case reinvestment of all dividends and
capital gain distributions, for the ten year period ended 3/31/03.
INVESCO GOLD & PRECIOUS METALS S&P 500 INDEX(R)(6)
FUND - INVESTOR CLASS
3/93 $10,000 $10,000
3/94 $14,170 $10,146
3/95 $10,020 $11,723
3/96 $16,646 $15,482
3/97 $13,943 $18,551
3/98 $ 7,537 $27,448
3/99 $ 5,405 $32,523
3/00 $ 4,674 $38,354
3/01 $ 4,283 $30,043
3/02 $ 6,858 $30,115
3/03 $ 7,187 $22,661
Generally, the fund's outperformance of the broad market for the year was due to
our investment in large- to mid-cap companies with the ability to grow their
gold reserves at a relatively low cost. In particular, we emphasized companies
that do not significantly hedge, and these firms benefited as gold prices moved
higher.
For example, Glamis Gold Ltd, the fund's largest holdings, advanced during the
period due to its successful acquisition of Francisco Gold, which helped broaden
Glamis' exploration base. In addition, the company continued to drive down costs
on its existing mines, fueling organic growth. Overall, Glamis exemplifies the
type of gold company we target, given its strong production growth capabilities,
appealing valuation, and prospects for long-term success.
OUTLOOK FOR GOLD APPEARS BRIGHT
Although the first few months of 2003 have been challenging for gold stocks, we
remain optimistic about the outlook for the gold market. On the one hand, if the
U.S. dollar rallies once the U.S./Iraq conflict has been resolved, that could be
a negative for gold (since gold is used as a hedge against a weak dollar, and
therefore typically declines when the dollar gains ground). On the other hand,
we will have to pay for the war, and U.S. deficits are heading higher -- which
could cause the dollar to suffer going forward (and gold to rise). Furthermore,
we could see the economy shift from a deflationary to an inflationary stance --
another potential positive for gold.
PIE CHART: GOLD & PRECIOUS METALS FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Gold..........................59.64%
Diversified Metals & Mining...16.59%
Precious Metals & Minerals....11.26%
Gold Bullion...................4.83%
Net Cash & Cash Equivalents....7.68%
Of course, time will tell whether gold resumes its upward trajectory, and we
will be watching carefully. It's instructive to note that roughly 20% of the
world's gold production costs $270 per ounce to produce, and more than 50% costs
$200 per ounce to produce. Therefore, since gold prices have recently been
around $325 per ounce (as of March 31, 2003), we do not expect the price of gold
to decline much. Furthermore, there are signs that gold's strong performance
this past year is causing investors to acknowledge its attractive long-term
fundamentals and its place in a well-diversified portfolio.
LINE GRAPH: INVESCO GOLD & PRECIOUS METALS FUND - CLASS A & B, GROWTH OF
$10,000(5)
This line graph compares the value of a $10,000 investment in INVESCO Gold &
Precious Metals Fund - Class A and the value of a $10,000 investment in INVESCO
Gold & Precious Metals Fund - Class B to the value of a $10,000 investment in
the S&P 500 Index(R)(6) assuming in each case reinvestment of all dividends and
capital gain distributions, and in the cases of INVESCO Gold & Precious Metals
Fund - Class A and Class B, inclusion of front-end sales charge and contingent
deferred sales charge, respectively, for the period since inception (4/02)
through 3/31/03.
INVESCO GOLD & PRECIOUS INVESCO GOLD & PRECIOUS S&P 500 INDEX(R)(6)
METALS FUND - CLASS A METALS FUND - CLASS B
3/02 $10,000 $10,000 $10,000
3/03 $ 9,876 $ 9,937 $ 7,525
LINE GRAPH: INVESCO GOLD & PRECIOUS METALS FUND - CLASS C, GROWTH OF $10,000(5)
This line graph compares the value of a $10,000 investment in INVESCO Gold &
Precious Metals Fund - Class C to the value of a $10,000 investment in the S&P
500 Index(R)(6), assuming in each case reinvestment of all dividends and capital
gain distributions, and in the case of INVESCO Gold & Precious Metals Fund -
Class C, inclusion of contingent deferred sales charge, for the period since
inception (2/00) through 3/31/03.
INVESCO GOLD & PRECIOUS METALS S&P 500 INDEX(R)(6)
FUND - CLASS C
2/00 $10,000 $10,000
3/00 $ 9,143 $10,978
3/01 $ 8,964 $ 8,599
3/02 $14,179 $ 8,620
3/03 $14,765 $ 6,486
(5)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEX DOES NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED ITS PERFORMANCE.
(6)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE INDEXES ARE NOT MANAGED;
THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER EXPENSES
ASSOCIATED WITH THE FUND INCLUDING FRONT-END SALES CHARGES AND CDSC. INVESTORS
CANNOT INVEST DIRECTLY IN ANY MARKET INDEX.
FUND MANAGEMENT
[PHOTOGRAPH OF JOHN S. SEGNER OMITTED]
JOHN S. SEGNER
JOHN SEGNER IS A SENIOR VICE PRESIDENT OF INVESCO FUNDS GROUP. HE RECEIVED A BS
FROM THE UNIVERSITY OF ALABAMA AND AN MBA FROM THE UNIVERSITY OF TEXAS AT
AUSTIN. BEFORE JOINING INVESCO IN 1997, JOHN SERVED AS MANAGING DIRECTOR AND
PRINCIPAL FOR THE MITCHELL GROUP. HE ALSO PREVIOUSLY HELD ENGINEERING
RESPONSIBILITIES WITH TEXACO INC., AND FINANCIAL RESPONSIBILITIES WITH AMERADA
HESS CORP. AND FIRST TENNESSEE NATIONAL CORP. JOHN BEGAN HIS INVESTMENT CAREER
IN 1980.
YOUR FUND'S REPORT
HEALTH SCIENCES FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
The past fiscal year proved challenging for financial markets, as an unrelenting
wave of economic and geopolitical uncertainty made for unfavorable conditions.
However, health care stocks -- which are typically less sensitive to broad
market moves than other groups -- fared well on a relative basis. This was
especially true in the second half of the year, when biotechnology and
pharmaceutical companies rebounded strongly.
For the one-year period ended March 31, 2003, the value of Health Sciences
Fund-Investor Class shares declined 18.99%. In comparison, the S&P 500 Index(R)
fell 24.75% over that same time frame. (Of course, past performance is no
guarantee of future results.)(7),(8) For performance of other share classes,
please see page 2.
SUBSTANTIAL POSITION IN MEDICAL TECHNOLOGY AIDS PERFORMANCE
During the period, a significant weighting in the medical technology sub-sector
of health care benefited the fund -- as did strong individual stock selection
within this area. Because the cost of the technology involved in producing
medical devices is so high, one often sees great barriers to entry once a
certain company has established itself as a leader within a particular
therapeutic market, such as implantable defibrillators or cancer radiation
equipment. In other words, those device firms able to develop a propriety edge
in growth markets can find themselves in a dominant position for a number of
years. As a result, profitable business models, strong cash flow, and favorable
returns on equity may generally follow.
For example, in the approximately $3 billion implantable defibrillator market,
Medtronic Inc and Guidant Corp have emerged as clear leaders. For cancer
radiation equipment, Varian Medical Systems is a leader, and we anticipate
Johnson & Johnson and Boston Scientific will emerge as the dominant competitors
in the pending drug-coated stent market, which we believe eventually could
exceed $5 billion. Finally, Zimmer Holdings, which manufactures hip and knee
implants, is a leader in the orthopedic market -- a strong growth area given the
aging of the baby boomer demographic. Our decision to target these
top-performing companies, therefore, proved advantageous during the year.
SHIFT INTO BIOTECH AND PHARMACEUTICAL STOCKS MAY POSITION FUND FOR GROWTH
Late in 2002, we shifted a significant portion of assets from health services
holdings into the large-cap pharmaceuticals group. Although pharmaceuticals had
been facing serious competition from the generic market earlier in the year, by
the second half of 2002 many companies had already dealt with lapses in patents
and their subsequent impact. As a result, earnings comparisons from previous
quarters were beginning to improve.
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Biotech HOLDRs Trust................4.95%
Johnson & Johnson...................4.90%
Forest Laboratories.................4.79%
Pharmaceutical HOLDRs Trust.........4.44%
Merck & Co..........................4.35%
Wyeth...............................4.29%
Amgen Inc...........................4.27%
Abbott Laboratories.................4.12%
Eli Lilly & Co......................4.05%
Bristol-Myers Squibb................3.89%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
Furthermore, research we conducted during the period showed that for the first
time in 40 years, dividend yields on drug stocks had surpassed those of
short-term interest rates. Even though income and yield are not primary
objectives of the fund per se, this unusual phenomenon seems to indicate that
the downside risk on many drug stocks have been mitigated as we await new
product cycles and earnings acceleration in 2004.
LINE GRAPH: INVESCO HEALTH SCIENCES FUND - INVESTOR CLASS GROWTH OF $10,000(7)
This line graph compares the value of a $10,000 investment in INVESCO Health
Sciences Fund - Investor Class to the value of a $10,000 investment in the S&P
500 Index(R)(8), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO HEALTH SCIENCES FUND - INVESTOR CLASS S&P 500 INDEX(R)(8)
3/93 $10,000 $10,000
3/94 $11,309 $10,146
3/95 $13,367 $11,723
3/96 $20,148 $15,482
3/97 $20,492 $18,551
3/98 $29,047 $27,448
3/99 $35,877 $32,523
3/00 $36,249 $38,354
3/01 $34,757 $30,043
3/02 $36,128 $30,115
3/03 $29,268 $22,661
Outperformers from the pharmaceutical industry during the year included Teva
Pharmaceuticals Industries Ltd, a leader in the international generic drug
market, and specialty pharmaceutical company Forest Laboratories. As a mid-size
drug company, Forest can realize dramatic earnings growth when a few key
products, such as their depression drugs Celexa and Lexapro, experience success.
We also increased the fund's weighting in biotechnology during this time. It's
important to note, however, that we sought only profitable companies in this
space -- firms with strong earnings, positive cash flows, and proven biological
products that have already been introduced to the market. For example, we
purchased additional shares of Gilead Sciences. Gilead is an example of a
biotech company benefiting from success with a new and highly profitable
product, Viread, which is used to treat HIV. The successful launch of Viread
made for a breakthrough year for Gilead, as the company was able to go from
posting losses to enjoying sharp profits.
HEALTH SERVICES HOLDINGS DETRACT
Through the first three quarters of 2002, the fund's health services stocks
performed well. However, at the end of October, Tenet Healthcare (no longer a
fund holding) fell under scrutiny for its Medicare pricing tactics -- news that
quickly clouded the entire services area. Following this development, the fund's
exposure to Tenet and other services leaders proved detrimental, hampering
performance and negatively affecting our overall return for the annual period.
In response, we significantly trimmed our weighting in health services.
This decision stemmed not only from the regulatory problems dogging hospitals,
but also from our growing concern over issues that we believe could hamper
services stocks going forward. First, we believe that, as the U.S. begins to
adjust to a deficit in its budget rather than a surplus, we could see cuts in
Medicare reimbursement for hospitals. Second, if a drug reimbursement plan is
implemented, it might be financed partly by taking funding from Medicare
hospital reimbursement. Although it remains to be seen whether funding will be
ultimately taken away from hospitals, this potential negative development
remains a risk for these stocks.
On the positive side, the fund had no exposure to HealthSouth Corp, a firm that
has faced accusations of earnings fraud. Our analysis of HealthSouth's cash flow
and balance sheet trends was enough to keep us away from its stock over the past
year.
MONITORING THE POLITICAL LANDSCAPE
Overall, demand for health care services and products remains high. We have long
subscribed to the notion that the aging of the baby boomers and increases in
life expectancy should drive growth in the health care sector for many years to
come. Furthermore, we are cautiously optimistic about the recent developments at
the Food and Drug Administration-- which has been approving more products since
the appointment of its new commissioner, Mark McClellan.
(7)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEX DOES NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED ITS PERFORMANCE.
(8)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE INDEX IS NOT MANAGED; THEREFORE,
ITS PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED
WITH THE FUND INCLUDING FRONT-END SALES CHARGES AND CDSC. INVESTORS CANNOT
INVEST DIRECTLY IN ANY MARKET INDEX.
Going forward, we will be monitoring the political landscape closely. As we
mentioned, Medicare reimbursement trends directly affect the health services
sector, and cuts in the growth of Medicare funding could be negative for
hospitals. Another interesting development could be the legislative introduction
and potential passage of a prescription drug reimbursement plan. Given that
another election year is approaching, voters may expect to see progress on this
issue.
Other major events to watch for in health care include HMO pricing and
hospital/HMO negotiations regarding a potential tiered hospital system. In terms
of pricing, HMOs have benefited from increases in recent years, but another
contract renegotiation season is on the horizon. We'll be following the news to
see whether HMOs are able to implement higher premiums this year at a marginal
spread to their cost trends. Meanwhile, interaction between hospitals and HMOs
could lead to talks regarding possibly creating a so-called "tiered system,"
meaning that hospitals would be grouped according to higher and lower co-payment
brackets. Such a system could hurt some hospitals, though select HMOs might
benefit.
Finally, we'll be tracking product cycles within the pharmaceutical industry.
Although there has recently been a gap in the introduction of new products, we
believe we are close to seeing an end to this lapse. The worst of the impact
from generic drug competitors appears to be over for many large-cap
pharmaceutical companies. If this is the case, we could see a re-acceleration of
earnings for leading pharmaceutical companies in 2003 and 2004.
LINE GRAPH: INVESCO HEALTH SCIENCES FUND - CLASS A & B, GROWTH OF $10,000(7)
This line graph compares the value of a $10,000 investment in INVESCO Health
Sciences Fund - Class A and the value of a $10,000 investment in INVESCO Health
Sciences Fund - Class B to the value of a $10,000 investment in the S&P 500
Index(R)(8) assuming in each case reinvestment of all dividends and capital gain
distributions, and in the cases of INVESCO Health Sciences Fund - Class A and
Class B, inclusion of front-end sales charge and contingent deferred sales
charge, respectively, for the period since inception (4/02) through 3/31/03.
INVESCO HEALTH SCIENCES INVESCO HEALTH SCIENCES S&P 500 INDEX(R)(8)
FUND - CLASS A FUND - CLASS B
4/02 $10,000 $10,000 $10,000
3/03 $ 7,661 $ 7,561 $ 7,525
LINE GRAPH: INVESCO HEALTH SCIENCES FUND - CLASS C GROWTH OF $10,000(7)
This line graph compares the value of a $10,000 investment in INVESCO Health
Sciences Fund - Class C to the value of a $10,000 investment in the S&P 500
Index(R)(8), assuming in each case reinvestment of all dividends and capital
gain distributions, and in the case of INVESCO Health Sciences Fund - Class C,
inclusion of contingent deferred sales charge, for the period since inception
(2/00) through 3/31/03.
INVESCO HEALTH SCIENCES FUND - CLASS C S&P 500 INDEX(R)(8)
2/00 $10,000 $10,000
3/00 $ 8,944 $10,978
3/01 $ 8,516 $ 8,599
3/02 $ 8,759 $ 8,620
3/03 $ 6,993 $ 6,486
LINE GRAPH: INVESCO HEALTH SCIENCES FUND - CLASS K GROWTH OF $10,000(7)
This line graph compares the value of a $10,000 investment in INVESCO Health
Sciences Fund - Class K to the value of a $10,000 investment in the S&P 500
Index(R)(8), assuming in each case reinvestment of all dividends and capital
gain distributions, for the period since inception (12/00) through 3/31/03.
INVESCO HEALTH SCIENCES FUND - CLASS K S&P 500 INDEX(R)(8)
12/00 $10,000 $10,000
3/01 $ 8,136 $ 8,858
3/02 $ 8,414 $ 8,879
3/03 $ 6,773 $ 6,682
PIE CHART: HEALTH SCIENCES FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Pharmaceuticals...............54.58%
Health Care Equipment.........19.70%
Biotechnology.................17.69%
Health Care Supplies...........2.34%
Health Care Facilities.........1.43%
Managed Health Care............1.39%
Household Products.............1.37%
Health Care Distributors
& Services.....................0.99%
Net Cash & Cash Equivalents....0.51%
FUND MANAGEMENT
[PHOTOGRAPH OF THOMAS R. WALD OMITTED]
THOMAS R. WALD, CFA
TOM WALD IS A VICE PRESIDENT OF INVESCO FUNDS GROUP. PRIOR TO JOINING INVESCO IN
1997, HE WAS THE SENIOR HEALTH CARE ANALYST AT MUNDER CAPITAL MANAGEMENT. HE
BEGAN HIS INVESTMENT CAREER IN 1988. TOM RECEIVED HIS BA FROM TULANE UNIVERSITY,
AND HIS MBA FROM THE UNIVERSITY OF PENNSYLVANIA. HE IS ALSO A CHARTERED
FINANCIAL ANALYST CHARTERHOLDER.
YOUR FUND'S REPORT
LEISURE FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
The past 12 months provided more challenges for equity investors, as stocks
continued their declines. The summer of 2002 saw several high-profile corporate
accounting scandals keep investors on their heels. By the fall, investors were
growing increasingly concerned about the likelihood of war with Iraq. All the
while, the economic recovery continued to tread water. Perhaps most disturbing
were the period's figures on consumer confidence and spending, which revealed
that the talk of war was taking its toll on consumption. Throughout this
economic downturn, consumer spending had remained remarkably robust, and many
observers suggested that this strength was the only variable staving off
recession. But with the economy continuing to stagnate, the employment outlook
became less encouraging and consumer confidence declined. As a result, companies
that are more cyclically-sensitive or with revenues that are largely derived
from consumer discretionary spending, including many leisure companies, came
under pressure.
- --------------------------------------------------------------------------------
LEISURE FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Mattel Inc.....................................................7.37%
International Game Technology..................................7.33%
Omnicom Group..................................................5.82%
Harrah's Entertainment.........................................5.34%
Liberty Media Series A Shrs....................................4.82%
Heineken NV....................................................2.69%
Anheuser-Busch Cos.............................................2.42%
CableVision Systems New York Group.............................2.41%
Carlsberg A/S Class B Shrs.....................................2.28%
Valassis Communications........................................2.18%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
LINE GRAPH: INVESCO LEISURE FUND - INVESTOR CLASS GROWTH OF $10,000(9)
This line graph compares the value of a $10,000 investment in INVESCO Leisure
Fund - Investor Class to the value of a $10,000 investment in the S&P 500
Index(R)(10), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO LEISURE FUND - INVESTOR CLASS S&P 500 INDEX(R)(10)
3/93 $10,000 $10,000
3/94 $11,753 $10,146
3/95 $12,637 $11,723
3/96 $14,615 $15,482
3/97 $14,748 $18,551
3/98 $21,813 $27,448
3/99 $27,706 $32,523
3/00 $40,191 $38,354
3/01 $37,980 $30,043
3/02 $40,261 $30,115
3/03 $31,860 $22,661
In light of these trends, for the year ended March 31, 2003, the value of
Leisure Fund-Investor Class shares declined 20.87%. However, the fund managed to
outperform its benchmark, the S&P 500 Index,(R) which declined 24.75% during
that same period. (Of course, past performance is not a guarantee of future
results.)(9),(10) For performance of other share classes, please see page 2.
ECONOMIC SOFTNESS THREATENED TO HURT AD SPENDING
In a period as challenging as the past year has been, it's no surprise that the
fund saw several holdings decline. Among the areas that detracted most from
performance were our advertising agencies, notably Omnicom Group. Omnicom faced
several problems throughout the year, including concerns about the means by
which the company accounted for several acquisitions. We investigated Omnicom's
accounting and held onto our position, believing the company has not done
anything improper. Our confidence was validated later in the period, but
Omnicom's troubles weren't over. The stock continued to trend lower as investors
worried about how advertising spending would be hurt by the persistent economic
weakness. Although Omnicom detracted from the fund's results this year, we
continue to believe in the company's business model and remain confident that it
will continue to gain market share over the next three to five years.
Valassis Communications was another underperformer. Shares of the coupon
publisher declined after its primary competitor in the coupon publishing
business announced plans to cut prices. At the time, Valassis was a top-ten
holding in the fund, so it adversely affected relative performance. However, we
continue to believe that the company possesses attractive long-term fundamental
prospects.
THE FUND'S CYCLICAL SHARES DECLINED AS THE RECOVERY STAGNATED
Several of the fund's other more economically sensitive holdings came under
pressure as well, including our cruise lines, diversified media companies, and
our hotel and lodging stocks. The fund's movie studio stocks also generally
underperformed. The exception was Pixar, a studio that specializes in animated
children's movies, which gained nearly 50% during the period.
LINE GRAPH: INVESCO LEISURE FUND - CLASS A & B GROWTH OF $10,000(9)
This line graph compares the value of a $10,000 investment in INVESCO Leisure
Fund - Class A and the value of a $10,000 investment in INVESCO Leisure Fund -
Class B to the value of a $10,000 investment in the S&P 500 Index(R)(10)
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the cases of INVESCO Leisure Fund - Class A and Class B,
inclusion of front-end sales charge and contingent deferred sales charge,
respectively, for the period since inception (4/02) through 3/31/03.
INVESCO LEISURE INVESCO LEISURE S&P 500 INDEX(R)(10)
FUND - CLASS A FUND - CLASS B
4/02 $10,000 $10,000 $10,000
3/03 $ 7,490 $ 7,367 $ 7,525
LINE GRAPH: INVESCO LEISURE FUND - CLASS C GROWTH OF $10,000(9)
This line graph compares the value of a $10,000 investment in INVESCO Leisure
Fund - Class C to the value of a $10,000 investment in the S&P 500 Index(R)(10),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the case of INVESCO Leisure Fund - Class C, inclusion of
contingent deferred sales charge, for the period since inception (2/00) through
3/31/03.
INVESCO LEISURE FUND - CLASS C S&P 500 INDEX(R)(10)
3/00 $10,000 $10,000
3/01 $ 9,708 $ 8,599
3/02 $10,203 $ 8,620
3/03 $ 7,994 $ 6,846
LINE GRAPH: INVESCO LEISURE FUND - CLASS K GROWTH OF $10,000(9)
This line graph compares the value of a $10,000 investment in INVESCO Leisure
Fund - Class K to the value of a $10,000 investment in the S&P 500 Index(R)(10),
assuming in each case reinvestment of all dividends and capital gain
distributions, for the period since inception (12/01) through 3/31/03.
INVESCO LEISURE FUND - CLASS K S&P 500 INDEX(R)(10)
12/01 $10,000 $10,000
3/02 $10,795 $10,255
3/03 $ 8,513 $ 7,717
The fund saw several other areas defy the market's weakness. For example, our
toy manufacturers, on the back of gains in the shares of Mattel Inc, generally
advanced, as did several of our cable and satellite television service
providers, including Comcast Corp and EchoStar Communications, two industries
that enjoy revenues that are largely independent of economic health.
PUBLISHERS, BREWERS AND RETAIL CONTRIBUTED POSITIVELY TO PERFORMANCE
Several of our holdings outperformed on a relative basis, declining less than
the broader market. Included in this group were the fund's publishing stocks,
such as New York Times and Harte-Hanks Inc. Likewise, many of our beverage
stocks, including Anheuser-Busch Cos, contributed positively to relative
performance. Our retail stocks also performed reasonably, as Foot Locker,
Tuesday Morning, and Target Corp all bettered the S&P 500 Index.(R)
Going forward, it's clear the war has influenced the economy and the market. It
will likely continue to do so until the conflict reaches resolution.
Unfortunately, this knowledge yields few ideas on which we can act or invest.
Consequently, our focus remains on the longer term. We continue to look for
companies capable of enjoying strong fundamental growth over the next three to
five years rather than the next few months. In this longer-term context, our
current portfolio holdings appear attractive.
PIE CHART: LEISURE FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Casinos & Gaming..............14.36%
Movies & Entertainment........11.59%
Cable & Satellite Operators...10.52%
Advertising...................10.18%
Leisure Products...............8.31%
Brewers........................7.95%
Publishing & Printing..........7.53%
Hotels & Resorts...............6.39%
Broadcasting - Radio/TV........5.10%
Investment Companies...........2.58%
Other Industries..............14.39%
Net Cash & Cash Equivalents....1.10%
(9)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEX DOES NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED ITS PERFORMANCE.
(10)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE INDEX IS NOT MANAGED; THEREFORE,
ITS PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED
WITH THE FUND INCLUDING FRONT-END SALES CHARGES AND CDSC. INVESTORS CANNOT
INVEST DIRECTLY IN ANY MARKET INDEX.
FUND MANAGEMENT
[PHOTOGRAPH OF MARK GREENBERG OMITTED]
MARK GREENBERG, CFA
MARK GREENBERG IS A SENIOR VICE PRESIDENT OF INVESCO FUNDS GROUP. HE BEGAN HIS
INVESTMENT CAREER IN 1980 AND HAS NEARLY 20 YEARS OF EXPERIENCE IN THE LEISURE
SECTOR. MARK RECEIVED A BSBA FROM MARQUETTE UNIVERSITY AND IS A CHARTERED
FINANCIAL ANALYST CHARTERHOLDER.
YOUR FUND'S REPORT
REAL ESTATE OPPORTUNITY FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
Equity investors were faced with a number of unnerving developments during the
past 12 months. In the summer of 2002, corporate accounting fiascos and tensions
in the Middle East gave investors pause. Fall saw talk of war with Iraq
intensify, and the economy continue to stagnate. By the end of the period, the
war had finally begun and stocks had seen the bear market extend another year.
- --------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Boston Properties.........................4.78%
General Growth Properties.................4.74%
Weingarten Realty Investors...............4.67%
ProLogis SBI..............................4.62%
Alexandria Real Estate Equities...........4.29%
Developers Diversified Realty.............4.25%
iStar Financial...........................4.17%
Vornado Realty Trust SBI..................4.17%
Equity Office Properties Trust............4.04%
CarrAmerica Realty........................3.89%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
THE MARKET'S RISK AVERSION SUPPORTED REITS
The uncertainty in the broader market provided some support for real estate
investment trusts (REITs). As investors' tolerance for risk declined, they
rotated into opportunities possessing a more defensive risk/reward profile, and
REITs benefited from this trend. Not only has the group's dividend yield
attracted investors, but also its financial health has withstood the economic
downturn more successfully than other business sectors. Most property types
outperformed the broader market during the fund's fiscal period, led by regional
malls, shopping centers and industrial REITs. Meanwhile, the only property type
that underperformed the S&P 500 Index(R) was the lodging group, which is
arguably the most economically sensitive property type.
LINE GRAPH: INVESCO REAL ESTATE OPPORTUNITY FUND - INVESTOR CLASS, GROWTH OF
$10,000(11)
This line graph compares the value of a $10,000 investment in INVESCO Real
Estate Opportunity Fund - Investor Class to the value of a $10,000 investment in
the S&P 500 Index(R)(12), and to the value of a $10,000 investment in the
NAREIT-Equity REIT Index(12), assuming in each case reinvestment of all
dividends and capital gain distributions, for the period (1/97) through 3/31/03.
INVESCO REAL ESTATE OPPORTUNITY NAREIT - EQUITY
FUND - INVESTOR CLASS S&P 500 INDEX(R)(12) REIT INDEX(12)
1/97 $10,000 $10,000 $10,000
3/97 $10,120 $10,269 $10,070
3/98 $12,136 $15,194 $11,970
3/99 $ 8,724 $18,003 $ 9,443
3/00 $ 9,097 $21,231 $ 9,689
3/01 $10,102 $16,231 $12,005
3/02 $11,584 $16,670 $14,748
3/03 $11,455 $12,545 $14,240
For the year ended March 31, 2003, the value of Real Estate Opportunity
Fund-Investor Class shares declined 1.12%. The fund significantly outperformed
the S&P 500 Index,(R) which declined by 24.75% during that same period. (Of
course, past performance is not a guarantee of future results.)(11),(12) For
performance of other share classes, please see page 2.
RETAIL REITS ENJOYED STRONG FUNDAMENTALS
The fund received positive contributions to relative performance from most REIT
property types, particularly its regional mall and shopping center exposure, two
of the stronger property types. In contrast to much of the economy, the retail
REIT group continued to exhibit relatively strong fundamentals throughout the
past year. Standouts in these groups included Simon Property Group, Weingarten
Realty Investors, and Rouse Co.
Other areas of strength included the fund's industrial REITs, notably ProLogis
SBI. And although the office group declined in absolute terms, our office group
holdings made positive contributions to relative performance, led by Alexandria
Real Estate Equities. Finally, another standout during the year was iStar
Financial, the commercial real estate lender, which advanced sharply.
LODGING AND HEALTH CARE REITS AMONG SECTOR'S FEW SOFT SPOTS
Detracting from the fund's performance was our minimal exposure to the lodging
group. In addition, after performing well for most of the year, our health care
REITs, such as Healthcare Realty, came under pressure late in the period, as the
financial health of some key tenants, coupled with the uncertainty relating to
possible changes in Medicare reimbursements, made investors wary.
The fund's non-REIT exposure also hindered performance, including casino
operator Park Place Entertainment, Home Depot, and homebuilder Beazer Homes USA.
FAVORING REITS WITH SOLID BALANCE SHEETS
We made a few changes to the portfolio over the period. For example, we
decreased the fund's health care exposure, as the financial health of some key
tenants, coupled with the uncertainty relating to possible changes in Medicare
reimbursements, prompted us to take some money off the table in that area. We
also decreased the fund's lodging exposure, believing that the group's prospects
remain murky in light of the war and resulting economic softness. On the other
hand, we increased our exposure to shopping centers. Although this group is
trading at a premium to other property types, we believe the sub-sector
possesses visibility into its earnings prospects that's hard to find in other
areas. Finally, we will continue to favor REITs with adequate dividend coverage
and healthy balance sheets. In the office group, we plan to continue to
emphasize firms that possess relatively low lease turnover.
Going forward, we remain cautiously optimistic about the REIT group. Reasons for
optimism include the sector's high dividend yield, which could appeal to
income-oriented investors, and its relative financial stability. Although the
fundamental prospects of REITs have deteriorated somewhat with the economy, the
degree of the softness has been significantly less severe than that endured by
other economic sectors. We also continue to monitor developments in the proposed
changes to the taxation of dividends.
LINE GRAPH: INVESCO REAL ESTATE OPPORTUNITY FUND - CLASS A & B GROWTH OF
$10,000(11)
This line graph compares the value of a $10,000 investment in INVESCO Real
Estate Opportunity Fund - Class A and the value of a $10,000 investment in
INVESCO Real Estate Opportunity Fund - Class B to the value of a $10,000
investment in the S&P 500 Index(R)(12), and to the value of a $10,000 investment
in the NAREIT - Equity Index(12) assuming in each case reinvestment of all
dividends and capital gain distributions, and in the cases of INVESCO Real
Estate Opportunity Fund - Class A and Class B, inclusion of front-end sales
charge and contingent deferred sales charge, respectively, for the period since
inception (4/02) through 3/31/03.
INVESCO REAL ESTATE INVESCO REAL ESTATE S&P 500 INDEX(R)(12) NAREIT - EQUITY
OPPORTUNITY FUND - CLASS A OPPORTUNITY FUND - CLASS B REIT INDEX(12)
4/02 $10,000 $10,000 $10,000 $10,000
3/03 $ 9,312 $ 9,306 $ 7,525 $ 9,655
LINE GRAPH: INVESCO REAL ESTATE OPPORTUNITY FUND - CLASS C GROWTH OF
$10,000(11)
This line graph compares the value of a $10,000 investment in INVESCO Real
Estate Opportunity Fund - Class C to the value of a $10,000 investment in the
S&P 500 Index(R)(12), and to the value of a $10,000 investment in the
NAREIT-Equity REIT Index(12), assuming in each case reinvestment of all
dividends and capital gain distributions, and in the case of INVESCO Real Estate
Opportunity Fund - Class C, inclusion of contingent deferred sales charge, for
the period since inception (2/00) through 3/31/03.
INVESCO REAL ESTATE OPPORTUNITY NAREIT-EQUITY
FUND - CLASS C S&P 500 INDEX(R)(12) REIT INDEX(12)
2/00 $10,000 $10,000 $10,000
3/00 $10,210 $10,978 $10,275
3/01 $11,251 $ 8,599 $12,730
3/02 $12,791 $ 8,620 $15,639
3/03 $12,559 $ 6,471 $15,100
PIE CHART: REAL ESTATE OPPORTUNITY FUND
INDUSTRY BREAKDOWN
AS OF 9/30/02
[PIE CHART]
% OF TOTAL NET ASSETS
Real Estate Investment Trusts..86.86%
Real Estate Management &
Development.....................2.32%
Paper Products..................1.49%
Forest Products.................1.43%
Casinos & Gaming................1.11%
Homebuilding....................1.00%
Hotels & Resorts................1.00%
Net Cash & Cash Equivalents.....4.79%
(11)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEXES DO NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED THEIR PERFORMANCE.
(12)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE NAREIT-EQUITY REIT INDEX IS AN
UNMANAGED INDEX REFLECTING PERFORMANCE OF THE U.S. REAL ESTATE INVESTMENT TRUST
MARKET. THE INDEXES ARE NOT MANAGED; THEREFORE, THEIR PERFORMANCE DOES NOT
REFLECT MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED WITH THE FUND INCLUDING
FRONT-END SALES CHARGES AND CDSC. INVESTORS CANNOT INVEST DIRECTLY IN ANY MARKET
INDEX.
THE REAL ESTATE INDUSTRY IS HIGHLY CYCLICAL, AND THE VALUE OF SECURITIES ISSUED
BY COMPANIES DOING BUSINESS IN THAT SECTOR MAY FLUCTUATE WIDELY.
FUND MANAGEMENT
[PHOTOGRAPH OF SEAN D. KATOF OMITTED]
SEAN D. KATOF, CFA
SEAN KATOF IS A VICE PRESIDENT OF INVESCO FUNDS GROUP. HE RECEIVED A BSBA FROM
THE UNIVERSITY OF COLORADO AT BOULDER AND AN MS IN FINANCE FROM THE UNIVERSITY
OF COLORADO AT DENVER. SEAN BEGAN HIS INVESTMENT CAREER IN 1994 AND IS ALSO A
CHARTERED FINANCIAL ANALYST CHARTERHOLDER.
YOUR FUND'S REPORT
TECHNOLOGY FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
The past fiscal year was characterized by continued weak performance of
technology stocks in the April through October period as a result of the failure
of the economy to recover which disappointed optimistc expectations held by
investors at the beginning of the year. During this period, investors were
shaken by one unnerving development after another. In the summer, several
high-profile accounting scandals and rising tensions in the Middle East
undermined confidence. With the fall came concerns about war with Iraq and
declining consumer confidence. Underlying all of these headline developments was
persistent economic weakness. The technology sector continued to be acutely
affected by the economic malaise. Demand for technology products, from consumers
or corporations, remained weak.
TECH STOCKS PERFORMED WELL DURING THE SECOND HALF
The second half of the period was a different story, however, as the sector
bounced sharply off the October lows. This strength could be attributed to the
market's anticipation of rising holiday consumer demand and corporate year-end
spending on technology upgrades. Further fueling the optimism was guidance from
several high-profile companies in the sector that indicated business had likely
stopped its cyclical deterioration. Although tech stocks lost some of their
momentum in January following the sharp increase off the October lows, the
sector managed to finish the fiscal year on a positive note. During the first
quarter of 2003, while most market sectors declined in the face of the war,
slipping consumer confidence and rising unemployment claims and energy prices,
the technology sector managed to outperform the broader market.
- --------------------------------------------------------------------------------
TECHNOLOGY FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Microsoft Corp............................6.57%
Intel Corp................................3.82%
Cisco Systems.............................3.55%
Symantec Corp.............................2.90%
Dell Computer.............................2.89%
eBay Inc..................................2.76%
Oracle Corp...............................2.50%
International Business Machines...........2.11%
Linear Technology.........................1.90%
BEA Systems...............................1.88%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
But those late gains could not offset earlier losses. As such, the value of
Technology Fund-Investor Class shares declined 44.43% for the one-year period
ended March 31, 2003. The fund under-performed the S&P 500 Index,(R) which
declined 24.75% during that same period. (Of course, past performance is not a
guarantee of future results.)(13),(14) For performance of other share classes,
please see page 2.
MOST TECH SUB-SECTORS ENDURED SHARP DECLINES
The selling was so intense throughout the tech sector during the period that
there weren't many industries that advanced. Information technology consulting,
software, communications equipment, computers, electronic equipment, and
semiconductors all suffered severe declines. Even more conservative tech stocks,
such as those in the aerospace and defense industry and commercial services
companies, could not resist the market weakness.
The fund's lone bright spot was in the Internet space, where Amazon.com Inc,
Yahoo! Inc, Hotels.com, and eBay Inc all advanced sharply. A handful of
companies also made positive relative contributions to performance by declining
less than the broader market. Included in this group were several technology
"blue chips," such as Microsoft Corp, Oracle Corp, and International Business
Machines. Dell Computer was another standout, as it managed to finish the period
in the black. Wireless telecommunications services stocks, such as Nextel
Communications, also performed well, on the heels of impressive subscriber
growth. Indeed, wireless communications was one of the few areas that saw demand
improve. Security software was another, led by Symantec Corp, as network
security has been one of the few areas in which corporations have demonstrated a
willingness to invest.
WE BELIEVE DEMAND FOR TECH PRODUCTS REMAINS WEAK BUT LIKELY TO IMPROVE
Going forward, we believe the coming quarter could be volatile for technology
stocks, as stocks are up sharply and expectations have risen following better
guidance than expected after first quarter earnings reports. We believe
investors might be more forgiving of companies that report disappointing
profits, as they are coming to focus more on improving prospects than current
weakness in business.
LINE GRAPH: INVESCO TECHNOLOGY FUND - INVESTOR CLASS GROWTH OF $10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Investor Class to the value of a $10,000 investment in the S&P 500
Index(R)(14), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO TECHNOLOGY FUND -
INVESTOR CLASS S&P 500 INDEX(14)
3/93 $ 10,000 $10,000
3/94 $ 11,785 $10,146
3/95 $ 14,192 $11,723
3/96 $ 19,426 $15,482
3/97 $ 21,371 $18,551
3/98 $ 28,039 $27,448
3/99 $ 37,453 $32,523
3/00 $100,781 $38,354
3/01 $ 36,749 $30,043
3/02 $ 31,392 $30,115
3/02 $ 17,446 $22,661
LINE GRAPH: INVESCO TECHNOLOGY FUND - INSTITUTIONAL CLASS, GROWTH OF
$10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Institutional Class to the value of a $10,000 investment in the S&P 500
Index(R)(14), assuming in each case reinvestment of all dividends and capital
gain distributions, for the period since inception (12/98) through 3/31/03.
INVESCO TECHNOLOGY FUND -
INSTITUTIONAL CLASS S&P 500 INDEX(R)(14)
12/98 $10,000 $10,000
3/99 $11,888 $10,498
3/00 $32,129 $12,380
3/01 $11,764 $ 9,697
3/02 $10,112 $ 9,721
3/03 $ 5,669 $ 7,315
LINE GRAPH: INVESCO TECHNOLOGY FUND - CLASS A & B, GROWTH OF $10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Class A and the value of a $10,000 investment in INVESCO Technology Fund
- - Class B to the value of a $10,000 investment in the S&P 500 Index(R)(14),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the cases of INVESCO Technology Fund - Class A and Class B
inclusion of front-end sales charge and contingent deferred sales charge,
respectively, for the period since inception (4/02) through 3/31/03.
INVESCO TECHNOLOGY INVESCO TECHNOLOGY S&P 500 INDEX(R)(14)
FUND - CLASS A FUND - CLASS B
4/02 $10,000 $10,000 $10,000
3/03 $ 5,277 $ 5,038 $ 7,525
PIE CHART: TECHNOLOGY FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Semiconductors................16.87%
Systems Software..............16.45%
Application Software..........10.47%
Computer Hardware..............7.82%
Computer Storage & Peripherals.5.55%
Electronic Equipment
& Instruments..................5.22%
Telecommunications Equipment...4.92%
Networking Equipment...........4.46%
Semiconductor Equipment........4.21%
Data Processing Services.......3.89%
Other Industries..............13.12%
Net Cash & Cash Equivalents....7.02%
FUND MANAGEMENT
[PHOTOGRAPH OF WILLIAM R. KEITHLER OMITTED]
WILLIAM R. KEITHLER, CFA
BILL KEITHLER IS A SENIOR VICE PRESIDENT AND DIRECTOR OF SECTOR MANAGEMENT OF
INVESCO FUNDS GROUP. A CHARTERED FINANCIAL ANALYST CHARTERHOLDER, BILL RECEIVED
AN MS FROM THE UNIVERSITY OF WISCONSIN-MADISON AND A BA FROM WEBSTER COLLEGE. HE
BEGAN HIS INVESTMENT CAREER IN 1982.
As the period came to a close, we did not see any change in the fundamental
outlook for the group. Current demand remains fairly weak. Our channel surveys
have revealed inventory build-ups in the personal computer and wireless
telecommunications sub-sectors. Demand for enterprise hardware has weakened
modestly, which is likely a function of seasonal trends. And telecom and
networking equipment companies have also seen their revenues stagnate, as their
primary customers continue to rein in capital expenditures.
Nevertheless, we believe there are reasons for optimism. For example, we expect
the second quarter of 2003 will see companies recapture the business that was
lost due to first quarter war considerations, a trend that could result in some
upside surprises. We will need a sustained period of improving business before
enterprises have the confidence to commit to spending on major projects.
However, there are glimmers of hope offered by mostly anecdotal data points
which suggest modestly improving business for technology companies, which we
believe reflects more than seasonal strength. The stocks may move in advance of
confirmation of this in reported numbers.
Prospects for consumer spending are not encouraging. And a recent decision by
the Federal Communications Commission (FCC), which forces regional Bell
operating companies (RBOCs) to continue to lease their networks to competitors
at wholesale rates, could throw cold water on the thesis of a recovery in the
telecom sector this year. However, although the FCC's ruling discourages
investments in legacy voice networks, the ruling encourages the RBOCs to build
out their data networks, which could benefit the data-related networking
equipment companies. In short, we believe opportunities can still be found in
the sector, and identifying the best of them remains our focus.
LINE GRAPH: INVESCO TECHNOLOGY FUND - CLASS C GROWTH OF $10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Class C to the value of a $10,000 investment in the S&P 500 Index(R)(14),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the case of INVESCO Technology Fund - Class C, inclusion
of contingent deferred sales charge, for the period since inception (2/00)
through 3/31/03.
INVESCO TECHNOLOGY FUND -
CLASS C S&P 500 INDEX(R)(14)
2/00 $10,000 $10,000
3/00 $10,663 $10,978
3/01 $ 3,851 $ 8,599
3/02 $ 3,251 $ 8,620
3/03 $ 1,792 $ 6,486
LINE GRAPH: INVESCO TECHNOLOGY FUND - CLASS K GROWTH OF $10,000(13)
This line graph compares the value of a $10,000 investment in INVESCO Technology
Fund - Class K to the value of a $10,000 investment in the S&P 500 Index(R)(14),
assuming in each case reinvestment of all dividends and capital gain
distributions, for the period since inception (12/00) through 3/31/03.
INVESCO TECHNOLOGY FUND -
CLASS K S&P 500 INDEX(R)(14)
12/00 $10,000 $10,000
3/01 $ 5,846 $ 8,858
3/02 $ 5,036 $ 8,879
3/03 $ 2,796 $ 6,682
(13)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEX DOES NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED ITS PERFORMANCE.
(14)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE INDEX IS NOT MANAGED; THEREFORE,
ITS PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED
WITH THE FUND INCLUDING FRONT-END SALES CHARGES AND CDSC. INVESTORS CANNOT
INVEST DIRECTLY IN ANY MARKET INDEX.
YOUR FUND'S REPORT
TELECOMMUNICATIONS FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
The telecommunications sector endured a difficult 12 months. Several
developments that pressured stocks in general, including persistent economic
worries, the threat of another conflict between the U.S. and Iraq, and repeated
uncertainty stemming from corporate malfeasance, also pressured the telecom
sector. The corporate accounting scandals of the spring and summer of 2002
affected the sector acutely. The confession from WorldCom, which is not a fund
holding, that it had overstated earnings by more than $3 billion hurt the entire
sector, as did the Securities and Exchange Commission's investigation into Qwest
Communications International for using networking capacity swaps to artificially
inflate revenues.
A SURPRISE RULING FROM REGULATORS HURT THE RBOCS
After a rally during the fourth quarter of 2002, the New Year brought
intensifying war rhetoric, which pressured the broad stock market. In February,
the Federal Communications Commission (FCC), in its triennial review of the
Telecommunications Act of 1996, decided it would continue to force the regional
Bell operating companies (RBOCs) to lease their networks to competitors at
below-market rates. This ruling surprised most investors and the RBOCs, which
are the splinters of the former Ma Bell monopoly, sold off sharply. In response,
many observers speculated that the RBOCs would discontinue network investments,
which pressured many telecom equipment companies that count the RBOCs among
their primary customers.
Even though the fund had minimal RBOC exposure, it could not resist the weakness
in the sector and, for the year ended March 31, 2003, the value of
Telecommunications Fund-Investor Class shares declined 35.60%. This return
lagged the 24.75% decline of the S&P 500 Index,(R) as well as the 23.30% decline
in the MSCI-EAFE. (Of course, past performance is not a guarantee of future
results.)(15),(16) For performance of other share classes, please see page 2.
TELECOM EQUIPMENT COMPANIES WERE ALSO HURT BY THE FCC RULING
As has been the case for much of the past two years, the telecommunications
sector offered few places to hide, and relative success meant owning the stocks
that declined the least. The fund saw its holdings in most sub-sectors decline,
particularly the RBOCs, such as SBC Communications and BellSouth Corp. Although
the RBOCs received some positive news during the period when several companies
received regulatory approval to offer long-distance service within their
territories, the FCC's decision about leasing networks to competitors was a
major blow for the entire group.
That decision had wide-reaching effects. Because the FCC maintained the status
quo, it deterred the RBOCs from wanting to invest in their legacy voice
networks, which is a bad omen for companies that provide the equipment for such
networks. Fortunately, during the fourth quarter, we chose to emphasize
data-related telecom equipment firms at the expense of voice-related equipment
companies, a decision that prevented additional losses. Other areas of weakness
included the fund's telecom-related semiconductor companies and its alternative
service providers.
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Vodafone Group PLC Sponsored ADR
Representing 10 Ord Shrs..................5.08%
AT&T Wireless Services....................4.71%
Comcast Corp Class A Shrs.................4.67%
Nextel Communications Class A Shrs........4.65%
QUALCOMM Inc..............................3.92%
EchoStar Communications Class A Shrs......3.90%
Verizon Communications....................3.61%
Nokia Corp Sponsored ADR
Representing Ord Shrs.....................3.17%
Symantec Corp.............................3.14%
Cox Communications Class A Shrs...........3.09%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
LINE GRAPH: INVESCO TELECOMMUNICATIONS FUND -INVESTOR CLASS GROWTH OF
$10,000(15)
This line graph compares the value of a $10,000 investment in INVESCO
Telecommunications Fund - Investor Class to the value of a $10,000 investment in
the S&P 500 Index(R)(16), and to the value of a $10,000 investment in the MSCI
EAFE Index(16), assuming in each case reinvestment of all dividends and capital
gain distributions, for the period since inception (8/94) through 3/31/03.
INVESCO TELECOMMUNICATIONS
FUND - INVESTOR CLASS S&P 500 INDEX(R)(16) MSCI EAFE INDEX(16)
8/94 $10,000 $10,000 $10,000
3/95 $10,997 $11,140 $10,015
3/96 $14,168 $14,713 $11,284
3/97 $14,919 $17,629 $11,481
3/98 $25,478 $26,083 $13,655
3/99 $36,872 $30,906 $14,525
3/00 $87,460 $36,448 $18,214
3/01 $33,742 $28,549 $13,538
3/02 $17,457 $28,618 $12,482
3/03 $11,243 $21,535 $ 9,574
WIRELESS COMMUNICATIONS SERVICE PROVIDERS WERE A BRIGHT SPOT
Among the few bright spots within the sector were the wireless service
providers. Unlike the RBOCs, which saw their pricing power and fundamental
growth prospects deteriorate during the past year, several wireless service
companies, such as Nextel Communications and Vodafone Group PLC, enjoyed
positive subscriber, revenue, and cash flow growth during the period. The fund's
cable and satellite television stocks, notably Cox Communications and Echostar
Communications, also resisted the market's downturn to log gains during the
period.
PIE CHART: TELECOMMUNICATIONS FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Integrated Telecommunication
Services......................22.67%
Wireless Telecommunication
Services......................18.31%
Telecommunications
Equipment.....................13.75%
Cable & Satellite Operators...13.11%
Broadcasting - Radio/TV........5.92%
Networking Equipment...........4.73%
Systems Software...............3.13%
Application Software...........2.77%
Semiconductors.................2.15%
Other Industries...............5.15%
Derivatives - Options..........0.11%
Net Cash & Cash Equivalents....8.20%
Going forward, it seems that the economic outlook is murkier than it has been in
a long time. We seem to be mired in a vicious cycle in which concerns about the
economy lead to spending curbs, which lead to additional concerns about the
economy. With the conflict in Iraq winding down, consumer confidence could
rebound, and corporations might loosen their purse strings. Until then, the
economy and the stock market could stagnate.
As for the portfolio, we have maintained its diversity, and believe it's well
positioned to participate in any rallies that might materialize as the economy
gains steam or as investor sentiment improves.
In the coming year, the FCC has another decision to make regarding wireless
number portability, which would allow consumers to keep their current wireless
phone number when they switch service providers. In our opinion, the FCC will
impose wireless number portability on the service providers, and some companies
are better positioned to manage this change than others. We will monitor this
development closely.
(15)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FRONT-END SALES CHARGES AND CDSC. THE CHARTS
AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S OPERATING EXPENSES, BUT
THE INDEXES DO NOT HAVE EXPENSES, WHICH WOULD HAVE LOWERED THEIR PERFORMANCE.
(16)THE S&P 500 INDEX(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE MSCI-EAFE INDEX REFLECTS THE
PERFORMANCE OF COMMON STOCKS FOR EUROPE, AUSTRALASIA AND THE FAR EAST. THE
INDEXES ARE NOT MANAGED; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT
MANAGEMENT FEES AND OTHER EXPENSES ASSOCIATED WITH THE FUND INCLUDING FRONT-END
SALES CHARGES AND CDSC. INVESTORS CANNOT INVEST DIRECTLY IN ANY MARKET INDEX.
FOREIGN INVESTMENTS ENTAIL SPECIAL RISKS, INCLUDING CURRENCY EXCHANGE RATE
FLUCTUATIONS, AS WELL AS DIFFERENCES IN FOREIGN ACCOUNTING AND SECURITIES
REGULATION.
FOREIGN INVESTMENTS ENTAIL SPECIAL RISKS, INCLUDING POLITICAL UNCERTAINTY AND
CURRENCY EXCHANGE RATE FLUCTUATIONS, AS WELL AS DIFFERENCES IN SECURITIES
REGULATION AND ACCOUNTING PRACTICES.
FUND MANAGEMENT
[PHOTOGRAPH OF BRIAN B. HAYWARD OMITTED]
BRIAN B. HAYWARD, CFA
BRIAN HAYWARD IS A SENIOR VICE PRESIDENT OF INVESCO FUNDS GROUP. PRIOR TO
JOINING INVESCO IN 1997, HE WAS A SENIOR EQUITY ANALYST FOR MISSISSIPPI VALLEY
ADVISORS. BRIAN HAS A BA IN MATHEMATICS AND AN MA IN ECONOMICS FROM THE
UNIVERSITY OF MISSOURI. HE IS ALSO A CHARTERED FINANCIAL ANALYST CHARTERHOLDER
AND BEGAN HIS INVESTMENT CAREER IN 1985.
In our opinion, the fund currently emphasizes the telecom sector's best growth
opportunities, such as cable and satellite television service, as well as
wireless communications services providers. In the equipment industry, although
our exposure is small, it is concentrated in companies that primarily sell to
the purveyors of broadband service and data traffic -- two areas that stand to
benefit from the recent FCC ruling. Finally, we plan to maintain a relatively
small exposure to the RBOCs.
LINE GRAPH: INVESCO TELECOMMUNICATIONS FUND - CLASS A & B, GROWTH OF $10,000(15)
This line graph compares the value of a $10,000 investment in INVESCO
Telecommunications Fund - Class A and the value of a $10,000 investment in
INVESCO Telecommunications Fund - Class B to the value of a $10,000 investment
in the S&P 500 Index(R)(16), and to the value of a $10,000 investment in the
MSCI EAFE Index(16), assuming in each case reinvestment of all dividends and
capital gain distributions, and in the cases of INVESCO Telecommunications Fund
- - Class A and Class B, inclusion of front-end sales charge and contingent
deferred sales charge, respectively, for the period since inception (4/02)
through 3/31/03.
INVESCO TELECOMMUNICATIONS INVESCO TELECOMMUNICATIONS S&P 500 MSCI EAFE
FUND - CLASS A FUND - CLASS B INDEX(R)(16) INDEX(16)
4/02 $10,000 $10,000 $10,000 $10,000
3/03 $ 6,055 $ 5,884 $ 7,525 $ 7,670
LINE GRAPH: INVESCO TELECOMMUNICATIONS FUND - CLASS C GROWTH OF $10,000(15)
This line graph compares the value of a $10,000 investment in INVESCO
Telecommunications Fund - Class C to the value of a $10,000 investment in the
S&P 500 Index(R)(16), and to the value of a $10,000 investment in the MSCI EAFE
Index(16), assuming in each case reinvestment of all dividends and capital gain
distributions, and in the case of INVESCO Telecommunications Fund - Class C,
inclusion of contingent deferred sales charge, for the period since inception
(2/00) through 3/31/03.
INVESCO TELECOMMUNICATIONS
FUND - CLASS C S&P 500 INDEX(R)(16) MSCI EAFE INDEX(16)
2/00 $10,000 $10,000 $10,000
3/00 $10,859 $10,978 $10,390
3/01 $ 4,159 $ 8,599 $ 7,723
3/02 $ 2,124 $ 8,620 $ 7,121
3/03 $ 1,355 $ 6,486 $ 5,461
LINE GRAPH: INVESCO TELECOMMUNICATIONS FUND - CLASS K GROWTH OF $10,000(15)
This line graph compares the value of a $10,000 investment in INVESCO
Telecommunications Fund - Class K to the value of a $10,000 investment in the
S&P 500 Index(R)(16), and to the value of a $10,000 investment in the MSCI EAFE
Index(16), assuming in each case reinvestment of all dividends and capital gain
distributions, for the period since inception (12/00) through 3/31/03.
INVESCO TELECOMMUNICATIONS
FUND - CLASS K S&P 500 INDEX(R)(16) MSCI EAFE INDEX(16)
12/00 $10,000 $10,000 $10,000
3/01 $ 6,533 $ 8,858 $ 8,943
3/02 $ 3,376 $ 8,879 $ 8,245
3/03 $ 2,169 $ 6,682 $ 6,324
YOUR FUND'S REPORT
UTILITIES FUND
FUND PERFORMANCE
DEAR SHAREHOLDER:
The bear market in stocks persisted during the fund's fiscal year, as investors
were faced with a number of unnerving developments. The summer saw several
corporate accounting scandals and persistent economic weakness that kept
investors on their heels. The second half of the period was dominated by rising
tensions between the U.S. and Iraq. Together, these developments translated into
another poor year for equities.
- --------------------------------------------------------------------------------
UTILITIES FUND --
TOP 10 COMMON STOCK HOLDINGS
% of Total Net Assets as of 3/31/03
- --------------------------------------------------------------------------------
Entergy Corp..............................4.79%
Dominion Resources........................4.78%
FPL Group.................................4.77%
CenturyTel Inc............................4.76%
PPL Corp..................................4.74%
Cinergy Corp..............................4.71%
Exelon Corp...............................4.61%
Kinder Morgan Management LLC..............4.58%
Verizon Communications....................4.48%
Bell South................................4.34%
HOLDINGS AND COMPOSITION OF HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
NEGATIVE HEADLINES PRESSURED UTILITIES
Utilities stocks did not fare much better, as sector-specific developments had
investors rotating away from the group. Without a doubt, the event that cast the
darkest cloud over this sector was the meltdown at Enron Corp (not a fund
holding). During the summer, the Federal Energy Regulatory Commission (FERC)
discovered that the bankrupt energy trader had used a variety of questionable
tactics to manipulate energy prices in California. In response, FERC ordered all
of the companies that supplied power to California to preserve their records,
leading many investors to wonder whether other energy trading companies would
meet the same fate as Enron. Consequently, many gas utilities declined sharply,
as the market grew increasingly leery of any company with trading operations.
LINE GRAPH: INVESCO UTILITIES FUND - INVESTOR CLASS GROWTH OF $10,000(17)
This line graph compares the value of a $10,000 investment in INVESCO Utilities
Fund - Investor Class to the value of a $10,000 investment in the S&P 500
Index(R)(18), and to the value of a $10,000 investment in the S&P Utilities
Index(R)(18), assuming in each case reinvestment of all dividends and capital
gain distributions, for the ten year period ended 3/31/03.
INVESCO UTILITIES
FUND - INVESTOR CLASS S&P 500 INDEX(R)(18) S&P UTILITIES INDEX(R)(18)
3/93 $10,000 $10,000 $10,000
3/94 $10,571 $10,146 $ 9,057
3/95 $10,489 $11,723 $ 9,485
3/96 $13,043 $15,482 $11,702
3/97 $13,820 $18,551 $12,182
3/98 $20,137 $27,448 $16,611
3/99 $22,301 $32,523 $16,345
3/00 $30,300 $38,354 $17,624
3/01 $25,700 $30,043 $23,954
3/02 $17,133 $30,115 $18,536
3/03 $13,537 $22,661 $12,158
Compared to the first half of the period, the past six months were relatively
quiet. Aside from liquidity problems faced by three utilities in February, the
sector largely faded from the headlines, and performance stabilized
dramatically.
AN INHOSPITABLE REGULATORY ENVIRONMENT HURT TELECOM
Accounting irregularities also affected the telecommunications utilities. With
investors already anxious that the prevailing economic softness had dampened the
group's financial prospects, the telecom sector took another blow when
accounting fraud surfaced at WorldCom (not a fund holding) in June.
Unfortunately, that was not the end of the bad news for the telecom service
providers. In February, the Federal Communications Commission (FCC) maintained a
regulation that forces the regional Bell operating companies (RBOCs) to offer
competitors access to their networks at wholesale rates. This decision surprised
many investors, and the RBOCs declined sharply in response.
For the year ended March 31, 2003, the value of Utilities Fund-Investor Class
shares declined 20.99%, which outperformed the 24.75% decline posted by the S&P
500 Index.(R) (Of course, past performance is not a guarantee of future
results.)(17),(18) For performance of other share classes, please see page 2.
The fund's emphasis on electric utilities, such as Southern Co, worked well for
the portfolio, as the electrics have handily outperformed their gas
counterparts. The fact that we have, for the most part, avoided or had minimal
exposure to some of the sector's high-profile blow-ups has also supported
relative performance. The fund's lone water utility, Philadelphia Suburban,
enjoyed strong results as well. Additionally, the fund's small bond holdings
contributed to its relative performance.
The fund had its share of laggards. Although we emphasized more conservative
electric utilities at the expense of gas utilities pipeline companies that have
extensive trading operations, even our minimal exposure to the group hindered
our annual showing. Also undermining performance were the fund's RBOCs, which,
as stated previously, endured a rough period.
Going forward, we remain cautiously optimistic about the utilities sector. The
headline risk that plagued the group throughout 2002 is likely behind us. And we
continue to believe valuations within the group remain reasonable. Furthermore,
the legislative and regulatory environment also appears favorable, as the
proposed changes to the tax treatment of dividends could increase investors'
appetite for dividend-paying stocks.
Fundamentally, there are reasons to be optimistic about the utilities sector in
the near term. For example, the past winter was colder than normal, which
increases demand for power. Furthermore, although natural gas prices have
declined since their recent highs, they remain high by historical standards.
Even then, higher gas prices support higher electricity prices, which could
provide a fundamental cushion for companies that are well hedged.
As for the portfolio, our strategy has not changed. We continue to look for
opportunities to increase the fund's diversification within the sector. Our
focus remains on finding and investing in companies with strong balance sheets,
liquidity, and attractive prospects for delivering a competitive total return.
As such, we do not anticipate making any significant changes. We are currently
searching the sector for cheaper firms that might have faced issues in the past,
but that have now rectified them and could see their stocks revalued higher as a
result
LINE GRAPH: INVESCO UTILITIES FUND - CLASS A & B GROWTH OF $10,000(17)
This line graph compares the value of a $10,000 investment in INVESCO Utilities
Fund - Class A and the value of a $10,000 investment in INVESCO Utilities Fund -
Class B to the value of a $10,000 investment in the S&P 500 Index(R)(18), and to
the value of a $10,000 investment in the S&P 500 Utilities Index(R)(18),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the cases of INVESCO Utilities Fund - Class A and Class B,
inclusion of front-end sales charge and contingent deferred sales charge,
respectively, for the period since inception (4/02) through 3/31/03.
INVESCO UTILITIES INVESCO UTILITIES S&P 500 S&P 500 UTILITIES
FUND - CLASS A FUND - CLASS B INDEX(R)(18) INDEX(R)(18)
4/02 $10,000 $10,000 $10,000 $10,000
3/03 $ 7,461 $ 7,333 $ 7,525 $ 6,559
LINE GRAPH: INVESCO UTILITIES FUND - CLASS C GROWTH OF $10,000(17)
This line graph compares the value of a $10,000 investment in INVESCO Utilities
Fund - Class C to the value of a $10,000 investment in the S&P 500 Index(R)(18),
and to the value of a $10,000 investment in the S&P Utilities Index(R)(18),
assuming in each case reinvestment of all dividends and capital gain
distributions, and in the case of INVESCO Utilities Fund - Class C, inclusion of
contingent deferred sales charge, for the period since inception (2/00) through
3/31/03.
INVESCO UTILITIES
FUND - CLASS C S&P 500 INDEX(R)(18) S&P UTILITIES INDEX(R)(18)
2/00 $10,000 $10,000 $10,000
3/00 $10,258 $10,978 $10,333
3/01 $ 8,633 $ 8,599 $14,045
3/02 $ 5,709 $ 8,620 $10,868
3/03 $ 4,462 $ 6,486 $ 7,128
(17)PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. TOTAL RETURN ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT, WHEN REDEEMED, AN INVESTOR'S SHARES MAY
BE WORTH MORE OR LESS THAN WHEN PURCHASED. THE LINE GRAPHS ILLUSTRATE THE VALUE
OF A $10,000 INVESTMENT, PLUS REINVESTED DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ALONG WITH APPLICABLE FUND INCLUDING FRONT-END SALES CHARGES AND
CDSC. THE CHARTS AND OTHER TOTAL RETURN FIGURES CITED REFLECT THE FUND'S
OPERATING EXPENSES, BUT THE INDEXES DO NOT HAVE EXPENSES, WHICH WOULD HAVE
LOWERED THEIR PERFORMANCE.
(18)THE S&P 500 Index(R) IS AN UNMANAGED INDEX OF THE 500 LARGEST COMMON STOCKS
(IN TERMS OF MARKET VALUE), WEIGHTED BY MARKET CAPITALIZATION AND CONSIDERED
REPRESENTATIVE OF THE BROAD STOCK MARKET. THE S&P 500 UTILITIES INDEX IS
CONSIDERED REPRESENTATIVE OF EQUITIES IN THE UTILITY SECTOR. THE INDEXES ARE NOT
MANAGED; THEREFORE, THEIR PERFORMANCE DOES NOT REFLECT MANAGEMENT FEES AND OTHER
EXPENSES ASSOCIATED WITH THE FUND INCLUDING FUND INCLUDING FRONT-END SALES
CHARGES AND CDSC. INVESTORS CANNOT INVEST DIRECTLY IN ANY MARKET INDEX.
PIE CHART: UTILITIES FUND
INDUSTRY BREAKDOWN
AS OF 3/31/03
[PIE CHART]
% OF TOTAL NET ASSETS
Electric Utilities............69.11%
Integrated Telecommunication
Services......................17.53%
Natural Gas Pipelines..........5.78%
Gas Utilities..................2.23%
Water Utilities................2.17%
Net Cash & Cash Equivalents....3.18%
FUND MANAGEMENT
JEFFREY G. MORRIS, CFA
JEFF MORRIS IS A VICE PRESIDENT OF INVESCO FUNDS GROUP. HE RECEIVED A BS FROM
COLORADO STATE UNIVERSITY AND AN MS FROM UNIVERSITY OF COLORADO-DENVER. JEFF IS
A CHARTERED FINANCIAL ANALYST CHARTERHOLDER AND BEGAN HIS INVESTMENT CAREER IN
1991.
QUESTIONS & ANSWERS
AN INTERVIEW WITH HEALTH SCIENCES FUND MANAGER TOM WALD
[PHOTOGRAPH OF TOM WALD OMITTED]
TOM WALD IS A VICE PRESIDENT AND FUND MANAGER OF INVESCO HEALTH SCIENCES FUND
KEEPING PACE WITH THE DYNAMIC HEALTH CARE SECTOR
THE HEALTH CARE SECTOR -- THOUGH RELATIVELY IMMUNE TO THE WAR WORRIES AND
ECONOMIC UNCERTAINTY THAT HAVE HURT OTHER AREAS -- HAS ENDURED ITS SHARE OF
CHANGES THESE PAST SIX MONTHS. WHAT WERE SOME OF THE KEY EVENTS AFFECTING
PERFORMANCE FOR THE SECTOR?
TOM WALD: Probably the most significant event was the market rotation out of
health services stocks, which had been doing well until late last year. At the
end of October 2002, hospital chain Tenet Healthcare came under regulatory fire.
Questions concerning whether the company had been over-billing Medicare suddenly
surfaced, and this controversy soured investors on hospitals and HMOs across the
sector. On top of that, the stock market rebounded in the fourth quarter, and,
generally speaking, defensive stocks that had performed well during the bear
market (including health services stocks) took a hit as investors began taking
profits from these companies and investing elsewhere.
With the Tenet blow-up, we recognized that the market had not properly
discounted the regulatory risk that is typically involved with health services
stocks. This is a risk we first saw about five years ago with HCA Inc (back then
called Columbia), which ran into Medicare fraud problems at that time, scaring
the market and showing that hospitals face systemic issues with Medicare
pricing. That event -- along with reductions in Medicare reimbursements in the
budget around 1997-98 -- hindered the performance of hospital stocks.
Then, through the middle of 2002, we saw these companies rebound and enjoy
outstanding performance -- a lot of it predicated on changing demographics as
more U.S. citizens moved toward senior citizen age, which kept political leaders
funding Medicare in an effort to satisfy their constituencies. A
Democratic-controlled Congress also helped keep funding for Medicare strong.
In retrospect, the market probably got carried away during these years,
downplaying the regulatory risk hospital stocks face. The market also overlooked
the liquidity risk associated with hospitals. After the Tenet debacle, it became
clear that hospital stocks weren't liquid enough to handle the sell-off -- even
those fundamentally strong companies within the space that were simply falling
in sympathy with Tenet.
In light of this shift, we opted to decrease our portfolios' exposure to health
services during the period and focus on other areas. It seemed like a good time
to reposition the fund not only because of the rotation, but also because the
midterm elections yielded a Republican-controlled Congress. At least for the
time being, the issue of how Medicare will fare in the budget remains in
question.
WITH HEALTH SERVICES STOCKS PULLING BACK, WERE THERE ANY AREAS OF THE SECTOR
THAT PROVIDED SOME BALLAST?
TOM WALD: Yes, fortunately, the health care sector is diverse, and some other
industries fared quite well. After trimming our exposure to health services, we
moved a considerable portion of assets into large-cap pharmaceuticals. Six
months ago, these companies were facing a lot of obstacles -- most notably,
expiring patents and competition from generic manufacturers -- but the long-term
picture has since brightened.
What we're seeing now is that the worst of the generic competition appears to
have been played out, and earnings comparisons for many pharmaceuticals have
therefore improved now that they've put some big losses behind them. Moreover,
we expect to see a wave of new products in late 2003 or early 2004, which should
provide a boost to the industry. And, for the first time in 40 years, dividend
yields on drug stocks are above those for short-term Treasuries -- suggesting
that there's probably less downside risk for these stocks than there has been in
some time. Therefore, I think it's less a question of whether you want to own
these stocks, and more a question of WHEN you want to own these stocks.
We're also bullish on the medical devices industry -- especially companies in
the drug-coated stent market. Drug-coated stents are devices used to open
arteries and keep them unclogged. We believe that this is the biggest new
therapeutic market to emerge -- and it could dominate the health care sector for
several years to come.
FOREST LABORATORIES IS ONE HEALTH CARE STOCK THAT SEEMS TO CONSISTENTLY
OUTPERFORM. WHAT HAS FUELED THIS COMPANY'S GROWTH OVER THE PAST YEAR?
TOM WALD: Forest Laboratories has been one of our largest holdings for some time
now, and it continued to perform well this reporting period. The company
continues to grow its earnings and beat Wall Street estimates. The company has
enjoyed tremendous success with its anti-depressant drugs, Lexapro and Celexa.
In addition, Forest has shown a strong pace of development for a new Alzheimer's
drug called Memantine, which we expect to be approved by the Food and Drug
Administration (FDA) within the next year or so. Memantine is likely to be the
best-in-class treatment for that disease, and the clinical research is promising
so far. Forest is an example of a company that has succeeded on many levels:
It's had great financial results, great product results, and boasts a strong
line-up of potential new products. Plus, Forest is a smaller firm, so positive
results have had a major affect on its earnings.
YOU MENTIONED THE FDA. FOR MOST OF 2002, PRODUCT APPROVALS WERE SLOW IN COMING.
WHAT ARE YOUR THOUGHTS ON THE FDA AT THIS JUNCTURE?
TOM WALD: For a while, the FDA was operating without a commissioner, and it took
some time to appoint someone. No one wanted to be held accountable for the next
Fen-Phen (a weight loss drug that wound up having life-threatening side effects
post-FDA approval). In late 2002, Mark McClellan was appointed. It's difficult
to judge what kind of effect his presence will have, but the market responded to
the news of his appointment positively.
We're encouraged that there appears to be strong leadership at the agency, and
the drug approval process has smoothed out a bit since his appointment. We think
that companies with promising propriety product pipelines will continue to be
well positioned for growth going forward.
ARE THERE ANY OTHER FACTORS ON YOUR RADAR SCREEN THAT COULD AFFECT THE HEALTH
CARE SECTOR GOING FORWARD?
TOM WALD: Another pertinent event involved the shift in leadership from a
Democratic to a Republican-controlled Congress during the mid-term elections
last November. While it's tough to gauge what the long-term effects of this
change might be, we'll be watching for any increases or decreases in the
Medicare portion of the federal budget. It will also be interesting to see
whether Medicare drug reimbursement legislation is passed, and, if so, how such
legislation might be structured.
"... FOR THE FIRST TIME IN 40 YEARS, DIVIDEND YIELDS ON DRUG STOCKS ARE ABOVE
THOSE FOR SHORT-TERM TREASURIES - SUGGESTING THAT THERE'S PROBABLY LESS DOWNSIDE
RISK FOR THESE STOCKS THAN THERE HAS BEEN IN SOME TIME."
SECTOR FUNDS MAY EXPERIENCE GREATER PRICE VOLATILITY THAN MORE DIVERSIFIED
EQUITY FUNDS DUE TO HIGHER INDUSTRY CONCENTRATIONS, AND ARE MOST SUITABLE FOR
THE AGGRESSIVE PORTION OF AN INVESTMENT PORTFOLIO.
MARKET HEADLINES
"OVERALL, FEW ECONOMIC ANALYSTS FORESEE A FOURTH YEAR OF BROAD STOCK DECLINES,
BUT IT WILL LIKELY TAKE SOME DECISIVE AND LASTING SIGNS OF IMPROVEMENT BEFORE
INVESTORS REGAIN CONFIDENCE."
MARKET OVERVIEW:
APRIL 2002 THROUGH MARCH 2003
After two years of declines in the stock market, investors had hoped to see an
improvement in 2002 -- or at least in the first quarter of 2003. Instead, the
market continued downward, with the major stock indexes registering sharp losses
for the 12-month period ended March 31, 2003.
There were a number of factors responsible for the year's decline. First, a
series of corporate accounting scandals dominated the news well into summer
2002, tainting investors' perception of the market. Talk of Enron's collapse
lingered -- and new scandals surrounding companies such as WorldCom Inc, Tyco
International Ltd, and HealthSouth Corp followed. Furthermore, geopolitical
uncertainty persisted throughout the year to varying degrees as threats of
terrorist attacks, a nuclear standoff between India and Pakistan, speculation
regarding the U.S.'s intentions toward Iraq, and North Korea's refusal to obey a
1994 arms agreement all clouded the landscape. In addition, oil prices surged,
as inventories were pressured by strikes in Venezuela, violence in Nigeria, and
concerns over a potential war with Iraq.
In addition, a generally weak economy and disappointing corporate earnings were
ongoing stories. Although a few rallies were ignited by hopes that a recovery
might be forthcoming -- most notably, a two-month surge that began on October
10, a week-long rally during the first days of January 2003, and a mini-rebound
in mid-March on the heels of the long-awaited start to the war in Iraq -- they
could not be sustained in such an uncertain environment.
Meanwhile, investors flocked to investments with a defensive reputation during
the year. Fixed-income securities advanced, benefiting from the
flight-to-quality trend as well as the Federal Reserve's decision to leave
interest rates unchanged until November, when a surprisingly steep
50-basis-point cut was implemented. Gold stocks and real estate investment
trusts were other top performers. Conversely, high-growth sectors, including
technology and telecommunications, declined.
As the fund's fiscal period came to a close, investors were still seeking
direction. On the one hand, some uncertainty was put to rest once American-led
coalition forces took up arms in Iraq. However, new questions regarding the
duration of the war and the rebuilding process have recently surfaced. There are
also concerns about the state of the U.S. economy.
Once the cloud of war lifts, investors will be watching to see whether corporate
spending, consumer confidence, and other important measures improve as most
analysts expect. Investors are also hoping that the newly elected
Republican-majority Congress and President Bush's economic plan -- which
includes a proposal for the elimination of individual taxes on dividends -- will
foster business-friendly fiscal policy going forward. Overall, few economic
analysts foresee a fourth year of broad stock declines, but it will likely take
some decisive and lasting signs of improvement before investors regain
confidence.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
INVESCO Sector Funds, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the statement of investment securities, 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 INVESCO Energy Fund, INVESCO
Financial Services Fund, INVESCO Gold & Precious Metals Fund, INVESCO Health
Sciences Fund, INVESCO Leisure Fund, INVESCO Real Estate Opportunity Fund,
INVESCO Technology Fund, INVESCO Telecommunications Fund and INVESCO Utilities
Fund (constituting INVESCO Sector Funds, Inc., hereafter referred to as the
"Fund") at March 31, 2003, the results of each of their operations for the year
then ended, the changes in each of their 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 auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 2003 by
correspondence with the custodian, transfer agent and brokers, and the
application of alternative auditing procedures where securities purchased had
not been received, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Denver, Colorado
April 30, 2003
FS-1
INVESTMENT HOLDINGS
STATEMENT OF INVESTMENT SECURITIES
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
ENERGY FUND
96.32 COMMON STOCKS
0.60 GAS UTILITIES
Equitable Resources 40,000 $ 1,500,400
==========================================================================================
25.06 INTEGRATED OIL & GAS
BP PLC Sponsored ADR
Representing 6 Ord Shrs UK 276,000 10,650,840
ChevronTexaco Corp 88,000 5,689,200
ConocoPhillips 165,000 8,844,000
Eni SpA Sponsored ADR
Representing 5 Ord Shrs(a) IT 82,000 5,475,140
Murphy Oil 300,000 13,251,000
Occidental Petroleum 165,000 4,943,400
Royal Dutch Petroleum New York
Registry 1.25 Gldr Shrs NL 135,000 5,501,250
TotalFinaElf SA Sponsored ADR
Representing 1/2 Ord Shr FR 137,000 8,667,990
==========================================================================================
63,022,820
3.48 NATURAL GAS PIPELINES
Enbridge Energy Management LLC 220,000 8,756,000
==========================================================================================
11.09 OIL & GAS DRILLING
Atwood Oceanics(b) 165,300 4,172,172
Grey Wolf(b) 400,000 1,576,000
Nabors Industries Ltd(b) BD 260,000 10,366,200
Noble Corp(b) 198,000 6,221,160
Rowan Cos 282,000 5,544,120
==========================================================================================
27,879,652
28.73 OIL & GAS EQUIPMENT & SERVICES
Baker Hughes 170,000 5,088,100
BJ Services(b) 160,000 5,502,400
Cal Dive International(b) 430,000 7,744,300
Cooper Cameron(b) 111,000 5,495,610
FMC Technologies(b) 289,100 5,550,720
Grant Prideco(b) 708,200 8,540,892
Halliburton Co 265,000 5,493,450
Lone Star Technologies(b) 388,600 8,207,232
Maverick Tube(b) 300,000 5,580,000
National-Oilwell Inc(b) 115,000 2,574,850
Schlumberger Ltd NL 100,000 3,801,000
Weatherford International Ltd(b) BD 230,000 8,687,100
==========================================================================================
72,265,654
21.65 OIL & GAS EXPLORATION,
PRODUCTION & TRANSPORTATION
Apache Corp 145,200 8,964,648
Burlington Resources 111,000 5,295,810
Devon Energy 55,000 2,652,100
FS-2
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
EnCana Corp CA 160,000 $ 5,177,600
Forest Oil(b) 228,000 5,084,400
Kerr-McGee Corp 132,000 5,360,520
Pioneer Natural Resources(b) 405,000 10,165,500
Remington Oil & Gas(b) 150,000 2,554,500
Talisman Energy CA 232,000 9,201,120
==========================================================================================
54,456,198
5.71 OIL & GAS REFINING & MARKETING
Sunoco Inc 195,000 7,131,150
Valero Energy 175,000 7,241,500
==========================================================================================
14,372,650
TOTAL COMMON STOCKS (COST $220,616,631) 242,253,374
==========================================================================================
9.34 SHORT-TERM INVESTMENTS
7.56 COMMERCIAL PAPER
3.98 CONSUMER RECEIVABLES
New Center Asset Trust, Series 1,
Discount Notes 1.420%, 4/1/2003 $ 10,000,000 10,000,000
==========================================================================================
3.58 DIVERSIFIED FINANCIAL SERVICES
State Street Boston, Discount Notes,
1.390%, 4/1/2003 $ 9,000,000 9,000,000
==========================================================================================
TOTAL COMMERCIAL PAPER (Amortized Cost
$19,000,000) 19,000,000
==========================================================================================
1.64 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$4,139,034) 4,139,034 4,139,034
==========================================================================================
0.14 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $360,012 (Collateralized
by Federal Home Loan Bank, Discount Notes,
due 4/1/2003, value $370,000) (Cost
$360,000) $ 360,000 360,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $23,499,034) 23,499,034
==========================================================================================
105.66 TOTAL INVESTMENTS AT VALUE
(COST $244,115,665) 265,752,408
==========================================================================================
(5.66) OTHER ASSETS LESS LIABILITIES (14,240,725)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 251,511,683
==========================================================================================
FINANCIAL SERVICES FUND
96.51 COMMON STOCKS
39.50 BANKS
Bank of America 690,700 $ 46,166,388
Bank of New York 817,400 16,756,700
Bank One 552,600 19,131,012
Charter One Financial 146,200 4,043,892
City National 43,300 1,902,602
Compass Bancshares 243,100 7,601,737
FS-3
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Fifth Third Bancorp 420,950 $ 21,106,433
First Tennessee National 154,700 6,143,137
FleetBoston Financial 436,000 10,411,680
Investors Financial Services 235,000 5,722,250
M&T Bank 178,100 13,995,098
Mellon Financial 485,400 10,319,604
National Commerce Financial 391,200 9,271,440
New York Community Bancorp 147,700 4,401,460
Northern Trust 329,300 10,027,185
Synovus Financial 642,500 11,494,325
TCF Financial 362,700 14,522,508
UBS AG(b) 254,600 10,871,420
Wachovia Corp 836,800 28,509,776
Wells Fargo & Co 910,700 40,972,393
Zions Bancorp 87,300 3,734,694
==========================================================================================
297,105,734
5.17 CONSUMER FINANCE
Fannie Mae 150,900 9,861,315
Freddie Mac 279,400 14,836,140
SLM Corp 127,600 14,153,392
==========================================================================================
38,850,847
0.17 DATA PROCESSING SERVICES
Concord EFS(b) 138,100 1,298,140
==========================================================================================
14.19 DIVERSIFIED FINANCIAL SERVICES
Ambac Financial Group 399,100 20,162,532
American Express 613,300 20,379,959
Citigroup Inc 1,172,000 40,375,400
Franklin Resources 233,300 7,677,903
Goldman Sachs Group 124,000 8,441,920
Moody's Corp 81,800 3,781,614
Prudential Financial 200,800 5,873,400
==========================================================================================
106,692,728
2.23 INSURANCE BROKERS
Marsh & McLennan 393,300 16,766,379
==========================================================================================
13.55 INVESTMENT ADVISER/BROKER DEALER SERVICES
Eaton Vance 165,700 4,429,161
Federated Investors Class B Shrs 336,950 8,575,377
Legg Mason 237,300 11,566,002
Lehman Brothers Holdings 403,100 23,279,025
Merrill Lynch & Co 1,080,000 38,232,000
Morgan Stanley 413,400 15,853,890
==========================================================================================
101,935,455
2.88 LIFE & HEALTH INSURANCE
AFLAC Inc 306,800 9,832,940
Lincoln National 70,700 1,979,600
Nationwide Financial Services Class A Shrs 91,000 2,217,670
Principal Financial Group 280,300 7,607,342
==========================================================================================
21,637,552
FS-4
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
6.78 MULTI-LINE INSURANCE
American International Group 730,402 $ 36,118,379
Radian Group 446,700 14,910,846
==========================================================================================
51,029,225
5.79 PROPERTY & CASUALTY INSURANCE
Allstate Corp 506,500 16,800,605
PMI Group 74,900 1,913,695
SAFECO Corp 383,100 13,397,007
St Paul 359,500 11,432,100
==========================================================================================
43,543,407
1.67 REAL ESTATE INVESTMENT TRUSTS
iStar Financial 430,900 12,569,353
==========================================================================================
4.58 REINSURANCE
Endurance Specialty Holdings Ltd(b) 166,200 4,020,378
PartnerRe Ltd 226,300 11,371,575
Platinum Underwriters Holdings Ltd 388,500 9,848,475
RenaissanceRe Holdings Ltd 230,200 9,219,510
==========================================================================================
34,459,938
TOTAL COMMON STOCKS (COST $693,290,685) 725,888,758
==========================================================================================
3.40 SHORT-TERM INVESTMENTS
3.33 COMMERCIAL PAPER -- CONSUMER RECEIVABLES
New Center Asset Trust, Series 1, Discount
Notes 1.420%, 4/1/2003 (Amortized Cost
$25,000,000) $ 25,000,000 25,000,000
==========================================================================================
0.07 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $533,018 (Collateralized
by Federal Home Loan Bank, Discount Notes,
due 4/1/2003, value $545,000) (Cost
$533,000) $ 533,000 533,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $25,533,000) 25,533,000
==========================================================================================
99.91 TOTAL INVESTMENTS AT VALUE
(COST $718,823,685) 751,421,758
==========================================================================================
0.09 OTHER ASSETS LESS LIABILITIES 692,085
==========================================================================================
100.00 NET ASSETS AT VALUE $ 752,113,843
==========================================================================================
GOLD & PRECIOUS METALS FUND
85.12 COMMON STOCKS & RIGHTS
14.22 DIVERSIFIED METALS & MINING
Apollo Gold(a)(b) CA 1,300,000 $ 3,084,401
Freeport McMoRan Copper & Gold Class B
Shrs(b) 245,000 4,177,250
Gold Fields Ltd Sponsored ADR Representing
Ord Shrs SF 450,000 4,725,000
North American Palladium Ltd(b) CA 200,000 503,076
Solitario Resources(b) CA 631,000 274,544
FS-5
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Teck Cominco Ltd Class B Shrs(a) CA 280,000 $ 2,120,534
==========================================================================================
14,884,805
59.64 GOLD
Agnico-Eagle Mines Ltd(a) CA 404,000 5,296,440
AngloGold Ltd Sponsored ADR
Representing Ord Shrs SF 117,000 3,531,060
Ashanti Goldfields Ltd GDR
Representing Ord Shrs(b) GH 660,000 3,748,800
Barrick Gold CA 315,000 4,901,400
Chesapeake Gold(b) CA 182,700 444,655
Claude Resources(b) CA 305,100 292,458
Glamis Gold Ltd(a)(b) CA 800,000 8,272,000
Glamis Gold Ltd Rights(b)
(to purchase Cmn Shrs) CA 226,700 0
Goldcorp Inc CA 295,000 3,129,950
Harmony Gold Mining Ltd Sponsored ADR
Representing Ord Shrs SF 300,000 3,669,000
IAMGOLD Corp(a) CA 1,200,000 5,221,117
Kinross Gold(b) CA 700,000 4,301,982
Meridian Gold(b) CA 500,000 4,725,000
Newmont Mining 195,000 5,099,250
Pacific Rim Mining(b) CA 1,254,900 409,499
Placer Dome CA 505,000 4,949,000
Rio Narcea Gold Mines Ltd(b) CA 515,900 736,524
Wheaton River Minerals Ltd(a)(b) CA 4,400,000 3,709,168
==========================================================================================
62,437,303
11.26 PRECIOUS METALS & MINERALS
Aber Diamond(b) CA 230,000 4,270,233
Compania de Minas Buenaventura SA Sponsored
ADR Representing Series B Shrs PE 160,000 4,000,000
Impala Platinum Holdings Ltd SF 49,000 2,496,379
SouthernEra Resources Ltd(b) CA 250,000 1,019,749
==========================================================================================
11,786,361
TOTAL COMMON STOCKS & RIGHTS (COST
$75,551,902) 89,108,469
==========================================================================================
2.37 PREFERRED STOCKS -- DIVERSIFIED METALS & MINING
Freeport McMoRan Copper & Gold Depository
Shrs Representing 1/20 Series Gold Pfd Shr
(Cost $1,405,625) 75,000 2,482,500
==========================================================================================
4.83 OTHER SECURITIES -- GOLD BULLION
Gold Bullion(b) (Cost $4,266,114) 14,974(d) 5,051,577
==========================================================================================
18.99 SHORT-TERM INVESTMENTS
10.84 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$11,344,418) 11,344,418 11,344,418
==========================================================================================
FS-6
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
8.15 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $8,531,291 (Collateralized
by Federal Home Loan Bank, Discount
Notes, due 4/1/2003, value $8,705,000)
(Cost $8,531,000) $ 8,531,000 $ 8,531,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(COST $19,875,418) 19,875,418
==========================================================================================
111.31 TOTAL INVESTMENTS AT VALUE
(COST $101,099,059) 116,517,964
==========================================================================================
(11.31) OTHER ASSETS LESS LIABILITIES (11,841,514)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 104,676,450
==========================================================================================
HEALTH SCIENCES FUND
98.72 COMMON STOCKS
17.69 BIOTECHNOLOGY
Amgen Inc(b) 717,200 $ 41,274,860
Biotech HOLDRs Trust(b)(e) 512,900 47,827,925
Chiron Corp(b) 295,300 11,073,750
Genentech Inc(b) 311,100 10,891,611
Genzyme Corp-General Division(b) 358,500 13,067,325
Gilead Sciences(b) 664,460 27,900,675
IDEC Pharmaceuticals(b) 208,500 7,176,362
MedImmune Inc(b) 360,800 11,845,064
==========================================================================================
171,057,572
0.99 HEALTH CARE DISTRIBUTORS & SERVICES
McKesson Corp 385,500 9,610,515
==========================================================================================
18.93 HEALTH CARE EQUIPMENT
Biomet Inc 398,600 12,217,090
Boston Scientific(b) 576,440 23,495,694
C.R. Bard 407,100 25,671,726
Edwards Lifesciences(b) 403,800 11,064,120
Guidant Corp(b) 565,600 20,474,720
Medtronic Inc 589,500 26,598,240
Stryker Corp 168,500 11,567,525
Varian Medical Systems(b) 458,180 24,709,647
Zimmer Holdings(b) 559,262 27,196,911
==========================================================================================
182,995,673
1.43 HEALTH CARE FACILITIES
HCA Inc 131,120 5,423,123
Health Management Associates Class A Shrs 299,300 5,686,700
Triad Hospitals(b) 102,100 2,746,490
==========================================================================================
13,856,313
2.34 HEALTH CARE SUPPLIES
Alcon Inc(b) 462,150 18,957,393
FS-7
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Smith & Nephew PLC 605,100 $ 3,701,467
==========================================================================================
22,658,860
1.37 HOUSEHOLD PRODUCTS
Procter & Gamble 149,300 13,295,165
==========================================================================================
1.39 MANAGED HEALTH CARE
First Health Group(b) 257,840 6,559,450
UnitedHealth Group 74,600 6,838,582
==========================================================================================
13,398,032
54.58 PHARMACEUTICALS
Abbott Laboratories 1,058,830 39,822,596
AmerisourceBergen Corp 173,925 9,131,063
Barr Laboratories(b) 269,700 15,372,900
Bristol-Myers Squibb 1,778,100 37,571,253
Eli Lilly & Co 685,700 39,187,755
Forest Laboratories(b) 859,084 46,364,763
GlaxoSmithKline PLC Sponsored ADR
Representing 2 Ord Shrs 658,700 23,179,653
Johnson & Johnson 818,462 47,364,396
Merck & Co 767,100 42,021,738
Novartis AG Sponsored ADR
Representing Ord Shrs 881,700 32,675,802
Pfizer Inc 980,151 30,541,505
Pharmaceutical HOLDRs Trust(a)(e)(f) 578,400 42,888,360
Pharmaceutical Resources(b) 323,500 13,742,280
Pharmacia Corp 808,307 34,999,693
Teva Pharmaceutical Industries Ltd Sponsored
ADR Representing Ord Shrs 753,140 31,368,281
Wyeth 1,096,600 41,473,412
==========================================================================================
527,705,450
TOTAL COMMON STOCKS (COST $821,536,195) 954,577,580
==========================================================================================
0.77 PREFERRED STOCKS
0.00 BIOTECHNOLOGY
Ingenex Inc, Conv Pfd, Series B Shrs(b)(l) 103,055 1
==========================================================================================
0.77 HEALTH CARE EQUIPMENT
Athersys Inc, Conv Pfd, Class F Shrs(b)(l) 416,667 5,416,667
Optimize Inc, Pfd, Series 5 Shrs(b)(l) 1,337,276 628,450
Scimagix Inc, Pfd, Series C Shrs(b)(l) 641,635 1,350,000
UltraGuide Inc, Pfd
Series E Shrs(b)(l) 445,050 84,560
Series F Shrs(b)(l) 50,000 9,500
==========================================================================================
7,489,177
TOTAL PREFERRED STOCKS (Cost $9,078,452) 7,489,178
==========================================================================================
2.96 SHORT-TERM INVESTMENTS
2.50 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$24,193,400) 24,193,400 24,193,400
==========================================================================================
FS-8
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
0.46 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $4,424,151 (Collateralized
by Federal Home Loan Bank, Discount Notes,
due 4/1/2003, value $4,515,000) (Cost
$4,424,000) $ 4,424,000 $ 4,424,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(COST $28,617,400) 28,617,400
==========================================================================================
102.45 TOTAL INVESTMENTS AT VALUE
(COST $859,232,047) 990,684,158
==========================================================================================
(2.45) OTHER ASSETS LESS LIABILITIES (23,730,992)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 966,953,166
==========================================================================================
LEISURE FUND
96.28 COMMON STOCKS
10.18 ADVERTISING
Harte-Hanks Inc 332,450 $ 6,349,795
JC Decaux SA(b) FR 218,400 2,073,367
Omnicom Group 706,000 38,244,020
Valassis Communications(b) 541,900 14,306,160
WPP Group PLC UK 1,090,730 5,879,053
==========================================================================================
66,852,395
2.34 APPAREL, ACCESSORIES & LUXURY GOODS
Jones Apparel Group(b) 256,900 7,046,767
Polo Ralph Lauren Class A Shrs(b) 363,400 8,321,860
==========================================================================================
15,368,627
7.95 BREWERS
Anheuser-Busch Cos 340,400 15,866,044
Carlsberg A/S Class B Shrs(a) DA 443,084 14,974,333
Diageo PLC UK 224,600 2,304,041
Heineken NV NL 477,200 17,699,295
Interbrew BE 66,535 1,347,512
==========================================================================================
52,191,225
5.10 BROADCASTING-- RADIO/TV
Belo Corp Series A Shrs 360,000 7,293,600
Clear Channel Communications(b) 124,049 4,207,742
Fox Kids Europe NV(b) NL 905,629 5,039,934
Granada PLC UK 324,208 292,102
Gray Television 640,100 5,760,900
Sinclair Broadcast Group Class A Shrs(b) 508,500 3,996,810
Spanish Broadcasting System Class A Shrs(b) 271,200 1,665,168
Television Broadcasts Ltd Sponsored ADR
Representing 2 Ord Shrs HK 154,500 946,869
Univision Communications Class A Shrs(b) 174,300 4,272,093
==========================================================================================
33,475,218
10.52 CABLE & SATELLITE OPERATORS
Cablevision Systems New York Group(b) 833,293 15,824,234
FS-9
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Comcast Corp Class A Shrs(b) 342,400 $ 9,789,216
EchoStar Communications Class A Shrs(b) 408,585 11,799,935
Liberty Media Series A Shrs(b) 3,253,914 31,660,583
==========================================================================================
69,073,968
1.59 CABLE & SATELLITE PROGRAMMERS
USA Interactive(b) 389,800 10,442,742
==========================================================================================
14.36 CASINOS & GAMING
Harrah's Entertainment(b) 982,000 35,057,400
International Game Technology(b) 588,000 48,157,200
MGM MIRAGE(b) 152,016 4,446,468
Park Place Entertainment(b) 95,200 677,824
Wynn Resorts Ltd(b) 387,700 5,986,088
==========================================================================================
94,324,980
0.37 CONSUMER ELECTRONICS
Sony Corp Sponsored ADR
Representing Ord Shrs JA 70,100 2,462,613
==========================================================================================
1.54 CRUISE LINES
Carnival Corp 268,900 6,483,179
Royal Caribbean Cruises Ltd 170,344 2,560,270
Steiner Leisure Ltd(b) 93,000 1,050,900
==========================================================================================
10,094,349
0.71 DIVERSIFIED FINANCIAL SERVICES
Pargesa Holding AG Class B Shrs SZ 2,708 4,688,831
==========================================================================================
0.66 DIVERSIFIED METALS & MINING
Anglo American PLC ADR
Representing Ord Shrs(a) UK 303,140 4,334,902
==========================================================================================
0.83 FOOTWEAR
Foot Locker 151,000 1,615,700
NIKE Inc Class B Shrs 75,000 3,856,500
==========================================================================================
5,472,200
0.71 GENERAL MERCHANDISE STORES
Target Corp 57,200 1,673,672
Tuesday Morning(b) 152,400 2,999,232
==========================================================================================
4,672,904
6.39 HOTELS & RESORTS
Accor SA FR 106,500 2,942,508
Cendant Corp(b) 563,700 7,158,990
Extended Stay America(b) 191,600 1,935,160
Hilton Hotels 605,150 7,025,791
Marriott International Class A Shrs 279,100 8,878,171
NH Hoteles SA(b) SP 418,600 3,416,687
Starwood Hotels & Resorts Worldwide
Paired Certificates SBI 445,860 10,607,009
==========================================================================================
41,964,316
0.30 INDUSTRIAL CONGLOMERATES
Campagnie Nationale a Portefeuille(a) BE 20,300 1,962,610
==========================================================================================
FS-10
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
2.58 INVESTMENT COMPANIES
iShares Trust
Russell 3000 Index Fund 185,000 $ 8,750,500
S&P 500 Index Fund 96,300 8,167,203
==========================================================================================
16,917,703
1.39 LEISURE FACILITIES
Cedar Fair LP(a) 97,800 2,437,176
Intrawest Corp CA 396,480 4,139,251
Six Flags(b) 362,500 2,030,000
Vail Resorts (b) 45,100 502,865
==========================================================================================
9,109,292
8.31 LEISURE PRODUCTS
Activision Inc(b) 88,300 1,275,935
Electronic Arts(b) 30,500 1,788,520
Hasbro Inc 138,400 1,922,376
Leapfrog Enterprises(b) 51,100 1,218,224
Mattel Inc 2,151,200 48,402,000
==========================================================================================
54,607,055
9.83 MOVIES & ENTERTAINMENT
AOL Time Warner(b) 1,169,500 12,700,770
Groupe Bruxelles Lambert SA BE 363,900 13,103,894
Metro-Goldwyn-Mayer Inc(b) 1,054,900 11,076,450
Pixar(b) 103,700 5,608,096
Regal Entertainment Group Class A Shrs 129,900 2,331,705
Viacom Inc
Class A Shrs(b) 101,880 3,718,620
Class B Shrs(b) 179,900 6,569,948
Walt Disney 556,199 9,466,507
==========================================================================================
64,575,990
7.53 PUBLISHING & PRINTING
E. W. Scripps Class A Shrs 73,300 5,551,742
Gannett Co 144,000 10,141,920
Knight-Ridder Inc 232,800 13,618,800
McClatchy Co Class A Shrs 131,900 7,068,521
McGraw-Hill Cos 76,700 4,263,753
Media General Class A Shrs 54,600 2,688,504
New York Times Class A Shrs 141,200 6,092,780
==========================================================================================
49,426,020
1.65 RESTAURANTS
CBRL Group 272,600 7,482,870
Yum! Brands(b) 136,900 3,330,777
==========================================================================================
10,813,647
0.35 SOFT DRINKS
Coca-Cola Femsa SA de CV Sponsored ADR
Representing 10 Ord Series L Shrs MX 134,500 2,305,330
==========================================================================================
0.39 SPECIALTY STORES
Hollywood Entertainment(b) 122,300 1,961,692
FS-11
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Toys "R" Us(b) 74,900 $ 626,913
==========================================================================================
2,588,605
0.10 TELECOMMUNICATIONS EQUIPMENT
General Motors Class H Shrs(b) 60,600 678,720
==========================================================================================
0.60 TOBACCO
Altria Group 130,900 3,921,764
==========================================================================================
TOTAL COMMON STOCKS (COST $575,154,170) 632,326,006
==========================================================================================
2.62 PREFERRED STOCKS
1.76 MOVIES & ENTERTAINMENT
News Corp Ltd Sponsored ADR
Representing 4 Pfd Ltd Voting Shrs AS 542,178 11,597,187
==========================================================================================
0.86 SOFT DRINKS
Companhia de Bebidas das Americas
Sponsored ADR Representing 100 Pfd Shrs BR 340,000 5,644,000
==========================================================================================
TOTAL PREFERRED STOCKS (COST $19,368,824) 17,241,187
==========================================================================================
2.97 SHORT-TERM INVESTMENTS
0.47 US GOVERNMENT OBLIGATIONS
US Government Securities(c)
(Cost $3,111,943) $ 3,111,943 3,111,943
==========================================================================================
1.61 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$10,594,794) 10,594,794 10,594,794
==========================================================================================
0.89 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $5,814,199 (Collateralized
by Federal Home Loan Bank, Discount
Notes, due 4/1/2003, value $5,935,000)
(Cost $5,814,000) $ 5,814,000 5,814,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(COST $19,520,737) 19,520,737
==========================================================================================
101.87 TOTAL INVESTMENTS AT VALUE
(COST $614,043,731) 669,087,930
==========================================================================================
(1.87) OTHER ASSETS LESS LIABILITIES (12,304,201)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 656,783,729
==========================================================================================
REAL ESTATE OPPORTUNITY FUND
95.21 COMMON STOCKS
1.11 CASINOS & GAMING
Park Place Entertainment(b) 36,900 $ 262,728
==========================================================================================
1.43 FOREST PRODUCTS
Weyerhaeuser Co 7,100 339,593
==========================================================================================
1.00 HOMEBUILDING
Ryland Group 5,500 237,545
==========================================================================================
FS-12
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
1.00 HOTELS & RESORTS
Starwood Hotels & Resorts Worldwide Paired
Certificates SBI 9,900 $ 235,521
==========================================================================================
1.49 PAPER PRODUCTS
Bowater Inc 9,500 352,925
==========================================================================================
86.86 REAL ESTATE INVESTMENT TRUSTS
Alexandria Real Estate Equities 24,200 1,017,610
Apartment Investment & Management Class A Shrs 9,200 335,616
Archstone-Smith Trust 19,210 421,852
Avalonbay Communities 12,100 446,490
Boston Properties 29,900 1,133,210
CarrAmerica Realty 36,400 922,740
Developers Diversified Realty 41,700 1,007,055
EastGroup Properties 17,400 444,744
Equity Office Properties Trust 37,600 956,920
Equity Residential SBI 32,200 775,054
Essex Property Trust 7,000 365,750
General Growth Properties 20,800 1,122,160
Impac Mortgage Holdings 27,900 362,421
iStar Financial 33,900 988,863
Mack-Cali Realty 26,500 820,705
Mid-Atlantic Realty Trust SBI 34,200 623,466
Mills Corp 24,700 770,640
Pan Pacific Retail Properties 6,500 246,025
Parkway Properties 19,800 746,064
Post Properties 16,900 408,135
Prentiss Properties Trust SBI 22,800 617,880
ProLogis SBI 43,270 1,095,596
RFS Hotel Investors 56,400 547,080
Rouse Co 21,900 756,645
Simon Property Group 21,000 752,430
SL Green Realty 22,200 678,432
Universal Health Realty Income Trust SBI 4,700 121,730
Vornado Realty Trust SBI 27,600 988,080
Weingarten Realty Investors 28,300 1,106,813
==========================================================================================
20,580,206
2.32 REAL ESTATE MANAGEMENT & DEVELOPMENT
Catellus Development(b) 12,300 258,300
St Joe 10,700 291,040
==========================================================================================
549,340
TOTAL COMMON STOCKS (COST $21,860,776) 22,557,858
==========================================================================================
6.27 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $1,485,051 (Collateralized
by Federal Home Loan Bank, Bonds, due
3/26/2004 at 1.350%, value $1,515,587)
(Cost $1,485,000) $ 1,485,000 1,485,000
==========================================================================================
FS-13
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
101.48 TOTAL INVESTMENTS AT VALUE
(COST $23,345,776) $ 24,042,858
==========================================================================================
(1.48) OTHER ASSETS LESS LIABILITIES (349,747)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 23,693,111
==========================================================================================
TECHNOLOGY FUND
92.58 COMMON STOCKS
0.68 AEROSPACE & DEFENSE
Lockheed Martin 226,300 $ 10,760,565
==========================================================================================
10.47 APPLICATION SOFTWARE
Amdocs Ltd(b) 1,204,720 15,998,682
BEA Systems(b) 2,941,800 29,976,942
Cadence Design Systems(b) 906,800 9,068,000
Check Point Software Technologies Ltd(b) 973,650 14,088,715
Intuit Inc(b) 582,300 21,661,560
Mercury Interactive(b) 808,500 23,996,280
PeopleSoft Inc(b) 1,018,700 15,586,110
SAP AG Sponsored ADR Representing 1/4
Ord Shr 114,900 2,178,504
Siebel Systems(b) 1,343,600 10,762,236
Software HOLDRs Trust(a)(e)(f) 834,700 21,209,727
Wipro Ltd Sponsored ADR Representing Ord Shrs(a) 84,000 2,360,400
==========================================================================================
166,887,156
0.54 CABLE & SATELLITE OPERATORS
Comcast Corp Class A Shrs(b) 300,400 8,588,436
==========================================================================================
7.82 COMPUTER HARDWARE
Apple Computer(b) 1,426,200 20,166,468
Dell Computer(b) 1,685,700 46,036,467
Hewlett-Packard Co 1,318,600 20,504,230
International Business Machines 428,900 33,638,627
Sun Microsystems(b) 1,317,300 4,294,398
==========================================================================================
124,640,190
5.55 COMPUTER STORAGE & PERIPHERALS
EMC Corp(b) 3,713,000 26,844,990
Emulex Corp(b) 830,600 15,905,990
Lexmark International Class A Shrs(b) 225,400 15,090,530
McDATA Corp Class A Shrs(b) 992,300 8,523,857
Network Appliance(b) 1,974,500 22,094,655
==========================================================================================
88,460,022
3.89 DATA PROCESSING SERVICES
First Data 696,100 25,762,661
Fiserv Inc(b) 627,450 19,752,126
Paychex Inc 599,350 16,464,144
==========================================================================================
61,978,931
0.98 DIVERSIFIED COMMERCIAL SERVICES
CheckFree Corp(b) 696,800 15,664,064
==========================================================================================
FS-14
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
5.22 ELECTRONIC EQUIPMENT & INSTRUMENTS
Celestica Inc(b) 1,326,200 $ 15,158,466
Flextronics International Ltd(b) 2,564,400 22,361,568
Jabil Circuit(b) 1,645,600 28,798,000
MKS Instruments(b) 64,500 806,250
Samsung Electronics Ltd Sponsored GDR
Representing 1/2 Ord Shr(g) 142,300 16,079,900
==========================================================================================
83,204,184
0.36 HOTELS & RESORTS
Hotels.com Class A Shrs(a)(b) 100,000 5,767,500
==========================================================================================
0.36 INTEGRATED TELECOMMUNICATION SERVICES
Verizon Communications 160,500 5,673,675
==========================================================================================
3.49 INTERNET RETAIL
Amazon.com Inc(b) 451,000 11,739,530
eBay Inc(b) 515,100 43,932,879
==========================================================================================
55,672,409
0.83 INTERNET SOFTWARE & SERVICES
Internet Security Systems(b) 227,400 2,258,082
VeriSign Inc(b) 344,700 3,012,678
Yahoo! Inc(b) 329,700 7,919,394
==========================================================================================
13,190,154
1.80 INVESTMENT COMPANIES
Nasdaq-100 Trust Series 1 Shrs(b) 1,138,900 28,757,225
==========================================================================================
1.92 IT CONSULTING & SERVICES
Affiliated Computer Services Class A
Shrs(b) 412,000 18,235,120
BISYS Group(b) 460,000 7,507,200
Cognizant Tech Solutions Class A Shrs(b) 72,900 4,909,815
==========================================================================================
30,652,135
0.50 MOVIES & ENTERTAINMENT
AOL Time Warner(b) 732,600 7,956,036
==========================================================================================
4.38 NETWORKING EQUIPMENT
Cisco Systems(b)(i) 4,359,860 56,590,983
Juniper Networks(b) 650,000 5,310,500
NetScreen Technologies(b) 466,800 7,832,904
==========================================================================================
69,734,387
4.21 SEMICONDUCTOR EQUIPMENT
Applied Materials(b) 1,624,500 20,436,210
ASML Holding NV New York Registered
Shrs(b) 363,300 2,386,881
Cymer Inc(b) 35,400 837,210
KLA-Tencor Corp(b) 416,300 14,962,655
Lam Research(b) 735,100 8,372,054
Novellus Systems(b) 733,800 20,010,726
==========================================================================================
67,005,736
16.87 SEMICONDUCTORS
Altera Corp(b) 1,188,600 16,093,644
Analog Devices(b) 345,000 9,487,500
FS-15
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Broadcom Corp Class A Shrs(b) 285,200 $ 3,522,220
Cypress Semiconductor(b) 252,200 1,740,180
Fairchild Semiconductor International
Class A Shrs(b) 603,400 6,311,564
GlobespanVirata Inc(b) 468,200 2,106,900
Intel Corp 3,736,800 60,835,104
Intersil Corp Class A Shrs(b) 282,400 4,394,144
Linear Technology 982,900 30,342,123
Maxim Integrated Products 715,900 25,858,308
Microchip Technology 1,092,800 21,746,720
National Semiconductor(b) 461,400 7,862,256
PMC-Sierra Inc(b) 271,000 1,612,450
QLogic Corp(b) 289,200 10,740,888
RF Micro Devices(b) 1,026,900 6,191,180
Skyworks Solutions(a)(b) 670,000 4,174,100
Taiwan Semiconductor Manufacturing Ltd
Sponsored ADR Representing 5 Ord Shrs 1,952,136 13,352,610
Texas Instruments 943,900 15,451,643
United Microelectronics Sponsored ADR
Representing 5 Ord Shrs 1,693,300 5,096,833
Vitesse Semiconductor(b) 674,100 1,442,574
Xilinx Inc(b)(h) 871,800 20,408,838
==========================================================================================
268,771,779
16.45 SYSTEMS SOFTWARE
Adobe Systems 842,700 25,980,441
BMC Software(b) 1,156,200 17,447,058
Micromuse Inc(b) 607,000 3,156,400
Microsoft Corp 4,327,200 104,761,512
Networks Associates(b) 899,000 12,415,190
Oracle Corp(b) 3,671,500 39,832,103
Symantec Corp(b) 1,177,600 46,138,368
VERITAS Software(b) 701,300 12,328,854
==========================================================================================
262,059,926
4.92 TELECOMMUNICATIONS EQUIPMENT
ADC Telecommunications(b) 2,022,292 4,165,922
Alcatel SA Sponsored ADR Representing
Ord Shrs 981,300 6,761,157
CIENA Corp(b) 591,900 2,586,603
Corning Inc(b) 412,500 2,409,000
Lucent Technologies(b) 2,375,800 3,492,426
Nokia Corp Sponsored ADR Representing Ord
Shrs(a) 1,561,900 21,882,219
Nortel Networks(b) 2,589,900 5,386,992
QUALCOMM Inc 711,950 25,672,917
UTStarcom Inc(b) 303,600 6,068,964
==========================================================================================
78,426,200
1.34 WIRELESS TELECOMMUNICATION SERVICES
Nextel Communications Class A Shrs(b) 530,700 7,106,073
Vodafone Group PLC Sponsored ADR
Representing 10 Ord Shrs 781,200 14,233,464
==========================================================================================
21,339,537
TOTAL COMMON STOCKS (COST $1,730,029,294) 1,475,190,247
==========================================================================================
FS-16
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
0.07 PREFERRED STOCKS
0.00 BIOTECHNOLOGY
Ingenex Inc, Conv Pfd, Series B Shrs(b)(l) 51,527 $ 1
==========================================================================================
0.07 NETWORKING EQUIPMENT
Calient Networks, Pfd, Series D
Shrs(b)(f)(l) 1,925,754 1,106,133
==========================================================================================
TOTAL PREFERRED STOCKS (COST $14,213,578) 1,106,134
==========================================================================================
0.01 FIXED INCOME SECURITIES -- CORPORATE BONDS
0.01 NETWORKING EQUIPMENT
Kestrel Solutions, Conv Sub Notes(g)(k)(l),
5.500%, 7/15/2005 (Cost $2,500,000) $ 2,500,000 200,000
==========================================================================================
0.32 OTHER SECURITIES -- DIVERSIFIED FINANCIAL SERVICES
BlueStream Ventures LP(b)(j)(l)(Cost
$12,268,055) 5,184,864
==========================================================================================
7.21 SHORT-TERM INVESTMENTS
4.96 COMMERCIAL PAPER
3.14 CONSUMER RECEIVABLES
New Center Asset Trust, Series 1, Discount
Notes 1.420%, 4/1/2003 $ 50,000,000 50,000,000
==========================================================================================
1.82 DIVERSIFIED FINANCIAL SERVICES
State Street Boston, Discount Notes,
1.390%, 4/1/2003 $ 29,000,000 29,000,000
==========================================================================================
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $79,000,000) 79,000,000
==========================================================================================
2.13 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$33,984,450) 33,984,450 33,984,450
==========================================================================================
0.12 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $1,910,065 (Collateralized
by Federal Home Loan Bank, Discount Notes,
due 4/1/2003, value $1,950,000) (Cost
$1,910,000) $ 1,910,000 1,910,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $114,894,450) 114,894,450
==========================================================================================
100.19 TOTAL INVESTMENTS AT VALUE
(COST $1,873,905,377) 1,596,575,695
==========================================================================================
(0.19) OTHER ASSETS LESS LIABILITIES (3,099,757)
==========================================================================================
100.00 NET ASSETS AT VALUE $1,593,475,938
==========================================================================================
TELECOMMUNICATIONS FUND
89.63 COMMON STOCKS & WARRANTS
2.77 APPLICATION SOFTWARE
Amdocs Ltd(b) UK 290,500 $ 3,857,840
BEA Systems(b) 246,100 2,507,759
Software HOLDRs Trust(e) 52,500 1,334,025
==========================================================================================
7,699,624
FS-17
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
5.92 BROADCASTING -- RADIO/TV
Clear Channel Communications(b) 100,000 $ 3,392,000
Fox Entertainment Group Class A Shrs(b) 304,000 8,107,680
Univision Communications Class A Shrs(b) 202,400 4,960,824
==========================================================================================
16,460,504
13.11 CABLE & SATELLITE OPERATORS
Comcast Corp Class A Shrs(b)(i) 454,552 12,995,642
Cox Communications Class A Shrs(b) 276,700 8,608,137
EchoStar Communications Class A Shrs(b) 375,500 10,844,440
Liberty Media Series A Shrs(b) 412,600 4,014,598
==========================================================================================
36,462,817
2.08 ELECTRONIC EQUIPMENT & INSTRUMENTS
Garmin Ltd(b) CJ 8,100 289,980
Samsung Electronics Ltd GDR
Representing 1/2 Ord Shr(g) KS 48,600 5,491,800
==========================================================================================
5,781,780
22.67 INTEGRATED TELECOMMUNICATION SERVICES
ALLTEL Corp 139,400 6,239,544
AT&T Corp 195,300 3,163,860
BCE Inc(a) CA 286,200 5,253,340
BellSouth Corp(i) 133,300 2,888,611
CenturyTel Inc 212,800 5,873,280
Deutsche Telekom AG GM 551,200 6,080,856
France Telecom SA(a) FR 97,700 1,992,545
France Telecom SA Warrants(b) (Exp 2003) FR 97,700 383,797
KT Corp Sponsored ADR
Representing 1/2 Ord Shr KS 155,600 2,671,652
Portugal Telecom SGPS SA Sponsored ADR
Representing Ord Shrs PO 814,900 5,557,618
Qwest Communications International(b) 972,100 3,392,629
SBC Communications(i) 147,186 2,952,551
Sprint Corp 276,500 3,248,875
Telefonos de Mexico SA de CV Sponsored ADR
Representing 20 Series L ShrsMX 111,100 3,301,892
Verizon Communications(i) 284,200 10,046,470
==========================================================================================
63,047,520
1.24 MOVIES & ENTERTAINMENT
Viacom Inc Class B Shrs(b) 94,500 3,451,140
==========================================================================================
4.50 NETWORKING EQUIPMENT
Cisco Systems(b)(i) 626,900 8,137,162
Extreme Networks(b) 166,800 722,244
Foundry Networks(b) 252,900 2,033,316
Juniper Networks(b) 198,000 1,617,660
==========================================================================================
12,510,382
2.15 SEMICONDUCTORS
Agere Systems Class A Shrs(b) 707,900 1,132,640
RF Micro Devices(b) 91,100 549,242
Semiconductor HOLDRs Trust(e) 116,300 2,685,367
FS-18
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Skyworks Solutions(a)(b) 259,200 $ 1,614,816
==========================================================================================
5,982,065
3.13 SYSTEMS SOFTWARE
Symantec Corp(b) 222,600 8,721,468
==========================================================================================
13.75 TELECOMMUNICATIONS EQUIPMENT
ADC Telecommunications(b) 981,800 2,022,508
ADTRAN Inc(b) 24,300 872,613
Advanced Fibre Communications(b) 52,900 800,906
Alcatel SA Sponsored ADR
Representing Ord Shrs FR 569,800 3,925,922
Comverse Technology(b) 99,800 1,128,738
Corning Inc(b) 513,600 2,999,424
Lucent Technologies(b) 599,700 881,559
Motorola Inc 333,500 2,754,710
Nokia Corp Sponsored ADR
Representing Ord Shrs(a)(i) FI 629,700 8,822,097
Nortel Networks(b) CA 1,516,900 3,155,152
QUALCOMM Inc(h) 302,200 10,897,332
==========================================================================================
38,260,961
18.31 WIRELESS TELECOMMUNICATION SERVICES
America Movil SA Sponsored ADR
Representing 20 Series L ShrsMX 108,200 1,446,634
AT&T Wireless Services(b) 1,983,100 13,088,460
Boston Communications Group(b) 43,900 687,474
Nextel Communications Class A Shrs(b) 965,000 12,921,350
Nextel Partners Class A Shrs(b) 134,300 676,872
Orange SA(b) FR 451,200 3,618,768
Sprint Corp-PCS Group Series 1 Shrs(b) 698,800 3,046,768
Telecom Italia Mobile SpA(a) IT 322,000 1,314,110
Vodafone Group PLC Sponsored ADR
Representing 10 Ord Shrs UK 775,571 14,130,904
==========================================================================================
50,931,340
TOTAL COMMON STOCKS & WARRANTS
(COST $255,802,849) 249,309,601
==========================================================================================
0.16 PREFERRED STOCKS
0.16 NETWORKING EQUIPMENT
Calient Networks, Pfd, Series D Shrs(b)(l)
(Cost $5,438,366) 752,715 432,352
==========================================================================================
0.07 FIXED INCOME SECURITIES -- CORPORATE BONDS
0.07 NETWORKING EQUIPMENT
Kestrel Solutions, Conv Sub Notes(g)(k)(l)
5.500%, 7/15/2005 (Cost $2,500,000) $2,500,000 200,000
==========================================================================================
1.84 OTHER SECURITIES -- DIVERSIFIED FINANCIAL SERVICES
BlueStream Ventures LP(b)(j)(l) (Cost
$12,072,288) 5,102,127
==========================================================================================
15.09 SHORT-TERM INVESTMENTS
8.27 COMMERCIAL PAPER
3.60 CONSUMER RECEIVABLES
New Center Asset Trust, Series 1, Discount
Notes 1.420%, 4/1/2003 $ 10,000,000 10,000,000
==========================================================================================
FS-19
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
4.67 DIVERSIFIED FINANCIAL SERVICES
State Street Boston, Discount Notes,
1.390%, 4/1/2003 $ 13,000,000 $ 13,000,000
==========================================================================================
TOTAL COMMERCIAL PAPER (Amortized
Cost $23,000,000) 23,000,000
==========================================================================================
6.62 INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market
Reserve Fund(c)(f), 1.092% (Cost
$18,406,718) 18,406,718 18,406,718
==========================================================================================
0.20 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 3/31/2003 due 4/1/2003 at 1.230%,
repurchased at $571,020 (Collateralized
by Federal Home Loan Bank, Discount
Notes, due 4/1/2003, value $585,000)
(Cost $571,000) $ 571,000 571,000
==========================================================================================
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $41,977,718) 41,977,718
==========================================================================================
0.11 OPTIONS PURCHASED -- PUTS
0.11 TELECOMMUNICATIONS EQUIPMENT
QUALCOMM Inc, 7/19/2003, $35 (Cost $261,403) 1,511 309,755
==========================================================================================
106.90 TOTAL INVESTMENTS AT VALUE
(COST $318,052,624) 297,331,553
==========================================================================================
(6.90) OTHER ASSETS LESS LIABILITIES (19,188,925)
==========================================================================================
100.00 NET ASSETS AT VALUE $ 278,142,628
==========================================================================================
UTILITIES FUND
96.82 COMMON STOCKS
69.11 ELECTRIC UTILITIES
Ameren Corp 55,700 $ 2,175,085
American Electric Power 35,600 813,460
Cinergy Corp 103,700 3,489,505
Consolidated Edison 78,100 3,004,507
Dominion Resources 63,900 3,538,143
DPL Inc 58,600 730,156
DTE Energy 50,600 1,955,690
Duke Energy 54,300 789,522
Energy East 136,200 2,424,360
Entergy Corp 73,600 3,543,840
Exelon Corp 67,775 3,416,538
FPL Group 60,000 3,535,800
Hawaiian Electric Industries 41,900 1,707,844
NiSource Inc 92,100 1,676,220
Pepco Holdings 46,900 816,060
Pinnacle West Capital 52,400 1,741,776
PNM Resources 17,200 386,828
PPL Corp 98,500 3,507,585
Progress Energy 69,500 2,720,925
Public Service Enterprise Group 60,800 2,230,752
Puget Energy 93,200 1,986,092
SCANA Corp 86,600 2,591,072
FS-20
SHARES,
COUNTRY CONTRACTS OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
- ------------------------------------------------------------------------------------------
Southern Co 84,400 $ 2,400,336
==========================================================================================
51,182,096
2.23 GAS UTILITIES
KeySpan Corp 51,200 1,651,200
==========================================================================================
17.53 INTEGRATED TELECOMMUNICATION SERVICES
AT&T Corp 12,700 205,740
BellSouth Corp 148,200 3,211,494
CenturyTel Inc 127,600 3,521,760
SBC Communications 135,712 2,722,383
Verizon Communications 93,796 3,315,689
==========================================================================================
12,977,066
5.78 NATURAL GAS PIPELINES
Enbridge Energy Management LLC 22,387 891,002
Kinder Morgan Management LLC(b) 104,771 3,389,342
==========================================================================================
4,280,344
2.17 WATER UTILITIES
Philadelphia Suburban 73,300 1,608,935
==========================================================================================
96.82 TOTAL INVESTMENTS AT VALUE
(COST $73,529,285) 71,699,641
==========================================================================================
3.18 OTHER ASSETS LESS LIABILITIES 2,358,450
==========================================================================================
100.00 NET ASSETS AT VALUE $ 74,058,091
==========================================================================================
(a) Loaned security, a portion or all of the security is on loan at March 31,
2003.
(b) Security is non-income producing.
(c) The security is purchased with the cash collateral received from securities
on loan (Note 5).
(d) Represents troy ounces.
(e) HOLDRs - Holding Company Depositary Receipts
(f) Security is an affiliated company (Note 4).
(g) Securities aquired pursuant to Rule 144A. The Fund deems such securities to
be "liquid" because an institutional market exists.
(h) Securities are pledged with broker as collateral for written options.
(i) A portion of the security has been designated as collateral for remaining
commitments to purchase additional interests in BlueStream Ventures LP.
(j) The Technology and Telecommunications Funds have remaining commitments of
$10,575,000 and $10,406,250, respectively, to purchase additional interests
in BlueStream Ventures LP, which are subject to the terms of the limited
partership agreement.
(k) Defaulted security. The issuer is in default with respect to interest
payments and the Fund has stopped accruing interest income.
FS-21
(l) The following are restricted and illiquid securities at March 31, 2003:
SCHEDULE OF RESTRICTED AND ILLIQUID
SECURITIES
% OF
ACQUISITION ACQUISITION NET ASSETS
DESCRIPTION DATE(S) COSTS AT VALUE
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND
Athersys Inc, Conv Pfd, Class F Shrs 4/17/00 $ 5,000,000 0.56%
Ingenex Inc, Conv Pfd, Series B Shrs 9/27/94 600,000 0.00
Optimize Inc, Pfd, Series 5 Shrs 10/10/02 628,450 0.06
Scimagix Inc, Pfd, Series C Shrs 5/24/01 1,350,000 0.14
UltraGuide Inc, Pfd
Series E Shrs 6/1/01 1,348,502 0.01
Series F Shrs 6/1/01 151,500 0.00
================================================================================
0.77%
================================================================================
TECHNOLOGY FUND
BlueStream Ventures LP 8/3/00-
12/9/02 $ 12,268,055 0.32%
Calient Networks, Pfd, Series D Shrs 12/8/00 13,913,578 0.07
Ingenex Inc, Conv Pfd, Series B Shrs 9/27/94 300,000 0.00
Kestrel Solutions, Conv Sub Notes
5.500%, 7/15/2005 7/20/00 2,500,000 0.01
================================================================================
0.40%
================================================================================
TELECOMMUNICATIONS FUND
BlueStream Ventures LP 8/3/00-
12/9/02 $ 12,072,288 1.84%
Calient Networks, Pfd, Series D Shrs 12/8/00 5,438,366 0.16
Kestrel Solutions, Conv Sub Notes
5.500%, 7/15/2005 7/20/00 2,500,000 0.07
================================================================================
2.07%
================================================================================
OPTION CONTRACTS
NUMBER OF EXPIRATION EXERCISE PREMIUMS
CONTRACTS DATES PRICE RECEIVED VALUE
- -------------------------------------------------------------------------------
TECHNOLOGY FUND
OPTIONS WRITTEN
CALLS
Xilinx Inc (6,539) 4/19/03 $27.50 $928,509 $(114,433)
================================================================================
TELECOMMUNICATIONS FUND
OPTIONS WRITTEN
CALLS
QUALCOMM Inc (1,511) 7/19/03 $42.50 $297,659 $(230,428)
================================================================================
FS-22
SUMMARY OF INVESTMENTS BY COUNTRY
% OF
COUNTRY NET ASSETS
COUNTRY CODE AT VALUE VALUE
- --------------------------------------------------------------------------------
ENERGY FUND
Bermuda BD 7.57% $ 19,053,300
Canada CA 5.72 14,378,720
France FR 3.45 8,667,990
Italy IT 2.18 5,475,140
Netherlands NL 3.70 9,302,250
United Kingdom UK 4.23 10,650,840
United States 78.81 198,224,168
Other Assets Less Liabilities (5.66) (14,240,725)
================================================================================
100.00% $ 251,511,683
================================================================================
GOLD & PRECIOUS METALS FUND
Canada CA 55.08% $ 57,661,730
Ghana GH 3.58 3,748,800
Peru PE 3.82 4,000,000
South Africa SF 13.78 14,421,439
United States 35.05 36,685,995
Other Assets Less Liabilities (11.31) (11,841,514)
================================================================================
100.00% $ 104,676,450
================================================================================
LEISURE FUND
Australia AS 1.77% $ 11,597,187
Belgium BE 2.50 16,414,016
Brazil BR 0.86 5,644,000
Canada CA 0.63 4,139,251
Denmark DA 2.28 14,974,333
France FR 0.76 5,015,875
Hong Kong HK 0.15 946,869
Japan JA 0.37 2,462,613
Mexico MX 0.35 2,305,330
Netherlands NL 3.46 22,739,229
Spain SP 0.52 3,416,687
Switzerland SZ 0.71 4,688,831
United Kingdom UK 1.95 12,810,098
United States 85.56 561,933,611
Other Assets Less Liabilities (1.87) (12,304,201)
================================================================================
100.00% $ 656,783,729
================================================================================
FS-23
SUMMARY OF INVESTMENTS BY COUNTRY
(CONTINUED)
% OF
COUNTRY NET ASSETS
COUNTRY CODE AT VALUE VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
Canada CA 3.02% $ 8,408,492
Cayman Islands CJ 0.10 289,980
Finland FI 3.17 8,822,097
France FR 3.57 9,921,032
Germany GM 2.19 6,080,856
Italy IT 0.47 1,314,110
South Korea KS 2.93 8,163,452
Mexico MX 1.71 4,748,526
Portugal PO 2.00 5,557,618
United Kingdom UK 6.47 17,988,744
United States 81.27 226,036,646
Other Assets Less Liabilities (6.90) (19,188,925)
================================================================================
100.00% $ 278,142,628
================================================================================
See Notes to Financial Statements
FS-24
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
FINANCIAL
ENERGY SERVICES
FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b) $ 244,115,665 $ 718,823,685
================================================================================
At Value(a)(b) $ 265,752,408 $ 751,421,758
Cash 0 1,593
Receivables:
Investment Securities Sold 368,936 1,180,061
Fund Shares Sold 771,634 276,376
Dividends and Interest 152,418 960,379
Prepaid Expenses and Other Assets 44,387 75,452
================================================================================
TOTAL ASSETS 267,089,783 753,915,619
================================================================================
LIABILITIES
Payables:
Custodian 9,741 0
Distribution to Shareholders 0 123,047
Investment Securities Purchased 9,872,390 0
Fund Shares Repurchased 1,471,960 1,410,677
Securities Loaned 4,139,034 0
Accrued Distribution Expenses
Investor Class 46,874 147,069
Class A 2,770 1,253
Class B 1,144 764
Class C 7,741 8,177
Class K 100 465
Accrued Expenses and Other Payables 26,346 110,324
================================================================================
TOTAL LIABILITIES 15,578,100 1,801,776
================================================================================
NET ASSETS AT VALUE $ 251,511,683 $ 752,113,843
================================================================================
NET ASSETS
Paid-in Capital(c) $ 292,005,495 $ 781,919,715
Accumulated Undistributed Net Investment
Loss (28,917) (27,883)
Accumulated Undistributed Net Realized
Loss on Investment Securities and
Foreign Currency Transactions (62,101,638) (62,379,689)
Net Appreciation of Investment
Securities and Foreign Currency
Transactions 21,636,743 32,601,700
================================================================================
NET ASSETS AT VALUE, Applicable to
Shares Outstanding $ 251,511,683 $ 752,113,843
================================================================================
NET ASSETS AT VALUE:
Investor Class $ 231,023,351 $ 734,439,759
================================================================================
Class A $ 9,130,699 $ 5,310,648
================================================================================
Class B $ 1,501,954 $ 989,629
================================================================================
Class C $ 9,566,346 $ 10,026,026
================================================================================
Class K $ 289,333 $ 1,347,781
================================================================================
FS-25
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
FINANCIAL
ENERGY SERVICES
FUND FUND
(CONTINUED) (CONTINUED)
- --------------------------------------------------------------------------------
Shares Outstanding
Investor Class 13,745,599 33,736,622
Class A 542,002 244,946
Class B 89,871 45,528
Class C 581,459 469,023
Class K 18,602 63,360
================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and
Redemption Price per Share $ 16.81 $ 21.77
Class A
Redemption Price per Share $ 16.85 $ 21.68
Offering Price per Share (Maximum
sales charge of 5.50%) $ 17.83 $ 22.94
Class B, Offering and Redemption
Price per Share $ 16.71 $ 21.74
Class C, Offering and Redemption
Price per Share $ 16.45 $ 21.38
Class K, Offering and Redemption
Price per Share $ 15.55 $ 21.27
================================================================================
(a) Investment securities at cost and value at March 31, 2003 include repurchase
agreements of $360,000 and $533,000 for Energy and Financial Services Funds,
respectively.
(b) Investment securities at cost and value at March 31, 2003 include $4,005,265
of securities loaned for Energy Fund (Note 5).
(c) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 500 million have been
allocated to Energy Fund and 700 million to Financial Services Fund: 100
million to each Class of Energy Fund, 300 million to Financial Services Fund
- Investor Class and 100 million to each additional Class of Financial
Services Fund.
See Notes to Financial Statements
FS-26
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
GOLD & HEALTH
PRECIOUS SCIENCES
METALS FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b)(c) $ 101,099,059 $ 859,232,047
================================================================================
At Value(a)(b)(c) $ 116,517,964 $ 990,684,158
Cash 245,147 19,111
Receivables:
Fund Shares Sold 3,240,837 3,397,774
Dividends and Interest 25,635 1,197,618
Prepaid Expenses and Other Assets 39,495 92,854
================================================================================
TOTAL ASSETS 120,069,078 995,391,515
================================================================================
LIABILITIES
Payables:
Investment Securities Purchased 3,848,188 0
Fund Shares Repurchased 157,417 3,914,950
Securities Loaned 11,344,418 24,193,400
Depreciation on Forward Foreign
Currency Contracts 1,612 0
Accrued Distribution Expenses
Investor Class 19,287 185,484
Class A 422 577
Class B 1,738 467
Class C 2,309 5,182
Class K -- 737
Accrued Expenses and Other Payables 17,237 137,552
================================================================================
TOTAL LIABILITIES 15,392,628 28,438,349
================================================================================
NET ASSETS AT VALUE $ 104,676,450 $ 966,953,166
================================================================================
NET ASSETS
Paid-in Capital(d) $ 281,090,573 $ 1,200,414,039
Accumulated Undistributed Net Investment
Loss (140,069) (158,098)
Accumulated Undistributed Net Realized
Loss on Investment Securities and
Foreign Currency Transactions (191,693,016) (364,758,358)
Net Appreciation of Investment
Securities and Foreign Currency
Transactions 15,418,962 131,455,583
================================================================================
NET ASSETS AT VALUE, Applicable to
Shares Outstanding $ 104,676,450 $ 966,953,166
================================================================================
NET ASSETS AT VALUE:
Investor Class $ 98,387,540 $ 954,764,627
================================================================================
Class A $ 1,514,115 $ 3,731,315
================================================================================
Class B $ 2,315,329 $ 620,876
================================================================================
Class C $ 2,459,466 $ 5,846,096
================================================================================
Class K -- $ 1,990,252
================================================================================
FS-27
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
GOLD & HEALTH
PRECIOUS SCIENCES
METALS FUND FUND
(CONTINUED) (CONTINUED)
- --------------------------------------------------------------------------------
Shares Outstanding
Investor Class 41,060,996 24,782,519
Class A 633,436 96,766
Class B 968,914 16,194
Class C 976,679 156,852
Class K -- 52,636
================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and
Redemption Price per Share $ 2.40 $ 38.53
Class A
Redemption Price per Share $ 2.39 $ 38.56
Offering Price per Share (Maximum
sales charge of 5.50%) $ 2.53 $ 40.80
Class B, Offering and Redemption
Price per Share $ 2.39 $ 38.34
Class C, Offering and Redemption
Price per Share $ 2.52 $ 37.27
Class K, Offering and Redemption
Price per Share -- $ 37.81
================================================================================
(a) Investment securities at cost and value at March 31, 2003 include repurchase
agreements of $8,531,000 and $4,424,000 for Gold & Precious Metals and
Health Sciences Funds, respectively.
(b) Investment securities at March 31, 2003 includes gold bullion cost of
$4,266,114 and value of $5,051,577 for Gold & Precious Metals Fund.
(c) Investment securities at cost and value at March 31, 2003 include
$10,736,161 and $23,272,794 of securities loaned for Gold & Precious Metals
and Health Sciences Funds, respectively (Note 5).
(d) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 800 million have been
allocated to Gold & Precious Metals Fund and 500 million to Health Sciences
Fund: 200 million to each Class of Gold & Precious Metals Fund and 100
million to each Class of Health Sciences Fund.
See Notes to Financial Statements
FS-28
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
REAL ESTATE
LEISURE OPPORTUNITY
FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b) $ 614,043,731 $ 23,345,776
================================================================================
At Value(a)(b) $ 669,087,930 $ 24,042,858
Cash 1,239 1,861
Foreign Currency (Cost $6,207 and $0,
respectively) 6,335 0
Receivables:
Investment Securities Sold 2,468,771 106,648
Fund Shares Sold 707,448 63,369
Dividends and Interest 508,967 127,465
Foreign Tax Reclaims 55,957 0
Prepaid Expenses and Other Assets 62,468 21,265
================================================================================
TOTAL ASSETS 672,899,115 24,363,466
================================================================================
LIABILITIES
Payables:
Distributions to Shareholders 0 6,503
Investment Securities Purchased 672,936 0
Fund Shares Repurchased 1,530,885 653,847
Securities Loaned 13,706,737 0
Accrued Distribution Expenses
Investor Class 105,106 4,158
Class A 7,193 661
Class B 6,290 101
Class C 14,074 556
Class K 23,460 --
Accrued Expenses and Other Payables 48,705 4,529
================================================================================
TOTAL LIABILITIES 16,115,386 670,355
================================================================================
NET ASSETS AT VALUE $ 656,783,729 $ 23,693,111
================================================================================
NET ASSETS
Paid-in Capital(c) $ 677,098,635 $ 31,772,926
Accumulated Undistributed Net
Investment Income (Loss) (48,343) 9,823
Accumulated Undistributed Net Realized
Loss on Investment Securities and
Foreign Currency Transactions (75,317,281) (8,786,720)
Net Appreciation of Investment
Securities and Foreign Currency
Transactions 55,050,718 697,082
================================================================================
NET ASSETS AT VALUE, Applicable to
Shares Outstanding $ 656,783,729 $ 23,693,111
================================================================================
NET ASSETS AT VALUE:
Investor Class $ 536,108,142 $ 20,313,257
================================================================================
Class A $ 27,174,768 $ 2,408,721
================================================================================
Class B $ 8,268,127 $ 133,437
================================================================================
Class C $ 17,767,841 $ 837,696
================================================================================
Class K $ 67,464,851 --
================================================================================
FS-29
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
REAL ESTATE
LEISURE OPPORTUNITY
FUND FUND
- --------------------------------------------------------------------------------
Shares Outstanding
Investor Class 17,391,376 2,697,435
Class A 880,146 323,961
Class B 269,777 17,990
Class C 592,268 108,422
Class K 2,194,824 --
================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and
Redemption Price per Share $ 30.83 $ 7.53
Class A
Redemption Price per Share $ 30.88 $ 7.44
Offering Price per Share (Maximum
sales charge of 5.50%) $ 32.68 $ 7.87
Class B, Offering and Redemption
Price per Share $ 30.65 $ 7.42
Class C, Offering and Redemption
Price per Share $ 30.00 $ 7.73
Class K, Offering and Redemption
Price per Share $ 30.74 --
================================================================================
(a) Investment securities at cost and value at March 31, 2003 include repurchase
agreements of $5,814,000 and $1,485,000 for Leisure and Real Estate
Opportunity Funds, respectively.
(b) Investment securities at cost and value at March 31, 2003 include
$13,094,173 of securities loaned for Leisure Fund (Note 5).
(c) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 500 million have been
allocated to Leisure Fund and 400 million to Real Estate Opportunity Fund:
100 million to each Class.
See Notes to Financial Statements
FS-30
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b) $ 1,873,905,377 $ 318,052,624
================================================================================
At Value(a)(b) $ 1,596,575,695 $ 297,331,553
Cash 6,204 6,580
Receivables:
Investment Securities Sold 54,863,674 1,457,710
Fund Shares Sold 5,018,934 137,164
Dividends and Interest 525,375 397,037
Prepaid Expenses and Other Assets 160,176 104,556
================================================================================
TOTAL ASSETS 1,657,150,058 299,434,600
================================================================================
LIABILITIES
Options Written at Value (Premiums
Received $928,509 and $297,659,
respectively) 114,433 230,428
Payables:
Investment Securities Purchased 20,722,456 1,953,643
Fund Shares Repurchased 8,425,828 562,373
Securities Loaned 33,984,450 18,406,718
Accrued Distribution Expenses
Investor Class 174,578 55,275
Class A 1,194 110
Class B 423 12
Class C 4,925 2,258
Class K 8,100 248
Accrued Expenses and Other Payables 237,733 80,907
================================================================================
TOTAL LIABILITIES 63,674,120 21,291,972
================================================================================
NET ASSETS AT VALUE $ 1,593,475,938 $ 278,142,628
================================================================================
NET ASSETS
Paid-in Capital(c) $ 6,042,626,245 $ 1,955,452,313
Accumulated Undistributed Net
Investment Loss (232,309) (66,378)
Accumulated Undistributed Net Realized
Loss on Investment Securities,
Foreign Currency Transactions and
Option Contracts (4,172,402,393) (1,656,590,047)
Net Depreciation of Investment
Securities, Foreign Currency
Transactions and Option Contracts (276,515,605) (20,653,260)
================================================================================
NET ASSETS AT VALUE, Applicable to
Shares Outstanding $ 1,593,475,938 $ 278,142,628
================================================================================
NET ASSETS AT VALUE:
Institutional Class $ 707,040,240 --
================================================================================
Investor Class $ 853,529,554 $ 274,946,793
================================================================================
Class A $ 4,459,686 $ 325,550
================================================================================
Class B $ 531,767 $ 15,865
================================================================================
Class C $ 5,758,958 $ 2,188,211
================================================================================
Class K $ 22,155,733 $ 666,209
================================================================================
FS-31
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
(CONTINUED) (CONTINUED)
- --------------------------------------------------------------------------------
Shares Outstanding
Institutional Class 40,770,656 --
Investor Class 50,510,923 34,558,571
Class A 262,641 41,098
Class B 31,586 2,011
Class C 351,409 283,394
Class K 1,320,710 84,345
================================================================================
NET ASSET VALUE PER SHARE:
Institutional Class, Offering and
Redemption Price per Share $ 17.34 --
Investor Class, Offering and
Redemption Price per Share $ 16.90 $ 7.96
Class A
Redemption Price per Share $ 16.98 $ 7.92
Offering Price per Share (Maximum
sales charge of 5.50%) $ 17.97 $ 8.38
Class B, Offering and Redemption
Price per Share $ 16.84 $ 7.89
Class C, Offering and Redemption
Price per Share $ 16.39 $ 7.72
Class K, Offering and Redemption
Price per Share $ 16.78 $ 7.90
================================================================================
(a) Investment securities at cost and value at March 31, 2003 include repurchase
agreements of $1,910,000 and $571,000 for the Technology and
Telecommunications Funds, respectively.
(b) Investment securities at cost and value at March 31, 2003 include
$31,829,843 and $17,205,652 of securities loaned for Technology and
Telecommunications Funds, respectively (Note 5).
(c) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 1 billion have been
allocated to Technology Fund and 1.1 billion to Telecommunications Fund: 300
million to Technology Fund - Institutional Class and Investor Class, 100
million to each additional Class of Technology Fund, 300 million to
Telecommunications Fund - Investor Class and 200 million to each additional
Class of Telecommunications Fund.
See Notes to Financial Statements
FS-32
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UTILITIES
FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost $ 73,529,285
================================================================================
At Value $ 71,699,641
Receivables:
Investment Securities Sold 151,526
Fund Shares Sold 22,796
Dividends and Interest 113,246
Loans to Affiliated Fund (Note 6) 2,200,000
Prepaid Expenses and Other Assets 38,582
================================================================================
TOTAL ASSETS 74,225,791
================================================================================
LIABILITIES
Payables:
Custodian 8,843
Distributions to Shareholders 23,888
Fund Shares Repurchased 103,481
Accrued Distribution Expenses
Investor Class 14,474
Class A 121
Class B 157
Class C 546
Accrued Expenses and Other Payables 16,190
================================================================================
TOTAL LIABILITIES 167,700
================================================================================
NET ASSETS AT VALUE $ 74,058,091
================================================================================
NET ASSETS
Paid-in Capital(a) $ 116,412,319
Accumulated Undistributed Net Investment Loss (43,913)
Accumulated Undistributed Net Realized Loss on
Investment Securities (40,480,671)
Net Depreciation of Investment Securities (1,829,644)
================================================================================
NET ASSETS AT VALUE, Applicable to Shares Outstanding $ 74,058,091
================================================================================
NET ASSETS AT VALUE:
Investor Class $ 72,749,091
================================================================================
Class A $ 449,557
================================================================================
Class B $ 192,632
================================================================================
Class C $ 666,811
================================================================================
FS-33
STATEMENT OF ASSETS AND LIABILITIES
(CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UTILITIES
FUND
(CONTINUED)
- --------------------------------------------------------------------------------
Shares Outstanding
Investor Class 8,881,314
Class A 55,310
Class B 23,629
Class C 81,169
================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and Redemption Price per Share $ 8.19
Class A
Redemption Price per Share $ 8.13
Offering Price per Share (Maximum sales charge of 5.50%) $ 8.60
Class B, Offering and Redemption Price per Share $ 8.15
Class C, Offering and Redemption Price per Share $ 8.22
================================================================================
(a) The INVESCO Sector Funds, Inc. have 6.5 billion authorized shares of common
stock, par value of $0.01 per share. Of such shares, 400 million have been
allocated to Utilities Fund: 100 million to each Class.
See Notes to Financial Statements
FS-34
STATEMENT OF OPERATIONS
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
FINANCIAL
ENERGY SERVICES
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 3,070,714 $ 15,953,262
Dividends from Affiliated Investment
Companies 1,432 13,560
Interest 179,899 683,454
Securities Loaned Income 22,711 0
Foreign Taxes Withheld (64,984) (14,787)
================================================================================
TOTAL INCOME 3,209,772 16,635,489
================================================================================
EXPENSES
Investment Advisory Fees 2,180,691 6,240,794
Distribution Expenses 816,474 2,466,453
Transfer Agent Fees 1,421,179 3,286,277
Administrative Services Fees 141,109 434,701
Custodian Fees and Expenses 63,123 154,671
Directors' Fees and Expenses 28,463 75,053
Interest Expenses 2,770 6,158
Professional Fees and Expenses 40,362 70,249
Registration Fees and Expenses
Investor Class 56,121 68,158
Class A 33 14
Class B 8 6
Class C 716 700
Class K 1,471 1,471
Reports to Shareholders 231,087 505,772
Other Expenses 17,972 51,659
================================================================================
TOTAL EXPENSES 5,001,579 13,362,136
Fees and Expenses Absorbed/Reimbursed
by Investment Adviser (25,187) (9,970)
Fees and Expenses Paid Indirectly (39,730) (120,799)
================================================================================
NET EXPENSES 4,936,662 13,231,367
================================================================================
NET INVESTMENT INCOME (LOSS) (1,726,890) 3,404,122
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (15,930,670) (63,593,616)
Foreign Currency Transactions 4,369 2,771,359
================================================================================
Total Net Realized Loss (15,926,301) (60,822,257)
================================================================================
Change in Net Appreciation/Depreciation of:
Investment Securities (32,597,193) (200,871,286)
Foreign Currency Transactions 0 578,729
================================================================================
Total Change in Net Appreciation/
Depreciation (32,597,193) (200,292,557)
================================================================================
NET LOSS ON INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS (48,523,494) (261,114,814)
================================================================================
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (50,250,384) $ (257,710,692)
================================================================================
See Notes to Financial Statements
FS-35
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
GOLD & HEALTH
PRECIOUS SCIENCES
METALS FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 1,130,458 $ 7,642,641
Dividends from Affiliated Investment
Companies 193 0
Interest 65,789 1,057,768
Securities Loaned Income 81,867 23,360
Foreign Taxes Withheld (51,397) (211,719)
================================================================================
TOTAL INCOME 1,226,910 8,512,050
================================================================================
EXPENSES
Investment Advisory Fees 872,426 7,301,319
Distribution Expenses 317,235 2,912,258
Transfer Agent Fees 663,698 4,499,468
Administrative Services Fees 62,346 521,471
Custodian Fees and Expenses 74,783 193,304
Directors' Fees and Expenses 15,272 93,700
Interest Expenses 3,928 55,920
Professional Fees and Expenses 30,114 88,461
Registration Fees and Expenses
Investor Class 28,521 81,710
Class A 26 57
Class B 16 9
Class C 709 757
Class K -- 1,490
Reports to Shareholders 127,695 744,825
Other Expenses 12,739 54,025
================================================================================
TOTAL EXPENSES 2,209,508 16,548,774
Fees and Expenses Absorbed/Reimbursed
by Investment Adviser (431) (46,227)
Fees and Expenses Paid Indirectly (35,642) (149,727)
================================================================================
NET EXPENSES 2,173,435 16,352,820
================================================================================
NET INVESTMENT LOSS (946,525) (7,840,770)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities 13,253,503 (174,505,515)
Foreign Currency Transactions (378,438) 2,888,105
================================================================================
Total Net Realized Gain (Loss) 12,875,065 (171,617,410)
================================================================================
Change in Net Appreciation/Depreciation of:
Investment Securities (13,851,974) (86,875,175)
Foreign Currency Transactions 3,527,175 (302,242)
================================================================================
Total Change in Net Appreciation/
Depreciation (10,324,799) (87,177,417)
================================================================================
NET GAIN (LOSS) ON INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS 2,550,266 (258,794,827)
================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 1,603,741 $ (266,635,597)
================================================================================
See Notes to Financial Statements
FS-36
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
REAL ESTATE
LEISURE OPPORTUNITY
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 5,639,202 $ 1,403,338
Dividends from Affiliated Investment
Companies 13,503 0
Interest 377,555 22,419
Securities Loaned Income 126,700 0
Foreign Taxes Withheld (242,648) 0
================================================================================
TOTAL INCOME 5,914,312 1,425,757
================================================================================
EXPENSES
Investment Advisory Fees 5,033,513 192,643
Distribution Expenses 2,130,359 72,018
Transfer Agent Fees 3,196,058 214,102
Administrative Services Fees 337,249 21,559
Custodian Fees and Expenses 219,159 9,627
Directors' Fees and Expenses 53,937 9,823
Interest Expenses 60 122
Professional Fees and Expenses 59,213 29,278
Registration Fees and Expenses
Investor Class 61,914 14,355
Class A 31 40
Class B 13 12
Class C 694 710
Class K 1,175 --
Reports to Shareholders 384,113 58,243
Other Expenses 39,395 4,429
================================================================================
TOTAL EXPENSES 11,516,883 626,961
Fees and Expenses Absorbed/Reimbursed
by Investment Adviser (213,960) (207,889)
Fees and Expenses Paid Indirectly (808) (730)
================================================================================
NET EXPENSES 11,302,115 418,342
================================================================================
NET INVESTMENT INCOME (LOSS) (5,387,803) 1,007,415
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (64,777,824) 33,309
Foreign Currency Transactions 947,408 0
================================================================================
Total Net Realized Gain (Loss) (63,830,416) 33,309
================================================================================
Change in Net Appreciation/Depreciation of:
Investment Securities (139,569,928) (2,096,036)
Foreign Currency Transactions 20,986,955 0
================================================================================
Total Change in Net Appreciation/
Depreciation (118,582,973) (2,096,036)
================================================================================
NET LOSS ON INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS (182,413,389) (2,062,727)
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS $ (187,801,192) $ (1,055,312)
================================================================================
See Notes to Financial Statements
FS-37
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
TECHNOLOGY TELECOMMUNICATIONS
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 3,714,705 $ 3,913,369
Dividends from Affiliated Investment
Companies 0 40,672
Interest 2,433,548 714,980
Securities Loaned Income 188,766 205,579
Foreign Taxes Withheld (212,626) (241,485)
================================================================================
TOTAL INCOME 6,124,393 4,633,115
================================================================================
EXPENSES
Investment Advisory Fees 11,673,473 2,309,149
Distribution Expenses 2,900,084 915,538
Transfer Agent Fees 10,338,284 5,386,698
Administrative Services Fees 892,715 170,044
Custodian Fees and Expenses 294,267 123,339
Directors' Fees and Expenses 133,696 31,221
Interest Expenses 8,418 2,969
Professional Fees and Expenses 134,083 55,220
Registration Fees and Expenses
Institutional 22,779 --
Investor Class 185,595 114,342
Class A 7 15
Class B 4 5
Class C 677 716
Class K 1,452 1,472
Reports to Shareholders 1,017,230 779,158
Other Expenses 92,971 26,364
================================================================================
TOTAL EXPENSES 27,695,735 9,916,250
Fees and Expenses Absorbed/Reimbursed
by Investment Adviser (233,001) (3,453,759)
Fees and Expenses Paid Indirectly (2,015) (74,314)
================================================================================
NET EXPENSES 27,460,719 6,388,177
================================================================================
NET INVESTMENT LOSS (21,336,326) (1,755,062)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (1,341,077,063) (397,915,271)
Foreign Currency Transactions (1,037) (120,611)
Option Contracts 20,689,078 314,778
================================================================================
Total Net Realized Loss (1,320,389,022) (397,721,104)
================================================================================
Change in Net Appreciation/Depreciation of:
Investment Securities (32,763,181) 204,480,051
Foreign Currency Transactions 0 5,240,216
Option Contracts (4,996,760) (114,268)
================================================================================
Total Change in Net Appreciation/
Depreciation (37,759,941) 209,605,999
================================================================================
NET LOSS ON INVESTMENT SECURITIES,
FOREIGN CURRENCY TRANSACTIONS AND
OPTION CONTRACTS (1,358,148,963) (188,115,105)
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS $(1,379,485,289) $ (189,870,167)
================================================================================
See Notes to Financial Statements
FS-38
STATEMENT OF OPERATIONS (CONTINUED)
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
UTILITIES
FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 3,192,572
Interest 295,851
Securities Loaned Income 1,380
Foreign Taxes Withheld (4,252)
================================================================================
TOTAL INCOME 3,485,551
================================================================================
EXPENSES
Investment Advisory Fees 666,839
Distribution Expenses 230,974
Transfer Agent Fees 560,954
Administrative Services Fees 50,010
Custodian Fees and Expenses 16,960
Directors' Fees and Expenses 14,978
Interest Expenses 266
Professional Fees and Expenses 28,014
Registration Fees and Expenses
Investor Class 21,891
Class A 12
Class B 9
Class C 703
Reports to Shareholders 104,971
Other Expenses 7,734
================================================================================
TOTAL EXPENSES 1,704,315
Fees and Expenses Absorbed/Reimbursed by Investment Adviser (543,805)
Fees and Expenses Paid Indirectly (316)
================================================================================
NET EXPENSES 1,160,194
================================================================================
NET INVESTMENT INCOME 2,325,357
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Loss on Investment Securities (13,056,963)
Change in Net Appreciation/Depreciation of Investment
Securities (13,674,867)
================================================================================
NET LOSS ON INVESTMENT SECURITIES (26,731,830)
================================================================================
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (24,406,473)
================================================================================
See Notes to Financial Statements
FS-39
STATEMENT OF CHANGES IN NET ASSETS
ENERGY FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (1,726,890) $ (1,466,773)
Net Realized Loss (15,926,301) (44,619,544)
Change in Net Appreciation/Depreciation (32,597,193) 5,832,460
================================================================================
NET DECREASE IN NET
ASSETS FROM OPERATIONS (50,250,384) (40,253,857)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 218,874,059 644,971,752
Class A 19,736,581 --
Class B 1,571,590 --
Class C 16,754,905 20,669,161
Class K 343,185 35,899
================================================================================
257,280,320 665,676,812
Amounts Paid for Repurchases of Shares
Investor Class (298,479,641) (692,833,382)
Class A (9,898,155) --
Class B (50,708) --
Class C (17,803,340) (16,337,642)
Class K (85,824) (2,743)
================================================================================
(326,317,668) (709,173,767)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (69,037,348) (43,496,955)
================================================================================
TOTAL DECREASE IN NET ASSETS (119,287,732) (83,750,812)
NET ASSETS
Beginning of Period 370,799,415 454,550,227
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss of
($28,917) and ($23,683), respectively) $ 251,511,683 $ 370,799,415
================================================================================
See Notes to Financial Statements
FS-40
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
FINANCIAL SERVICES FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Income $ 3,404,122 $ 3,116,228
Net Realized Gain (Loss) (60,822,257) 17,633,179
Change in Net Appreciation/Depreciation (200,292,557) 15,800,834
================================================================================
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (257,710,692) 36,550,241
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class (4,532,916) (74,131,190)
Class A (54,866) --
Class B (6,424) --
Class C (18,276) (769,067)
Class K (9,840) (74,131)
================================================================================
TOTAL DISTRIBUTIONS (4,622,322) (74,974,388)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 2,282,256,437 1,480,559,448
Class A 8,745,135 --
Class B 1,184,600 --
Class C 19,297,579 27,338,396
Class K 964,477 1,778,835
Reinvestment of Distributions
Investor Class 4,373,500 70,771,361
Class A 46,662 --
Class B 5,986 --
Class C 15,533 715,041
Class K 9,812 74,046
================================================================================
2,316,899,721 1,581,237,127
Amounts Paid for Repurchases of Shares
Investor Class (2,529,161,658) (1,647,802,644)
Class A (2,632,329) --
Class B (49,759) --
Class C (22,397,274) (22,844,846)
Class K (355,893) (825,978)
================================================================================
(2,554,596,913) (1,671,473,468)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (237,697,192) (90,236,341)
================================================================================
TOTAL DECREASE IN NET ASSETS (500,030,206) (128,660,488)
NET ASSETS
Beginning of Period 1,252,144,049 1,380,804,537
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($27,883) and ($108,164),
respectively) $ 752,113,843 $ 1,252,144,049
================================================================================
See Notes to Financial Statements
FS-41
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
GOLD & PRECIOUS METALS FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (946,525) $ (618,754)
Net Realized Gain (Loss) 12,875,065 (561,100)
Change in Net Appreciation/Depreciation (10,324,799) 38,665,964
================================================================================
NET INCREASE IN NET
ASSETS FROM OPERATIONS 1,603,741 37,486,110
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 288,729,638 250,552,619
Class A 8,742,700 --
Class B 2,670,343 --
Class C 20,351,688 3,043,172
================================================================================
320,494,369 253,595,791
Amounts Paid for Repurchases of Shares
Investor Class (297,679,646) (247,531,594)
Class A (6,894,638) --
Class B (228,708) --
Class C (17,964,744) (2,690,754)
================================================================================
(322,767,736) (250,222,348)
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (2,273,367) 3,373,443
================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (669,626) 40,859,553
NET ASSETS
Beginning of Period 105,346,076 64,486,523
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($140,069) and ($789,954),
respectively) $ 104,676,450 $ 105,346,076
================================================================================
See Notes to Financial Statements
FS-42
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
HEALTH SCIENCES FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (7,840,770) $ (12,583,295)
Net Realized Loss (171,617,410) (148,326,289)
Change in Net Appreciation/Depreciation (87,177,417) 226,759,441
================================================================================
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (266,635,597) 65,849,857
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class 0 (583,793)
Class C 0 (8,161)
Class K 0 (1,034)
================================================================================
TOTAL DISTRIBUTIONS 0 (592,988)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 3,275,394,183 2,819,831,341
Class A 11,568,902 --
Class B 709,368 --
Class C 86,806,161 444,052,177
Class K 1,290,276 3,560,641
Reinvestment of Distributions
Investor Class 0 569,872
Class C 0 7,780
Class K 0 1,034
================================================================================
3,375,768,890 3,268,022,845
Amounts Paid for Repurchases of Shares
Investor Class (3,532,369,079) (2,989,733,603)
Class A (7,580,049) --
Class B (38,094) --
Class C (94,578,217) (440,088,546)
Class K (1,224,074) (994,361)
================================================================================
(3,635,789,513) (3,430,816,510)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (260,020,623) (162,793,665)
================================================================================
TOTAL DECREASE IN NET ASSETS (526,656,220) (97,536,796)
NET ASSETS
Beginning of Period 1,493,609,386 1,591,146,182
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($158,098) and ($124,891),
respectively) $ 966,953,166 $ 1,493,609,386
================================================================================
See Notes to Financial Statements
FS-43
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
LEISURE FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
(Note 1)
OPERATIONS
Net Investment Loss $ (5,387,803) $ (4,636,576)
Net Realized Loss (63,830,416) (11,436,792)
Change in Net Appreciation/Depreciation (118,582,973) 43,733,217
================================================================================
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (187,801,192) 27,659,849
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class 0 (6,606,439)
Class C 0 (83,069)
================================================================================
TOTAL DISTRIBUTIONS 0 (6,689,508)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 207,349,184 729,179,032
Class A 37,428,048 --
Class B 9,606,745 --
Class C 42,717,603 54,801,929
Class K 37,654,639 59,960,773
Reinvestment of Distributions
Investor Class 0 6,410,599
Class C 0 79,560
================================================================================
334,756,219 850,431,893
Amounts Paid for Repurchases of Shares
Investor Class (306,714,154) (561,176,279)
Class A (7,012,073) --
Class B (467,634) --
Class C (36,749,162) (43,833,698)
Class K (17,226,143) (1,210,408)
================================================================================
(368,169,166) (606,220,385)
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (33,412,947) 244,211,508
================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS (221,214,139) 265,181,849
NET ASSETS
Beginning of Period 877,997,868 612,816,019
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($48,343) and ($445,820),
respectively) $ 656,783,729 $ 877,997,868
================================================================================
See Notes to Financial Statements
FS-44
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
REAL ESTATE OPPORTUNITY FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Income $ 1,007,415 $ 959,897
Net Realized Gain (Loss) 33,309 (1,776,058)
Change in Net Appreciation/Depreciation (2,096,036) 3,077,128
================================================================================
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (1,055,312) 2,260,967
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class (869,479) (883,840)
Class A (66,360) --
Class B (4,005) --
Class C (17,981) (19,583)
================================================================================
TOTAL DISTRIBUTIONS (957,825) (903,423)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 40,930,071 65,554,193
Class A 4,016,740 --
Class B 164,213 --
Class C 3,324,794 6,576,932
Reinvestment of Distributions
Investor Class 812,836 847,345
Class A 61,410 --
Class B 3,335 --
Class C 15,925 17,365
================================================================================
49,329,324 72,995,835
Amounts Paid for Repurchases of Shares
Investor Class (39,958,634) (75,885,547)
Class A (1,612,336) --
Class B (28,724) --
Class C (2,852,451) (7,520,965)
================================================================================
(44,452,145) (83,406,512)
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 4,877,179 (10,410,677)
================================================================================
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,864,042 (9,053,133)
NET ASSETS
Beginning of Period 20,829,069 29,882,202
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Income
of $9,823 and $4,923, respectively) $ 23,693,111 $ 20,829,069
================================================================================
See Notes to Financial Statements
FS-45
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
TECHNOLOGY FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (21,336,326) $ (29,818,014)
Net Realized Loss (1,320,389,022) (1,701,319,209)
Change in Net Appreciation/Depreciation (37,759,941) 1,093,675,772
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS (1,379,485,289) (637,461,451)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Institutional Class 400,830,100 1,144,541,447
Investor Class 4,495,198,217 4,626,109,679
Class A 39,607,123 --
Class B 784,386 --
Class C 16,773,376 98,155,680
Class K 18,036,725 31,102,806
================================================================================
4,971,229,927 5,899,909,612
Amounts Paid for Repurchases of Shares
Institutional Class (460,489,454) (884,671,106)
Investor Class (4,742,030,065) (4,604,480,513)
Class A (34,425,710) --
Class B (225,672) --
Class C (23,667,790) (91,350,472)
Class K (9,475,180) (4,487,304)
================================================================================
(5,270,313,871) (5,584,989,395)
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (299,083,944) 314,920,217
================================================================================
TOTAL DECREASE IN NET ASSETS (1,678,569,233) (322,541,234)
NET ASSETS
Beginning of Period 3,272,045,171 3,594,586,405
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($232,309) and ($771,569),
respectively) $ 1,593,475,938 $ 3,272,045,171
================================================================================
See Notes to Financial Statements
FS-46
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
TELECOMMUNICATIONS FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Loss $ (1,755,062) $ (6,130,769)
Net Realized Loss (397,721,104) (861,726,352)
Change in Net Appreciation/Depreciation 209,605,999 246,742,633
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS (189,870,167) (621,114,488)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 921,394,710 2,027,191,892
Class A 9,330,840 --
Class B 24,155 --
Class C 47,707,611 327,970,659
Class K 632,772 1,234,228
================================================================================
979,090,088 2,356,396,779
Amounts Paid for Repurchases of Shares
Investor Class (1,033,252,143) (2,325,417,357)
Class A (8,626,147) --
Class B (3,783) --
Class C (53,919,269) (323,176,133)
Class K (500,459) (104,957)
================================================================================
(1,096,301,801) (2,648,698,447)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (117,211,713) (292,301,668)
================================================================================
TOTAL DECREASE IN NET ASSETS (307,081,880) (913,416,156)
NET ASSETS
Beginning of Period 585,224,508 1,498,640,664
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($66,378) and ($65,928),
respectively) $ 278,142,628 $ 585,224,508
================================================================================
See Notes to Financial Statements
FS-47
STATEMENT OF CHANGES IN NET ASSETS
(CONTINUED)
UTILITIES FUND
YEAR ENDED MARCH 31
- --------------------------------------------------------------------------------
2003 2002
OPERATIONS
Net Investment Income $ 2,325,357 $ 1,845,871
Net Realized Loss (13,056,963) (22,801,292)
Change in Net Appreciation/Depreciation (13,674,867) (53,674,952)
================================================================================
NET DECREASE IN NET ASSETS
FROM OPERATIONS (24,406,473) (74,630,373)
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Investor Class (2,288,373) (1,869,306)
Class A (16,410) --
Class B (4,725) --
Class C (9,547) (728)
================================================================================
TOTAL DISTRIBUTIONS (2,319,055) (1,870,034)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares
Investor Class 110,818,499 138,696,599
Class A 2,519,233 --
Class B 263,926 --
Class C 11,010,192 8,575,353
Reinvestment of Distributions
Investor Class 2,165,716 1,774,320
Class A 12,275 --
Class B 1,446 --
Class C 9,205 718
================================================================================
126,800,492 149,046,990
Amounts Paid for Repurchases of Shares
Investor Class (138,522,409) (173,267,204)
Class A (1,960,442) --
Class B (34,745) --
Class C (11,876,032) (9,358,343)
================================================================================
(152,393,628) (182,625,547)
NET DECREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS (25,593,136) (33,578,557)
================================================================================
TOTAL DECREASE IN NET ASSETS (52,318,664) (110,078,964)
NET ASSETS
Beginning of Period 126,376,755 236,455,719
================================================================================
End of Period (Including Accumulated
Undistributed Net Investment Loss
of ($43,913) and ($5,069),
respectively) $ 74,058,091 $ 126,376,755
================================================================================
See Notes to Financial Statements
FS-48
NOTES TO FINANCIAL STATEMENTS
INVESCO SECTOR FUNDS, INC.
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Sector
Funds, Inc. is incorporated in Maryland and presently consists of nine separate
Funds: Energy Fund, Financial Services Fund, Gold & Precious Metals Fund
(formerly Gold Fund), Health Sciences Fund, Leisure Fund, Real Estate
Opportunity Fund, Technology Fund, Telecommunications Fund and Utilities Fund
(individually the "Fund" and collectively, the "Funds"). Effective July 31,
2002, Gold Fund's name changed to Gold & Precious Metals Fund. The investment
objectives of the Funds are: to seek capital growth through investments in
specific business sectors for Energy, Financial Services, Gold & Precious
Metals, Health Sciences, Leisure and Technology Funds; to achieve capital growth
and current income for Real Estate Opportunity, Telecommunications and Utilities
Funds. INVESCO Sector Funds, Inc. is registered under the Investment Company Act
of 1940 (the "Act") as a diversified, open-end management investment company.
Effective April 1, 2002, the Funds began offering two additional classes of
shares, referred to as Class A and Class B shares. Effective December 17, 2001,
Leisure Fund began offering an additional class of shares, referred to as Class
K shares. Income, expenses (other than those attributable to a specific class)
and realized and unrealized gains and losses are allocated daily to each class
of shares based on the relative proportion of net assets represented by such
class. Operating expenses directly attributable to a specific class are charged
against operations of that class. Class A shares are sold with a front-end sales
charge ranging from 5.50% to 2.00% of the offering price on purchases of less
than $1,000,000. Class B shares and Class C shares are subject to a contingent
deferred sales charge paid by the redeeming shareholder. Class B shares convert
to Class A shares after eight years along with a pro rata portion of its
reinvested dividends and distributions.
Effective April 1, 2002, the Investor Class shares are offered only to
grandfathered investors who have established and maintained an account in any of
the funds managed and distributed by INVESCO Funds Group, Inc. ("IFG") in
Investor Class shares prior to April 1, 2002.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
A. SECURITY VALUATION -- Domestic (U.S.) equity securities traded on national
securities exchanges or in the over-the-counter market are valued at the last
sales price at the close of the regular trading day on the exchange (generally
4:00 p.m. Eastern time) where such securities are primarily traded. If last
sales prices are not available, securities are valued at the closing bid price
for the regular trading day as obtained from one or more dealers making a market
for such securities or by a pricing service approved by the Fund's board of
directors.
Foreign equity securities are valued at the closing price. The closing price is
designated by the principal stock exchange in the country in which the
securities are traded. In the event that closing prices are not available for
foreign securities, a snapshot of prices will be obtained from the principal
stock exchange at or prior to the close of the New York Stock Exchange. Foreign
currency exchange rates are determined daily prior to the close of the New York
Stock Exchange.
Gold bullion is valued at the close of the New York Stock Exchange and its
valuation is obtained by a pricing service approved by the Fund's board of
directors.
Option contracts are valued at the average of the closing bid and ask prices
from the exchange with the highest trading volume on that particular day.
FS-49
Debt securities are valued at evaluated bid prices as determined by a pricing
service approved by the Fund's board of directors. If evaluated bid prices are
not available, debt securities are valued by averaging the bid prices obtained
from one or more dealers making a market for such securities.
Investments in shares of investment companies are valued at the net asset value
of the respective fund as calculated each day.
If market quotations or pricing service valuations are not readily available, or
events or circumstances that may affect the value of portfolio securities are
identified between the closing of their principal markets and the time that the
net asset value per share is determined, securities are valued at fair value as
determined in good faith under procedures established by the Fund's board of
directors. Restricted and illiquid securities are valued in accordance with
procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Fund are fully
collateralized by securities issued by the U.S. Government, its agencies or
instrumentalities and such collateral is in the possession of the Fund's
custodian. The collateral is evaluated daily to ensure its market value exceeds
the current market value of the repurchase agreements including accrued
interest. In the event of default on the obligation to repurchase, the Fund has
the right to liquidate the collateral and apply the proceeds in satisfaction of
the obligation.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income, which may be comprised of stated coupon rate,
market discount, original issue discount or amortized premium, is recorded on
the accrual basis. Discounts or premiums on debt securities purchased are
amortized over the life of the respective security as adjustments to interest
income. Cost is determined on the specific identification basis. Certain
dividends from foreign securities will be recorded as soon as the Fund is
informed of the dividend if such information is obtained subsequent to the
ex-dividend date. Investment income received from foreign sources may be subject
to foreign withholding taxes. Dividend and interest income is shown gross of
foreign withholding taxes in the accompanying financial statements. Income and
expenses on foreign securities are translated into U.S. dollars at rates of
exchange prevailing when accrued. The cost of foreign securities is translated
into U.S. dollars at the rates of exchange prevailing when such securities are
acquired. During the year ended March 31, 2003, Energy Fund was reimbursed for
certain trading losses in the amount of $35,462.
Each Fund may invest in securities issued by other INVESCO investment companies
that invest in short-term debt securities and seek to maintain a net asset value
of one dollar per share. During the year ended March 31, 2003, Energy, Financial
Services, Gold & Precious Metals, Leisure and Telecommunications Funds invested
in INVESCO Treasurer's Series Money Market Reserve Fund. During that same period
there were no such investments by Health Sciences, Real Estate Opportunity,
Technology and Utilities Funds. The income from this investment is recorded in
the Statement of Operations.
The Fund may have elements of risk due to investments in specific industries or
foreign issuers located in a specific country. Such investments may subject the
Fund to additional risks resulting from future political or economic conditions
and/or possible impositions of adverse foreign governmental laws or currency
exchange restrictions. Net realized and unrealized gain or loss from investment
securities includes fluctuations from currency exchange rates and fluctuations
in market value.
FS-50
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
The Gold & Precious Metals Fund may invest in gold bullion which may have
significant price movements over short periods of time and may be affected by
unpredictable international monetary and political policies. Further, gold
bullion may have storage and transaction costs associated with its ownership
which may be higher than that of other types of securities.
Restricted securities held by a Fund may not be sold except in exempt
transactions or in a public offering registered under the Securities Act of
1933. The risk of investing in such securities is generally greater than the
risk of investing in the securities of widely held, publicly traded companies.
Lack of a secondary market and resale restrictions may result in the inability
of a Fund to sell a security at a fair price and may substantially delay the
sale of the security which each Fund seeks to sell. In addition, these
securities may exhibit greater price volatility than securities for which
secondary markets exist.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to
shareholders are recorded by the Fund on the ex-dividend/distribution date. The
Fund distributes net realized capital gains, if any, to its shareholders at
least annually, if not offset by capital loss carryovers.
E. TAX INFORMATION -- The Fund has complied, and continues to comply, with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and, accordingly, has made or intends to make sufficient distributions
of net investment income and net realized capital gains, if any, to relieve it
from all federal and state income taxes and federal excise taxes.
Dividends paid by the Fund from net investment income and distributions of net
realized short-term capital gains are, for federal income tax purposes, taxable
as ordinary income to shareholders. The tax composition of distributions from
ordinary income, long-term capital gains and of the ordinary income
distributions declared for the year ended March 31, 2003, and amounts qualifying
for the dividends received deduction available to the Fund's corporate
shareholders were as follows:
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 2003 MARCH 31, 2003 MARCH 31, 2003 MARCH 31, 2002 MARCH 31, 2002
ORDINARY INCOME LONG-TERM CAPITAL QUALIFYING ORDINARY INCOME LONG-TERM CAPITAL
FUND DISTRIBUTIONS GAIN DISTRIBUTIONS PERCENTAGE DISTRIBUTIONS GAIN DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------------------------------------
Financial Services Fund $ 3,324,494 $ 1,297,828 100.00% $ 6,877,940 $ 68,096,448
Health Sciences Fund 0 0 0.00% 548,602 44,386
Leisure Fund 0 0 0.00% 1,613,479 5,076,029
Real Estate Opportunity Fund 957,825 0 1.61% 903,423 0
Utilities Fund 2,319,055 0 1.00% 1,870,034 0
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from accounting principles generally accepted
in the United States.
FS-51
The tax components of the Fund at March 31, 2003 include:
NET TAX
COST OF GROSS TAX GROSS TAX APPRECIATION
INVESTMENTS FOR UNREALIZED UNREALIZED (DEPRECIATION)
FUND TAX PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS
- --------------------------------------------------------------------------------------------------------
Energy Fund $ 247,769,524 $ 28,433,184 $ 10,450,300 $ 17,982,884
Financial Services Fund 719,839,008 77,427,623 45,844,873 31,582,750
Gold & Precious Metals Fund 104,610,389 21,144,944 9,237,369 11,907,575
Health Sciences Fund 895,666,927 140,758,771 45,741,540 95,017,231
Leisure Fund 613,757,329 122,008,477 66,677,876 55,330,601
Real Estate Opportunity Fund 23,648,035 997,063 602,240 394,823
Technology Fund 1,975,193,766 86,437,493 465,055,564 (378,618,071)
Telecommunications Fund 324,308,326 13,728,939 40,705,712 (26,976,773)
Utilities Fund 73,840,716 3,212,948 5,354,023 (2,141,075)
ACCUMULATED CUMULATIVE EFFECT
UNDISTRIBUTED CAPITAL LOSS OF OTHER
FUND ORDINARY INCOME CARRYOVERS TIMING DIFFERENCES
- --------------------------------------------------------------------------------------------------------
Energy Fund $ 0 $ (58,447,779) $ (28,917)
Financial Services Fund 93,812 (52,702,581) (8,783,479)
Gold & Precious Metals Fund 1,354,029 (189,650,608) (25,176)
Health Sciences Fund 0 (297,476,816) (31,004,760)
Leisure Fund 0 (63,392,926) (12,252,581)
Real Estate Opportunity Fund 12,213 (8,274,056) (212,795)
Technology Fund 0 (3,791,182,138) (279,350,098)
Telecommunications Fund 0 (1,622,403,229) (27,997,494)
Utilities Fund 0 (37,516,958) (2,696,195)
The primary difference between book and tax appreciation/depreciation is wash
sale loss deferrals. Telecommunications Fund has a partnership tax deferral in
the amount of $2,267,247. The net tax appreciation/depreciation on investments
excludes the effect of foreign currency transactions and written options
activity.
Capital loss carryovers expire in the years 2005, 2006, 2007, 2008, 2009, 2010
and 2011. To the extent future capital gains and income are offset by capital
loss carryovers and deferred post-October 31 losses, such gains and income will
not be distributed to shareholders. Deferred post-October 31 capital and
currency losses are: Financial Services Fund $8,661,785, Gold & Precious Metals
Fund $2,834, Health Sciences Fund $30,846,662, Leisure Fund $12,210,757, Real
Estate Opportunity Fund $210,405, Technology Fund $279,932,903,
Telecommunications Fund $27,931,116 and Utilities Fund $2,652,282.
Due to inherent differences in the recognition of income, expenses and realized
gains/losses under accounting principles generally accepted in the United States
and Federal income tax purposes, permanent and temporary differences between
book and tax basis reporting have been identified and appropriately reclassified
on the Statement of Assets and Liabilities. Energy, Health Sciences, Leisure,
Technology and Telecommunications Funds reclassified $1,820,004, $7,795,809,
$5,933,695, $22,459,448, $2,314,505, respectively, of net investment losses to
paid-in capital. Gold & Precious Metals Fund reclassified $1,596,421 of net
investment losses to accumulated undistributed net realized losses.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
FS-52
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. OPTIONS -- The Funds may buy or write put and call options, including
securities index options, on portfolio securities for hedging purposes or as a
substitute for an investment. The Funds generally invest in options to hedge
against adverse movements in the value of portfolio holdings.
When an option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying security at a fixed price, upon exercise of the
option. In writing an option, the Fund bears the market risk of an unfavorable
change in the price of the security underlying the written option. Exercise of
an option written by the Fund could result in the Fund buying or selling a
security at a price different from the current market value.
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option, or the cost of the security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
Securities designated to cover outstanding written options are noted in the
Statement of Investment Securities where applicable. Options written are
reported as a liability in the Statement of Assets and Liabilities. Gains and
losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity to
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The use of such instruments may involve certain additional risks as a
result of unanticipated movements in the market. A lack of correlation between
the value of an instrument underlying an option and the asset being hedged, or
unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful. In addition, there can be no assurance that a liquid secondary
market will exist for any option purchased or sold.
Written option activity for the year ended March 31, 2003, was as follows:
CALL OPTIONS PUT OPTIONS
- ----------------------------------------------------------------------------------------------------
NUMBER AMOUNT NUMBER AMOUNT
OF OPTIONS OF PREMIUMS OF OPTIONS OF PREMIUMS
- ----------------------------------------------------------------------------------------------------
TECHNOLOGY FUND
Options outstanding at March 31, 2002 (43,575) $ 17,656,466 0 $ 0
Options written (132,549) 33,132,524 (12,597) 1,519,455
Options closed or expired 169,585 (49,860,481) 12,597 (1,519,455)
Options outstanding at March 31, 2003 (6,539) $928,509 0 0
TELECOMMUNICATIONS FUND
Options outstanding at March 31, 2002 (1,600) $ 261,852
Options written (7,009) 1,017,875
Options closed or expired 7,098 (982,068)
Options outstanding at March 31, 2003 (1,511) $ 297,659
H. EXPENSES -- Each Fund or Class bears expenses incurred specifically on its
behalf and, in addition, each Fund or Class bears a portion of general expenses,
based on the relative net assets of each Fund or Class.
Under an agreement between each Fund and the Fund's Custodian, certain Custodian
Fees and Expenses are reduced by credits granted by the Custodian from any
temporarily uninvested cash. Similarly, Custodian Fees and Expenses for Energy,
Financial Services, Gold & Precious Metals, Health Sciences and
Telecommunications Funds are reduced by credits earned from security brokerage
FS-53
transactions under certain broker/service arrangements with third parties. Such
credits are included in Fees and Expenses Paid Indirectly in the Statement of
Operations.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. IFG serves as the Funds'
investment adviser. As compensation for its services to the Funds, IFG receives
an investment advisory fee which is accrued daily at the applicable rate and
paid monthly. The fee is based on the annual rate of each Fund's average net
assets as follows:
AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------------
$700 $2 $4 $6
$0 TO $350 TO MILLION BILLION BILLION BILLION OVER
$350 $700 TO $2 TO $4 TO $6 TO $8 $8
FUND MILLION MILLION BILLION BILLION BILLION BILLION BILLION
- -----------------------------------------------------------------------------------------------------
Energy Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Financial Services Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Gold & Precious Metals Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Health Sciences Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Leisure Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Technology Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Utilities Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------------
$500 $1 $2 $4 $6
$0 TO MILLION BILLION BILLION BILLION BILLION OVER
$500 TO $1 TO $2 TO $4 TO $6 TO $8 $8
FUND MILLION BILLION BILLION BILLION BILLION BILLION BILLION
- -----------------------------------------------------------------------------------------------------
Real Estate Opportunity Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Telecommunications Fund 0.65% 0.55% 0.45% 0.45% 0.40% 0.375% 0.35%
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
compensation of marketing and advertising expenditures to INVESCO Distributors,
Inc. ("IDI" or the "Distributor"), a wholly owned subsidiary of IFG, of 0.25% of
annual average net assets of Investor Class shares. A master distribution plan
and agreement for Class A, Class B and Class C shares pursuant to Rule 12b-1 of
the Act provides for compensation of certain promotional and other sales related
costs to IDI. Class A shares of the Fund pay compensation to IDI at a rate of
0.35% of annual average net assets. During any period that Class A shares of the
Fund are closed to new investors, the Fund will reduce this payment for Class A
shares from 0.35% to 0.25% per annum. Class B and Class C shares of the Fund pay
compensation to IDI at a rate of 1.00% of annual average net assets. Of these
amounts, IDI may pay a service fee of 0.25% of the average net assets of the
Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the applicable class of shares of the Fund. Any
amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose caps on the total sales charges,
including asset-based sales charges, that may be paid by the respective class. A
plan of distribution pursuant to Rule 12b-1 of the Act provides for financing
the distribution and continuing personal shareholder servicing of Class K shares
of 0.45% of annual average net assets. Any unreimbursed expenses IDI incurs with
respect to Investor Class, Class A, Class C and Class K shares in any fiscal
year can not be recovered in subsequent years. For the year ended March 31,
2003, amounts paid to the Distributor were as follows:
FS-54
INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund $ 710,505 $ 19,438 $ 6,195 $ 102,870 $ 526
Financial Services Fund 2,428,349 9,547 5,826 134,199 5,109
Gold & Precious Metals Fund 279,306 4,965 6,902 22,606 --
Health Sciences Fund 2,942,165 4,556 3,194 89,870 9,856
Leisure Fund 1,625,603 52,465 44,957 176,639 277,058
Real Estate Opportunity Fund 59,074 3,327 580 8,070 --
Technology Fund 2,923,222 6,303 1,332 88,805 98,700
Telecommunications Fund 948,389 2,727 99 37,403 3,117
Utilities Fund 230,252 1,046 1,559 10,094 --
If the Class B Plan is terminated, the Board of Directors may allow the Class B
shares to continue payments of the asset-based sales charge to the Distributor
for allowable unreimbursed expenses incurred for distributing shares before the
Class B Plan was terminated. The Class B Plan allows for the carry-forward of
distribution expenses, to be recovered from asset-based sales charges in
subsequent fiscal periods. Distribution fees related to the Distributor for the
year ended March 31, 2003, for Class B were as follows:
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
AMOUNT RETAINED EXPENSES OF NET ASSETS
FUND BY DISTRIBUTOR UNDER PLAN OF CLASS
- --------------------------------------------------------------------------------------------------
Energy Fund - Class B Plan $ 7,253 $ 50,817 3.38%
Financial Services Fund - Class B Plan 6,587 38,040 3.84%
Gold & Precious Metals Fund - Class B Plan 8,631 89,799 3.88%
Health Sciences Fund - Class B Plan 3,649 22,662 3.65%
Leisure Fund - Class B Plan 50,672 300,396 3.63%
Real Estate Opportunity Fund - Class B Plan 672 5,126 3.84%
Technology Fund - Class B Plan 1,736 20,563 3.87%
Telecommunications Fund - Class B Plan 112 556 3.50%
Utilities Fund - Class B Plan 1,712 7,112 3.69%
Distribution Expenses for each class as presented in the Statement of Operations
for the year ended March 31, 2003 were as follows:
INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund $ 685,019 $ 22,209 $ 7,338 $ 101,292 $ 616
Financial Services Fund 2,314,987 10,800 6,591 128,891 5,184
Gold & Precious Metals Fund 278,665 5,387 8,640 24,543 --
Health Sciences Fund 2,810,808 5,134 3,661 82,986 9,669
Leisure Fund 1,563,784 59,657 51,248 177,740 277,930
Real Estate Opportunity Fund 59,144 3,989 681 8,204 --
Technology Fund 2,714,413 7,497 1,755 79,762 96,657
Telecommunications Fund 877,339 2,837 112 32,223 3,027
Utilities Fund 218,659 1,167 1,716 9,432 --
IFG receives a transfer agent fee from each Class at an annual rate of $22.50
per shareholder account, or, where applicable, per participant in an omnibus
account, per year. IFG may pay such fee for participants in omnibus accounts to
affiliates or third parties. The fee is paid monthly at one-twelfth of the
annual fee and is based upon the actual number of accounts in existence during
each month. Transfer agent fees for each class as presented in the Statement of
Operations for the year ended March 31, 2003 were as follows:
FS-55
INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund -- $ 1,351,371 $ 13,598 $ 2,355 $ 51,772 $ 2,083
Financial Services Fund -- 3,201,855 10,460 2,419 66,317 5,226
Gold & Precious Metals Fund -- 640,022 10,637 898 12,141 --
Health Sciences Fund -- 4,374,452 9,750 1,618 98,464 15,184
Leisure Fund -- 2,455,246 39,891 15,848 85,622 599,451
Real Estate Opportunity Fund -- 202,193 2,124 285 9,500 --
Technology Fund $ 1,921,921 7,981,678 7,798 857 136,791 289,239
Telecommunications Fund -- 5,273,178 3,544 131 99,233 10,612
Utilities Fund -- 547,156 1,045 294 12,459 --
In accordance with an Administrative Services Agreement, each Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.045% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG has voluntarily agreed to absorb and assume certain fees and expenses
incurred by the Funds. IFG is entitled to reimbursement from a Fund share class
that has fees and expenses voluntarily absorbed pursuant to this arrangement if
such reimbursements do not cause a share class to exceed voluntary expense
limitations and the reimbursement is made within three years after IFG incurred
the expense. For the year ended March 31, 2003, total fees and expenses
voluntarily absorbed were as follows:
INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund -- $ 0 $ 0 $ 582 $ 20,103 $ 4,502
Financial Services Fund -- 0 3,917 2,056 0 3,997
Gold & Precious Metals Fund -- 0 431 0 0 --
Health Sciences Fund -- 0 6,829 1,648 37,750 0
Leisure Fund -- 0 0 4,408 0 209,552
Real Estate Opportunity Fund -- 195,593 0 936 11,360 --
Technology Fund $ 0 0 818 1,027 100,306 130,850
Telecommunications Fund -- 3,343,479 0 1,069 100,846 8,365
Utilities Fund -- 526,139 1,095 943 15,628 --
At March 31, 2003, the reimbursement that may potentially be made by the Funds
to IFG that will expire during the calendar years ended 2005 and 2006, are as
follows:
INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund -- $ 0 $ 0 $ 582 $ 20,103 $ 4,502
Financial Services Fund -- 0 3,917 2,056 0 3,997
Gold & Precious Metals Fund -- 0 431 0 0 --
Health Sciences Fund -- 0 6,829 1,648 37,750 0
Leisure Fund -- 0 0 4,408 0 209,552
Real Estate Opportunity Fund -- 171,596 0 936 10,559 --
Technology Fund $ 0 0 818 1,027 100,306 130,850
Telecommunications Fund -- 3,015,954 0 1,069 90,199 8,022
Utilities Fund -- 442,999 1,095 943 13,761 --
FS-56
During the year ended March 31, 2003, the reimbursement that was made by the
Funds to IFG were as follows:
INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS
FUND CLASS CLASS A B C K
- --------------------------------------------------------------------------------------------------
Energy Fund -- $ 0 $ 0 $ 23 $ 0 $ 0
Financial Services Fund -- 0 0 0 0 0
Gold & Precious Metals Fund -- 0 0 0 495 --
Health Sciences Fund -- 0 62 0 0 1,052
Leisure Fund -- 0 345 0 0 81,554
Real Estate Opportunity Fund -- 0 431 0 0 --
Technology Fund $ 146,221 0 717 0 0 72,949
Telecommunications Fund -- 0 0 0 0 0
Utilities Fund -- 0 0 32 0 --
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended March
31, 2003, the aggregate cost of purchases and proceeds from sales of investment
securities (excluding all U.S. Government securities and short-term securities)
were as follows:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------------------------
Energy Fund $ 408,740,450 $ 482,197,618
Financial Services Fund 548,905,269 772,106,486
Gold & Precious Metals Fund 86,860,593 84,190,776
Health Sciences Fund 1,960,059,993 2,220,999,802
Leisure Fund 143,284,512 161,229,805
Real Estate Opportunity Fund 64,102,072 59,811,861
Technology Fund 1,954,796,496 2,111,792,047
Telecommunications Fund 451,481,007 547,641,041
Utilities Fund 53,521,881 67,293,763
There were no purchases or sales of U.S. Government Securities.
NOTE 4 -- TRANSACTIONS WITH AFFILIATES AND AFFILIATED COMPANIES. Certain of the
Funds' officers and directors are also officers and directors of IFG or IDI.
Each Fund has adopted a retirement plan covering all independent directors of
the Fund who will have served as an independent director for at least five years
at the time of retirement. Benefits under this plan are based on an annual rate
as defined in the plan agreement, as amended March 1, 2001. Effective November
8, 2002, the plan provides that a director, prior to retirement, may elect to
convert amounts accrued under this plan into a new deferred retirement plan.
Pension expenses for the year ended March 31, 2003, included in Directors' Fees
and Expenses in the Statement of Operations and pension liability included in
Accrued Expenses in the Statement of Assets and Liabilities were as follows:
PENSION PENSION
FUND EXPENSES LIABILITY
- --------------------------------------------------------------------------------------------------
Energy Fund $ 8,483 $ 17,442
Financial Services Fund 28,573 74,609
Gold & Precious Metals Fund 2,306 13,523
Health Sciences Fund 38,593 95,696
Leisure Fund 16,795 29,900
Real Estate Opportunity Fund 531 1,469
Technology Fund 47,637 141,768
Telecommunications Fund 8,540 40,554
Utilities Fund 3,050 12,237
FS-57
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of the INVESCO Funds. The
deferred amounts may be invested in the shares of any of the INVESCO Funds,
excluding the INVESCO Variable Investment Funds.
An affiliated company represents ownership by a Fund of at least 5% of the
voting securities of the issuer or may be affiliated with other INVESCO
investment companies during the period, as defined in the Act. A summary of the
transactions during the year ended March 31, 2003, in which the issuer was an
affiliate of the Fund, is as follows:
REALIZED
PURCHASES SALES GAIN (LOSS) ON
------------------------------------------------ INVESTMENT VALUE AT
AFFILIATE SHARES COST SHARES PROCEEDS SECURITIES 3/31/2003
- --------------------------------------------------------------------------------------------------------------
ENERGY FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 93,897,299 $93,897,299 95,042,365 $95,042,365 $ 0 $ 4,139,034
FINANCIAL SERVICES FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 46,028,775 46,028,775 46,028,775 46,028,775 0 --
GOLD & PRECIOUS METALS FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 233,983,415 233,983,415 237,869,295 237,869,295 0 11,344,418
HEALTH SCIENCES FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 361,349,392 361,349,392 343,090,592 343,090,592 0 24,193,400
Pharmaceutical HOLDRs
Trust 2,205,300 174,015,044 1,760,000 140,744,454 (3,355,550) 42,888,360
LEISURE FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 288,556,802 288,556,802 314,042,259 314,042,259 0 10,594,794
FS-58
REALIZED
PURCHASES SALES GAIN (LOSS) ON
------------------------------------------------ INVESTMENT VALUE AT
AFFILIATE SHARES COST SHARES PROCEEDS SECURITIES 3/31/2003
- --------------------------------------------------------------------------------------------------------------
TECHNOLOGY FUND
Calient Networks, Pfd
Series D Shrs -- -- -- -- -- $ 1,106,133
INVESCO Treasurer's
Series Money
Market Reserve
Fund 622,363,052 $622,363,052 670,243,884 $670,243,884 $ 0 33,984,450
Software HOLDRs Trust 954,400 22,443,535 119,700 3,200,177 221,898 21,209,727
TELECOMMUNICATIONS FUND
Broadband HOLDRs Trust 1,057,500 9,494,055 1,057,500 8,652,026 (842,029) --
INVESCO Treasurer's
Series Money
Market Reserve
Fund 453,774,284 453,774,284 472,945,556 472,945,556 0 18,406,718
UTILITIES FUND
INVESCO Treasurer's
Series Money
Market Reserve
Fund 2,633,600 2,633,600 4,842,800 4,842,800 0 --
Dividend income from INVESCO Treasurer's Series Money Market Reserve Fund is
disclosed in the Statement of Operations. The following Funds received dividend
income from affiliated investments: Health Sciences Fund received $352,761 from
Pharmaceutical HOLDRs Trust and Technology Fund received $523,966 from Software
HOLDRs Trust. No dividend income was received from any other affiliate.
NOTE 5 -- SECURITIES LOANED. The Funds have entered into a securities lending
agreement with the custodian. Under the terms of the agreement, the Funds
receive income, recorded monthly, after deduction of other amounts payable to
the custodian or to the borrower from lending transactions. In exchange for such
fees, the custodian is authorized to loan securities on behalf of the Funds,
against receipt of collateral at least equal in value to the value of securities
loaned. Cash collateral is invested by the custodian in the INVESCO Treasurer's
Series Money Market Reserve Fund or securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. As of March 31, 2003, Energy,
Gold & Precious Metals, Health Sciences, Leisure, Technology and
Telecommunications Funds have on loan securities valued at $4,005,265,
$10,736,161, $23,272,794, $13,094,173, $31,829,843 and $17,205,652,
respectively, and cash collateral of $4,139,034, $11,344,418, $24,193,400,
$13,706,737, $33,984,450 and $18,406,718, repectively, has been invested in the
INVESCO Treasurer's Series Money Market Reserve Fund or U.S. Government
obligations and is disclosed in the Statement of Investment Securities. The Fund
bears the risk of any deficiency in the amount of collateral available for
return to a borrower due to a loss in an approved investment. The securities
loaned income is recorded in the Statement of Operations. Of the securities
lending income received for Energy, Gold & Precious Metals, Health Sciences,
Leisure, Technology, Telecommunications and Utilities Funds $22,711, $81,867,
$23,360, $123,994, $187,904, $205,579 and $1,380, respectively, were received
from investments in INVESCO Treasurer's Series Money Market Reserve Fund. During
the year ended March 31, 2003, there were no such securities lending
arrangements for Financial Services and Real Estate Opportunity Funds.
NOTE 6 -- INTERFUND BORROWING AND LENDING. Each Fund is party to an interfund
lending agreement between each Fund and other INVESCO sponsored mutual funds,
which permit it to borrow or lend cash, at rates beneficial to both the
borrowing and lending funds. Loans totaling 10% or more of a borrowing Fund's
total assets are collateralized at 102% of the value of the loan; loans of less
than 10% are unsecured. The Funds may borrow up to 10% of its total net assets
FS-59
for temporary or emergency purposes. During the year ended March 31, 2003,
Energy, Financial Services, Gold & Precious Metals, Health Sciences, Leisure,
Real Estate Opportunity, Technology, Telecommunications and Utilities Funds
borrowed cash at a weighted average rate ranging from 1.50% to 2.00% and
interest expenses amounted to $2,770, $2,346, $4,423, $54,615, $60, $122,
$7,840, $3,044 and $266 respectively. During that same period, Energy, Health
Sciences, Technology and Utilities Funds lent cash at a weighted average rate
ranging from 1.58% to 2.06% and interest income amounted $609, $7,082, $24,118
and $95, respectively. At March 31, 2003, INVESCO Combination Stock & Bond
Funds, Inc. - Total Return Fund had borrowed from Utilities Fund at an interest
rate of 1.58%. The amount of the lending and the related accrued interest are
presented in the Statement of Assets and Liabilities. On April 1, 2003, INVESCO
Combination Stock & Bond Funds, Inc. - Total Return Fund paid the borrowing back
to Utilities Fund in full including interest.
NOTE 7 -- LINE OF CREDIT. Each Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the net assets at value of each respective
Fund. Each Fund agrees to pay annual fees and interest on the unpaid principal
balance based on prevailing market rates as defined in the agreement. During the
year ended March 31, 2003, Financial Services and Technology Funds borrowed cash
at a weighted average rate of 2.31%, and interest expenses amounted to $450 and
$578, respectively. During that same period, there were no such borrowings for
Energy, Gold & Precious Metals, Health Sciences, Leisure, Real Estate
Opportunity, Telecommunications and Utilities Funds.
NOTE 8 -- CONTINGENT DEFERRED SALES CHARGE ("CDSC"). Class A shares may charge a
1.00% CDSC if a shareholder purchased $1,000,000 or more and redeemed these
shares within 18 months from the date of purchase. Effective November 15, 2002,
qualified plans investing in Class A shares may pay a 1.00% CDSC and Class K
shares may pay a 0.70% CDSC if a shareholder redeemed these shares within 12
months from the date of purchase. A CDSC is charged by Class B shares on
redemptions or exchanges of shares at a maximum of 5.00% beginning at the time
of purchase to 0.00% at the beginning of the seventh year. A 1.00% CDSC is
charged by Class C shares on redemptions or exchanges held thirteen months or
less. Shares acquired through reinvestment of dividends or other distributions
are not charged a CDSC. The CDSC may be reduced or certain sales charge
exceptions may apply. The CDSC is paid by the redeeming shareholder and
therefore it is not an expense of the Fund. For the year ended March 31, 2003,
the Distributor received the following CDSC from Class A, Class B, Class C and
Class K shareholders:
FUND CLASS A CLASS B CLASS C CLASS K
- ------------------------------------------------------------------------------------------------
Energy Fund $ 0 $ 1,393 $ 7,690 $ 0
Financial Services Fund 0 1,307 13,978 0
Gold & Precious Metals Fund 0 1 2,197 --
Health Sciences Fund 0 747 11,340 0
Leisure Fund 0 12,171 16,172 0
Real Estate Opportunity Fund 0 243 770 --
Technology Fund 0 276 7,494 0
Telecommunications Fund 0 181 18,384 0
Utilities Fund 0 1,250 578 --
NOTE 9 -- SHARE INFORMATION. Changes in fund share transactions during the years
ended March 31, 2003 and 2002 were as follows:
FS-60
ENERGY FUND FINANCIAL SERVICES FUND GOLD & PRECIOUS METALS FUND
YEAR ENDED MARCH 31 YEAR ENDED MARCH 31 YEAR ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002 2003 2002
Shares Sold
Investor Class 12,665,097 33,986,047 92,466,548 52,167,572 113,839,180 141,069,920
Class A 1,144,145 -- 357,198 -- 3,326,766 --
Class B 93,080 -- 47,478 -- 1,053,937 --
Class C 984,511 1,099,872 774,225 981,786 7,482,496 1,500,683
Class K 22,288 2,143 41,708 64,647 -- --
Shares Issued from
Reinvestment of Distributions
Investor Class 0 0 196,653 2,638,995 0 0
Class A 0 -- 2,132 -- 0 --
Class B 0 -- 267 -- 0 --
Class C 0 0 673 27,003 0 0
Class K 0 0 454 2,787 -- --
==================================================================================================================
14,909,121 35,088,062 93,887,336 55,882,790 125,702,379 142,570,603
Shares Repurchased
Investor Class (17,525,270) (37,979,338) (102,655,456) (58,464,938) (118,596,254) (140,424,339)
Class A (602,143) -- (114,384) -- (2,693,330) --
Class B (3,209) -- (2,217) -- (85,023) --
Class C (1,052,371) (895,102) (911,176) (829,034) (6,718,167) (1,325,678)
Class K (5,719) (170) (16,126) (30,145) -- --
==================================================================================================================
(19,188,712) (38,874,610) (103,699,359) (59,324,117) (128,092,774) (141,750,017)
NET INCREASE
(DECREASE) IN
FUND SHARES (4,279,591) (3,786,548) (9,812,023) (3,441,327) (2,390,395) 820,586
==================================================================================================================
NOTE 9 -- SHARE INFORMATION (CONTINUED)
HEALTH SCIENCES FUND LEISURE FUND REAL ESTATE OPPORTUNITY FUND
YEAR ENDED MARCH 31 YEAR ENDED MARCH 31 YEAR ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002 2003 2002
(Note 1)
Shares Sold
Investor Class 79,949,743 57,443,476 6,136,558 19,352,726 5,248,092 8,923,885
Class A 287,786 -- 1,104,358 -- 527,534 --
Class B 17,220 -- 284,942 -- 21,438 --
Class C 2,159,153 9,130,105 1,250,725 1,453,013 417,652 908,498
Class K 32,296 71,569 1,128,435 1,628,033 -- --
Shares Issued from
Reinvestment of Distributions
Investor Class 0 10,932 0 178,618 105,846 116,421
Class A 0 -- 0 -- 8,241 --
Class B 0 -- 0 -- 444 --
Class C 0 152 0 2,249 1,932 2,433
Class K 0 20 0 0 -- --
=================================================================================================================
82,446,198 66,656,254 9,905,018 22,614,639 6,331,179 9,951,237
Shares Repurchased
Investor Class (86,187,098) (60,958,816) (9,267,982) (15,369,925) (5,234,590) (10,471,115)
Class A (191,020) -- (224,212) -- (211,814) --
Class B (1,026) -- (15,165) -- (3,892) --
Class C (2,342,780) (9,026,936) (1,084,357) (1,175,755) (372,001) (1,038,382)
Class K (30,847) (20,420) (529,876) (31,768) -- --
=================================================================================================================
(88,752,771) (70,006,172) (11,121,592) (16,577,448) (5,822,297) (11,509,497)
NET INCREASE
(DECREASE) IN
FUND SHARES (6,306,573) (3,349,918) (1,216,574) (6,037,191) 508,882 (1,558,260)
=================================================================================================================
FS-61
TECHNOLOGY FUND TELECOMMUNICATIONS FUND UTILITIES FUND
YEAR ENDED MARCH 31 YEAR ENDED MARCH 31 YEAR ENDED MARCH 31
- -----------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002 2003 2002
Shares Sold
Institutional Class 19,889,258 31,869,203 -- -- -- --
Investor Class 224,764,422 139,817,995 104,306,735 113,031,996 12,818,438 10,812,169
Class A 2,174,042 -- 1,088,209 -- 282,591 --
Class B 44,687 -- 2,489 -- 27,752 --
Class C 788,820 3,082,019 5,665,489 19,484,375 1,261,896 679,313
Class K 920,699 1,038,923 70,829 77,229 -- --
Shares Issued from
Reinvestment of Distributions
Investor Class 0 0 0 0 254,574 154,281
Class A 0 -- 0 -- 1,448 --
Class B 0 -- 0 -- 172 --
Class C 0 0 0 0 1,058 50
=================================================================================================================
248,581,928 175,808,140 111,133,751 132,593,600 14,647,929 11,645,813
Shares Repurchased
Institutional Class (23,113,782) (26,698,958) -- -- -- --
Investor Class (235,589,807) (139,766,344) (116,174,811) (128,834,470) (15,880,668) (13,656,118)
Class A (1,911,401) -- (1,047,111) -- (228,729) --
Class B (13,101) -- (478) -- (4,295) --
Class C 1,073,531) (2,897,877) (6,240,763) (19,131,108) (1,350,991) (732,739)
Class K (498,359) (140,570) (56,707) (7,033) -- --
=================================================================================================================
(262,199,981) (169,503,749) (123,519,870) (147,972,611) (17,464,683) (14,388,857)
NET INCREASE
(DECREASE) IN
FUND SHARES (13,618,053) 6,304,391 (12,386,119) (15,379,011) (2,816,754) (2,743,044)
=================================================================================================================
FS-62
FINANCIAL HIGHLIGHTS
ENERGY FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30 $ 19.38
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) (0.10) (0.07) (0.08) (0.00) (0.00) 0.00
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.35) (0.40) 3.84 3.72 2.39 (5.04)
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.45) (0.47) 3.76 3.72 2.39 (5.04)
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00 0.01 3.04
====================================================================================================================================
Net Asset Value -- End of Period $ 16.81 $ 19.26 $ 19.73 $ 17.40 $ 13.68 $ 11.30
====================================================================================================================================
TOTAL RETURN (12.72%) (2.38%) 23.09% 27.19%(d) 21.19% (28.51%)
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 231,023 $ 358,439 $ 445,845 $ 221,432 $ 196,136 $ 137,455
Ratio of Expenses to Average Net Assets(e) 1.69% 1.53% 1.41% 1.60%(f) 1.68% 1.58%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.57%) (0.34%) (0.35%) (0.26%)(f) (0.05%) 0.01%
Portfolio Turnover Rate 144% 144% 166% 109%(d) 279% 192%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001.
(c) Net Investment Income (Loss) aggregated less than $0.01 on a per share basis for the period ended March 31, 2000 and the years
ended October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(f) Annualized
FS-63
FINANCIAL HIGHLIGHTS
ENERGY FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 19.26 $ 19.26
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.05) (0.17)
Net Losses on Securities (Both Realized
and Unrealized) (2.36) (2.38)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.41) (2.55)
================================================================================
Net Asset Value -- End of Period $ 16.85 $ 16.71
================================================================================
TOTAL RETURN(c) (12.51%) (13.24%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 9,131 $ 1,502
Ratio of Expenses to Average Net Assets(d)(e) 1.46% 2.33%
Ratio of Net Investment Loss to Average Net Assets(e) (0.33%) (1.16%)
Portfolio Turnover Rate 144% 144%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class B, ratio of expenses to average net assets would have been 2.41% and
ratio of net investment loss to average net assets would have been (1.24%).
FS-64
FINANCIAL HIGHLIGHTS
ENERGY FUND -- CLASS C
- ---------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- --------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 18.98 $ 19.58 $ 17.39 $ 14.35
==============================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.11) (0.07) (0.05) (0.01)
Net Gains or (Losses) on Securities (Both
Realized and Unrealized) (2.42) (0.53) 3.67 3.05
==============================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.53) (0.60) 3.62 3.04
==============================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.43 0.00
==============================================================================================================
NET ASSET VALUE -- END OF PERIOD $ 16.45 $ 18.98 $ 19.58 $ 17.39
==============================================================================================================
TOTAL RETURN(c) (13.33%) (3.06%) 22.35% 21.11%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 9,566 $ 12,324 $ 8,704 $ 16
Ratio of Expenses to Average Net Assets(e)(f) 2.33% 2.27% 2.05% 2.05%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.22%) (1.08%) (1.10%) (1.11%)(g)
Portfolio Turnover Rate 144% 144% 166% 109%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 2.53%
and ratio of net investment loss to average net assets would have been (1.42%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March
31, 2000.
FS-65
FINANCIAL HIGHLIGHTS
ENERGY FUND -- CLASS K
- -----------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -----------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 17.98 $ 19.62 $ 16.76
=========================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.14) (0.05) (0.15)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (2.29) (1.59) 3.01
=========================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.43) (1.64) 2.86
=========================================================================================
Net Asset Value -- End of Period $ 15.55 $ 17.98 $ 19.62
=========================================================================================
TOTAL RETURN (13.52%) (8.36%) 17.06%(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 289 $ 37 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 2.07% 11.62% 3.11%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.90%) (10.45%) (2.34%)(f)
Portfolio Turnover Rate 144% 144% 166%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended
March 31, 2003.
(c) Based on operations for the period shown and, accordingly, is not representative of a
full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment
Adviser, if applicable, which is before any expense offset arrangements (which may
include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the year ended
March 31, 2003. If such expenses had not been voluntarily absorbed, ratio of expenses
to average net assets would have been 5.36% and ratio of net investment loss to
average net assets would have been (4.19%).
(f) Annualized
(g) Portfolio turnover is calculated at the Fund level. Represents the year ended March
31, 2001.
FS-66
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45 $ 29.14
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.10 0.07 0.10 0.03 0.08 0.25
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (6.42) 0.94 2.97 0.05 3.52 3.01
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (6.32) 1.01 3.07 0.08 3.60 3.26
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.13 1.67 1.32 2.68 2.32 3.95
====================================================================================================================================
Net Asset Value -- End of Period $ 21.77 $ 28.22 $ 28.88 $ 27.13 $ 29.73 $ 28.45
====================================================================================================================================
TOTAL RETURN (22.39%) 3.82% 11.25% 0.60%(b) 13.52 11.76%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 734,440 $ 1,234,230 $ 1,368,583 $ 1,133,350 $ 1,242,555 $ 1,417,655
Ratio of Expenses to Average Net Assets(c) 1.40% 1.27% 1.25% 1.29%(d) 1.26% 1.05%
Ratio of Net Investment Income to Average
Net Assets 0.38% 0.24% 0.36% 0.25%(d) 0.25% 0.85%
Portfolio Turnover Rate 60% 81% 99% 38%(b) 83% 52%
(a) From November 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(d) Annualized
FS-67
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND -- CLASS A & CLASS B
- -----------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- -----------------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 28.22 $ 28.22
=========================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.06 (0.03)
Net Losses on Securities (Both Realized
and Unrealized) (6.37) (6.30)
=========================================================================================
TOTAL FROM INVESTMENT OPERATIONS (6.31) (6.33)
=========================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.23 0.15
=========================================================================================
Net Asset Value -- End of Period $ 21.68 $ 21.74
=========================================================================================
TOTAL RETURN(b) (22.36%) (22.48%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 5,311 $ 990
Ratio of Expenses to Average Net Assets(c)(d) 1.38% 2.09%
Ratio of Net Investment Income (Loss) to Average Net Assets(d) 0.49% (0.20%)
Portfolio Turnover Rate 60% 60%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included in the
Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by Investment
Adviser, which is before any expense offset arrangements (which may include custodian
fees).
(d) Various expenses of each Class were absorbed by IFG for the year ended March 31,
2003. If such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 1.51% for Class A and 2.40% for Class B and ratio
of net investment income (loss) to average net assets would have been 0.36% for Class
A and (0.51%) for Class B.
FS-68
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND -- CLASS C
- -------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 27.89 $ 28.72 $ 27.06 $ 23.66
=========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) (0.25) (0.10) (0.09) 0.00
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (6.22) 0.87 3.05 3.48
=========================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (6.47) 0.77 2.96 3.48
=========================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.04 1.60 1.30 0.08
=========================================================================================================================
Net Asset Value -- End of Period $ 21.38 $ 27.89 $ 28.72 $ 27.06
=========================================================================================================================
TOTAL RETURN(d) (23.22%) 2.98% 10.87% 14.72%(e)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 10,026 $ 16,880 $ 12,221 $ 138
Ratio of Expenses to Average Net Assets(f) 2.45% 2.07% 1.85% 1.63%(g)
Ratio of Net Investment Income (Loss) to Average Net Assets (0.68%) (0.57%) (0.31%) 0.39%(g)
Portfolio Turnover Rate 60% 81% 99% 38%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Income aggregated less than $0.01 on a per share basis for the period ended March 31, 2000.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include
custodian fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FS-69
FINANCIAL HIGHLIGHTS
FINANCIAL SERVICES FUND -- CLASS K
- ---------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- ---------------------------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 27.69 $ 28.67 $ 29.35
===============================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss) 0.15 (0.03) (0.17)
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (6.41) 0.90 (0.38)
===============================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (6.26) 0.87 (0.55)
===============================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.16 1.85 0.13
===============================================================================================================
Net Asset Value -- End of Period $ 21.27 $ 27.69 $ 28.67
===============================================================================================================
TOTAL RETURN (22.62%) 3.38% (1.97%)(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 1,348 $ 1,033 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.78% 1.63% 3.35%(f)
Ratio of Net Investment Income (Loss) to Average Net Assets(e) 0.18% (0.12%) (1.80%)(f)
Portfolio Turnover Rate 60% 81% 99%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 2.13%
and ratio of net investment loss to average net assets would have been (0.17%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FS-70
FINANCIAL HIGHLIGHTS
GOLD & PRECIOUS METALS FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90 $ 3.21
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss) (0.02) (0.01) (0.01) (0.01) (0.03) 0.01
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.13 0.87 (0.12) (0.22) (0.04) (1.29)
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.11 0.86 (0.13) (0.23) (0.07) (1.28)
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00 0.00 0.03
====================================================================================================================================
Net Asset Value -- End of Period $ 2.40 $ 2.29 $ 1.43 $ 1.60 $ 1.83 $ 1.90
====================================================================================================================================
TOTAL RETURN 4.80% 60.14% (8.38%) (12.58%)(c) (3.68%) (39.98%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 98,388 $ 104,831 $ 64,429 $ 81,470 $ 99,753 $ 107,249
Ratio of Expenses to Average Net Assets(d) 1.88% 2.10% 2.34% 2.08%(e) 2.20% 1.90%
Ratio of Net Investment Loss to Average
Net Assets (0.79%) (0.80%) (0.99%) (0.76%)(e) (1.60%) (0.93%)
Portfolio Turnover Rate 84% 46% 90% 37%(c) 141% 133%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2001 and October 31, 1999.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(e) Annualized
FS-71
FINANCIAL HIGHLIGHTS
GOLD & PRECIOUS METALS FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 2.29 $ 2.29
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.02) (0.02)
Net Gains on Securities (Both Realized and Unrealized) 0.12 0.12
================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.10
================================================================================
Net Asset Value -- End of Period $ 2.39 $ 2.39
================================================================================
TOTAL RETURN(c) 4.37% 4.37%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 1,514 $ 2,315
Ratio of Expenses to Average Net Assets(d)(e) 2.09% 2.18%
Ratio of Net Investment Loss to Average Net Assets(e) (1.09%) (1.12%)
Portfolio Turnover Rate 84% 84%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of Class A were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class A, ratio of expenses to average net assets would have been 2.11% and
ratio of net investment loss to average net assets would have been (1.11%).
FS-72
GOLD & PRECIOUS METALS FUND -- CLASS C
- ------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- ------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 2.42 $ 1.53 $ 1.60 $ 1.75
======================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss(c) (0.00) (0.07) (0.01) (0.00)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) 0.10 0.96 (0.02) (0.15)
======================================================================================================
TOTAL FROM INVESTMENT OPERATIONS 0.10 0.89 (0.03) (0.15)
======================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 0.04 0.00
======================================================================================================
Net Asset Value -- End of Period $ 2.52 $ 2.42 $ 1.53 $ 1.60
======================================================================================================
TOTAL RETURN(d) 4.13% 58.17% (1.95%) (8.57%)(e)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 2,459 $ 515 $ 57 $ 1
Ratio of Expenses to Average Net Assets(f) 2.65% 3.33% 3.38% 3.54%(g)
Ratio of Net Investment Loss to Average Net Assets (1.60%) (1.67%) (1.41%) (0.82%)(g)
Portfolio Turnover Rate 84% 46% 90% 37%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31,
2003 and the period ended March 31, 2000.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements
(which may include custodian fees).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to
March 31, 2000.
FS-73
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12 $ 57.50
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss) (0.28) (0.38) (0.12) (0.06) 0.14 0.13
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (8.75) 2.18 (0.51) 3.53 5.02 13.55
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (9.03) 1.80 (0.63) 3.47 5.16 13.68
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 9.11 6.34 8.89 9.06
====================================================================================================================================
Net Asset Value -- End of Period $ 38.53 $ 47.56 $ 45.78 $ 55.52 $ 58.39 $ 62.12
====================================================================================================================================
TOTAL RETURN (18.99%) 3.95% (4.12%) 6.30%(d) 8.44% 28.58%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 954,765 $ 1,475,313 $ 1,580,378 $ 1,622,624 $ 1,574,020 $ 1,328,196
Ratio of Expenses to Average Net Assets(e) 1.44% 1.31% 1.23% 1.18%(f) 1.22% 1.12%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.68%) (0.75%) (0.20%) (0.22%)(f) 0.07% 0.25%
Portfolio Turnover Rate 179% 160% 177% 107%(d) 127% 92%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(f) Annualized
FS-74
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 47.56 $ 47.56
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.22) (0.44)
Net Losses on Securities (Both Realized and Unrealized) (8.78) (8.78)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (9.00) (9.22)
================================================================================
Net Asset Value -- End of Period $ 38.56 $ 38.34
================================================================================
TOTAL RETURN(c) (18.92%) (19.39%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 3,731 $ 621
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.06%
Ratio of Net Investment Loss to Average Net Assets(e) (0.69%) (1.22%)
Portfolio Turnover Rate 179% 179%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.88% for Class A
and 2.51% for Class B and ratio of net investment loss to average net assets
would have been (1.16%) for Class A and (1.67%) for Class B.
FS-75
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND -- CLASS C
- -----------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -----------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 46.68 $ 45.40 $ 55.50 $ 62.05
=================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (1.20) (0.35) (0.05) (0.03)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (8.21) 1.65 (0.94) (6.52)
=================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (9.41) 1.30 (0.99) (6.55)
=================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 9.11 0.00
=================================================================================================================
Net Asset Value -- End of Period $ 37.27 $ 46.68 $ 45.40 $ 55.50
=================================================================================================================
TOTAL RETURN(d) (20.16%) 2.85% (4.79%) (10.56%)(e)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 5,846 $ 15,892 $ 10,767 $ 470
Ratio of Expenses to Average Net Assets(f)(g) 2.81% 2.26% 2.03% 1.65%(h)
Ratio of Net Investment Loss to Average Net Assets(g) (2.04%) (1.70%) (1.08%) (0.54%)(h)
Portfolio Turnover Rate 179% 160% 177% 107%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) Distribution was a tax return of capital.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 3.27% and
ratio of net investment loss to average net assets would have been (2.50%).
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31,
2000.
FS-76
FINANCIAL HIGHLIGHTS
HEALTH SCIENCES FUND -- CLASS K
- --------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- --------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 46.98 $ 45.43 $ 55.84
==================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.23) (0.48) (0.22)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (8.94) 2.05 (10.19)
==================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (9.17) 1.57 (10.41)
==================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.02(c) 0.00
==================================================================================================
Net Asset Value -- End of Period $ 37.81 $ 46.98 $ 45.43
==================================================================================================
TOTAL RETURN (19.50%) 3.42% (18.64%)(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 1,990 $ 2,405 $ 1
Ratio of Expenses to Average Net Assets(e) 2.07% 1.71% 3.62%(f)
Ratio of Net Investment Loss to Average Net Assets (1.29%) (1.09%) (2.75%)(f)
Portfolio Turnover Rate 179% 160% 177%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31,
2002.
(c) Distribution was a tax return of capital.
(d) Based on operations for the period shown and, accordingly, is not representative of a full
year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements
(which may include custodian fees).
(f) Annualized
(g) Portfolio turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FS-77
FINANCIAL HIGHLIGHTS
LEISURE FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92 $ 27.21
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss(c) (0.23) (0.03) (0.00) (0.13) (0.00) (0.00)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (7.89) 2.21 (3.05) 7.27 17.20 3.69
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (8.12) 2.18 (3.05) 7.14 17.20 3.69
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 3.23 1.91 2.98
====================================================================================================================================
Net Asset Value -- End of Period $ 30.83 $ 38.95 $ 37.13 $ 47.12 $ 43.21 $ 27.92
====================================================================================================================================
TOTAL RETURN (20.87%) 6.01% (5.50%) 17.34%(d) 65.13% 15.16%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 536,108 $ 799,465 $ 607,428 $ 549,523 $ 443,348 $ 228,681
Ratio of Expenses to Average Net Assets(e) 1.50% 1.40% 1.36% 1.28%(f) 1.44% 1.41%
Ratio of Net Investment Loss to Average
Net Assets (0.69%) (0.64%) (0.51%) (0.65%)(f) (0.68%) (0.09%)
Portfolio Turnover Rate 20% 27% 28% 23%(d) 35% 31%
(a) From November 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2003 and the period ended March 31,
2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001 and the years ended
October 31, 1999 and 1998.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(f) Annualized
FS-78
FINANCIAL HIGHLIGHTS
LEISURE FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 38.96 $ 38.96
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.17) (0.38)
Net Losses on Securities (Both Realized
and Unrealized) (7.91) (7.93)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (8.08) (8.31)
================================================================================
Net Asset Value -- End of Period $ 30.88 $ 30.65
================================================================================
TOTAL RETURN(c) (20.74%) (21.33%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 27,175 $ 8,268
Ratio of Expenses to Average Net Assets(d)(e) 1.42% 2.14%
Ratio of Net Investment Loss to Average Net Assets(e) (0.56%) (1.29%)
Portfolio Turnover Rate 20% 20%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of Class B were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class B, ratio of expenses to average net assets would have been 2.23% and
ratio of net investment loss to average net assets would have been (1.38%).
FS-79
FINANCIAL HIGHLIGHTS
LEISURE FUND -- CLASS C
- ----------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- ----------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 38.29 $ 36.80 $ 47.09 $ 45.51
================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.18) (0.17) (0.13) (0.02)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (8.11) 2.02 (3.22) 1.60
================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (8.29) 1.85 (3.35) 1.58
================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.36 6.94 0.00
================================================================================================================
Net Asset Value -- End of Period $ 30.00 $ 38.29 $ 36.80 $ 47.09
================================================================================================================
TOTAL RETURN(c) (21.65%) 5.10% (6.18%) 3.47%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 17,768 $ 16,307 $ 5,388 $ 84
Ratio of Expenses to Average Net Assets(e) 2.44% 2.26% 2.08% 1.71%(f)
Ratio of Net Investment Loss to Average Net Assets (1.62%) (1.48%) (1.08%) (0.42%)(f)
Portfolio Turnover Rate 20% 27% 28% 23%(g)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may
include custodian fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31,
2000.
FS-80
FINANCIAL HIGHLIGHTS
LEISURE FUND -- CLASS K
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR PERIOD
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003 2002(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 38.98 $ 36.11
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.06) (0.09)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (8.18) 2.96
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (8.24) 2.87
================================================================================
Net Asset Value -- End of Period $ 30.74 $ 38.98
================================================================================
TOTAL RETURN (21.14%) 7.95%(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 67,465 $ 62,226
Ratio of Expenses to Average Net Assets(d)(e) 1.87% 1.23%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.05%) (0.48%)(f)
Portfolio Turnover Rate 20% 27%(g)
(a) From December 17, 2001, since inception of Class, to March 31, 2002.
(b) The per share information was computed based on average shares for the
period ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not
representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.21% and ratio of
net investment loss to average net assets would have been (1.39%).
(f) Annualized
(g) Portfolio turnover is calculated at the Fund level. Represents the year
ended March 31, 2002.
FS-81
FINANCIAL HIGHLIGHTS
REAL ESTATE OPPORTUNITY FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15 $ 10.99
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.24 0.26 0.27 0.33 0.38
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.37) 0.78 0.48 (0.28) (1.56) (0.96)
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.09) 1.02 0.74 (0.01) (1.23) (0.58)
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.27 0.25 0.25 0.26 1.02 1.26
====================================================================================================================================
Net Asset Value -- End of Period $ 7.53 $ 7.89 $ 7.12 $ 6.63 $ 6.90 $ 9.15
====================================================================================================================================
TOTAL RETURN (1.12%) 14.67% 11.05% (0.03%)(b) (13.29%) (6.49%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 20,313 $ 20,345 $ 28,546 $ 20,046 $ 17,406 $ 23,548
Ratio of Expenses to Average Net Assets(c)(d) 1.60% 1.61% 1.60% 1.34%(e) 1.34% 1.22%
Ratio of Net Investment Income to Average Net Assets(d) 3.92% 3.58% 3.52% 5.54%(e) 4.23% 3.53%
Portfolio Turnover Rate 248% 196% 338%(f) 272%(b)(f) 697%(f) 258%
(a) From August 1, 1999 to March 31, 2000.
(b) Based on operations for the period shown and, accordingly, is not representative of a full year.
(c) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March 31, 2003, 2002 and 2001, the period
ended March 31, 2000 and the years ended July 31, 1999 and 1998. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 2.43%, 2.25%, 2.03%, 2.73% (annualized), 2.76% and 1.97%, respectively, and ratio
of net investment income to average net assets would have been 3.09%, 2.94%, 3.09%, 4.15% (annualized), 2.81% and 2.78%,
respectively.
(e) Annualized
(f) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market conditions.
FS-82
FINANCIAL HIGHLIGHTS
REAL ESTATE OPPORTUNITY FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 7.89 $ 7.89
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.21
Net Losses on Securities (Both Realized
and Unrealized) (0.39) (0.36)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.11) (0.15)
================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.34 0.32
================================================================================
Net Asset Value -- End of Period $ 7.44 $ 7.42
================================================================================
TOTAL RETURN(b) (1.45%) (1.94%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 2,409 $ 133
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.36%
Ratio of Net Investment Income to Average Net Assets(d) 4.57% 3.49%
Portfolio Turnover Rate 248% 248%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses absorbed by
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class B, ratio of expenses to average net assets would have been 3.73% and
ratio of net investment income to average net assets would have been 2.12%.
FS-83
FINANCIAL HIGHLIGHTS
REAL ESTATE OPPORTUNITY FUND -- CLASS C
- ----------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- ----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 7.95 $ 7.10 $ 6.62 $ 6.58
============================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.14 0.14 0.20 0.08
Net Gains or (Losses) on Securities (Both Realized and Unrealized) (0.28) 0.82 0.48 0.06
============================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.14) 0.96 0.68 0.14
============================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.08 0.11 0.20 0.10
============================================================================================================================
Net Asset Value -- End of Period $ 7.73 $ 7.95 $ 7.10 $ 6.62
============================================================================================================================
TOTAL RETURN(b) (1.81%) 13.69% 10.20% 2.10%(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 838 $ 484 $ 1,336 $ 143
Ratio of Expenses to Average Net Assets(d)(e) 2.35% 2.37% 2.26% 1.77%(f)
Ratio of Net Investment Income to Average Net Assets(e) 3.25% 2.72% 2.90% 19.13%(f)
Portfolio Turnover Rate 248% 196% 338%(g) 272%(g)(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The applicable CDSC is not included in the Total Return calculation.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, which is before any expense
offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March 31, 2003, 2002 and 2001 and the
period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets
would have been 3.74%, 2.72%, 2.26% and 2.04% (annualized), respectively, and ratio of net investment income to average
net assets would have been 1.86%, 2.37%, 2.90% and 18.86% (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover was greater than expected during the year due to active trading undertaken in response to market
conditions.
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31, 2000.
FS-84
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD PERIOD
ENDED ENDED
YEAR ENDED MARCH 31 MARCH 31 OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999(b)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 30.93 $ 35.98 $ 102.55 $ 58.43 $ 33.85
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(c)
Net Investment Loss (0.12) (0.16) (0.06) (0.04) (0.16)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (13.47) (4.89) (63.87) 48.07 24.74
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.59) (5.05) (63.93) 48.03 24.58
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 3.91 0.00
====================================================================================================================================
Net Asset Value -- End of Period $ 17.34 $ 30.93 $ 35.98 $ 102.55 $ 58.43
====================================================================================================================================
TOTAL RETURN (43.94%) (14.04%) (63.39%) 86.14%(d) 72.61%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 707,040 $ 1,360,738 $ 1,396,788 $ 4,453,520 $ 951,925
Ratio of Expenses to Average Net Assets(e) 0.90% 0.74% 0.58% 0.56%(f) 0.74%(f)
Ratio of Net Investment Loss to Average Net Assets (0.59%) (0.46%) (0.08%) (0.15%)(f) (0.36%)(f)
Portfolio Turnover Rate 107% 79% 85% 28%(d) 143%(g)
(a) From November 1, 1999 to March 31, 2000.
(b) From December 22, 1998, since inception of Class, to October 31, 1999.
(c) The per share information was computed based on average shares for the years ended March 31, 2003 and 2002 and the period ended
October 31, 1999.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian
fees).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended October 31, 1999.
FS-85
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07 $ 35.97
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss(b) (0.14) (0.08) (0.10) (0.03) (0.07) (0.00)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (13.37) (5.11) (63.58) 47.69 30.17 (1.45)
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.51) (5.19) (63.68) 47.66 30.10 (1.45)
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 3.91 0.00 6.45
====================================================================================================================================
Net Asset Value -- End of Period $ 16.90 $ 30.41 $ 35.60 $ 101.92 $ 58.17 $ 28.07
====================================================================================================================================
TOTAL RETURN (44.43%) (14.58%) (63.54%) 85.87%(c) 107.23% (2.47%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 853,530 $ 1,865,251 $ 2,181,879 $ 5,034,087 $ 2,081,613 $ 1,008,771
Ratio of Expenses to Average Net Assets(d) 1.77% 1.37% 0.98% 0.88%(e) 1.20% 1.17%
Ratio of Net Investment Loss
to Average Net Assets (1.46%) (1.08%) (0.47%) (0.48%)(e) (0.79%) (0.49%)
Portfolio Turnover Rate 107% 79% 85% 28%(c) 143% 178%
(a) From November 1, 1999 to March 31, 2000.
(b) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended October 31, 1998.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, which is before any expense offset arrangements (which may include custodian,
distribution and transfer agent fees).
(e) Annualized
FS-86
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 30.41 $ 30.41
================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.20) (0.27)
Net Losses on Securities
(Both Realized and Unrealized) (13.23) (13.30)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.43) (13.57)
================================================================================
Net Asset Value -- End of Period $ 16.98 $ 16.84
================================================================================
TOTAL RETURN(c) (44.16%) (44.62%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 4,460 $ 532
Ratio of Expenses to Average Net Assets(d)(e) 1.47% 2.15%
Ratio of Net Investment Loss to Average Net Assets(e) (1.12%) (1.71%)
Portfolio Turnover Rate 107% 107%
(a) Class commenced operations on April 1, 2002.
(b) The per share information was computed based on average shares.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of each Class, less Expenses absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.51% for Class A
and 2.74% for Class B and ratio of net investment loss to average net assets
would have been (1.16%) for Class A and (2.30%) for Class B.
FS-87
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- CLASS C
- -------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 29.73 $ 35.22 $ 101.85 $ 95.51
===================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.62) (0.22) (0.18) (0.15)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (12.72) (5.27) (63.81) 6.49
===================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.34) (5.49) (63.99) 6.34
===================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 2.64 0.00
===================================================================================================================
Net Asset Value -- End of Period $ 16.39 $ 29.73 $ 35.22 $ 101.85
===================================================================================================================
TOTAL RETURN(c) (44.87%) (15.59%) (63.89%) 6.63%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 5,759 $ 18,910 $ 15,919 $ 2,970
Ratio of Expenses to Average Net Assets(e)(f) 2.69% 2.54% 1.86% 1.45%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (2.39%) (2.26%) (1.30%) (1.03%)(g)
Portfolio Turnover Rate 107% 79% 85% 28%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(f) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such
expenses had not been voluntarily absorbed, ratio of expenses to average net assets would have been 3.95%, and
ratio of net investment loss to average net assets would have been (3.65%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31,
2000.
FS-88
FINANCIAL HIGHLIGHTS
TECHNOLOGY FUND -- CLASS K
- -------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -------------------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 30.22 $ 35.09 $ 60.01
=======================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.07) (0.27) (0.82)
Net Losses on Securities (Both Realized and Unrealized) (13.37) (4.60) (24.10)
=======================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (13.44) (4.87) (24.92)
=======================================================================================================
Net Asset Value -- End of Period $ 16.78 $ 30.22 $ 35.09
=======================================================================================================
TOTAL RETURN (44.47%) (13.85%) (41.54%)(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 22,156 $ 27,147 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 1.88% 1.28% 5.18%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (1.55%) (1.15%) (4.67%)(f)
Portfolio Turnover Rate 107% 79% 85%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March 31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if
applicable, which is before any expense offset arrangements (which may include custodian fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003.
If such expenses had not been voluntarily absorbed, ratio of expenses to average net assets would
have been 2.49%, and ratio of net investment loss to average net assets would have been (2.16%).
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31, 2001.
FS-89
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED JULY 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60 $ 15.31
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) (0.04) (0.11) (0.16) (0.10) (0.00) 0.01
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (4.36) (11.42) (38.91) 32.87 12.57 5.32
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.53) (39.07) 32.77 12.57 5.33
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.15 0.37 1.04
====================================================================================================================================
Net Asset Value -- End of Period $ 7.96 $ 12.36 $ 23.89 $ 64.42 $ 31.80 $ 19.60
====================================================================================================================================
TOTAL RETURN (35.60%) (48.26%) (61.42%) 103.25%(d) 65.52% 36.79%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 274,947 $ 573,969 $ 1,486,660 $ 4,125,890 $ 1,029,256 $ 276,577
Ratio of Expenses to Average Net Assets(e)(f) 1.81% 1.70% 1.10% 0.99%(g) 1.24% 1.32%
Ratio of Net Investment Loss
to Average Net Assets(f) (0.49%) (0.57%) (0.32%) (0.32%)(g) (0.49%) (0.16%)
Portfolio Turnover Rate 137% 91% 61% 24%(d) 62% 55%
(a) From August 1, 1999 to March 31, 2000.
(b) The per share information was computed based on average shares for the years ended March 31, 2003, 2002 and 2001 and the period
ended March 31, 2000.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended July 31, 1999.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable, which is before any
expense offset arrangements (which may include custodian, distribution and transfer agent fees).
(f) Various expenses of the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been 2.76% and ratio of net investment loss to average
net assets would have been (1.44%).
(g) Annualized
FS-90
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND-- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 12.36 $ 12.36
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss (0.08) (0.03)
Net Losses on Securities (Both Realized and Unrealized) (4.36) (4.44)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (4.44) (4.47)
================================================================================
Net Asset Value -- End of Period $ 7.92 $ 7.89
================================================================================
TOTAL RETURN(b) (35.92%) (36.17%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 326 $ 16
Ratio of Expenses to Average Net Assets(c)(d) 1.66% 2.57%
Ratio of Net Investment Loss to Average Net Assets(d) (0.65%) (1.44%)
Portfolio Turnover Rate 137% 137%
(a) Class commenced operations on April 1, 2002.
(b) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(c) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by the
Investment Adviser, if applicable, which is before any expense offset
arrangements (which may include custodian fees).
(d) Various expenses of Class B were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed for
Class B, ratio of expenses to average net assets would have been 12.15% and
ratio of net investment loss to average net assets would have been (11.02%).
FS-91
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND -- CLASS C
- -------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 12.10 $ 23.70 $ 64.37 $ 59.28
===================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Loss (0.34) (0.04) (0.13) (0.06)
Net Gains or (Losses) on Securities (Both Realized
and Unrealized) (4.04) (11.56) (39.08) 5.15
===================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (4.38) (11.60) (39.21) 5.09
===================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.00 0.00 1.46 0.00
===================================================================================================================
Net Asset Value -- End of Period $ 7.72 $ 12.10 $ 23.70 $ 64.37
===================================================================================================================
TOTAL RETURN(c) (36.20%) (48.95%) (61.69%) 8.59%(d)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 2,188 $ 10,392 $ 11,980 $ 2,530
Ratio of Expenses to Average Net Assets(e)(f) 2.63% 2.60% 1.99% 1.49%(g)
Ratio of Net Investment Loss to Average Net Assets(f) (1.18%) (1.52%) (1.18%) (0.86%)(g)
Portfolio Turnover Rate 137% 91% 61% 24%(h)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the period ended March 31, 2000.
(c) The applicable CDSC is not included in the Total Return calculation.
(d) Based on operations for the period shown and, accordingly, is not representative of a full year.
(e) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, if applicable,
which is before any expense offset arrangements (which may include custodian fees).
(f) Various expenses the Class were voluntarily absorbed by IFG for the year ended March 31, 2003. If such expenses
had not been voluntarily absorbed, ratio of expenses to average net assets would have been 5.76% and ratio of
net investment loss to average net assets would have been (4.31%).
(g) Annualized
(h) Portfolio Turnover is calculated at the Fund level. Represents the period from August 1, 1999 to March 31,
2000.
FS-92
FINANCIAL HIGHLIGHTS
TELECOMMUNICATIONS FUND -- CLASS K
- --------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- --------------------------------------------------------------------------------------------
2003 2002 2001(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 12.30 $ 23.80 $ 36.43
============================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss(b) (0.02) (0.15) (0.19)
Net Losses on Securities (Both Realized
and Unrealized) (4.38) (11.35) (12.44)
============================================================================================
TOTAL FROM INVESTMENT OPERATIONS (4.40) (11.50) (12.63)
============================================================================================
Net Asset Value -- End of Period $ 7.90 $ 12.30 $ 23.80
============================================================================================
TOTAL RETURN (35.77%) (48.32%) (34.67%)(c)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 666 $ 864 $ 1
Ratio of Expenses to Average Net Assets(d)(e) 2.06% 2.21% 2.30%(f)
Ratio of Net Investment Loss to Average Net Assets(e) (0.77%) (1.32%) (1.52%)(f)
Portfolio Turnover Rate 137% 91% 61%(g)
(a) From December 1, 2000, since inception of Class, to March 31, 2001.
(b) The per share information was computed based on average shares for the year ended March
31, 2002.
(c) Based on operations for the period shown and, accordingly, is not representative of a
full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment
Adviser, which is before any expense offset arrangements (which may include custodian
fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March
31, 2003 and 2002 and the period ended March 31, 2001. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been 3.30%,
2.42% and 3.38% (annualized), respectively, and ratio of net investment loss to average
net assets would have been (2.01%), (1.53%) and (2.60%) (annualized), respectively.
(f) Annualized
(g) Portfolio Turnover is calculated at the Fund level. Represents the year ended March 31,
2001.
FS-93
FINANCIAL HIGHLIGHTS
UTILITIES FUND -- INVESTOR CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31 YEAR ENDED OCTOBER 31
- ------------------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a) 1999 1998
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73 $ 12.42
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.23 0.15 0.13 0.04 0.17 0.30
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.46) (5.54) (3.22) 3.95 3.20 2.56
====================================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.23) (5.39) (3.09) 3.99 3.37 2.86
====================================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.24(b) 0.15 1.13 1.25 0.42 0.55
====================================================================================================================================
Net Asset Value -- End of Period $ 8.19 $ 10.66 $ 16.20 $ 20.42 $ 17.68 $ 14.73
====================================================================================================================================
TOTAL RETURN (20.99%) (33.34%) (15.18%) 23.99%(c) 23.22% 23.44%
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 72,749 $ 124,578 $ 232,877 $ 260,554 $ 223,334 $ 177,309
Ratio of Expenses to Average Net Assets(d)(e) 1.30% 1.30% 1.30% 1.24%(f) 1.26% 1.29%
Ratio of Net Investment Income
to Average Net Assets(e) 2.63% 1.09% 0.74% 0.50%(f) 1.02% 1.82%
Portfolio Turnover Rate 64% 56% 49% 18%(c) 32% 47%
(a) From November 1, 1999 to March 31, 2000.
(b) Dividends and Distributions included a tax return of capital which aggregated less than $0.01 on a per share basis.
(c) Based on operations for the period shown and, accordingly, is not representative of a full year.
(d) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangements (which may include custodian and transfer agent fees).
(e) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March 31, 2003, 2002 and 2001, the period
ended March 31, 2000 and the years ended October 31, 1999 and 1998. If such expenses had not been voluntarily absorbed, ratio of
expenses to average net assets would have been 1.90%, 1.57%, 1.40%, 1.33% (annualized), 1.43% and 1.36%, respectively, and ratio
of net investment income to average net assets would have been 2.03%, 0.82%, 0.64%, 0.41% (annualized), 0.85% and 1.75%,
respectively.
(f) Annualized
FS-94
FINANCIAL HIGHLIGHTS
UTILITIES FUND -- CLASS A & CLASS B
- --------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
MARCH 31 MARCH 31
- --------------------------------------------------------------------------------
2003(a) 2003(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.66 $ 10.66
================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.16 0.13
Net Losses on Securities (Both Realized
and Unrealized) (2.40) (2.43)
================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.24) (2.30)
================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.29(b) 0.21(b)
================================================================================
Net Asset Value -- End of Period $ 8.13 $ 8.15
================================================================================
TOTAL RETURN(c) (21.05%) (21.67%)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 450 $ 193
Ratio of Expenses to Average Net Assets(d)(e) 1.41% 2.14%
Ratio of Net Investment Income to Average Net Assets(e) 2.79% 1.84%
Portfolio Turnover Rate 64% 64%
(a) Class commenced operations on April 1, 2002.
(b) Dividends and Distributions included a tax return of capital which
aggregated less than $0.01 on a per share basis.
(c) The applicable sales charges for Class A or CDSC for Class B is not included
in the Total Return calculation.
(d) Ratio is based on Total Expenses of the Class, less Expensed Absorbed by
Investment Adviser, which is before any expense offset arrangements (which
may include custodian fees).
(e) Various expenses of each Class were voluntarily absorbed by IFG for the year
ended March 31, 2003. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 1.74% for Class A
and 2.69% for Class B and ratio of net investment income to average net
assets would have been 2.46% for Class A and 1.29% for Class B.
FS-95
FINANCIAL HIGHLIGHTS
UTILITIES FUND -- CLASS C
- -----------------------------------------------------------------------------------------------------------------------
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
YEAR ENDED MARCH 31 MARCH 31
- -----------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000(a)
PER SHARE DATA
Net Asset Value -- Beginning of Period $ 10.63 $ 16.08 $ 20.40 $ 19.91
=======================================================================================================================
INCOME FROM INVESTMENT OPERATIONS(b)
Net Investment Income (Loss)(c) 0.15 0.03 (0.00) (0.01)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (2.47) (5.48) (3.22) 0.52
=======================================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (2.32) (5.45) (3.22) 0.51
=======================================================================================================================
LESS DIVIDENDS AND DISTRIBUTIONS 0.09 0.00 1.10 0.02
=======================================================================================================================
Net Asset Value -- End of Period $ 8.22 $ 10.63 $ 16.08 $ 20.40
=======================================================================================================================
TOTAL RETURN(d) (21.85%) (33.87%) (15.83%) 2.58%(e)
RATIOS
Net Assets -- End of Period ($000 Omitted) $ 667 $ 1,799 $ 3,579 $ 248
Ratio of Expenses to Average Net Assets(f)(g) 2.05% 2.04% 2.07% 1.83%(h)
Ratio of Net Investment Income (Loss) to Average Net Assets(g) 1.75% 0.32% (0.02%) (0.32%)(h)
Portfolio Turnover Rate 64% 56% 49% 18%(i)
(a) From February 15, 2000, since inception of Class, to March 31, 2000.
(b) The per share information was computed based on average shares for the year ended March 31, 2001.
(c) Net Investment Loss aggregated less than $0.01 on a per share basis for the year ended March 31, 2001.
(d) The applicable CDSC is not included in the Total Return calculation.
(e) Based on operations for the period shown and, accordingly, is not representative of a full year.
(f) Ratio is based on Total Expenses of the Class, less Expenses Absorbed by Investment Adviser, which is before any
expense offset arrangements (which may include custodian fees).
(g) Various expenses of the Class were voluntarily absorbed by IFG for the years ended March 31, 2003, 2002 and 2001
and the period ended March 31, 2000. If such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 3.70%, 2.45%, 2.11% and 1.83% (annualized), respectively, and ratio of net
investment income (loss) to average net assets would have been 0.10%, (0.09%), (0.06%) and (0.32%) (annualized),
respectively.
(h) Annualized
(i) Portfolio Turnover is calculated at the Fund level. Represents the period from November 1, 1999 to March 31, 2000.
FS-96
OTHER INFORMATION
UNAUDITED
The table below provides information about each of the Independent and
Interested Directors. Their affiliations represent their principal occupations.
NUMBER OF
FUNDS IN
POSITION(S) HELD WITH FUND
COMPANY, TERM OF COMPLEX OTHER
OFFICE AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE OF TIME SERVED* DURING PAST FIVE YEARS* DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
Bob A. Baker Vice Chairman of Consultant (2000-present). 47
37 Castle Pines Dr. N. the Board Formerly, President and
Castle Rock, Colorado Chief Executive Officer
(1988-2000) of AMC Cancer
Age: 66 Research Center, Denver,
Colorado. Until Mid-December
1988, Vice Chairman of the
Board of First Columbia
Financial Corporation,
Englewood, Colorado;
formerly, Chairman of the
Board and Chief Executive
Officer of First Columbia
Financial Corporation.
Sueann Ambron, Ph.D. Director Dean of the Business School, 47
University of Colorado (Since 2003) College of Business,
at Denver University of Colorado of
1250 14th Street Denver (2000-present).
Denver, Colorado Formerly, President and
Chief Executive Officer of
Age: 58 Avulet, Inc., Sunnyvale,
California (1998-1999), Vice
President and General
Manager, Multimedia Services
Division, Motorola, Inc.,
Schoumburg, Illinois
(1996-1998).
Victor L. Andrews, Ph.D. Director Professor Emeritus, Chairman 47 Director of The
34 Seawatch Drive Emeritus and Chairman and Sheffield Funds, Inc.
Savannah, Georgia CFO of the Roundtable of the
Department of Finance of
Age: 72 Georgia State University;
and President, Andrews
Financial Associates, Inc.
(consulting firm). Formerly,
member of the faculties of
the Harvard Business School;
and the Sloan School of
Management of MIT.
Lawrence H. Budner Director Trust Consultant. Formerly, 47
7608 Glen Albens Circle Senior Vice President and
Dallas, Texas Senior Trust Officer of
InterFirst Bank, Dallas,
Age: 72 Texas.
OTHER INFORMATION
UNAUDITED
NUMBER OF
FUNDS IN
POSITION(S) HELD WITH FUND
COMPANY, TERM OF COMPLEX OTHER
OFFICE AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE OF TIME SERVED* DURING PAST FIVE YEARS* DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
James T. Bunch Director Co-President and Founder of 47
Green, Manning & Bunch,
3600 Republic Plaza (since 2000) Ltd., Denver, Colorado
370 Seventeenth Street (1988-present); Director and
Denver, Colorado Vice President of Western
Golf Association and Evans
Age: 60 Scholars Foundation; and
Excutive Committee, United
States Golf Association.
Formerly, General Counsel
and Director of Boettcher &
Company, Denver, Colorado;
and formerly, Chairman and
Managing Partner of Davis,
Graham & Stubbs, Denver,
Colorado.
Gerald J. Lewis Director Chairman of Lawsuit 47 Director of General Chemical
701 "B" Street (since 2000) Resolution Services, San Group, Inc., Hampdon, New
Suite 2100 Diego, California Hampshire (1996-present).
San Diego, California (1987-present). Formerly, Director of Wheelabrator
Associate Justice of the Technologies, Inc., Fisher
California Court of Appeals; Scientific, Inc., Henley
Age: 69 and of Counsel, Latham & Manufacturing, Inc., and
Watkins, San Diego, California CoastalProperties,
California (1987-1997). Inc.
John W. McIntyre Director Retired. Trustee of Gables 47
7 Piedmont Center Residential Trust. Trustee
Suite 100 and Chairman of the J.M. Tull
Atlanta, Georgia Charitable Foundation;
Director of Kaiser Foundation
Age: 72 Health Plans of Georgia, Inc.
Formerly, Vice Chairman of
the Board of Directors of The
Citizens and Southern
Corporation and Chairman of
the Board and Chief Executive
Officer of The Citizens and
Southern Georgia Corporation
and The Citizens and Southern
National Bank. Formerly,
Trustee of INVESCO Global
Health Sciences Fund and
Trustee of Employee's
Retirement System of Georgia,
Emory University.
Larry Soll, Ph. D. Director Retired. Formerly, Chairman 47 Director of Synergen since
2358 Sunshine Canyon Dr. (since 1997) of the Board (1987-1994), incorporation in 1982;
Boulder, Colorado Chief Executive Officer Director of Isis
(1982-1989 and 1993-1994) and Pharmaceuticals, Inc.
Age: 60 President (1982-1989) of
Synergen Inc.; and formerly,
Trustee of INVESCO Global
Health Sciences Fund.
OTHER INFORMATION
UNAUDITED
NUMBER OF
FUNDS IN
POSITION(S) HELD WITH FUND
COMPANY, TERM OF COMPLEX OTHER
OFFICE AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE OF TIME SERVED* DURING PAST FIVE YEARS* DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS AND OFFICERS
These directors are "interested persons" of IFG as defined in the Act, and they
are interested persons by virtue of the fact that he/she is an officer or
director of IFG, IDI or an affiliate of IFG.
Mark H. Williamson Chairman of the Board President and Chief Executive 47
4350 South Monaco Street (since 1999). Formerly, Officer AIM Investment
Denver, Colorado President (1998-2002); Management and Chief
and Chief Executive Executive Officer of the AIM
Age: 51 Officer (1998-2002). Division of AMVESCAP PLC
(2003-present). Formerly,
Chief Executive Officer,
Managed Products Division,
AMVESCAP PLC (2001-present).
Formerly, Chairman of the
Board (1998-2002), President
(1998-2002), and Chief
Executive Officer (1998-2002)
of INVESCO Funds Group, Inc.
and of INVESCO Distributors,
Inc. Formerly, Chief
Operating Officer and
Chairman of the Board of
INVESCO Global Health
Sciences Fund; formerly,
Chairman and Chief Executive
Officer of NationsBanc
Advisors, Inc.; and formerly,
Chairman of NationsBanc
Investments, Inc.
Raymond R. Cunningham President (2003-present), President (2003-present) and 47 Director of INVESCO Funds
4350 South Monaco Street Chief Executive Officer Chief Executive Officer Group, Inc. and Chairman of
Denver, Colorado (2003-present) and (2003-present) of INVESCO the Board of INVESCO
Director (2001-present). Funds Group, Inc.; Distributors, Inc.
Age: 51 Formerly, Vice President Chairman of the Board (2003-
(2001-2002). present), President
(2003-present), and Chief
Executive Officer
(2003-present) of INVESCO
Distributors, Inc. Formerly,
Chief Operating Officer
(2002-2003) and Senior Vice
President (1999-2002) of
INVESCO Funds Group, Inc. and
INVESCO Distributors, Inc.;
and Formerly, Senior Vice
President of GT Global -
North America (1992-1998).
Richard W. Healey Director Senior Vice President of 39 Director of INVESCO Funds
4350 South Monaco Street (since 2000) INVESCO Funds Group, Inc.; Group, Inc. and INVESCO
Denver, Colorado Senior Vice President of Distributors, Inc.
INVESCO Distributors, Inc.
Age: 48 Formerly, Senior Vice
President of GT Global -
North America (1996-1998) and
The Boston Company
(1993-1996).
OTHER INFORMATION
UNAUDITED
NUMBER OF
FUNDS IN
POSITION(S) HELD WITH FUND
COMPANY, TERM OF COMPLEX OTHER
OFFICE AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
NAME, ADDRESS AND AGE OF TIME SERVED* DURING PAST FIVE YEARS* DIRECTOR HELD BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
Glen A. Payne Secretary Senior Vice President,
4350 South Monaco Street General Counsel and Secretary
Denver, Colorado of INVESCO Funds Group, Inc.;
Senior Vice President,
Age: 55 Secretary and General Counsel
of INVESCO Distributors, Inc.
Formerly, Secretary of
INVESCO Global Health
Sciences Fund; General
Counsel of INVESCO Trust
Company (1989-1998); and
employee of a U.S. regulatory
agency, Washington, D.C.
(1973-1989).
Ronald L. Grooms Chief Accounting Senior Vice President and Director of INVESCO Funds
4350 South Monaco Street Officer, Chief Treasurer of INVESCO Funds Group, Inc. and INVESCO
Denver, Colorado Financial Officer Group, Inc.; and Senior Vice Distributors, Inc.
and Treasurer President and Treasurer of
Age: 56 INVESCO Distributors, Inc.
Formerly, Treasurer and
Principal Financial and
Accounting Officer of INVESCO
Global Health Sciences Fund;
and Senior Vice President and
Treasurer of INVESCO Trust
Company (1988-1998).
William J. Galvin, Jr. Assistant Secretary Senior Vice President and Director of INVESCO Funds
4350 South Monaco Street Assistant Secretary of Group, Inc. and INVESCO
Denver, Colorado INVESCO Funds Group, Inc.; Distributors, Inc.
and Senior Vice President and
Age: 46 Assistant Secretary of
INVESCO Distributors, Inc.
Formerly, Trust Officer of
INVESCO Trust Company
(1995-1998).
Pamela J. Piro Assistant Treasurer Vice President and Assistant
4350 South Monaco Street Treasurer of INVESCO Funds
Denver, Colorado Group, Inc.; and Assistant
Treasurer of INVESCO
Age: 42 Distributors, Inc. Formerly,
Assistant Vice President
(1996-1997).
Tane T. Tyler Assistant Secretary Vice President and Assistant
4350 South Monaco Street (since 2002) General Counsel of INVESCO
Denver, Colorado Funds Group, Inc.
Age: 37
* Except as otherwise indicated, each individual has held the position(s) shown for at least the last five years.
The Statement of Additional Information ("SAI") includes additional information about Fund directors and is available, without
charge, upon request. To obtain a free copy of the current SAI, call 1-800-525-8085.
[INVESCO ICON] INVESCO(R)
1-800-525-8085
Personal Account Line: 1-800-424-8085
Advisor Services: 1-800-6-INVESCO
invescofunds.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or accompanied
by a current prospectus.
ASEC 900466 4/03
Appendix XI
PRO FORMA FINANCIAL STATEMENTS
PRO FORMA STATEMENT OF INVESTMENT SECURITIES *
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UNAUDITED
SHARES OR PRINCIPAL AMOUNT
- ----------------------------------------------------------
AIM GLOBAL INVESCO
ENERGY ENERGY PRO FORMA
FUND FUND COMBINED DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
96.69% COMMON STOCKS
0.15% DIVERSIFIED METALS & MINING
22,700 22,700 Fording Canadian Coal Trust
====================================================================================================================================
0.42% ELECTRIC UTILITIES
202,800 202,800 Clean Power Income Fund
====================================================================================================================================
0.08% ELECTRICAL COMPONENTS & EQUIPMENT
116,700 116,700 Stuart Energy Systems (a)
====================================================================================================================================
0.70% GAS UTILITIES
40,000 40,000 Equitable Resources
41,900 41,900 Southwestern Energy (a)
====================================================================================================================================
24.22% INTEGRATED OIL & GAS
83,230 83,230 BP PLC
21,500 276,000 297,500 BP PLC Sponsored ADR Representing 6 Ord Shrs
88,000 88,000 ChevronTexaco Corp
18,900 165,000 183,900 ConocoPhillips
82,000 82,000 Eni SpA Sponsored ADR Representing 5 Ord Shrs (b)
18,400 18,400 Exxon Mobil
23,400 23,400 Marathon Oil
31,600 300,000 331,600 Murphy Oil
165,000 165,000 Occidental Petroleum
27,000 135,000 162,000 Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs
72,300 72,300 Suncor Energy
8,104 8,104 TotalFinaElf SA
137,000 137,000 TotalFinaElf SA Sponsored ADR Representing 1/2 Ord Shr
====================================================================================================================================
2.97% NATURAL GAS PIPELINES
220,000 220,000 Enbridge Energy Management LLC
====================================================================================================================================
11.83% OIL & GAS DRILLING
165,300 165,300 Atwood Oceanics (a)
42,600 42,600 Ensign Resource Service Group
50,000 400,000 450,000 Grey Wolf (a)
27,900 260,000 287,900 Nabors Industries Ltd (a)
31,300 198,000 229,300 Noble Corp (a)
315,900 315,900 Parker Drilling (a)
36,800 36,800 Patterson-UTI Energy (a)
6,900 6,900 Precision Drilling (a)
31,300 31,300 Pride International (a)
58,000 282,000 340,000 Rowan Cos
24,200 24,200 Varco International (a)
====================================================================================================================================
27.11% OIL & GAS EQUIPMENT & SERVICES
170,000 170,000 Baker Hughes
45,500 160,000 205,500 BJ Services (a)
430,000 430,000 Cal Dive International (a)
117,200 117,200 CE Franklin Ltd (a)
12,600 111,000 123,600 Cooper Cameron (a)
289,100 289,100 FMC Technologies (a)
708,200 708,200 Grant Prideco (a)
74,200 265,000 339,200 Halliburton Co
128,300 128,300 Key Energy Services (a)
388,600 388,600 Lone Star Technologies (a)
300,000 300,000 Maverick Tube (a)
115,000 115,000 National-Oilwell Inc (a)
39,100 100,000 139,100 Schlumberger Ltd
12,800 12,800 Smith International (a)
11,300 230,000 241,300 Weatherford International Ltd (a)
====================================================================================================================================
22.74% OIL & GAS EXPLORATION, PRODUCTION & TRANSPORTATION
26,360 145,200 171,560 Apache Corp
56,400 56,400 BP Prudhoe Bay Royalty Trust
29,900 111,000 140,900 Burlington Resources
30,100 30,100 Canadian Occidental Petroleum Ltd (Nexen Inc)
12,700 12,700 Canadian Oil Sands Trust (c)
76,700 76,700 Cimarex Energy (a)
185,100 185,100 Compton Petroleum (a)
55,000 55,000 Devon Energy
VALUE
--------------------------------------------------------------------
COUNTRY AIM GLOBAL INVESCO
CODE IF ENERGY ENERGY PRO FORMA
DESCRIPTION NON US FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
DIVERSIFIED METALS & MINING
Fording Canadian Coal Trust CA $ 442,263 $ 442,263
====================================================================================================================================
ELECTRIC UTILITIES
Clean Power Income Fund CA 1,250,274 1,250,274
====================================================================================================================================
ELECTRICAL COMPONENTS & EQUIPMENT
Stuart Energy Systems (a) CA 226,571 226,571
====================================================================================================================================
GAS UTILITIES
Equitable Resources $ 1,500,400 1,500,400
Southwestern Energy (a) 548,890 548,890
====================================================================================================================================
2,049,290
INTEGRATED OIL & GAS
BP PLC UK 528,826 528,826
BP PLC Sponsored ADR Representing 6 Ord Shrs UK 829,685 10,650,840 11,480,525
ChevronTexaco Corp 5,689,200 5,689,200
ConocoPhillips 1,013,040 8,844,000 9,857,040
Eni SpA Sponsored ADR Representing 5 Ord Shrs (b) IT 5,475,140 5,475,140
Exxon Mobil 643,080 643,080
Marathon Oil 560,898 560,898
Murphy Oil 1,395,772 13,251,000 14,646,772
Occidental Petroleum 4,943,400 4,943,400
Royal Dutch Petroleum New York Registry 1.25 Gldr Shrs NL 1,100,250 5,501,250 6,601,500
Suncor Energy CA 1,261,353 1,261,353
TotalFinaElf SA FR 1,027,161 1,027,161
TotalFinaElf SA Sponsored ADR Representing 1/2 Ord Shr FR 8,667,990 8,667,990
====================================================================================================================================
71,382,885
NATURAL GAS PIPELINES
Enbridge Energy Management LLC 8,756,000 8,756,000
====================================================================================================================================
OIL & GAS DRILLING
Atwood Oceanics (a) 4,172,172 4,172,172
Ensign Resource Service Group CA 506,981 506,981
Grey Wolf (a) 197,000 1,576,000 1,773,000
Nabors Industries Ltd (a) BD 1,112,373 10,366,200 11,478,573
Noble Corp (a) 983,446 6,221,160 7,204,606
Parker Drilling (a) 748,683 748,683
Patterson-UTI Energy (a) 1,190,848 1,190,848
Precision Drilling (a) CA 231,637 231,637
Pride International (a) 422,237 422,237
Rowan Cos 1,140,280 5,544,120 6,684,400
Varco International (a) 443,102 443,102
====================================================================================================================================
34,856,239
OIL & GAS EQUIPMENT & SERVICES
Baker Hughes 5,088,100 5,088,100
BJ Services (a) 1,564,745 5,502,400 7,067,145
Cal Dive International (a) 7,744,300 7,744,300
CE Franklin Ltd (a) CA 269,560 269,560
Cooper Cameron (a) 623,826 5,495,610 6,119,436
FMC Technologies (a) 5,550,720 5,550,720
Grant Prideco (a) 8,540,892 8,540,892
Halliburton Co 1,538,166 5,493,450 7,031,616
Key Energy Services (a) 1,293,264 1,293,264
Lone Star Technologies (a) 8,207,232 8,207,232
Maverick Tube (a) 5,580,000 5,580,000
National-Oilwell Inc (a) 2,574,850 2,574,850
Schlumberger Ltd NL 1,486,191 3,801,000 5,287,191
Smith International (a) 450,944 450,944
Weatherford International Ltd (a) BD 426,801 8,687,100 9,113,901
====================================================================================================================================
79,919,151
OIL & GAS EXPLORATION, PRODUCTION & TRANSPORTATION
Apache Corp 1,627,466 8,964,648 10,592,114
BP Prudhoe Bay Royalty Trust 843,180 843,180
Burlington Resources 1,426,529 5,295,810 6,722,339
Canadian Occidental Petroleum Ltd (Nexen Inc) CA 614,118 614,118
Canadian Oil Sands Trust (c) CA $ 305,831 $ 305,831
Cimarex Energy (a) 1,491,815 1,491,815
Compton Petroleum (a) CA 617,862 617,862
Devon Energy $ 2,652,100 2,652,100
SHARES OR PRINCIPAL AMOUNT
- ----------------------------------------------------------
AIM GLOBAL INVESCO
ENERGY ENERGY PRO FORMA
FUND FUND COMBINED DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
160,000 160,000 EnCana Corp
36,200 36,200 EOG Resources
228,000 228,000 Forest Oil (a)
132,000 132,000 Kerr-McGee Corp
741,000 741,000 Nexen Inc
126,700 126,700 Oiltec Resources Ltd (a)
405,000 405,000 Pioneer Natural Resources (a)
150,000 150,000 Remington Oil & Gas (a)
45,700 232,000 277,700 Talisman Energy
74,333 74,333 XTO Energy
29,000 29,000 Zargon Oil & Gas Ltd (a)
====================================================================================================================================
6.15% OIL & GAS REFINING & MARKETING
48,900 48,900 Frontier Oil
62,800 62,800 Heating Oil Partners Income Fund
34,800 34,800 Premcor Inc (a)
21,600 195,000 216,600 Sunoco Inc
18,100 175,000 193,100 Valero Energy
====================================================================================================================================
0.32% PRECIOUS METALS & MINERALS
67,600 67,600 Minefinders Corp Ltd (a)
58,900 58,900 Southwestern Resources (a)
====================================================================================================================================
TOTAL COMMON STOCKS (COST $41,962,101, $220,616,631 AND
$262,578,732, RESPECTIVELY)
====================================================================================================================================
7.98% SHORT-TERM INVESTMENTS
6.45% COMMERCIAL PAPER
3.39% CONSUMER RECEIVABLES
New Center Asset Trust, Series 1, Discount Notes, 1.420%,
$ 10,000,000 $ 10,000,000 4/1/2003
====================================================================================================================================
3.06% DIVERSIFIED FINANCIAL SERVICES
$ 9,000,000 $ 9,000,000 State Street Boston, Discount Notes, 1.390%, 4/1/2003
====================================================================================================================================
TOTAL COMMERCIAL PAPER (Amortized Cost $0, $19,000,000 and
$19,000,000, respectively)
====================================================================================================================================
1.41% INVESTMENT COMPANIES
8,219 8,219 STIC Liquid Assets Portfolio (e)
8,219 8,219 STIC Prime Portfolio (e)
INVESCO Treasurer's Series Money Market Reserve Fund, (d)
4,139,034 4,139,034 (e), 1.092%
====================================================================================================================================
TOTAL INVESTMENT COMPANIES (Cost $16,438, $4,139,034 and
$4,155,472, respectively)
====================================================================================================================================
0.12% REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated 3/31/2003 due
4/1/2003 at 1.230%, repurchased at $360,012 (Collateralized
by Federal Home Loan Bank, Discount Notes, due 4/1/2003,
value $370,000)(Cost $0, $360,000 and $360,000,
$ 360,000 $ 360,000 respectively)
====================================================================================================================================
TOTAL SHORT-TERM INVESTMENTS (AMORTIZED COST $16,438,
$23,499,034 AND $23,515,472, RESPECTIVELY)
====================================================================================================================================
104.67% TOTAL INVESTMENTS AT VALUE
(COST $41,978,539, $244,115,665 AND $286,094,204,
RESPECTIVELY)
====================================================================================================================================
-4.67% OTHER ASSETS LESS LIABILITIES
100.00% NET ASSETS AT VALUE
====================================================================================================================================
VALUE
--------------------------------------------------------------------
COUNTRY AIM GLOBAL INVESCO
CODE IF ENERGY ENERGY PRO FORMA
DESCRIPTION NON US FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
EnCana Corp CA 5,177,600 5,177,600
EOG Resources 1,432,072 1,432,072
Forest Oil (a) 5,084,400 5,084,400
Kerr-McGee Corp 5,360,520 5,360,520
Nexen Inc CA 681,461 681,461
Oiltec Resources Ltd (a) CA 100,984 100,984
Pioneer Natural Resources (a) 10,165,500 10,165,500
Remington Oil & Gas (a) 2,554,500 2,554,500
Talisman Energy CA 1,818,100 9,201,120 11,019,220
XTO Energy 1,412,327 1,412,327
Zargon Oil & Gas Ltd (a) CA 182,738 182,738
====================================================================================================================================
67,010,681
OIL & GAS REFINING & MARKETING
Frontier Oil 836,190 836,190
Heating Oil Partners Income Fund CA 495,401 495,401
Premcor Inc (a) 894,012 894,012
Sunoco Inc 789,912 7,131,150 7,921,062
Valero Energy 748,978 7,241,500 7,990,478
====================================================================================================================================
18,137,143
PRECIOUS METALS & MINERALS
Minefinders Corp Ltd (a) CA 345,380 345,380
Southwestern Resources (a) CA 603,465 603,465
====================================================================================================================================
948,845
TOTAL COMMON STOCKS (COST $41,962,101, $220,616,631 AND
$262,578,732, RESPECTIVELY) 284,979,342
====================================================================================================================================
SHORT-TERM INVESTMENTS
COMMERCIAL PAPER
CONSUMER RECEIVABLES
New Center Asset Trust, Series 1, Discount Notes, 1.420%,
4/1/2003 10,000,000 10,000,000
====================================================================================================================================
DIVERSIFIED FINANCIAL SERVICES
State Street Boston, Discount Notes, 1.390%, 4/1/2003 9,000,000 9,000,000
====================================================================================================================================
TOTAL COMMERCIAL PAPER (Amortized Cost $0, $19,000,000 and
$19,000,000, respectively) 19,000,000
====================================================================================================================================
INVESTMENT COMPANIES
STIC Liquid Assets Portfolio (e) 8,219 8,219
STIC Prime Portfolio (e) 8,219 8,219
INVESCO Treasurer's Series Money Market Reserve Fund, (d)
(e), 1.092% 4,139,034 4,139,034
====================================================================================================================================
TOTAL INVESTMENT COMPANIES (Cost $16,438, $4,139,034 and
$4,155,472, respectively) 4,155,472
====================================================================================================================================
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated 3/31/2003 due
4/1/2003 at 1.230%, repurchased at $360,012 (Collateralized
by Federal Home Loan Bank, Discount Notes, due 4/1/2003,
value $370,000)(Cost $0, $360,000 and $360,000,
respectively) 360,000 360,000
====================================================================================================================================
TOTAL SHORT-TERM INVESTMENTS (AMORTIZED COST $16,438,
$23,499,034 AND $23,515,472, RESPECTIVELY) 23,515,472
====================================================================================================================================
TOTAL INVESTMENTS AT VALUE
(COST $41,978,539, $244,115,665 AND $286,094,204,
RESPECTIVELY) 42,742,406 265,752,408 308,494,814
====================================================================================================================================
OTHER ASSETS LESS LIABILITIES 569,468 (14,240,725) (13,752,257)
NET ASSETS AT VALUE $ 43,311,874 $ 251,511,683 $ 294,742,557
====================================================================================================================================
(a) Security is non-income producing.
(b) Loaned security, a portion or all of the security is on loan at March 31,
2003.
(c) Securities acquired pursuant to Rule 144A. The Fund deems such securities
to be "liquid" because an institutional market exists.
(d) The security is purchased with the cash collateral received from securities
on loan.
(e) Security is an affiliated company.
* As of 3/31/03, all of the securities held by the AIM Global Energy Fund
would comply with the compliance guidelines and/or investment restrictions
of the INVESCO Energy Fund.
SUMMARY OF INVESTMENTS BY COUNTRY
VALUE
-------------------------------------------------------
% OF AIM GLOBAL INVESCO
COUNTRY NET ASSETS ENERGY ENERGY PRO FORMA
COUNTRY CODE AT VALUE FUND FUND COMBINED
- ---------------------------------------------------------------------------------------------------------------------------
Bermuda BD 6.99% $ 1,539,174 $ 19,053,300 $ 20,592,474
Canada CA 8.26 9,953,979 14,378,720 24,332,699
France FR 3.29 1,027,161 8,667,990 9,695,151
Italy IT 1.86 0 5,475,140 5,475,140
Netherlands NL 4.03 2,586,441 9,302,250 11,888,691
United Kingdom UK 4.07 1,358,511 10,650,840 12,009,351
United States 76.17 26,277,140 198,224,168 224,501,308
Other Assets Less Liabilities (4.67) 569,468 (14,240,725) (13,752,257)
===========================================================================================================================
100.00% $43,311,874 $251,511,683 $294,742,557
===========================================================================================================================
See Notes to Financial Statements
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UNAUDITED
AIM GLOBAL INVESCO
ENERGY ENERGY PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
-----------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b) $ 41,978,539 $244,115,665 $286,094,204
====================================================================================================================================
At Value(a)(b) $ 42,742,406 $265,752,408 $308,494,814
Cash 269,441 0 $ (9,741) 259,700
Foreign Currencies (Cost $383,029, $0 and $383,029, respectively) 383,608 0 383,608
Receivables:
Investment Securities Sold 42,306 368,936 411,242
Fund Shares Sold 29,528 771,634 801,162
Dividends and Interest 58,064 152,418 210,482
Prepaid Expenses and Other Assets 4,997 44,387 49,384
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 43,530,350 267,089,783 (9,741) 310,610,392
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Custodian 0 9,741 (9,741) 0
Investment Securities Purchased 39,939 9,872,390 9,912,329
Fund Shares Repurchased 108,471 1,471,960 1,580,431
Securities Loaned 0 4,139,034 4,139,034
Accrued Distribution Expenses
Investor Class -- 46,874 46,874
Class A 8,415 2,770 11,185
Class B 10,368 1,144 11,512
Class C 1,389 7,741 9,130
Class K -- 100 100
Accrued Merger Expenses -- -- 81,000 81,000
Accrued Expenses and Other Payables 49,894 26,346 76,240
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 218,476 15,578,100 71,259 15,867,835
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE $ 43,311,874 $251,511,683 $ (81,000) $294,742,557
====================================================================================================================================
NET ASSETS
Paid-in Capital $ 68,575,554 $292,005,495 $360,581,049
Accumulated Undistributed Net Investment Loss (347,873) (28,917) $ (81,000) (457,790)
Accumulated Undistributed Net Realized Loss on Investment
Securities and Foreign Currency Transactions (25,681,314) (62,101,638) (87,782,952)
Net Appreciation of Investment Securities and Foreign
Currency Transactions 765,507 21,636,743 22,402,250
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE, APPLICABLE TO SHARES OUTSTANDING $ 43,311,874 $251,511,683 $ (81,000)$ 294,742,557
====================================================================================================================================
Net Assets at Value:
Investor Class -- $231,023,351 $ (63,472)(c) $230,959,879
====================================================================================================================================
Class A $ 28,345,772 $ 9,130,699 $ (10,295)(c) $ 37,466,176
====================================================================================================================================
Class B $ 12,981,388 $ 1,501,954 $ (3,977)(c) $ 14,479,365
====================================================================================================================================
Class C $ 1,984,714 $ 9,566,346 $ (3,175)(c) $ 11,547,885
====================================================================================================================================
Class K -- $ 289,333 $ (81)(c) $ 289,252
====================================================================================================================================
Shares Outstanding
Investor Class -- 13,745,599 13,745,599
Class A 2,415,278 542,002 1,682,242 (d) 2,224,244
Class B 1,139,593 89,871 776,863 (d) 866,734
Class C 174,072 581,459 120,651 (d) 702,110
Class K -- 18,602 18,602
====================================================================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and Redemption Price per Share -- $ 16.81 $ 16.80
Class A
Redemption Price per Share $ 11.74 $ 16.85 $ 16.84
Offering Price per Share (Maximum sales charge of 4.75%,
5.50% and 5.50%, respectively) $ 12.33 $ 17.83 $ 17.82
Class B, Offering and Redemption Price per Share $ 11.39 $ 16.71 $ 16.71
Class C, Offering and Redemption Price per Share $ 11.40 $ 16.45 $ 16.45
Class K, Offering and Redemption Price per Share -- $ 15.55 $ 15.55
====================================================================================================================================
(a) Investment securities at cost and value at March 31, 2003 includes a
repurchase agreement of $360,000 and $360,000, respectively, for INVESCO
Energy Fund and Pro Forma Combined.
(b) Investment securities at cost and value at March 31, 2003 include
$4,005,265 and $4,005,265, respectively, of securities loaned for INVESCO
Energy Fund and Pro Forma Combined.
(c) Adjustment for Pro Forma Combined bearing all the expenses related to the
proposed merger.
(d) Adjustment to reflect the exchange of shares of common stock outstanding
from AIM Global Energy Fund to INVESCO Energy Fund.
PRO FORMA STATEMENT OF OPERATIONS
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
UNAUDITED
AIM GLOBAL INVESCO
ENERGY ENERGY PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
-------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 632,317 $ 3,070,714 $ 3,703,031
Dividends from Affiliated Investment
Companies 0 1,432 1,432
Interest 499 179,899 180,398
Securities Loaned Income 21,350 22,711 44,061
Foreign Taxes Withheld (56,431) (64,984) (121,415)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 597,735 3,209,772 3,807,507
- --------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 327,726 2,180,691 $(71,174)(a) 2,437,243
Distribution Expenses
Investor Class -- 685,019 685,019
Class A 98,947 22,209 (29,685)(a) 91,471
Class B 121,903 7,338 129,241
Class C 16,333 101,292 117,625
Class K -- 616 616
Transfer Agent Fees
Investor Class -- 1,351,371 1,351,371
Class A 83,585 13,598 6,392 (a) 103,575
Class B 51,489 2,355 7,034 (a) 60,878
Class C 6,898 51,772 3,722 (a) 62,392
Class K -- 2,083 2,083
Administrative Services Fees 50,000 141,109 (34,874)(a) 156,235
Custodian Fees and Expenses 25,099 63,123 (18,269)(b) 69,953
Directors' Fees and Expenses 9,578 28,463 (9,898)(b) 28,143
Interest Expenses 0 2,770 2,770
Professional Fees and Expenses 44,000 40,362 (29,346)(b) 55,016
Registration Fees and Expenses
Investor Class -- 56,121 56,121
Class A 23,204 33 23,237
Class B 14,294 8 14,302
Class C 1,915 716 2,631
Class K -- 1,471 1,471
Reports to Shareholders 56,000 231,087 287,087
Other Expenses 4,844 17,972 3,205 (b) 26,021
- --------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 935,815 5,001,579 (172,893) 5,764,501
Fees and Expenses Absorbed/Reimbursed by
Investment Adviser
Class A (114,330) 0 72,143 (c) (42,187)
Class B (70,429) (582) 33,542 (c) (37,469)
Class C (9,436) (20,103) 3,141 (c) (26,398)
Class K -- (4,502) (420)(c) (4,922)
Fees and Expenses Paid Indirectly (572) (39,730) 572 (b) (39,730)
- --------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 741,048 4,936,662 (63,915) 5,613,795
- --------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (143,313) (1,726,890) 63,915 (1,806,288)
- --------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (925,532) (15,930,670) (16,856,202)
Foreign Currency Transactions 1,401 4,369 5,770
- --------------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss (924,131) (15,926,301) (16,850,432)
- --------------------------------------------------------------------------------------------------------------------------
Change in Net Appreciation/Depreciation of:
Investment Securities (667,094) (32,597,193) (33,264,287)
Foreign Currency Transactions 1,674 0 1,674
- --------------------------------------------------------------------------------------------------------------------------
Total Net Change in
Appreciation/Depreciation (665,420) (32,597,193) (33,262,613)
- --------------------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS (1,589,551) (48,523,494) (50,113,045)
- --------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(1,732,864) $(50,250,384) $ 63,915 $(51,919,333)
==========================================================================================================================
(a) Reflects adjustments to Investment Advisory Fees, Distribution Expenses,
Transfer Agent Fees and Administrative Services Fees based on the surviving
Fund's contractual fee obligation.
(b) Reflects elimination of duplicate services or fees.
(c) Reflects adjustment to the level of the surviving Fund's voluntary expense
reimbursement.
See Notes to Financial Statements
PRO FORMA NOTES TO FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- BASIS OF COMBINATION
On June 9, 2003, the Board of Directors of INVESCO Sector Funds, Inc.- INVESCO
Energy Fund and AIM Global Energy Fund a separate series of AIM Investment Funds
(collectively the "Funds", individually the "Fund"), approved an Agreement and
Plan of Reorganization (the "Plan") whereby, subject to approval by the
shareholders of AIM Global Energy Fund, INVESCO Energy Fund will acquire all of
the assets of AIM Global Energy Fund subject to the liabilities of such Fund, in
exchange for a number of shares of INVESCO Energy Fund equal in value to the net
assets of AIM Global Energy Fund (the "Merger").
The Merger will be accounted for as a tax-free merger of investment companies.
The unaudited pro forma combined financial statements are presented for the
information of the reader and may not necessarily be representative of what the
actual combined financial statements would have been had the reorganization
occurred at March 31, 2003. The unaudited pro forma statement of investment
securities and statement of assets and liabilities reflect the financial
position of the Funds at March 31, 2003. The unaudited pro forma statement of
operations reflects the results of operations of the Funds for the year ended
March 31, 2003. These statements have been derived from the Funds' respective
books and records utilized in calculating daily net asset value at the date
indicated above for each Fund under generally accepted accounting principles.
The historical cost of investment securities will be carried forward to the
surviving entity and the results of operations of INVESCO Energy Fund for
pre-combination periods will not be restated.
The unaudited pro forma statement of investment securities, unaudited statement
of assets and liabilities and statement of operations should be read in
conjunction with the historical financial statements of each Fund which are
incorporated by reference in the Statement of Additional Information.
NOTE 2 -- SECURITY VALUATION
Domestic (U.S.) equity securities traded on national securities exchanges or in
the over-the-counter market are valued at the last sales price at the close of
the regular trading day on the exchange (generally 4:00p.m. Eastern time) where
such securities are primarily traded. If last sales prices are not available,
securities are valued at the closing bid price for the regular trading day as
obtained from one or more dealers making a market for such securities or by a
pricing service approved by the Fund's board of directors.
Foreign equity securities are valued at the closing price. The closing price is
designated by the principal stock exchange in the country in which the
securities are primarily traded. In the event that closing bid prices are not
available for foreign securities, a snapshot of prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to the
close of the New York Stock Exchange.
Investments in shares of investment companies are valued at the net asset value
of the respective fund as calculated each day.
If market quotations or pricing service valuations are not readily available, or
events or circumstances that may affect the value of portfolio securities are
identified between the closing of their principal markets and the time that the
net asset value per share is determined, securities are valued at fair value as
determined in good faith under procedures established by the Fund's board of
directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
NOTE 3 -- CAPITAL SHARES
The unaudited pro forma net asset value per share assumes additional shares of
common stock of INVESCO Energy Fund issued in connection with the proposed
acquisition of AIM Global Energy Fund by INVESCO Energy Fund as of March 31,
2003. The number of additional shares issued was calculated by dividing the net
asset value of each Class of AIM Global Energy Fund by the respective Class' net
asset value per share of INVESCO Energy Fund.
NOTE 4 -- UNEDITED PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma financial statements reflect changes in
fund shares as if the merger had taken place on March 31, 2003. AIM Global
Energy Fund expenses were adjusted assuming INVESCO Energy Fund's fee structure
was in effect for the entire year ended March 31, 2003.
NOTE 5 -- MERGER COSTS
Merger costs are estimated at approximately $81,000 and are not included in the
unaudited pro forma statement of operations since these costs are not recurring.
These costs represent the estimated expense of both Funds carrying out their
obligations under the Plan and consist of management's estimate of legal fees,
accounting fees, printing costs and mailing charges related to the proposed
merger. INVESCO Funds Group, Inc., Investment Adviser to the Funds, will bear no
of the cost of the Reorganization. The Funds will bear the all of the expenses
relating to the proposed Reorganization based on their relative net assets.
NOTE 6 -- FEDERAL INCOME TAXES
The Fund has complied, and continues to comply, with the provisions of the
Internal Revenue Code applicable to regulated investment companies and,
accordingly, has made or intends to make sufficient distributions of net
investment income and net realized capital gains, if any, to relieve it from all
federal and state income taxes and federal excise taxes.
The Fund intends to offset any net capital gains with any available capital loss
carryforward until each carryforward has been fully utilized or expires. The
amount of capital loss carryforward, which may offset INVESCO Energy Fund's
capital gains in any given year may be limited as a result of previous
reorganizations. In addition, no capital gain distribution shall be made until
the capital loss carry forward has been fully utilized or expires.
APPENDIX XII
PRO FORMA FINANCIAL STATEMENTS
PRO FORMA STATEMENT OF INVESTMENT SECURITIES *
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UNAUDITED
<Table>
<Caption>
SHARES, CONTRACTS OR PRINCIPAL AMOUNT VALUE
- ---------------------------------------- -------------------------------------------
AIM GLOBAL INVESCO AIM GLOBAL INVESCO
FINANCIAL FINANCIAL FINANCIAL FINANCIAL
SERVICES SERVICES PRO FORMA SERVICES SERVICES PRO FORMA
FUND FUND COMBINED DESCRIPTION FUND FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
96.41% COMMON STOCKS
39.88% BANKS
78,900 78,900 Allied Irish Banks PLC $ 1,090,558 $ 1,090,558
104,700 104,700 AmSouth Bancorp 2,081,436 2,081,436
858,800 858,800 Anglo Irish Bank PLC 6,136,926 6,136,926
146,310 146,310 Banco Popolare di Verona
e Novara Scrl 1,662,603 1,662,603
82,400 82,400 Banco Popular Espanol SA 3,565,361 3,565,361
107,600 690,700 798,300 Bank of America 7,191,984 $ 46,166,388 53,358,372
148,200 148,200 Bank of Ireland 1,572,347 1,572,347
67,000 817,400 884,400 Bank of New York 1,373,500 16,756,700 18,130,200
42,000 552,600 594,600 Bank One 1,454,040 19,131,012 20,585,052
40,800 40,800 BNP Paribas SA 1,636,090 1,636,090
102,150 146,200 248,350 Charter One Financial 2,825,469 4,043,892 6,869,361
43,300 43,300 City National 1,902,602 1,902,602
73,000 73,000 Comerica Inc(b) 2,765,240 2,765,240
243,100 243,100 Compass Bancshares 7,601,737 7,601,737
160,000 160,000 Cullen/Frost Bankers 4,860,800 4,860,800
434,000 434,000 Dah Sing Financial Group 2,031,041 2,031,041
420,950 420,950 Fifth Third Bancorp 21,106,433 21,106,433
154,700 154,700 First Tennessee National 6,143,137 6,143,137
124,200 436,000 560,200 FleetBoston Financial 2,965,896 10,411,680 13,377,576
2,392,900 2,392,900 Grupo Financiero BBVA
Bancomer
SA de CV Class B 1,831,471 1,831,471
Shrs(a)
235,000 235,000 Investors Financial Services 5,722,250 5,722,250
132,100 132,100 KeyCorp 2,980,176 2,980,176
47,300 47,300 Kookmin Bank Sponsored ADR
Representing Ord Shrs 1,087,900 1,087,900
30,600 178,100 208,700 M&T Bank 2,404,548 13,995,098 16,399,646
70,403 485,400 555,803 Mellon Financial 1,496,768 10,319,604 11,816,372
391,200 391,200 National Commerce Financial 9,271,440 9,271,440
147,700 147,700 New York Community Bancorp 4,401,460 4,401,460
56,950 56,950 Northern Rock PLC 585,721 585,721
329,300 329,300 Northern Trust 10,027,185 10,027,185
46,500 46,500 Royal Bank of Canada 1,810,014 1,810,014
101,000 101,000 Royal Bank of Scotland
Group PLC 2,279,052 2,279,052
202,000 202,000 St George Bank Ltd 2,343,968 2,343,968
159,000 642,500 801,500 Synovus Financial 2,844,510 11,494,325 14,338,835
362,700 362,700 TCF Financial 14,522,508 14,522,508
97,500 97,500 U.S. Bancorp 1,850,550 1,850,550
254,600 254,600 UBS AG(a) 10,871,420 10,871,420
524,800 524,800 UniCredito Italiano SpA 2,001,245 2,001,245
107,800 836,800 944,600 Wachovia Corp 3,672,746 28,509,776 32,182,522
107,500 910,700 1,018,200 Wells Fargo & Co 4,836,425 40,972,393 45,808,818
80,700 87,300 168,000 Zions Bancorp 3,452,346 3,734,694 7,187,040
===================================================================================================================================
375,796,465
5.24% CONSUMER FINANCE
18,000 18,000 Countrywide Financial(b) 1,035,000 1,035,000
40,100 150,900 191,000 Fannie Mae 2,620,535 9,861,315 12,481,850
65,200 279,400 344,600 Freddie Mac 3,462,120 14,836,140 18,298,260
223,500 223,500 MBNA Corp(b) 3,363,675 3,363,675
127,600 127,600 SLM Corp 14,153,392 14,153,392
====================================================================================================================================
49,332,177
0.38% DATA PROCESSING SERVICES
138,100 138,100 Concord EFS(a) 1,298,140 1,298,140
85,200 85,200 DST Systems(a) 2,317,440 2,317,440
===================================================================================================================================
3,615,580
13.91% DIVERSIFIED FINANCIAL
SERVICES
52,000 399,100 451,100 Ambac Financial Group 2,627,040 20,162,532 22,789,572
112,400 613,300 725,700 American Express 3,735,052 20,379,959 24,115,011
127,000 127,000 Charles Schwab 916,940 916,940
170,101 1,172,000 1,342,101 Citigroup Inc 5,859,979 40,375,400 46,235,379
233,300 233,300 Franklin Resources 7,677,903 7,677,903
61,300 124,000 185,300 Goldman Sachs Group(b) 4,173,304 8,441,920 12,615,224
90,200 90,200 Investors Financial Services 2,196,370 2,196,370
81,700 81,700 Man Group PLC 1,256,848 1,256,848
81,800 81,800 Moody's Corp 3,781,614 3,781,614
37,000 37,000 Neuberger Berman 1,044,510 1,044,510
62,000 62,000 Nomura Holdings 649,091 649,091
200,800 200,800 Prudential Financial 5,873,400 5,873,400
60,200 60,200 State Street 1,904,126 1,904,126
===================================================================================================================================
131,055,988
2.27% INSURANCE BROKERS
55,700 393,300 449,000 Marsh & McLennan 2,374,491 16,766,379 19,140,870
80,000 80,000 Willis Group Holdings Ltd 2,216,000 2,216,000
===================================================================================================================================
21,356,870
13.33% INVESTMENT ADVISER/BROKER
DEALER SERVICES
165,700 165,700 Eaton Vance 4,429,161 4,429,161
62,000 336,950 398,950 Federated Investors Class B
Shrs 1,577,900 8,575,377 10,153,277
130,200 237,300 367,500 Legg Mason 6,345,948 11,566,002 17,911,950
127,000 403,100 530,100 Lehman Brothers Holdings(b) 7,334,250 23,279,025 30,613,275
165,300 1,080,000 1,245,300 Merrill Lynch & Co $ 5,851,620 $ 38,232,000 $ 44,083,620
65,700 413,400 479,100 Morgan Stanley 2,519,595 15,853,890 18,373,485
===================================================================================================================================
125,564,768
</Table>
,
<Table>
<Caption>
SHARES, CONTRACTS OR PRINCIPAL AMOUNT VALUE
- --------------------------------------- -------------------------------------------
AIM GLOBAL INVESCO AIM GLOBAL INVESCO
FINANCIAL FINANCIAL FINANCIAL FINANCIAL
SERVICES SERVICES PRO FORMA SERVICES SERVICES PRO FORMA
FUND FUND COMBINED DESCRIPTION FUND FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
0.25% IT CONSULTING & SERVICES
110,000 110,000 Sungard Data Systems(a) 2,343,000 2,343,000
===================================================================================================================================
3.42% LIFE & HEALTH INSURANCE
306,800 306,800 AFLAC Inc 9,832,940 9,832,940
70,700 70,700 Lincoln National 1,979,600 1,979,600
98,100 91,000 189,100 Nationwide Financial Services
Class A Shrs 2,390,697 2,217,670 4,608,367
121,000 280,300 401,300 Principal Financial Group 3,283,940 7,607,342 10,891,282
38,800 38,800 Prudential Financial 1,134,900 1,134,900
73,000 73,000 StanCorp Financial Group 3,763,150 3,763,150
===================================================================================================================================
32,210,239
6.24% MULTI-LINE INSURANCE
80,650 730,402 811,052 American International Group 3,988,143 36,118,379 40,106,522
69,200 69,200 Hartford Financial Services
Group 2,442,068 2,442,068
54,000 54,000 HCC Insurance Holdings 1,380,240 1,380,240
446,700 446,700 Radian Group 14,910,846 14,910,846
===================================================================================================================================
58,839,676
6.13% PROPERTY & CASUALTY INSURANCE
73,900 73,900 ACE Ltd 2,139,405 2,139,405
506,500 506,500 Allstate Corp 16,800,605 16,800,605
28,000 28,000 MBIA Inc 1,081,920 1,081,920
54,000 54,000 MGIC Investment 2,120,580 2,120,580
82,000 74,900 156,900 PMI Group 2,095,100 1,913,695 4,008,795
82,000 82,000 Radian Group 2,737,160 2,737,160
383,100 383,100 SAFECO Corp 13,397,007 13,397,007
76,200 359,500 435,700 St Paul 2,423,160 11,432,100 13,855,260
113,800 113,800 Travelers Property Casualty
Class B Shrs 1,605,718 1,605,718
===================================================================================================================================
57,746,450
1.33% REAL ESTATE INVESTMENT TRUSTS
430,900 430,900 iStar Financial 12,569,353 12,569,353
===================================================================================================================================
4.03% REINSURANCE
166,200 166,200 Endurance Specialty Holdings
Ltd(a) 4,020,378 4,020,378
61,000 61,000 Everest Re Group Ltd 3,489,810 3,489,810
226,300 226,300 PartnerRe Ltd 11,371,575 11,371,575
388,500 388,500 Platinum Underwriters Holdings Ltd 9,848,475 9,848,475
230,200 230,200 RenaissanceRe Holdings Ltd 9,219,510 9,219,510
===================================================================================================================================
37,949,748
TOTAL COMMON STOCKS
(COST $192,601,966, $693,290,685
AND $885,892,651, RESPECTIVELY) 908,380,314
===================================================================================================================================
3.52% SHORT-TERM INVESTMENTS
2.65% COMMERCIAL PAPER - CONSUMER
RECEIVABLES
New Center Asset Trust, Series 1,
Discount Notes, 1.420%, 4/1/2003
(Amortized Cost $0, $25,000,000
$ 25,000,000 $ 25,000,000 and $25,000,000, respectively) 25,000,000 25,000,000
===================================================================================================================================
0.81% INVESTMENT COMPANIES
3,785,399 3,785,399 STIC Liquid Assets Portfolio(c) 3,785,399 3,785,399
3,785,399 3,785,399 STIC Prime Portfolio(c) 3,785,399 3,785,399
===================================================================================================================================
TOTAL INVESTMENT COMPANIES (cost
$7,570,798, $0 and $7,570,798,
respectively) 7,570,798
===================================================================================================================================
0.06% REPURCHASE AGREEMENTS
Repurchase Agreement with State
Street dated 3/31/2003 due 4/1/2003
at 1.230%, repurchased at $533,018
(Collateralized by Federal Home
Loan Bank, Discount Notes, due
4/1/2003, value $545,000) (Cost $0,
$ 533,000 $ 533,000 $533,000 and $533,000, respectively) 533,000 533,000
===================================================================================================================================
0.00% OPTIONS PURCHASED-PUTS -
CONSUMER FINANCE
1,100 1,100 MBNA Corp, 4/2003(Cost $151,800,
$0 and $151,800, respectively) 19,250 19,250
===================================================================================================================================
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $7,722,598,
$25,533,000 AND $33,255,598,
RESPECTIVELY) 33,123,048
===================================================================================================================================
99.93% TOTAL INVESTMENTS AT VALUE
(COST $200,324,564, $718,823,685
AND $919,148,249, RESPECTIVELY) 190,081,604 751,421,758 941,503,362
===================================================================================================================================
0.07% OTHER ASSETS LESS LIABILITIES 203,111 692,085 686,046
100.00% NET ASSETS AT VALUE $ 190,284,715 $ 752,113,843 $ 942,189,408
===================================================================================================================================
</Table>
(a) Security is non-income producing.
(b) Securities are pledged with broker as collateral for written options.
(c) Security is an affiliated company.
* As of 3/31/03, all of the securities held by the AIM Global Financial Services
Fund would comply with the compliance guidelines and/or investment restrictions
of the INVESCO Financial Services Fund.
See Notes to Financial Statements
<Table>
<Caption>
OPTION CONTRACTS
NUMBER OF CONTRACTS PREMIUMS RECEIVED VALUE
- ------------------------------- ---------------------------------- -----------------------------------
AIM GLOBAL INVESCO AIM GLOBAL INVESCO AIM GLOBAL INVESCO
FINANCIAL FINANCIAL FINANCIAL FINANCIAL FINANCIAL FINANCIAL
SERVICES SERVICES PRO FORMA SERVICES SERVICES PRO FORMA SERVICES SERVICES PRO FORMA
FUND FUND COMBINED DESCRIPTION FUND FUND COMBINED FUND FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
OPTIONS WRITTEN - CALLS
(360) (360) Comerica Inc, 4/2003, $ 56,518 $ 56,518 $ (900) $ $ (900)
$45.00
(180) (180) Countrywide Financial, 21,959 21,959 (56,700) (56,700)
4/2003, $55.00
(195) (195) Goldman Sachs Group, 19,889 19,889 (5,362) (5,362)
4/2003, $75.00
(210) (210) Lehman Brothers Holdings, 44,519 44,519 (18,900) (18,900)
4/2003, $60.00
(210) (210) Lehman Brothers Holdings, 11,130 11,130 (2,100) (2,100)
4/2003, $65.00
(1,100) (1,100) MBNA Corp, 4/2003, $17.50 47,299 47,299 (11,000) (11,000)
===================================================================================================================================
$201,314 $ (94,962)
===================================================================================================================================
</Table>
See Notes to Financial Statements
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UNAUDITED
<Table>
<Caption>
AIM GLOBAL INVESCO
FINANCIAL FINANCIAL PRO FORMA PRO FORMA
SERVICES FUND SERVICES FUND ADJUSTMENTS COMBINED
----------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $200,324,564 $ 718,823,685 $ 919,148,249
===================================================================================================================================
At Value(a) $190,081,604 $ 751,421,758 $ 941,503,362
Cash 0 1,593 1,593
Foreign Currencies (Cost $376,650, $0 and $376,650, 384,785 0 384,785
respectively)
Receivables:
Investment Securities Sold 0 1,180,061 1,180,061
Fund Shares Sold 47,321 276,376 323,697
Dividends and Interest 462,214 960,379 1,422,593
Prepaid Expenses and Other Assets 5,809 75,452 81,261
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 190,981,733 753,915,619 944,897,352
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Options Written at Value
(Premiums Received $201,314, $0 and $201,314,
respectively) 94,962 0 94,962
Payables:
Distributions to Shareholders 0 123,047 123,047
Investment Securities Purchased 0 0 0
Fund Shares Repurchased 176,799 1,410,677 1,587,476
Accrued Distribution Expenses
Investor Class -- 147,069 147,069
Class A 70,094 1,253 71,347
Class B 120,616 764 121,380
Class C 35,831 8,177 44,008
Class K -- 465 465
Accrued Merger Expenses -- -- $ 209,150 209,150
Accrued Expenses and Other Payables 198,716 110,324 309,040
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 697,018 1,801,776 209,150 2,707,944
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE $190,284,715 $ 752,113,843 $ (209,150) $ 942,189,408
===================================================================================================================================
NET ASSETS
Paid-in Capital $229,336,869 $ 781,919,715 $1,011,256,584
Accumulated Undistributed Net Investment
Income (Loss) 28,602 (27,883) $ (209,150) (208,431)
Accumulated Undistributed Net Realized Loss on
Investment
Securities and Foreign Currency Transactions (28,956,527) (62,379,689) (91,336,216)
Net Appreciation (Depreciation) of Investment
Securities and
Foreign
Currency Transactions (10,124,229) 32,601,700 22,477,471
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE, APPLICABLE TO SHARES
OUTSTANDING $190,284,715 $ 752,113,843 $ (209,150) $ 942,189,408
===================================================================================================================================
NET ASSETS AT VALUE:
Investor Class -- $ 734,439,759 $ (163,011)(b) $ 734,276,748
===================================================================================================================================
Class A $ 91,490,281 $ 5,310,648 $ (21,480)(b) $ 96,779,449
===================================================================================================================================
Class B $ 75,931,171 $ 989,629 $ (17,067)(b) $ 76,903,733
===================================================================================================================================
Class C $ 22,863,263 $ 10,026,026 $ (7,299)(b) $ 32,881,990
===================================================================================================================================
Class K -- $ 1,347,781 $ (293)(b) $ 1,347,488
===================================================================================================================================
Shares Outstanding
Investor Class -- 33,736,622 33,736,622
Class A 5,153,261 244,946 4,220,031(c) 4,464,977
Class B 4,457,777 45,528 3,492,694(c) 3,538,222
Class C 1,342,342 469,023 1,069,376(c) 1,538,399
Class K -- 63,360 63,360
===================================================================================================================================
NET ASSET VALUE PER SHARE:
Investor Class, Offering and Redemption Price per Share -- $ 21.77 $ 21.76
Class A
Redemption Price per Share $ 17.75 $ 21.68 $ 21.68
Offering Price per Share (Maximum sales charge of 4.75%,
5.50% and 5.50%, respectively) $ 18.64 $ 22.94 $ 22.94
Class B, Offering and Redemption Price per Share $ 17.03 $ 21.74 $ 21.74
Class C, Offering and Redemption Price per Share $ 17.03 $ 21.38 $ 21.37
Class K, Offering and Redemption Price per Share -- $ 21.27 $ 21.27
===================================================================================================================================
</Table>
(a) Investment securities at cost and value at March 31, 2003 includes a
repurchase agreement of $533,000 and $533,000, respectively, for
INVESCO Financial Services Fund and Pro Forma Combined.
(b) Adjustment for Pro Forma Combined bearing all the expenses related to
the proposed merger.
(c) Adjustment to reflect the exchange of shares of common stock
outstanding from AIM Global Financial Services Fund to INVESCO
Financial Services Fund.
PRO FORMA STATEMENT OF OPERATIONS
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
UNAUDITED
<Table>
<Caption>
AIM GLOBAL INVESCO
FINANCIAL FINANCIAL PRO FORMA PRO FORMA
SERVICES FUND SERVICES FUND ADJUSTMENTS COMBINED
----------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 4,684,186 $ 15,953,262 $ 20,637,448
Dividends from Affiliated Investment Companies 0 13,560 13,560
Interest 5,760 683,454 689,214
Securities Loaned Income 55,996 0 55,996
Foreign Taxes Withheld (100,491) (14,787) (115,278)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 4,645,451 16,635,489 21,280,940
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 2,413,689 6,240,794 $ (1,052,121)(a) 7,602,362
Distribution Expenses 0
Investor Class -- 2,314,987 2,314,987
Class A 584,971 10,800 (175,491)(a) 420,280
Class B 1,006,603 6,591 1,013,194
Class C 299,033 128,891 427,924
Class K -- 5,184 5,184
Transfer Agent Fees
Investor Class -- 3,201,855 3,201,855
Class A 441,940 10,460 (79,351)(a) 373,049
Class B 380,241 2,419 (53,474)(a) 329,186
Class C 112,959 66,317 (14,229)(a) 165,047
Class K -- 5,226 5,226
Administrative Services Fees 50,000 434,701 61,401 (a) 546,102
Custodian Fees and Expenses 62,954 154,671 (54,080)(b) 163,545
Directors' Fees and Expenses 9,078 75,053 7,180 (b) 91,311
Interest Expenses 0 6,158 6,158
Professional Fees and Expenses 46,249 70,249 (26,119)(b) 90,379
Registration Fees and Expenses
Investor Class -- 68,158 68,158
Class A 21,192 14 21,206
Class B 18,233 6 18,239
Class C 5,416 700 6,116
Class K -- 1,471 1,471
Reports to Shareholders 130,967 505,772 636,739
Other Expenses 6,982 51,659 10,655 (b) 69,296
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 5,590,507 13,362,136 (1,375,629) 17,577,014
Fees and Expenses Absorbed/Reimbursed by Investment
Adviser
Class A (1,248) (3,917) (35,439)(c) (40,604)
Class B (1,073) (2,056) (46,669)(c) (49,798)
Class C (319) 0 319 (c) 0
Class K -- (3,997) (1,285)(c) (5,282)
Fees and Expenses Paid Indirectly (4,705) (120,799) 4,705 (b) (120,799)
- -----------------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 5,583,162 13,231,367 (1,453,998) 17,360,531
- -----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (937,711) 3,404,122 1,453,998 3,920,409
- -----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (27,159,987) (63,593,616) (90,753,603)
Foreign Currency Transactions 43,311 2,771,359 2,814,670
Option Contracts 620,698 0 620,698
- -----------------------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss (26,495,978) (60,822,257) (87,318,235)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in Net Appreciation/Depreciation of:
Investment Securities (46,781,511) (200,871,286) (247,652,797)
Foreign Currency Transactions 12,671 578,729 591,400
Option Contracts (59,057) 0 (59,057)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Change Net in Appreciation/Depreciation (46,827,897) (200,292,557) (247,120,454)
- -----------------------------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENT SECURITIES, FOREIGN CURRENCY
TRANSACTIONS AND OPTION CONTRACTS (73,323,875) (261,114,814) (334,438,689)
- -----------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (74,261,586) $ (257,710,692) $ 1,453,998 $(330,518,280)
===================================================================================================================================
</Table>
(a) Reflects adjustments to Investment Advisory Fees, Distribution
Expenses, Transfer Agent Fees and Administrative Services Fees based on
the surviving Fund's contractual fee obligation.
(b) Reflects elimination of duplicate services or fees.
(c) Reflects adjustment of the level of the surviving Fund's voluntary
expense reimbursement.
See Notes to Financial Statements
PRO FORMA NOTES TO FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- BASIS OF COMBINATION
On June 9, 2003, the Board of Directors of INVESCO Sector Funds, Inc.- INVESCO
Financial Services Fund and AIM Global Financial Services Fund a separate series
of AIM Investment Funds (collectively the "Funds", individually the "Fund"),
approved an Agreement and Plan of Reorganization (the "Plan") whereby, subject
to approval by the shareholders of AIM Global Financial Services Fund, INVESCO
Financial Services Fund will acquire all of the assets of AIM Global Financial
Services Fund subject to the liabilities of such Fund, in exchange for a number
of shares of INVESCO Financial Services Fund equal in value to the net assets of
AIM Global Financial Services Fund (the "Merger").
The Merger will be accounted for as a tax-free merger of investment companies.
The unaudited pro forma combined financial statements are presented for the
information of the reader and may not necessarily be representative of what the
actual combined financial statements would have been had the reorganization
occurred at March 31, 2003. The unaudited pro forma statement of investment
securities and statement of assets and liabilities reflect the financial
position of the Funds at March 31, 2003. The unaudited pro forma statement of
operations reflects the results of operations of the Funds for the year ended
March 31, 2003. These statements have been derived from the Funds' respective
books and records utilized in calculating daily net asset value at the date
indicated above for each Fund under generally accepted accounting principles.
The historical cost of investment securities will be carried forward to the
surviving entity and the results of operations of INVESCO Financial Services
Fund for pre-combination periods will not be restated.
The unaudited pro forma statement of investment securities, unaudited statement
of assets and liabilities and statement of operations should be read in
conjunction with the historical financial statements of each Fund which are
incorporated by reference in the Statement of Additional Information.
NOTE 2 -- SECURITY VALUATION
Domestic (U.S.) equity securities traded on national securities exchanges or in
the over-the-counter market are valued at the last sales price at the close of
the regular trading day on the exchange (generally 4:00p.m. Eastern time) where
such securities are primarily traded. If last sales prices are not available,
securities are valued at the closing bid price for the regular trading day as
obtained from one or more dealers making a market for such securities or by a
pricing service approved by the Fund's board of directors.
Foreign equity securities are valued at the closing price. The closing price is
designated by the principal stock exchange in the country in which the
securities are primarily traded. In the event that closing bid prices are not
available for foreign securities, a snapshot of prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to the
close of the New York Stock Exchange.
Option contracts are valued at the average of the closing bid and ask prices
from the exchange with the highest trading volume on that particular day.
Investments in shares of investment companies are valued at the net asset value
of the respective fund as calculated each day.
If market quotations or pricing service valuations are not readily available, or
events or circumstances that may affect the value of portfolio securities are
identified between the closing of their principal markets and the time that the
net asset value per share is determined, securities are valued at fair value as
determined in good faith under procedures established by the Fund's board of
directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
NOTE 3 -- CAPITAL SHARES
The unaudited pro forma net asset value per share assumes additional shares of
common stock of INVESCO Financial Services Fund issued in connection with the
proposed acquisition of AIM Global Financial Services Fund by INVESCO Financial
Services Fund as of March 31, 2003. The number of additional shares issued was
calculated by dividing the net asset value of each Class of AIM Global Financial
Services Fund by the respective Class' net asset value per share of INVESCO
Financial Services Fund.
NOTE 4 -- UNAUDITED PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma financial statements reflect changes in
fund shares as if the merger had taken place on March 31, 2003. AIM Global
Financial Services Fund expenses were adjusted assuming INVESCO Financial
Services Fund's fee structure was in effect for the entire year ended March 31,
2003.
NOTE 5 -- MERGER COSTS
Merger costs are estimated at approximately $209,150 and are not included in the
unaudited pro forma statement of operations since these costs are not recurring.
These costs represent the estimated expense of both Funds carrying out their
obligations under the Plan and consist of management's estimate of legal fees,
accounting fees, printing costs and mailing charges related to the proposed
merger. INVESCO Funds Group, Inc., Investment Adviser to the Funds, will bear no
cost of the Reorganization. The Funds will bear all the expenses relating to the
proposed Reorganization based on their relative net assets.
NOTE 6 -- FEDERAL INCOME TAXES
The Fund has complied, and continues to comply, with the provisions of the
Internal Revenue Code applicable to regulated investment companies and,
accordingly, has made or intends to make sufficient distributions of net
investment income and net realized capital gains, if any, to relieve it from all
federal and state income taxes and federal excise taxes.
The Fund intends to offset any net capital gains with any available capital loss
carry forward until each carry forward has been fully utilized or expires. The
amount of capital loss carry forward, which may offset INVESCO Financial
Services Fund's capital gains in any given year may be limited as a result of
previous reorganizations. In addition, no capital gain distribution shall be
made until the capital loss carry forward has been fully utilized or expires.
Appendix XIII
PRO FORMA FINANCIAL STATEMENTS
PRO FORMA STATEMENT OF INVESTMENT SECURITIES *
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UNAUDITED
SHARES, CONTRACTS OR PRINCIPAL AMOUNT
- ----------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
FUND FUND FUND FUND COMBINED DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
92.76% COMMON STOCKS & WARRANTS
0.88% AEROSPACE & DEFENSE
41,600 3,950 45,550 Alliant Techsystems(a)
12,050 12,050 Engineered Support Systems
146,800 9,000 155,800 L-3 Communications Holdings(a)
226,300 226,300 Lockheed Martin
====================================================================================================================================
8.91% APPLICATION SOFTWARE
290,500 72,400 6,800 1,204,720 1,574,420 Amdocs Ltd(a)
246,100 373,700 34,500 2,941,800 3,596,100 BEA Systems(a)
906,800 906,800 Cadence Design Systems(a)
973,650 973,650 Check Point Software Technologies Ltd(a)
81,700 7,700 89,400 Cognos Inc(a)
303,500 40,600 344,100 Documentum Inc(a)
85,000 11,300 96,300 FileNET Corp(a)
76,400 6,000 582,300 664,700 Intuit Inc(a)
192,200 15,300 808,500 1,016,000 Mercury Interactive(a)
163,200 15,500 1,018,700 1,197,400 PeopleSoft Inc(a)
35,953 35,953 SAP AG
114,900 114,900 SAP AG Sponsored ADR Representing 1/4 Ord Shr
1,343,600 1,343,600 Siebel Systems(a)
52,500 834,700 887,200 Software HOLDRs Trust(b)(c)(d)
84,000 84,000 Wipro Ltd Sponsored ADR Representing Ord Shrs(b)
====================================================================================================================================
0.19% AUTO PARTS & EQUIPMENT
159,800 13,400 173,200 Gentex Corp(a)
====================================================================================================================================
1.12% BIOTECHNOLOGY
52,500 52,500 Amgen Inc
45,500 4,300 49,800 Charles River Laboratories International(a)
5,800 5,800 Enzon Pharmaceuticals(a)
326,200 28,900 355,100 Gilead Sciences(a)
100,000 15,400 115,400 IDEC Pharmaceuticals(a)
2,300 2,300 IDEXX Laboratories(a)
23,500 23,500 OraSure Technologies(a)
42,300 42,300 PRAECIS Pharmaceuticals(a)
146,200 13,300 159,500 SangStat Medical(a)
3,900 3,900 Trimeris(a)
====================================================================================================================================
0.73% BROADCASTING - RADIO/TV
100,000 100,000 Clear Channel Communications(a)
304,000 304,000 Fox Entertainment Group Class A Shrs(a)
202,400 202,400 Univision Communications Class A Shrs(a)
====================================================================================================================================
1.99% CABLE & SATELLITE OPERATORS
454,552 300,400 754,952 Comcast Corp Class A Shrs(a)(g)
276,700 276,700 Cox Communications Class A Shrs(a)
375,500 375,500 EchoStar Communications Class A Shrs(a)
412,600 412,600 Liberty Media Series A Shrs(a)
====================================================================================================================================
6.31% COMPUTER HARDWARE
1,426,200 1,426,200 Apple Computer(a)
500,000 45,900 1,685,700 2,231,600 Dell Computer(a)
187,000 17,400 1,318,600 1,523,000 Hewlett-Packard Co
428,900 428,900 International Business Machines
28,600 28,600 Pinnacle Systems(a)
1,317,300 1,317,300 Sun Microsystems(a)
====================================================================================================================================
VALUE
------------------------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
DESCRIPTION FUND FUND FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS & WARRANTS
AEROSPACE & DEFENSE
Alliant Techsystems(a) $ 2,246,816 $ 213,339 $ 2,460,155
Engineered Support Systems 471,757 471,757
L-3 Communications Holdings(a) 5,896,956 361,530 6,258,486
Lockheed Martin $ 10,760,565 10,760,565
====================================================================================================================================
19,950,963
APPLICATION SOFTWARE
Amdocs Ltd(a) $ 3,857,840 961,472 90,304 15,998,682 20,908,298
BEA Systems(a) 2,507,759 3,808,003 351,555 29,976,942 36,644,259
Cadence Design Systems(a) 9,068,000 9,068,000
Check Point Software Technologies Ltd(a) 14,088,715 14,088,715
Cognos Inc(a) 1,856,306 174,952 2,031,258
Documentum Inc(a) 3,981,920 532,672 4,514,592
FileNET Corp(a) 891,650 118,537 1,010,187
Intuit Inc(a) 2,842,080 223,200 21,661,560 24,726,840
Mercury Interactive(a) 5,704,496 454,104 23,996,280 30,154,880
PeopleSoft Inc(a) 2,496,960 237,150 15,586,110 18,320,220
SAP AG 2,728,277 2,728,277
SAP AG Sponsored ADR Representing 1/4
Ord Shr 2,178,504 2,178,504
Siebel Systems(a) 10,762,236 10,762,236
Software HOLDRs Trust(b)(c)(d) 1,334,025 21,209,727 22,543,752
Wipro Ltd Sponsored ADR Representing Ord
Shrs(b) 2,360,400 2,360,400
====================================================================================================================================
202,040,418
AUTO PARTS & EQUIPMENT
Gentex Corp(a) 4,065,312 340,896 4,406,208
====================================================================================================================================
BIOTECHNOLOGY
Amgen Inc 3,021,375 3,021,375
Charles River Laboratories International(a) 1,161,160 109,736 1,270,896
Enzon Pharmaceuticals(a) 65,830 65,830
Gilead Sciences(a) 13,697,138 1,213,511 14,910,649
IDEC Pharmaceuticals(a) 3,441,900 530,053 3,971,953
IDEXX Laboratories(a) 80,431 80,431
OraSure Technologies(a) 137,240 137,240
PRAECIS Pharmaceuticals(a) 163,701 163,701
SangStat Medical(a) 1,434,222 130,473 1,564,695
Trimeris(a) 160,602 160,602
====================================================================================================================================
25,347,372
BROADCASTING - RADIO/TV
Clear Channel Communications(a) 3,392,000 3,392,000
Fox Entertainment Group Class A Shrs(a) 8,107,680 8,107,680
Univision Communications Class A Shrs(a) 4,960,824 4,960,824
====================================================================================================================================
16,460,504
CABLE & SATELLITE OPERATORS
Comcast Corp Class A Shrs(a)(g) 12,995,642 8,588,436 21,584,078
Cox Communications Class A Shrs(a) 8,608,137 8,608,137
EchoStar Communications Class A Shrs(a) 10,844,440 10,844,440
Liberty Media Series A Shrs(a) 4,014,598 4,014,598
====================================================================================================================================
45,051,253
COMPUTER HARDWARE
Apple Computer(a) 20,166,468 20,166,468
Dell Computer(a) 13,655,000 1,253,529 46,036,467 60,944,996
Hewlett-Packard Co 2,907,850 270,570 20,504,230 23,682,650
International Business Machines $ 33,638,627 $ 33,638,627
Pinnacle Systems(a) $ 297,726 297,726
Sun Microsystems(a) 4,294,398 4,294,398
====================================================================================================================================
SHARES, CONTRACTS OR PRINCIPAL AMOUNT
- ----------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
FUND FUND FUND FUND COMBINED DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
4.69% COMPUTER STORAGE & PERIPHERALS
349,700 37,900 3,713,000 4,100,600 EMC Corp(a)
70,500 6,600 830,600 907,700 Emulex Corp(a)
56,200 6,800 63,000 Imation Corp(a)
225,400 225,400 Lexmark International Class A Shrs(a)
235,000 26,300 992,300 1,253,600 McDATA Corp Class A Shrs(a)
1,974,500 1,974,500 Network Appliance(a)
7,100 7,100 Overland Storage(a)
171,100 19,400 190,500 SanDisk Corp(a)
141,900 13,200 155,100 Storage Technology(a)
267,900 25,600 293,500 Western Digital(a)
====================================================================================================================================
0.15% CONSUMER ELECTRONICS
43,100 4,000 47,100 Garmin Ltd(a)
25,400 2,300 27,700 Harman International Industries
====================================================================================================================================
2.84% DATA PROCESSING SERVICES
17,800 17,800 eSPEED Inc Class A Shrs(a)
696,100 696,100 First Data
627,450 627,450 Fiserv Inc(a)
70,900 6,600 599,350 676,850 Paychex Inc
====================================================================================================================================
0.69% DIVERSIFIED COMMERCIAL SERVICES
696,800 696,800 CheckFree Corp(a)
====================================================================================================================================
4.54% ELECTRONIC EQUIPMENT & INSTRUMENTS
1,326,200 1,326,200 Celestica Inc(a)
2,564,400 2,564,400 Flextronics International Ltd(a)
8,100 8,100 Garmin Ltd(a)
6,300 6,300 Itron Inc(a)
1,645,600 1,645,600 Jabil Circuit(a)
64,500 64,500 MKS Instruments(a)
9,900 9,900 OSI Systems(a)
44,800 44,800 Samsung Electronics Ltd
Samsung Electronics Sponsored GDR Representing 1/2
48,600 142,300 190,900 Ord Shr(e)
169,300 15,700 185,000 Trimble Navigation Ltd(a)
====================================================================================================================================
0.51% HEALTH CARE DISTRIBUTORS & SERVICES
3,350 3,350 Accredo Health(a)
194,500 22,000 216,500 Cerner Corp(a)
36,500 3,300 39,800 Express Scripts(a)
4,200 4,200 IMPAC Medical Systems(a)
32,900 3,000 35,900 Laboratory Corp. of America Holdings(a)
41,500 4,000 45,500 Priority Healthcare Class B Shrs(a)
====================================================================================================================================
0.13% HEALTH CARE EQUIPMENT
65,400 5,200 70,600 Boston Scientific(a)
====================================================================================================================================
0.31% HOTELS & RESORTS
21,200 2,000 100,000 123,200 Hotels.com Class A Shrs(a)(b)
====================================================================================================================================
3.03% INTEGRATED TELECOMMUNICATION SERVICES
139,400 139,400 ALLTEL Corp
195,300 195,300 AT&T Corp
286,200 286,200 BCE Inc(b)
133,300 133,300 BellSouth Corp(g)
212,800 212,800 CenturyTel Inc
551,200 551,200 Deutsche Telekom AG
97,700 97,700 France Telecom SA(b)
97,700 97,700 France Telecom SA Warrants(a) (Exp 4/2003)
155,600 155,600 KT Corp Sponsored ADR Representing 1/2 Ord Shr
Portugal Telecom SGPS SA Sponsored ADR Representing
814,900 814,900 Ord Shrs
972,100 972,100 Qwest Communications International(a)
147,186 147,186 SBC Communications(g)
276,500 276,500 Sprint Corp
VALUE
------------------------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
DESCRIPTION FUND FUND FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTER STORAGE & PERIPHERALS
EMC Corp(a) $ 2,528,331 274,017 26,844,990 29,647,338
Emulex Corp(a) 1,350,075 126,390 15,905,990 17,382,455
Imation Corp(a) 2,091,764 253,096 2,344,860
Lexmark International Class A Shrs(a) 15,090,530 15,090,530
McDATA Corp Class A Shrs(a) 2,018,650 225,917 8,523,857 10,768,424
Network Appliance(a) 22,094,655 22,094,655
Overland Storage(a) 102,027 102,027
SanDisk Corp(a) 2,877,902 326,308 3,204,210
Storage Technology(a) 2,869,218 266,904 3,136,122
Western Digital(a) 2,427,174 231,936 2,659,110
====================================================================================================================================
106,429,731
CONSUMER ELECTRONICS
Garmin Ltd(a) 1,542,980 143,200 1,686,180
Harman International Industries 1,487,678 134,711 1,622,389
====================================================================================================================================
3,308,569
DATA PROCESSING SERVICES
eSPEED Inc Class A Shrs(a) 207,014 207,014
First Data 25,762,661 25,762,661
Fiserv Inc(a) 19,752,126 19,752,126
Paychex Inc 1,947,623 181,302 16,464,144 18,593,069
====================================================================================================================================
64,314,870
DIVERSIFIED COMMERCIAL SERVICES
CheckFree Corp(a) 15,664,064 15,664,064
====================================================================================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS
Celestica Inc(a) 15,158,466 15,158,466
Flextronics International Ltd(a) 22,361,568 22,361,568
Garmin Ltd(a) $ 289,980 289,980
Itron Inc(a) 105,273 105,273
Jabil Circuit(a) 28,798,000 28,798,000
MKS Instruments(a) 806,250 806,250
OSI Systems(a) 156,519 156,519
Samsung Electronics Ltd 10,170,424 10,170,424
Samsung Electronics Sponsored GDR Representing
1/2 Ord Shr(e) 5,491,800 16,079,900 21,571,700
Trimble Navigation Ltd(a) 3,206,542 297,358 3,503,900
====================================================================================================================================
102,922,080
HEALTH CARE DISTRIBUTORS & SERVICES
Accredo Health(a) 81,536 81,536
Cerner Corp(a) 6,297,910 712,360 7,010,270
Express Scripts(a) 2,032,320 183,744 2,216,064
IMPAC Medical Systems(a) 93,576 93,576
Laboratory Corp. of America Holdings(a) 975,485 88,950 1,064,435
Priority Healthcare Class B Shrs(a) 1,105,975 106,600 1,212,575
====================================================================================================================================
11,678,456
HEALTH CARE EQUIPMENT
Boston Scientific(a) 2,665,704 211,952 2,877,656
====================================================================================================================================
HOTELS & RESORTS
Hotels.com Class A Shrs(a)(b) 1,222,710 115,350 5,767,500 7,105,560
====================================================================================================================================
INTEGRATED TELECOMMUNICATION SERVICES
ALLTEL Corp 6,239,544 6,239,544
AT&T Corp 3,163,860 3,163,860
BCE Inc(b) 5,253,340 5,253,340
BellSouth Corp(g) 2,888,611 2,888,611
CenturyTel Inc 5,873,280 5,873,280
Deutsche Telekom AG 6,080,856 6,080,856
France Telecom SA(b) 1,992,545 1,992,545
France Telecom SA Warrants(a) (Exp 4/2003) $ 383,797 $ 383,797
KT Corp Sponsored ADR Representing 1/2 Ord Shr 2,671,652 2,671,652
Portugal Telecom SGPS SA Sponsored ADR
Representing Ord Shrs 5,557,618 5,557,618
Qwest Communications International(a) 3,392,629 3,392,629
SBC Communications(g) 2,952,551 2,952,551
Sprint Corp 3,248,875 3,248,875
SHARES, CONTRACTS OR PRINCIPAL AMOUNT
- ---------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
FUND FUND FUND FUND COMBINED DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
Telefonos de Mexico SA Sponsored ADR Representing
111,100 111,100 20 Series L Shrs
284,200 160,500 444,700 Verizon Communications(g)
====================================================================================================================================
3.09% INTERNET RETAIL
143,200 13,900 451,000 608,100 Amazon.com Inc(a)
110,500 10,600 515,100 636,200 eBay Inc(a)
====================================================================================================================================
0.94% INTERNET SOFTWARE & SERVICES
227,400 227,400 Internet Security Systems(a)
121,300 11,200 132,500 United Online(a)
344,700 344,700 VeriSign Inc(a)
61,200 38,400 99,600 Websense Inc(a)
170,700 15,600 329,700 516,000 Yahoo! Inc(a)
====================================================================================================================================
1.27% INVESTMENT COMPANIES
1,138,900 1,138,900 Nasdaq-100 Trust Series 1 Shrs(a)
====================================================================================================================================
1.79% IT CONSULTING & SERVICES
124,600 11,500 412,000 548,100 Affiliated Computer Services Class A Shrs(a)
158,800 14,400 173,200 Anteon International(a)
460,000 460,000 BISYS Group(a)
72,900 72,900 Cognizant Tech Solutions Class A Shrs(a)
====================================================================================================================================
0.50% MOVIES & ENTERTAINMENT
732,600 732,600 AOL Time Warner(a)
94,500 94,500 Viacom Inc Class B Shrs(a)
====================================================================================================================================
4.14% NETWORKING EQUIPMENT
626,900 525,000 42,000 4,359,860 5,553,760 Cisco Systems(a)(g)
166,800 166,800 Extreme Networks(a)
252,900 252,900 Foundry Networks(a)
198,000 650,000 848,000 Juniper Networks(a)
215,900 20,200 466,800 702,900 NetScreen Technologies(a)
13,200 13,200 SafeNet Inc(a)
====================================================================================================================================
0.20% PHARMACEUTICALS
9,100 9,100 American Pharmaceutical Partners(a)
23,200 2,200 25,400 Biovail Corp(a)
33,000 2,200 35,200 Forest Laboratories(a)
3,000 3,000 Mylan Laboratories
Teva Pharmaceutical Industries Ltd Sponsored ADR
30,000 30,000 Representing Ord Shrs
====================================================================================================================================
4.61% SEMICONDUCTOR EQUIPMENT
429,300 33,500 1,624,500 2,087,300 Applied Materials(a)
363,300 363,300 ASML Holding NV New York Registered Shrs(a)
522,900 67,600 590,500 Axcelis Technologies(a)
35,400 35,400 Cymer Inc(a)
205,700 28,800 234,500 Entegris Inc(a)
120,000 10,500 416,300 546,800 KLA-Tencor Corp(a)
492,800 28,100 735,100 1,256,000 Lam Research(a)
197,300 15,400 733,800 946,500 Novellus Systems(a)
361,700 33,500 395,200 Teradyne Inc(a)
255,400 19,800 275,200 Varian Semiconductor Equipment Associates(a)
====================================================================================================================================
15.41% SEMICONDUCTORS
707,900 707,900 Agere Systems Class A Shrs(a)
1,188,600 1,188,600 Altera Corp(a)
301,300 25,800 345,000 672,100 Analog Devices(a)
285,200 285,200 Broadcom Corp Class A Shrs(a)
89,700 16,700 106,400 Cree Inc(a)
252,200 252,200 Cypress Semiconductor(a)
Fairchild Semiconductor International Class A
603,400 603,400 Shrs(a)
468,200 468,200 GlobespanVirata Inc(a)
103,300 22,700 126,000 Integrated Circuit Systems(a)
VALUE
------------------------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
DESCRIPTION FUND FUND FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
Telefonos de Mexico SA Sponsored ADR Representing
20 Series L Shrs 3,301,892 3,301,892
Verizon Communications(g) 10,046,470 $ 5,673,675 15,720,145
====================================================================================================================================
68,721,195
INTERNET RETAIL
Amazon.com Inc(a) $ 3,727,496 $ 361,817 11,739,530 15,828,843
eBay Inc(a) 9,424,545 904,074 43,932,879 54,261,498
====================================================================================================================================
70,090,341
INTERNET SOFTWARE & SERVICES
Internet Security Systems(a) 2,258,082 2,258,082
United Online(a) 2,091,212 193,088 2,284,300
VeriSign Inc(a) 3,012,678 3,012,678
Websense Inc(a) 897,804 563,328 1,461,132
Yahoo! Inc(a) 4,100,214 374,712 7,919,394 12,394,320
====================================================================================================================================
21,410,512
INVESTMENT COMPANIES
Nasdaq-100 Trust Series 1 Shrs(a) 28,757,225 28,757,225
====================================================================================================================================
IT CONSULTING & SERVICES
Affiliated Computer Services Class A Shrs(a) 5,514,796 508,990 18,235,120 24,258,906
Anteon International(a) 3,565,060 323,280 3,888,340
BISYS Group(a) 7,507,200 7,507,200
Cognizant Tech Solutions Class A Shrs(a) 4,909,815 4,909,815
====================================================================================================================================
40,564,261
MOVIES & ENTERTAINMENT
AOL Time Warner(a) 7,956,036 7,956,036
Viacom Inc Class B Shrs(a) 3,451,140 3,451,140
====================================================================================================================================
11,407,176
NETWORKING EQUIPMENT
Cisco Systems(a)(g) 8,137,162 6,772,500 541,800 56,590,983 72,042,445
Extreme Networks(a) 722,244 722,244
Foundry Networks(a) 2,033,316 2,033,316
Juniper Networks(a) 1,617,660 5,310,500 6,928,160
NetScreen Technologies(a) 3,622,802 338,956 7,832,904 11,794,662
SafeNet Inc(a) 269,940 269,940
====================================================================================================================================
93,790,767
PHARMACEUTICALS
American Pharmaceutical Partners(a) 174,265 174,265
Biovail Corp(a) 924,984 87,714 1,012,698
Forest Laboratories(a) 1,781,010 118,734 1,899,744
Mylan Laboratories 86,250 86,250
Teva Pharmaceutical Industries Ltd Sponsored ADR
Representing Ord Shrs 1,249,500 1,249,500
====================================================================================================================================
4,422,457
SEMICONDUCTOR EQUIPMENT
Applied Materials(a) 5,400,594 421,430 20,436,210 26,258,234
ASML Holding NV New York Registered Shrs(a) 2,386,881 2,386,881
Axcelis Technologies(a) 2,473,317 319,748 2,793,065
Cymer Inc(a) 837,210 837,210
Entegris Inc(a) 2,048,772 286,848 2,335,620
KLA-Tencor Corp(a) 4,313,040 377,391 14,962,655 19,653,086
Lam Research(a) 5,612,499 320,031 8,372,054 14,304,584
Novellus Systems(a) 5,380,371 419,958 20,010,726 25,811,055
Teradyne Inc(a) 4,210,188 389,940 4,600,128
Varian Semiconductor Equipment Associates(a) 5,194,836 402,732 5,597,568
====================================================================================================================================
104,577,431
SEMICONDUCTORS
Agere Systems Class A Shrs(a) $ 1,132,640 $ 1,132,640
Altera Corp(a) $ 16,093,644 16,093,644
Analog Devices(a) $ 8,285,750 $ 709,500 9,487,500 18,482,750
Broadcom Corp Class A Shrs(a) 3,522,220 3,522,220
Cree Inc(a) 1,661,244 309,284 1,970,528
Cypress Semiconductor(a) 1,740,180 1,740,180
Fairchild Semiconductor International Class A
Shrs(a) 6,311,564 6,311,564 6,311,564
GlobespanVirata Inc(a) 2,106,900 2,106,900
Integrated Circuit Systems(a) 2,241,610 492,590 2,734,200
SHARES, CONTRACTS OR PRINCIPAL AMOUNT
- ---------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
FUND FUND FUND FUND COMBINED DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
327,100 31,200 3,736,800 4,095,100 Intel Corp
282,400 282,400 Intersil Corp Class A Shrs(a)
982,900 982,900 Linear Technology
163,000 19,100 182,100 Marvell Technology Group Ltd(a)
48,300 4,400 715,900 768,600 Maxim Integrated Products
454,700 29,300 1,092,800 1,576,800 Microchip Technology
461,400 461,400 National Semiconductor(a)
271,000 271,000 PMC-Sierra Inc(a)
193,800 13,000 289,200 496,000 QLogic Corp(a)
91,100 1,026,900 1,118,000 RF Micro Devices(a)
116,300 116,300 Semiconductor HOLDRs Trust(c)
242,400 24,200 266,600 Silicon Laboratories(a)
259,200 670,000 929,200 Skyworks Solutions(a)(b)
225,000 9,100 234,100 STMicroelectronics NV New York Shrs
Taiwan Semiconductor Manufacturing Sponsored ADR
510,000 49,960 1,952,136 2,512,096 Representing 5 Ord Shrs
708,200 19,900 943,900 1,672,000 Texas Instruments
United Microelectronics Sponsored ADR Representing
1,693,300 1,693,300 5 Ord Shrs
674,100 674,100 Vitesse Semiconductor(a)
190,800 17,700 871,800 1,080,300 Xilinx Inc(a)(f)
====================================================================================================================================
13.36% SYSTEMS SOFTWARE
842,700 842,700 Adobe Systems
1,156,200 1,156,200 BMC Software(a)
226,200 24,600 250,800 Borland Software(a)
607,000 607,000 Micromuse Inc(a)
560,000 44,700 4,327,200 4,931,900 Microsoft Corp
899,000 899,000 Networks Associates(a)
449,400 36,000 3,671,500 4,156,900 Oracle Corp(a)
222,600 233,600 21,900 1,177,600 1,655,700 Symantec Corp(a)
701,300 701,300 VERITAS Software(a)
====================================================================================================================================
6.23% TELECOMMUNICATIONS EQUIPMENT
981,800 2,022,292 3,004,092 ADC Telecommunications(a)
24,300 24,300 ADTRAN Inc(a)
52,900 61,400 5,700 120,000 Advanced Fibre Communications(a)
569,800 981,300 1,551,100 Alcatel SA Sponsored ADR Representing Ord Shrs
591,900 591,900 CIENA Corp(a)
99,800 99,800 Comverse Technology(a)
513,600 412,500 926,100 Corning Inc(a)
599,700 2,375,800 2,975,500 Lucent Technologies(a)
333,500 333,500 Motorola Inc
Nokia Corp Sponsored ADR Representing Ord
629,700 392,900 37,200 1,561,900 2,621,700 Shrs(b)(g)
1,516,900 2,589,900 4,106,800 Nortel Networks(a)
302,200 206,100 17,300 711,950 1,237,550 QUALCOMM Inc(f)
440,000 33,800 303,600 777,400 UTStarcom Inc(a)
====================================================================================================================================
4.20% WIRELESS TELECOMMUNICATION SERVICES
108,200 108,200 America Movil SA ADR Representing 20 Series L Shrs
1,983,100 700,400 65,800 2,749,300 AT&T Wireless Services(a)
43,900 43,900 Boston Communications Group(a)
965,000 829,400 66,600 530,700 2,391,700 Nextel Communications Class A Shrs(a)
134,300 134,300 Nextel Partners Class A Shrs(a)
451,200 451,200 Orange SA(a)
698,800 698,800 Sprint Corp-PCS Group Series 1 Shrs(a)
322,000 322,000 Telecom Italia Mobile SpA(b)
154,500 15,900 170,400 United States Cellular(a)
Vodafone Group PLC Sponsored ADR Representing 10
775,571 101,400 781,200 1,658,171 Ord Shrs
====================================================================================================================================
TOTAL COMMON STOCKS & WARRANTS (COST $255,802,849,
$376,832,365, $32,936,104, $1,730,029,294 AND
$2,395,600,612, RESPECTIVELY)
====================================================================================================================================
VALUE
-----------------------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
DESCRIPTION FUND FUND FUND FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
Intel Corp 5,325,188 507,936 60,835,104 66,668,228
Intersil Corp Class A Shrs(a) 4,394,144 4,394,144
Linear Technology 30,342,123 30,342,123
Marvell Technology Group Ltd(a) 3,453,970 404,729 3,858,699
Maxim Integrated Products 1,744,596 158,928 25,858,308 27,761,832
Microchip Technology 9,048,530 583,070 21,746,720 31,378,320
National Semiconductor(a) 7,862,256 7,862,256
PMC-Sierra Inc(a) 1,612,450 1,612,450
QLogic Corp(a) 7,197,732 482,820 10,740,888 18,421,440
RF Micro Devices(a) 549,242 6,191,180 6,740,422
Semiconductor HOLDRs Trust(c) 2,685,367 2,685,367
Silicon Laboratories(a) 6,338,760 632,830 6,971,590
Skyworks Solutions(a)(b) 1,614,816 4,174,100 5,788,916
STMicroelectronics NV New York Shrs 4,265,432 171,990 4,437,422
Taiwan Semiconductor Manufacturing Sponsored ADR
Representing 5 Ord Shrs 3,488,400 341,726 13,352,610 17,182,736
Texas Instruments 11,593,234 325,763 15,451,643 27,370,640
United Microelectronics Sponsored ADR
Representing 5 Ord Shrs 5,096,833 5,096,833
Vitesse Semiconductor(a) 1,442,574 1,442,574
Xilinx Inc(a)(f) 4,466,628 414,357 20,408,838 25,289,823
====================================================================================================================================
349,400,441
SYSTEMS SOFTWARE
Adobe Systems 25,980,441 25,980,441
BMC Software(a) 17,447,058 17,447,058
Borland Software(a) 2,081,040 226,320 2,307,360
Micromuse Inc(a) 3,156,400 3,156,400
Microsoft Corp 13,557,600 1,082,187 104,761,512 119,401,299
Networks Associates(a) 12,415,190 12,415,190
Oracle Corp(a) 4,875,541 390,564 39,832,103 45,098,208
Symantec Corp(a) 8,721,468 9,152,448 858,042 46,138,368 64,870,326
VERITAS Software(a) 12,328,854 12,328,854
====================================================================================================================================
303,005,136
TELECOMMUNICATIONS EQUIPMENT
ADC Telecommunications(a) 2,022,508 4,165,922 6,188,430
ADTRAN Inc(a) 872,613 872,613
Advanced Fibre Communications(a) 800,906 929,596 86,298 1,816,800
Alcatel SA Sponsored ADR Representing Ord Shrs 3,925,922 6,761,157 10,687,079
CIENA Corp(a) 2,586,603 2,586,603
Comverse Technology(a) 1,128,738 1,128,738
Corning Inc(a) 2,999,424 2,409,000 5,408,424
Lucent Technologies(a) 881,559 3,492,426 4,373,985
Motorola Inc 2,754,710 2,754,710
Nokia Corp Sponsored ADR Representing Ord
Shrs(b)(g) 8,822,097 5,504,529 521,172 21,882,219 36,730,017
Nortel Networks(a) 3,155,152 5,386,992 8,542,144
QUALCOMM Inc(f) 10,897,332 7,431,966 623,838 25,672,917 44,626,053
UTStarcom Inc(a) 8,795,600 675,662 6,068,964 15,540,226
====================================================================================================================================
141,255,822
WIRELESS TELECOMMUNICATION SERVICES
America Movil SA ADR Representing 20
Series L Shrs 1,446,634 1,446,634
AT&T Wireless Services(a) $ 13,088,460 $ 4,622,640 $ 434,280 $ 18,145,380
Boston Communications Group(a) 687,474 687,474
Nextel Communications Class A Shrs(a) 12,921,350 11,105,666 891,774 $ 7,106,073 32,024,863
Nextel Partners Class A Shrs(a) 676,872 676,872
Orange SA(a) 3,618,768 3,618,768
Sprint Corp-PCS Group Series 1 Shrs(a) 3,046,768 3,046,768
Telecom Italia Mobile SpA(b) 1,314,110 1,314,110
United States Cellular(a) 3,647,745 375,399 4,023,144
Vodafone Group PLC Sponsored ADR Representing
10 Ord Shrs 14,130,904 1,847,508 14,233,464 30,211,876
====================================================================================================================================
95,195,889
TOTAL COMMON STOCKS & WARRANTS (COST $255,802,849,
$376,832,365, $32,936,104, $1,730,029,294 AND
$2,395,600,612, RESPECTIVELY) 2,103,181,222
====================================================================================================================================
0.07% PREFERRED STOCKS
SHARES, CONTRACTS OR PRINCIPAL AMOUNT
- ------------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
FUND FUND FUND FUND COMBINED DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% BIOTECHNOLOGY
51,527 51,527 Ingenex Inc, Conv Pfd, Series B Shrs(a)(k)
====================================================================================================================================
0.07% NETWORKING EQUIPMENT
752,715 1,925,754 2,678,469 Calient Networks, Pfd, Series D Shrs(a)(d)(k)
====================================================================================================================================
TOTAL PREFERRED STOCKS (COST $5,438,366, $0, $0,
$14,213,578 AND $19,651,944, RESPECTIVELY)
====================================================================================================================================
0.02% FIXED INCOME SECURITIES - CORPORATE BONDS
0.02% NETWORKING EQUIPMENT
Kestrel Solutions, Conv Sub Notes(e)(i)(k), 5.500%,
7/15/2005 (Cost $2,500,000, $0, $0, $2,500,000 and
$ 2,500,000 $ 2,500,000 $ 5,000,000 $5,000,000, respectively)
====================================================================================================================================
0.45% OTHER SECURITIES - DIVERSIFIED FINANCIAL SERVICES
BlueStream Ventures LP(a)(h)(k)(Cost $12,072,288,
$0, $0, $12,268,055 and $24,340,343, respectively)
====================================================================================================================================
7.78% SHORT-TERM INVESTMENTS
4.50% COMMERCIAL PAPER
2.65% CONSUMER RECEIVABLES
New Center Asset Trust, Discount Notes, Series 1,
$10,000,000 $50,000,000 $60,000,000 1.420%, 4/1/2003
====================================================================================================================================
1.85% DIVERSIFIED FINANCIAL SERVICES
State Street Boston, Discount Notes, 1.390%,
$13,000,000 $29,000,000 $42,000,000 4/1/2003
====================================================================================================================================
TOTAL COMMERCIAL PAPER (Amortized Cost $23,000,000,
$0, $0, $79,000,000 and 102,000,000, respectively)
====================================================================================================================================
3.17% INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market Reserve
18,406,718 33,984,450 52,391,168 Fund (d)(j), 1.092%
8,159,866 1,576,221 9,736,087 STIC Liquid Assets Portfolio(d)
8,159,866 1,576,221 9,736,087 STIC Prime Portfolio(d)
====================================================================================================================================
TOTAL INVESTMENT COMPANIES (Cost $18,406,718,
$16,319,732, $3,152,442, $33,984,450 and
$71,863,342, respectively)
====================================================================================================================================
0.11% REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
3/31/2003 due 4/1/2003 at 1.230%, repurchased at
$571,020, $0, $0, $1,910,065 and $2,481,085,
respectively (Collateralized by Federal Home Loan
Bank, Discount Notes, due 4/1/2003, value $585,000,
$0, $0, $1,950,000 and $2,535,000, respectively)
(Cost $571,000, $0, $0, $1,910,000 and $2,481,000,
$ 571,000 $ 1,910,000 $ 2,481,000 respectively)
====================================================================================================================================
TOTAL SHORT-TERM INVESTMENTS (Amortized Cost
$41,977,718, $16,319,732, $3,152,442, $114,894,450
and $176,344,342, respectively)
====================================================================================================================================
0.01% OPTIONS PURCHASED-PUTS
0.01% TELECOMMUNICATIONS EQUIPMENT
QUALCOMM Inc, 7/19/2003, $35.00 (Cost $261,403,
1,511 1,511 $0, $0, $0 and $261,403, respectively)
====================================================================================================================================
101.09% TOTAL INVESTMENTS AT VALUE
(COST $318,052,624, $393,152,097, $36,088,546,
$1,873,905,377 AND $2,621,198,644, RESPECTIVELY)
====================================================================================================================================
-1.09% OTHER ASSETS LESS LIABILITIES
====================================================================================================================================
100.00% NET ASSETS AT VALUE
====================================================================================================================================
VALUE
-----------------------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
DESCRIPTION FUND FUND FUND FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY
Ingenex Inc, Conv Pfd, Series B Shrs(a)(k) 1 1
====================================================================================================================================
NETWORKING EQUIPMENT
Calient Networks, Pfd, Series D Shrs(a)(d)(k) 432,352 1,106,133 1,538,485
====================================================================================================================================
TOTAL PREFERRED STOCKS (COST $5,438,366, $0, $0,
$14,213,578 AND $19,651,944, RESPECTIVELY) 1,538,486
====================================================================================================================================
FIXED INCOME SECURITIES - CORPORATE BONDS
NETWORKING EQUIPMENT
Kestrel Solutions, Conv Sub Notes(e)(i)(k), 5.500%,
7/15/2005 (Cost $2,500,000, $0, $0, $2,500,000 and
$5,000,000, respectively) 200,000 200,000 400,000
====================================================================================================================================
OTHER SECURITIES - DIVERSIFIED FINANCIAL SERVICES
BlueStream Ventures LP(a)(h)(k)(Cost $12,072,288,
$0, $0, $12,268,055 and $24,340,343, respectively) 5,102,127 5,184,864 10,286,991
====================================================================================================================================
SHORT-TERM INVESTMENTS
COMMERCIAL PAPER
CONSUMER RECEIVABLES
New Center Asset Trust, Discount Notes, Series 1,
1.420%, 4/1/2003 10,000,000 50,000,000 60,000,000
====================================================================================================================================
DIVERSIFIED FINANCIAL SERVICES
State Street Boston, Discount Notes, 1.390%,
4/1/2003 13,000,000 29,000,000 42,000,000
====================================================================================================================================
TOTAL COMMERCIAL PAPER (Amortized Cost $23,000,000,
$0, $0, $79,000,000 and 102,000,000, respectively) 102,000,000
====================================================================================================================================
INVESTMENT COMPANIES
INVESCO Treasurer's Series Money Market Reserve
Fund (d)(j), 1.092% 18,406,718 33,984,450 52,391,168
STIC Liquid Assets Portfolio(d) 8,159,866 1,576,221 9,736,087
STIC Prime Portfolio(d) 8,159,866 1,576,221 9,736,087
====================================================================================================================================
TOTAL INVESTMENT COMPANIES (Cost $18,406,718,
$16,319,732, $3,152,442, $33,984,450 and
$71,863,342, respectively) 71,863,342
====================================================================================================================================
0.11% REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
3/31/2003 due 4/1/2003 at 1.230%, repurchased at
$571,020, $0, $0, $1,910,065 and $2,481,085,
respectively (Collateralized by Federal Home Loan
Bank, Discount Notes, due 4/1/2003, value $585,000,
$0, $0, $1,950,000 and $2,535,000, respectively)
(Cost $571,000, $0, $0, $1,910,000 and $2,481,000,
respectively) 571,000 1,910,000 2,481,000
====================================================================================================================================
TOTAL SHORT-TERM INVESTMENTS (Amortized Cost
$41,977,718, $16,319,732, $3,152,442, $114,894,450
and $176,344,342, respectively) $ 176,344,342
====================================================================================================================================
OPTIONS PURCHASED-PUTS
TELECOMMUNICATIONS EQUIPMENT
QUALCOMM Inc, 7/19/2003, $35.00 (Cost $261,403,
$0, $0, $0 and $261,403, respectively) 309,755 309,755
====================================================================================================================================
TOTAL INVESTMENTS AT VALUE
(COST $318,052,624, $393,152,097, $36,088,546,
$1,873,905,377 AND $2,621,198,644, RESPECTIVELY) 297,331,553 $362,905,583 $35,247,965 $1,596,575,695 2,292,060,796
====================================================================================================================================
OTHER ASSETS LESS LIABILITIES (19,188,925) (1,520,618) (937,364) (3,099,757) (24,746,664)
====================================================================================================================================
NET ASSETS AT VALUE $278,142,628 $361,384,965 $34,310,601 $1,593,475,938 $2,267,314,132
====================================================================================================================================
(a) Security is non-income producing.
(b) Loaned security, a portion or all of the security is on loan at March 31,
2003.
(c) HOLDRs - Holding Company Depositary Receipts.
(d) Security is an affiliated company.
(e) Securities acquired pursuant to Rule 144A. The Fund deems such securities
to be "liquid" because an institutional market exists.
(f) Securities are pledged with broker as collateral for written options.
(g) A portion of the security has been designated for remaining commitments to
purchase additional interest in BlueStream Ventures LP.
(h) The INVESCO Technology and INVESCO Telecommunications Funds have remaining
commitments of $10,575,000 and $10,406,250, respectively, to purchase
additional interests in BlueStream Ventures LP, which are subject to terms
of the limited partnership agreement.
(i) Defaulted security. The issuer is in default with respect to interest
payments and the Fund has stopped accruing interest income.
(j) The security has been purchased with the cash collateral received from
securities on loan.
* As of 3/31/03, all of the securities held by the INVESCO Telecommunications
Fund, AIM Global Science and Technology Fund and AIM New Technology Fund would
comply with the compliance guidelines and/or investment restrictions of the
INVESCO Technology Fund.
See Notes to Financial Statements
(k) The following are restricted and illiquid securities at March 31, 2003.
SCHEDULE OF RESTRICTED AND ILLIQUID SECURITIES
COST
-------------------------------------------------------------------------
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO % OF NET
ACQUISITION TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA ASSETS
DESCRIPTION DATES FUND FUND FUND FUND COMBINED AT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BlueStream Ventures LP 8/30/00-12/9/02 $12,072,288 $12,268,055 $24,340,343 0.45%
Calient Networks, Pfd,
Series D Shrs 12/8/00 5,438,366 13,913,578 19,351,944 0.07%
Ingenex Inc, Conv Pfd,
Series B Shrs 9/27/94 300,000 300,000 0.00%
Kestrel Solutions, Conv
Sub Notes, 5.500%, 7/15/2005 7/20/00 2,500,000 2,500,000 5,000,000 0.02%
====================================================================================================================================
0.54%
====================================================================================================================================
See Notes to Financial Statements
OPTION CONTRACTS
NUMBER OF CONTRACTS
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
FUND FUND FUND FUND COMBINED DESCRIPTION
OPTIONS WRITTEN
CALLS
(6,539) (6,539) Xilinx Inv, 4/2003, $27.50
(1,511) (1,511) QUALCOMM Inc, 7/2003, $42.50
PREMIUMS RECEIVED
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
DESCRIPTION FUND FUND FUND FUND COMBINED
OPTIONS WRITTEN
CALLS
Xilinx Inv, 4/2003, $27.50 $ 928,509 $ 928,509
QUALCOMM Inc, 7/2003, $42.50 $297,659 297,659
$1,226,168
VALUE
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY PRO FORMA
DESCRIPTION FUND FUND FUND FUND COMBINED
OPTIONS WRITTEN
CALLS
Xilinx Inv, 4/2003, $27.50 $(114,433) $(114,433)
QUALCOMM Inc, 7/2003, $42.50 $(230,428) (230,428)
$(344,861)
See Notes to Financial Statements
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UNAUDITED
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY
FUND FUND FUND
------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b) $ 318,052,624 $ 393,152,097 $ 36,088,546
=====================================================================================================================
At Value(a)(b) $ 297,331,553 $ 362,905,583 $ 35,247,965
Cash 6,580 0 0
Foreign Currencies (Cost $0, $541, $0, $0 and
$541, respectively) 0 492 0
Receivables:
Investment Securities Sold 1,457,710 0 0
Fund Shares Sold 137,164 4,052,341 19,717
Dividends and Interest 397,037 131,067 14,298
Due from Advisor -- -- --
Prepaid Expenses and Other Assets 104,556 6,757 13,060
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 299,434,600 367,096,240 35,295,040
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES
Options Written at Value
(Premiums Received $297,659, $0, $0, $928,509
and $1,226,168, respectively) 230,428 0 0
Payables:
Investment Securities Purchased 1,953,643 4,224,257 884,740
Fund Shares Repurchased 562,373 267,163 7,712
Securities Loaned 18,406,718 0 0
Accrued Distribution Expenses
Investor Class 55,275 -- --
Class A 110 190,845 8,171
Class B 12 150,740 14,079
Class C 2,258 22,345 6,953
Class K 248 -- --
Accrued Merger Expenses -- -- --
Accrued Expenses and Other Payables 80,907 855,925 62,784
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 21,291,972 5,711,275 984,439
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE $ 278,142,628 $ 361,384,965 $ 34,310,601
=====================================================================================================================
NET ASSETS
Paid-in Capital $ 1,955,452,313 $ 1,899,595,018 $ 126,014,770
Accumulated Undistributed Net Investment Loss (66,378) (14,636,649) (180,198)
Accumulated Undistributed Net Realized Loss
on Investment Securities, Foreign Currency
Transactions and Option Contracts (1,656,590,047) (1,493,326,879) (90,683,390)
Net Appreciation (Depreciation) of Investment
Securities, Foreign Currency Transactions and
Option Contracts (20,653,260) (30,246,525) (840,581)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE, APPLICABLE TO SHARES OUTSTANDING $ 278,142,628 $ 361,384,965 $ 34,310,601
=====================================================================================================================
INVESCO
TECHNOLOGY PRO FORMA PRO FORMA
FUND ADJUSTMENTS COMBINED
---------------------------------------------------
ASSETS
Investment Securities:
At Cost(a)(b) $1,873,905,377 $ 2,621,198,644
============================================================================================================
At Value(a)(b) $1,596,575,695 $ 2,292,060,796
Cash 6,204 12,784
Foreign Currencies (Cost $0, $541, $0, $0 and
$541, respectively) 0 492
Receivables:
Investment Securities Sold 54,863,674 56,321,384
Fund Shares Sold 5,018,934 9,228,156
Dividends and Interest 525,375 1,067,777
Due from Advisor -- $ 1,767,100 1,767,100
Prepaid Expenses and Other Assets 160,176 284,549
- ------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 1,657,150,058 1,767,100 2,360,743,038
- ------------------------------------------------------------------------------------------------------------
LIABILITIES
Options Written at Value
(Premiums Received $297,659, $0, $0, $928,509
and $1,226,168, respectively) 114,433 344,861
Payables:
Investment Securities Purchased 20,722,456 27,785,096
Fund Shares Repurchased 8,425,828 9,263,076
Securities Loaned 33,984,450 52,391,168
Accrued Distribution Expenses
Investor Class 174,578 229,853
Class A 1,194 200,320
Class B 423 165,254
Class C 4,925 36,481
Class K 8,100 8,348
Accrued Merger Expenses -- 1,767,100 1,767,100
Accrued Expenses and Other Payables 237,733 1,237,349
- ------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 63,674,120 1,767,100 93,428,906
- ------------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE $1,593,475,938 $ 0 $ 2,267,314,132
============================================================================================================
NET ASSETS
Paid-in Capital $6,042,626,245 $10,023,688,346
Accumulated Undistributed Net Investment Loss (232,309) (15,115,534)
Accumulated Undistributed Net Realized Loss
on Investment Securities, Foreign Currency
Transactions and Option Contracts (4,172,402,393) (7,413,002,709)
Net Appreciation (Depreciation) of Investment
Securities, Foreign Currency Transactions and
Option Contracts (276,515,605) (328,255,971)
- ------------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE, APPLICABLE TO SHARES OUTSTANDING $1,593,475,938 $ 2,267,314,132
============================================================================================================
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UNAUDITED
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW INVESCO
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY TECHNOLOGY
FUND FUND FUND FUND
--------------------------------------------------------------
NET ASSETS AT VALUE:
Institutional Class -- -- -- $707,040,240
================================================================================================================
Investor Class $274,946,793 -- -- $853,529,554
================================================================================================================
Class A $ 325,550 $259,794,538 $17,832,997 $ 4,459,686
================================================================================================================
Class B $ 15,865 $ 86,450,773 $10,902,887 $ 531,767
================================================================================================================
Class C $ 2,188,211 $ 15,139,654 $ 5,574,717 $ 5,758,958
================================================================================================================
Class K $ 666,209 -- -- $ 22,155,733
================================================================================================================
Shares Outstanding
Institutional Class -- -- -- 40,770,656
Investor Class 34,558,571 -- -- 50,510,923
Class A 41,098 56,238,269 8,614,884 262,641
Class B 2,011 20,078,388 5,356,039 31,586
Class C 283,394 3,516,236 2,736,421 351,409
Class K 84,345 -- -- 1,320,710
================================================================================================================
NET ASSET VALUE PER SHARE:
Institutional Class, Offering and Redemption
Price per Share -- -- -- $ 17.34
Investor Class, Offering and Redemption Price
per Share $ 7.96 -- -- $ 16.90
Class A
Redemption Price per Share $ 7.92 $ 4.62 $ 2.07 $ 16.98
Offering Price per Share (Maximum sales charge
of 5.50%, 4.75%, 5.50%, 5.50% and 5.50%,
respectively) $ 8.38 $ 4.85 $ 2.19 $ 17.97
Class B, Offering and Redemption Price per Share $ 7.89 $ 4.31 $ 2.04 $ 16.84
Class C, Offering and Redemption Price per Share $ 7.72 $ 4.31 $ 2.04 $ 16.39
Class K, Offering and Redemption Price per Share $ 7.90 -- -- $ 16.78
================================================================================================================
PRO FORMA PRO FORMA
ADJUSTMENTS COMBINED
------------------------------------
NET ASSETS AT VALUE:
Institutional Class $ 707,040,240
======================================================================================
Investor Class $1,128,476,347
======================================================================================
Class A $ 282,412,771
======================================================================================
Class B $ 97,901,292
======================================================================================
Class C $ 28,661,540
======================================================================================
Class K $ 22,821,942
======================================================================================
Shares Outstanding
Institutional Class 40,770,656
Investor Class 16,269,041 (c) 66,779,964
Class A 16,369,440 (c) 16,632,081
Class B 5,782,038 (c) 5,813,624
Class C 1,397,351 (c) 1,748,760
Class K 39,703 (c) 1,360,413
======================================================================================
NET ASSET VALUE PER SHARE:
Institutional Class, Offering and Redemption
Price per Share $ 17.34
Investor Class, Offering and Redemption Price
per Share $ 16.90
Class A
Redemption Price per Share $ 16.98
Offering Price per Share (Maximum sales charge
of 5.50%, 4.75%, 5.50%, 5.50% and 5.50%,
respectively) $ 17.97
Class B, Offering and Redemption Price per Share $ 16.84
Class C, Offering and Redemption Price per Share $ 16.39
Class K, Offering and Redemption Price per Share $ 16.78
======================================================================================
(a) Investment securities at cost and value at March 31, 2003 include
repurchase agreements of $571,000, $1,910,000 and $2,481,000,
respectively, for INVESCO Telecommunications Fund, INVESCO Technology
Fund and Pro Forma Combined.
(b) Investment securities at cost and value at March 31, 2003 include
$17,205,652, $31,829,843 and $49,035,495, respectively, of securities
loaned for INVESCO Telecommunications Fund, INVESCO Technology Fund and
Pro Forma Combined.
(c) Adjustment to reflect the exchange of shares of common stock outstanding
from INVESCO Telecommunications Fund, AIM Global Science and Technology
Fund and AIM New Technology Fund to INVESCO Technology Fund.
See Notes to Financial Statements
PRO FORMA STATEMENT OF OPERATIONS
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
UNAUDITED
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY
FUND FUND FUND
-------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $3,913,369 $ 945,322 $ 58,200
Dividends from Affiliated Investment Companies 40,672 0 0
Interest 714,980 5,691 0
Securities Loaned Income 205,579 472,794 9,476
Foreign Taxes Withheld (241,485) 0 0
- ----------------------------------------------------------------------------------------------------
TOTAL INCOME 4,633,115 1,423,807 67,676
- ----------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 2,309,149 4,364,063 407,563
Distribution Expenses
Investor Class 877,339 -- --
Class A 2,837 1,539,723 75,047
Class B 112 1,216,106 129,286
Class C 32,223 180,410 63,858
Class K 3,027 -- --
Transfer Agent Fees
Institutional Class -- -- --
Investor Class 5,273,178 -- --
Class A 3,544 3,305,663 213,214
Class B 131 1,305,448 128,552
Class C 99,233 193,631 63,506
Class K 10,612 -- --
Administrative Services Fees 170,044 115,443 50,000
Custodian Fees and Expenses 123,339 67,594 16,637
Directors' Fees and Expenses 31,221 7,607 7,450
Interest Expenses 2,969 0 0
Professional Fees and Expenses 55,220 27,771 56,450
Registration Fees and Expenses
Institutional Class -- -- --
Investor Class 114,342 -- --
Class A 15 46,025 16,174
Class B 5 18,176 9,751
Class C 716 2,696 4,817
Class K 1,472 -- --
Reports to Shareholders 779,158 619,772 32,655
Other Expenses 26,364 18,619 44,885
- ----------------------------------------------------------------------------------------------------
TOTAL EXPENSES 9,916,250 13,028,747 1,319,845
INVESCO
TECHNOLOGY PRO FORMA PRO FORMA
FUND ADJUSTMENTS COMBINED
-----------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 3,714,705 $ 8,631,596
Dividends from Affiliated Investment Companies 0 40,672
Interest 2,433,548 3,154,219
Securities Loaned Income 188,766 876,615
Foreign Taxes Withheld (212,626) (454,111)
- ---------------------------------------------------------------------------------------------------
TOTAL INCOME 6,124,393 12,248,991
- ---------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 11,673,473 $(3,079,079)(a) 15,675,169
Distribution Expenses
Investor Class 2,714,413 3,591,752
Class A 7,497 (461,917)(a) 1,163,187
Class B 1,755 1,347,259
Class C 79,762 356,253
Class K 96,657 99,684
Transfer Agent Fees
Institutional Class 1,921,921 1,921,921
Investor Class 7,981,678 13,254,856
Class A 7,798 (617,953)(a) 2,912,266
Class B 857 128,467 (a) 1,563,455
Class C 136,791 39,211 (a) 532,372
Class K 289,239 299,851
Administrative Services Fees 892,715 44,315 (a) 1,272,517
Custodian Fees and Expenses 294,267 (7,588)(b) 494,249
Directors' Fees and Expenses 133,696 27,249 (b) 207,223
Interest Expenses 8,418 11,387
Professional Fees and Expenses 134,083 (107,101)(b) 166,423
Registration Fees and Expenses
Institutional Class 22,779 22,779
Investor Class 185,595 (114,342)(b) 185,595
Class A 7 62,221
Class B 4 27,936
Class C 677 8,906
Class K 1,452 2,924
Reports to Shareholders 1,017,230 2,448,815
Other Expenses 92,971 18,658 (b) 201,497
- ---------------------------------------------------------------------------------------------------
TOTAL EXPENSES 27,695,735 (4,130,080) 47,830,497
PRO FORMA STATEMENT OF OPERATIONS (CONTINUED)
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
UNAUDITED
AIM GLOBAL
INVESCO SCIENCE AND AIM NEW
TELECOMMUNICATIONS TECHNOLOGY TECHNOLOGY
FUND FUND FUND
-----------------------------------------------------
Fees and Expenses Absorbed/Reimbursed by Investment Adviser
Investor Class $ (3,343,479) -- --
Class A 0 $ (2,303,641) $ (198,878)
Class B (1,069) (909,737) (119,909)
Class C (100,846) (134,937) (59,236)
Class K (8,365) -- --
Fees and Expenses Paid Indirectly (74,314) (12,084) (1,150)
- --------------------------------------------------------------------------------------------------------------------
NET EXPENSES 6,388,177 9,668,348 940,672
- --------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (1,755,062) (8,244,541) (872,996)
- --------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (397,915,271) (217,671,786) (20,908,909)
Foreign Currency Transactions (120,611) 236,652 0
Option Contracts 314,778 2,448,992 20,388
- --------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss (397,721,104) (214,986,142) (20,888,521)
- --------------------------------------------------------------------------------------------------------------------
Change in Net Appreciation/Depreciation of:
Investment Securities 204,480,051 (41,423,573) (4,076,054)
Foreign Currency Transactions 5,240,216 30,885 0
Option Contracts (114,268) (423,379) (235)
- --------------------------------------------------------------------------------------------------------------------
Total Change in Net Appreciation/Depreciation 209,605,999 (41,816,067) (4,076,289)
- --------------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENT SECURITIES, FOREIGN CURRENCY
TRANSACTIONS AND OPTION CONTRACTS (188,115,105) (256,802,209) (24,964,810)
- --------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(189,870,167) $(265,046,750) $(25,837,806)
====================================================================================================================
INVESCO
TECHNOLOGY PRO FORMA PRO FORMA
FUND ADJUSTMENTS COMBINED
--------------------------------------------------
Fees and Expenses Absorbed/Reimbursed by Investment Adviser
Investor Class $ 0 $ 827,806 (c) $ (2,515,673)
Class A (818) 776,481 (c) (1,726,856)
Class B (1,027) (57,155)(c) (1,088,897)
Class C (100,306) (60,944)(c) (456,269)
Class K (130,850) 23,235 (c) (115,980)
Fees and Expenses Paid Indirectly (2,015) 13,234 (b) (76,329)
- ----------------------------------------------------------------------------------------------------------------------
NET EXPENSES 27,460,719 (2,607,423) 41,850,493
- ----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (21,336,326) 2,607,423 (29,601,502)
- ----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (1,341,077,063) (1,977,573,029)
Foreign Currency Transactions (1,037) 115,004
Option Contracts 20,689,078 23,473,236
- ----------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss (1,320,389,022) (1,953,984,789)
- ----------------------------------------------------------------------------------------------------------------------
Change in Net Appreciation/Depreciation of:
Investment Securities (32,763,181) 126,217,243
Foreign Currency Transactions 0 5,271,101
Option Contracts (4,996,760) (5,534,642)
- ----------------------------------------------------------------------------------------------------------------------
Total Change in Net Appreciation/Depreciation (37,759,941) 125,953,702
- ----------------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENT SECURITIES, FOREIGN CURRENCY
TRANSACTIONS AND OPTION CONTRACTS (1,358,148,963) (1,828,031,087)
- ----------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(1,379,485,289) $2,607,423 $(1,857,632,589)
======================================================================================================================
(a) Reflects adjustments to Investment Advisory Fees, Distribution Expenses,
Transfer Agent Fees and Administrative Services Fees based on the surviving
Fund's contractual fee obligation.
(b) Reflects elimination of duplicate services or fees.
(c) Reflects adjustment of the level to the surviving Fund's voluntary expense
reimbursement.
See Notes to Financial Statements
PRO FORMA NOTES TO FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- BASIS OF COMBINATION
On June 9, 2003, the Board of Directors of INVESCO Sector Funds, Inc.- INVESCO
Technology Fund and INVESCO Telecommunications Fund, AIM Global Science and
Technology Fund and AIM New Technology Fund a separate series of AIM Investment
Funds (collectively the "Funds", individually the "Fund"), approved an Agreement
and Plan of Reorganization (the "Plan") whereby, subject to approval by the
shareholders of INVESCO Telecommunications Fund, AIM Global Science and
Technology Fund and AIM New Technology Fund, INVESCO Technology Fund will
acquire all of the assets of the INVESCO Telecommunications Fund, AIM Global
Sciences and Technology Fund and AIM New Technology Fund subject to the
liabilities of such Funds, in exchange for a number of shares of INVESCO
Technology Fund equal in value to the net assets of INVESCO Telecommunications
Fund, AIM Global Science and Technology Fund and AIM New Technology Fund (the
"Merger").
The Merger will be accounted for as a tax-free merger of investment companies.
The unaudited pro forma combined financial statements are presented for the
information of the reader and may not necessarily be representative of what the
actual combined financial statements would have been had the reorganization
occurred at March 31, 2003. The unaudited pro forma statement of investment
securities and statement of assets and liabilities reflect the financial
position of the Funds at March 31, 2003. The unaudited pro forma statement of
operations reflects the results of operations of the Funds for the year ended
March 31, 2003. These statements have been derived from the Funds' respective
books and records utilized in calculating daily net asset value at the date
indicated above for each Fund under generally accepted accounting principles.
The historical cost of investment securities will be carried forward to the
surviving entity and the results of operations of INVESCO Technology Fund for
pre-combination periods will not be restated.
The unaudited pro forma statement of investment securities, unaudited statement
of assets and liabilities and statement of operations should be read in
conjunction with the historical financial statements of each Fund which are
incorporated by reference in the Statement of Additional Information.
NOTE 2 -- SECURITY VALUATION
Domestic (U.S.) equity securities traded on national securities exchanges or in
the over-the-counter market are valued at the last sales price at the close of
the regular trading day on the exchange (generally 4:00p.m. Eastern time) where
such securities are primarily traded. If last sales prices are not available,
securities are valued at the closing bid price for the regular trading day as
obtained from one or more dealers making a market for such securities or by a
pricing service approved by the Fund's board of directors.
Foreign equity securities are valued at the closing price. The closing price is
designated by the principal stock exchange in the country in which the
securities are primarily traded. In the event that closing bid prices are not
available for foreign securities, a snapshot of prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to the
close of the New York Stock Exchange.
Option contracts are valued at the average of the closing bid and ask prices
from the exchange with the highest trading volume on that particular day.
Investments in shares of investment companies are valued at the net asset value
of the respective fund as calculated each day.
If market quotations or pricing service valuations are not readily available, or
events or circumstances that may affect the value of portfolio securities are
identified between the closing of their principal markets and the time that the
net asset value per share is determined, securities are valued at fair value as
determined in good faith under procedures established by the Fund's board of
directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
NOTE 3 -- CAPITAL SHARES
The unaudited pro forma net asset value per share assumes additional shares of
common stock of INVESCO Technology Fund issued in connection with the proposed
acquisition of INVESCO Telecommunications Fund, AIM Global Science and
Technology Fund and AIM New Technology Fund by INVESCO Technology Fund as of
March 31, 2003. The number of additional shares issued was calculated by
dividing the net asset value of each Class of INVESCO Telecommunications Fund,
AIM Global Science and Technology Fund and AIM New Technology Fund by the
respective Class' net asset value per share of INVESCO Technology Fund.
NOTE 4 -- UNAUDITED PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma financial statements reflect changes in
fund shares as if the merger had taken place on March 31, 2003. INVESCO
Telecommunications Fund, AIM Global Science and Technology Fund and AIM New
Technology Fund expenses were adjusted assuming INVESCO Technology Fund's fee
structure was in effect for the entire year ended March 31, 2003.
NOTE 5 -- MERGER COSTS
Merger costs are estimated at approximately $1,767,100 and are not included in
the unaudited pro forma statement of operations since these costs are not
recurring. These costs represent the estimated expense of both Funds carrying
out their obligations under the Plan and consist of management's estimate of
legal fees, accounting fees, printing costs and mailing charges related to the
proposed merger. INVESCO Funds Group, Inc., Investment Adviser to the Funds,
will bear all of the cost of the Reorganization. The Funds will bear no expenses
relating to the proposed Reorganization.
NOTE 6 -- FEDERAL INCOME TAXES
The Fund has complied, and continues to comply, with the provisions of the
Internal Revenue Code applicable to regulated investment companies and,
accordingly, has made or intends to make sufficient distributions of net
investment income and net realized capital gains, if any, to relieve it from all
federal and state income taxes and federal excise taxes.
The Fund intends to offset any net capital gains with any available capital loss
carry forward until each carry forward has been fully utilized or expires. The
amount of capital loss carry forward, which may offset INVESCO Technology Fund's
capital gains in any given year may be limited as a result of previous
reorganizations. In addition, no capital gain distribution shall be made until
the capital loss carry forward has been fully utilized or expires.
APPENDIX XIV
PRO FORMA FINANCIAL STATEMENTS PRO FORMA STATEMENT OF INVESTMENT SECURITIES *
INVESCO SECTOR FUNDS, INC.
MARCH 31, 2003
UNAUDITED
SHARES, CONTRACTS OR PRINCIPAL AMOUNT
- -----------------------------------------------------------------
AIM GLOBAL INVESCO
UTILITIES UTILITIES PRO FORMA
FUND FUND COMBINED DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
92.99% COMMON STOCKS
0.88% DIVERSIFIED METALS & MINING
66,700 66,700 Peabody Energy
====================================================================================================================================
60.82% ELECTRIC UTILITIES
55,700 55,700 Ameren Corp
63,600 35,600 99,200 American Electric Power
105,000 105,000 CenterPoint Energy
47,000 103,700 150,700 Cinergy Corp
92,000 92,000 CMS Energy
65,000 78,100 143,100 Consolidated Edison
86,500 86,500 Constellation Energy Group
28,000 63,900 91,900 Dominion Resources
58,600 58,600 DPL Inc
143,000 50,600 193,600 DTE Energy
65,334 54,300 119,634 Duke Energy
58,880 58,880 E.ON AG
55,500 55,500 Edison International(a)
227,000 227,000 Endesa SA
39,600 39,600 Endesa SA Sponsored ADR Representing Ord Shrs
306,200 136,200 442,400 Energy East
62,000 73,600 135,600 Entergy Corp
59,000 67,775 126,775 Exelon Corp
90,000 90,000 FirstEnergy Corp
132,000 60,000 192,000 FPL Group
41,900 41,900 Hawaiian Electric Industries
92,100 92,100 NiSource Inc
134,000 134,000 Northeast Utilities
106,000 106,000 OGE Energy
46,900 46,900 Pepco Holdings
77,000 77,000 PG&E Corp(a)
228,600 52,400 281,000 Pinnacle West Capital
17,200 17,200 PNM Resources
75,000 98,500 173,500 PPL Corp
36,500 69,500 106,000 Progress Energy
89,300 89,300 Public Power GDR(b)
63,600 60,800 124,400 Public Service Enterprise Group
120,000 93,200 213,200 Puget Energy
86,600 86,600 SCANA Corp
209,700 84,400 294,100 Southern Co
86,500 86,500 TXU Corp
62,500 62,500 Wisconsin Energy
====================================================================================================================================
8.00% GAS UTILITIES
55,000 51,200 106,200 KeySpan Corp
37,200 37,200 Kinder Morgan
290,000 290,000 NiSource Inc
44,000 44,000 Peoples Energy
164,000 164,000 Sempra Energy
247,600 247,600 Snam Rete Gas SpA
====================================================================================================================================
0.41% INTEGRATED OIL & GAS
6,800 6,800 TotalFinaElf SA
====================================================================================================================================
12.89% INTEGRATED TELECOMMUNICATION SERVICES
12,700 12,700 AT&T Corp
154,100 148,200 302,300 BellSouth Corp
127,600 127,600 CenturyTel Inc
88,000 135,712 223,712 SBC Communications
526,700 526,700 Telecom Italia SpA
255,743 255,743 Telefonica SA(a)
128,662 93,796 222,458 Verizon Communications
====================================================================================================================================
4.04% MULTI-UTILITIES & UNREGULATED POWER
428,800 428,800 ACEA SpA(a)
22,100 22,100 Equitable Resources
31,000 31,000 MDU Resources Group
202,526 202,526 National Grid Transco PLC
61,000 61,000 ONEOK Inc
161,663 161,663 Reliant Resources(a)(c)
67,750 67,750 Suez SA
10,250 10,250 Texas Genco Holdings
151,936 151,936 United Utilities PLC
====================================================================================================================================
VALUE
--------------------------------------------------------
AIM GLOBAL INVESCO
UTILITIES UTILITIES PRO FORMA
DESCRIPTION FUND FUND COMBINED
- ----------------------------------------------------------------------------------------------------------------
COMMON STOCKS
DIVERSIFIED METALS & MINING
Peabody Energy $ 1,860,263 $ 1,860,263
================================================================================================================
ELECTRIC UTILITIES
Ameren Corp $2,175,085 2,175,085
American Electric Power 1,453,260 813,460 2,266,720
CenterPoint Energy 740,250 740,250
Cinergy Corp 1,581,550 3,489,505 5,071,055
CMS Energy 405,720 405,720
Consolidated Edison 2,500,550 3,004,507 5,505,057
Constellation Energy Group 2,398,645 2,398,645
Dominion Resources 1,550,360 3,538,143 5,088,503
DPL Inc 730,156 730,156
DTE Energy 5,526,950 1,955,690 7,482,640
Duke Energy 949,956 789,522 1,739,478
E.ON AG 2,430,585 2,430,585
Edison International(a) 759,795 759,795
Endesa SA 2,765,552 2,765,552
Endesa SA Sponsored ADR Representing Ord Shrs 481,140 481,140
Energy East 5,450,360 2,424,360 7,874,720
Entergy Corp 2,985,300 3,543,840 6,529,140
Exelon Corp 2,974,190 3,416,538 6,390,728
FirstEnergy Corp 2,835,000 2,835,000
FPL Group 7,778,760 3,535,800 11,314,560
Hawaiian Electric Industries 1,707,844 1,707,844
NiSource Inc 1,676,220 1,676,220
Northeast Utilities 1,865,280 1,865,280
OGE Energy 1,904,820 1,904,820
Pepco Holdings 816,060 816,060
PG&E Corp(a) 1,035,650 1,035,650
Pinnacle West Capital 7,598,664 1,741,776 9,340,440
PNM Resources 386,828 386,828
PPL Corp 2,670,750 3,507,585 6,178,335
Progress Energy 1,428,975 2,720,925 4,149,900
Public Power GDR(b) 1,286,021 1,286,021
Public Service Enterprise Group 2,333,484 2,230,752 4,564,236
Puget Energy 2,557,200 1,986,092 4,543,292
SCANA Corp 2,591,072 2,591,072
Southern Co 5,963,868 2,400,336 8,364,204
TXU Corp 1,544,025 1,544,025
Wisconsin Energy 1,587,500 1,587,500
================================================================================================================
128,526,256
GAS UTILITIES
KeySpan Corp 1,773,750 1,651,200 3,424,950
Kinder Morgan 1,674,000 1,674,000
NiSource Inc 5,278,000 5,278,000
Peoples Energy 1,573,880 1,573,880
Sempra Energy 4,093,440 4,093,440
Snam Rete Gas SpA 871,139 871,139
================================================================================================================
16,915,409
INTEGRATED OIL & GAS
TotalFinaElf SA 861,882 861,882
================================================================================================================
INTEGRATED TELECOMMUNICATION SERVICES
AT&T Corp 205,740 205,740
BellSouth Corp 3,339,347 3,211,494 6,550,841
CenturyTel Inc 3,521,760 3,521,760
SBC Communications 1,765,280 2,722,383 4,487,663
Telecom Italia SpA 2,221,425 2,221,425
Telefonica SA(a) 2,394,780 2,394,780
Verizon Communications 4,548,202 3,315,689 7,863,891
================================================================================================================
27,246,100
MULTI-UTILITIES & UNREGULATED POWER
ACEA SpA(a) 1,532,088 1,532,088
Equitable Resources 828,971 828,971
MDU Resources Group 865,520 865,520
National Grid Transco PLC 1,242,712 1,242,712
ONEOK Inc 1,118,740 1,118,740
Reliant Resources(a)(c) 575,520 575,520
Suez SA 788,388 788,388
Texas Genco Holdings 178,247 178,247
United Utilities PLC 1,409,861 1,409,861
================================================================================================================
8,540,047
SHARES, CONTRACTS OR PRINCIPAL AMOUNT
- -----------------------------------------------------------------
AIM GLOBAL INVESCO
UTILITIES UTILITIES PRO FORMA
FUND FUND COMBINED DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
2.03% NATURAL GAS PIPELINES
22,387 22,387 Enbridge Energy Management LLC
104,771 104,771 Kinder Morgan Management LLC(a)
====================================================================================================================================
2.79% WATER UTILITIES
538,407 538,407 Kelda Group PLC
36,000 73,300 109,300 Philadelphia Suburban
====================================================================================================================================
1.13% WIRELESS TELECOMMUNICATION SERVICES
1,034,218 1,034,218 Vodafone Group PLC
Vodafone Group PLC Sponsored ADR Representing 10
29,200 29,200 Ord Shrs
====================================================================================================================================
TOTAL COMMON STOCKS (COST $134,208,402, $73,529,285
AND $207,737,687, RESPECTIVELY)
====================================================================================================================================
4.58% FIXED INCOME SECURITIES - CORPORATE BONDS
1.38% ELECTRIC UTILITIES
Ameren Energy Generating, Sr Notes, 7.750%,
$ 750,000 $ 750,000 11/1/2005
Hydro-Quebec, Medium-Term Notes, Series B,
$ 750,000 $ 750,000 6.520%, 2/23/2006
$ 500,000 $ 500,000 Kansas City Power & Light, Sr Notes, 7.125%,
12/15/2005
$ 650,000 $ 650,000 Wisconsin Energy, Sr Notes, 5.500%, 12/1/2008
====================================================================================================================================
0.22% GAS UTILITIES
$ 420,000 $ 420,000 Consolidated Natural Gas, Deb, 6.625%, 12/1/2008
====================================================================================================================================
0.70% INTEGRATED TELECOMMUNICATION SERVICES
British Telecommunications PLC, Notes,
$ 750,000 $ 750,000 7.625%, 12/15/2005
Southwestern Bell Capital, Medium-Term Notes,
$ 550,000 $ 550,000 Series D, 7.110%, 8/14/2006
====================================================================================================================================
2.28% MULTI-UTILITIES & UNREGULATED POWER
$2,760,000 $2,760,000 National Grid PLC, Conv Bonds(b), 4.250%, 2/17/2008
====================================================================================================================================
TOTAL FIXED-INCOME SECURITIES (AMORTIZED COST
$9,470,834, $0 AND $9,470,834, RESPECTIVELY)
====================================================================================================================================
0.88% SHORT-TERM INVESTMENTS
0.12% CORPORATE BONDS - COMPUTER STORAGE & PERIPHERALS
Candescent Technologies, Sr Sub Deb(b)(d),
$ 190,000 $ 190,000 8.000%, 5/1/2003
Candescent Technologies, Sr Sub Deb(b)(d),
$4,676,000 $4,676,000 8.000%, 5/1/2003
====================================================================================================================================
TOTAL CORPORATE BONDS (Amortized Cost $4,602,348,
$0 and $4,602,348, respectively)
====================================================================================================================================
0.76% INVESTMENT COMPANIES
799,280 799,280 STIC Liquid Assets Portfolio(e)
799,280 799,280 STIC Prime Portfolio(e)
====================================================================================================================================
TOTAL INVESTMENT COMPANIES (Cost $1,598,560, $0
and $1,598,560, respectively)
====================================================================================================================================
TOTAL SHORT-TERM INVESTMENTS (AMORTIZED COST
$6,200,908, $0 and $6,200,908, RESPECTIVELY)
====================================================================================================================================
98.45% TOTAL INVESTMENTS AT VALUE
(COST $149,880,144, $73,529,285 AND
$223,409,429, RESPECTIVELY)
====================================================================================================================================
1.55% OTHER ASSETS LESS LIABILITIES
====================================================================================================================================
100.00% NET ASSETS AT VALUE
====================================================================================================================================
VALUE
--------------------------------------------------------
AIM GLOBAL INVESCO
UTILITIES UTILITIES PRO FORMA
DESCRIPTION FUND FUND COMBINED
- ----------------------------------------------------------------------------------------------------------------
NATURAL GAS PIPELINES
Enbridge Energy Management LLC $ 891,002 $ 891,002
Kinder Morgan Management LLC(a) 3,389,342 3,389,342
================================================================================================================
4,280,344
WATER UTILITIES
Kelda Group PLC $ 3,491,264 3,491,264
Philadelphia Suburban 790,200 1,608,935 2,399,135
================================================================================================================
5,890,399
WIRELESS TELECOMMUNICATION SERVICES
Vodafone Group PLC 1,850,583 1,850,583
Vodafone Group PLC Sponsored ADR Representing 10
Ord Shrs 532,024 532,024
================================================================================================================
2,382,607
TOTAL COMMON STOCKS (COST $134,208,402, $73,529,285
AND $207,737,687, RESPECTIVELY) 196,503,307
================================================================================================================
FIXED INCOME SECURITIES - CORPORATE BONDS
ELECTRIC UTILITIES
Ameren Energy Generating, Sr Notes, 7.750%,
11/1/2005 836,617 836,617
Hydro-Quebec, Medium-Term Notes, Series B,
6.520%, 2/23/2006 828,285 828,285
Kansas City Power & Light, Sr Notes, 7.125%,
12/15/2005 554,365 554,365
Wisconsin Energy, Sr Notes, 5.500%, 12/1/2008 701,110 701,110
================================================================================================================
2,920,377
GAS UTILITIES
Consolidated Natural Gas, Deb, 6.625%, 12/1/2008 475,642 475,642
================================================================================================================
INTEGRATED TELECOMMUNICATION SERVICES
British Telecommunications PLC, Notes,
7.625%, 12/15/2005 849,675 849,675
Southwestern Bell Capital, Medium-Term Notes,
Series D, 7.110%, 8/14/2006 623,090 623,090
================================================================================================================
1,472,765
MULTI-UTILITIES & UNREGULATED POWER
National Grid PLC, Conv Bonds(b), 4.250%, 2/17/2008 4,811,990 4,811,990
================================================================================================================
TOTAL FIXED-INCOME SECURITIES (AMORTIZED COST
$9,470,834, $0 AND $9,470,834, RESPECTIVELY) 9,680,774
================================================================================================================
SHORT-TERM INVESTMENTS
CORPORATE BONDS - COMPUTER STORAGE & PERIPHERALS
Candescent Technologies, Sr Sub Deb(b)(d),
8.000%, 5/1/2003 10,070 10,070
Candescent Technologies, Sr Sub Deb(b)(d),
8.000%, 5/1/2003 247,828 247,828
================================================================================================================
TOTAL CORPORATE BONDS (Amortized Cost $4,602,348,
$0 and $4,602,348, respectively) 257,898
================================================================================================================
INVESTMENT COMPANIES
STIC Liquid Assets Portfolio(e) 799,280 799,280
STIC Prime Portfolio(e) 799,280 799,280
================================================================================================================
TOTAL INVESTMENT COMPANIES (Cost $1,598,560, $0
and $1,598,560, respectively) 1,598,560
================================================================================================================
TOTAL SHORT-TERM INVESTMENTS (Amortized Cost
$6,200,908, $0 and $6,200,908, respectively) 1,856,458
================================================================================================================
TOTAL INVESTMENTS AT VALUE
(COST $149,880,144, $73,529,285 AND
$223,409,429, RESPECTIVELY) 136,340,898 71,699,641 208,040,539
================================================================================================================
OTHER ASSETS LESS LIABILITIES 1,000,489 2,358,450 3,273,839
================================================================================================================
NET ASSETS AT VALUE $137,341,387 $74,058,091 $211,314,378
================================================================================================================
(a) Security is non-income producing.
(b) Securities acquired pursuant to Rule 144A. The Fund deems such securities
to be "liquid" because an institutional market exists.
(c) Securities are pledged with broker as collateral for written options.
(d) Defaulted security. The issuer is in default with respect to interest
payments and the Fund has stopped accruing interest income.
(e) Security is an affiliated company.
* As of 3/31/03, all of the securities held by the AIM Global Utilities Fund
would comply with the compliance guidelines and/or investment restrictions of
the INVESCO Utilities Fund.
See Notes to Financial Statements
PRO FORMA STATEMENT OF OPERATIONS
INVESCO SECTOR FUNDS, INC.
YEAR ENDED MARCH 31, 2003
UNAUDITED
AIM GLOBAL INVESCO
UTILITIES UTILITIES PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
---------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 7,046,527 $3,192,572 $10,239,099
Interest 637,314 295,851 933,165
Securities Loaned Income 185,027 1,380 186,407
Foreign Taxes Withheld (120,136) (4,252) (124,388)
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 7,748,732 3,485,551 11,234,283
- --------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees 1,044,776 666,839 $ 261,193 (a) 1,972,808
Distribution Expenses
Investor Class -- 218,659 218,659
Class A 289,912 1,167 (334)(a) 290,745
Class B 511,856 1,716 513,572
Class C 69,791 9,432 79,223
Transfer Agent Fees
Investor Class -- 547,156 547,156
Class A 448,464 1,045 (79,892)(a) 369,617
Class B 197,948 294 840 (a) 199,082
Class C 26,990 12,459 5,567 (a) 45,016
Administrative Services Fees 50,000 50,010 28,359 (a) 128,369
Custodian Fees and Expenses 57,773 16,960 (25,184)(b) 49,549
Directors' Fees and Expenses 8,371 14,978 (6,236)(b) 17,113
Interest Expenses 0 266 266
Professional Fees and Expenses 40,061 28,014 (17,861)(b) 50,214
Registration Fees and Expenses
Investor Class -- 21,891 21,891
Class A 27,277 12 27,289
Class B 12,040 9 12,049
Class C 1,642 703 2,345
Reports to Shareholders 55,081 104,971 160,052
Other Expenses 50,590 7,734 1,366 (b) 59,690
- --------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,892,572 1,704,315 167,818 4,764,705
Fees and Expenses Absorbed/Reimbursed by
Investment Adviser
Investor Class -- (526,139) 23,948 (c) (502,191)
Class A (11,633) (1,095) (95,054)(c) (107,782)
Class B (5,135) (943) (129,171)(c) (135,249)
Class C (700) (15,628) (22,410)(c) (38,738)
Fees and Expenses Paid Indirectly (4,867) (316) 4,867 (b) (316)
- --------------------------------------------------------------------------------------------------------------------
NET EXPENSES 2,870,237 1,160,194 (50,002) 3,980,429
- --------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 4,878,495 2,325,357 50,002 7,253,854
- --------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (63,448,690) (13,056,963) (76,505,653)
Foreign Currency Transactions 107,142 0 107,142
Option Contracts 519,873 0 519,873
- --------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss (62,821,675) (13,056,963) (75,878,638)
- --------------------------------------------------------------------------------------------------------------------
Change in Net Appreciation/Depreciation of:
Investment Securities (21,902,707) (13,674,867) (35,577,574)
Foreign Currency Transactions 1,860 0 1,860
Option Contracts 95,087 0 95,087
- --------------------------------------------------------------------------------------------------------------------
Total Change in Net Appreciation/Depreciation (21,805,760) (13,674,867) (35,480,627)
- --------------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENT SECURITIES, FOREIGN CURRENCY
TRANSACTIONS AND OPTION CONTRACTS (84,627,435) (26,731,830) (111,359,265)
- --------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(79,748,940) $(24,406,473) $ 50,002 $(104,105,411)
====================================================================================================================
(a) Reflects adjustments to Investment Advisory Fees, Distribution Expenses,
Transfer Agent Fees and Administrative Services Fees based on the surviving
Fund's contractual fee obligation. Effective July 1, 2003, INVESCO
Utilities Fund Class A Distribution Expenses are reduced to 0.25% of annual
average net assets.
(b) Reflects elimination of duplicate services or fees.
(c) Reflects adjustment to the level of the surviving Fund's voluntary expense
reimbursement.
See Notes to Financial Statements
PRO FORMA NOTES TO FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- BASIS OF COMBINATION
On June 9, 2003, the Board of Directors of INVESCO Sector Funds, Inc.- INVESCO
Utilities Fund and AIM Global Utilities Fund a separate series of AIM Investment
Funds (collectively the "Funds", individually the "Fund"), approved an Agreement
and Plan of Reorganization (the "Plan") whereby, subject to approval by the
shareholders of AIM Global Utilities Fund, INVESCO Utilities Fund will acquire
all of the assets of AIM Global Utilities Fund subject to the liabilities of
such Fund, in exchange for a number of shares of INVESCO Utilities Fund equal in
value to the net assets of AIM Global Utilities Fund (the "Merger").
The Merger will be accounted for as a tax-free merger of investment companies.
The unaudited pro forma combined financial statements are presented for the
information of the reader and may not necessarily be representative of what the
actual combined financial statements would have been had the reorganization
occurred at March 31, 2003. The unaudited pro forma statement of investment
securities and statement of assets and liabilities reflect the financial
position of the Funds at March 31, 2003. The unaudited pro forma statement of
operations reflects the results of operations of the Funds for the year ended
March 31, 2003. These statements have been derived from the Funds' respective
books and records utilized in calculating daily net asset value at the date
indicated above for each Fund under generally accepted accounting principles.
The historical cost of investment securities will be carried forward to the
surviving entity and the results of operations of INVESCO Utilities Fund for
pre-combination periods will not be restated.
The unaudited pro forma statement of investment securities, unaudited statement
of assets and liabilities and statement of operations should be read in
conjunction with the historical financial statements of each Fund which are
incorporated by reference in the Statement of Additional Information.
NOTE 2 -- SECURITY VALUATION
Domestic (U.S.) equity securities traded on national securities exchanges or in
the over-the-counter market are valued at the last sales price at the close of
the regular trading day on the exchange (generally 4:00p.m. Eastern time) where
such securities are primarily traded. If last sales prices are not available,
securities are valued at the closing bid price for the regular trading day as
obtained from one or more dealers making a market for such securities or by a
pricing service approved by the Fund's board of directors.
Foreign equity securities are valued at the closing price. The closing price is
designated by the principal stock exchange in the country in which the
securities are primarily traded. In the event that closing bid prices are not
available for foreign securities, a snapshot of prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to the
close of the New York Stock Exchange.
Debt securities are valued at evaluated bid prices as determined by a pricing
service approved by the Fund's board of directors. If evaluated bid prices are
not available, debt securities are valued by averaging the bid prices obtained
from one ore more dealers making a market for such securities.
Option contracts are valued at the average of the closing bid and ask prices
from the exchange with the highest trading volume on that particular day.
Investments in shares of investment companies are valued at the net asset value
of the respective fund as calculated each day.
If market quotations or pricing service valuations are not readily available, or
events or circumstances that may affect the value of portfolio securities are
identified between the closing of their principal markets and the time that the
net asset value per share is determined, securities are valued at fair value as
determined in good faith under procedures established by the Fund's board of
directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
NOTE 3 -- CAPITAL SHARES
The unaudited pro forma net asset value per share assumes additional shares of
common stock of INVESCO Utilities Fund issued in connection with the proposed
acquisition of AIM Global Utilities Fund by INVESCO Utilities Fund as of March
31, 2003. The number of additional shares issued was calculated by dividing the
net asset value of each Class of AIM Global Utilities Fund by the respective
Class' net asset value per share of INVESCO Utilities Fund.
NOTE 4 -- UNAUDITED PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma financial statements reflect changes in
fund shares as if the merger had taken place on March 31, 2003. AIM Global
Utilities Fund expenses were adjusted assuming INVESCO Utilities Fund's fee
structure was in effect for the entire year ended March 31, 2003, including a
reduction of the INVESCO Utilities Fund Class A Distribution Expense to 0.25% of
annual average net assets which will be effective July 1, 2003.
NOTE 5 -- MERGER COSTS
Merger costs are estimated at approximately $170,200 and are not included in the
unaudited pro forma statement of operations since these costs are not recurring.
These costs represent the estimated expense of both Funds carrying out their
obligations under the Plan and consist of management's estimate of legal fees,
accounting fees, printing costs and mailing charges related to the proposed
merger. INVESCO Funds Group, Inc., Investment Adviser to the Funds, will bear
half of the cost of the Reorganization. The Funds will bear the other half of
the expenses relating to the proposed Reorganization based on their relative net
assets.
NOTE 6 -- FEDERAL INCOME TAXES
The Fund has complied, and continues to comply, with the provisions of the
Internal Revenue Code applicable to regulated investment companies and,
accordingly, has made or intends to make sufficient distributions of net
investment income and net realized capital gains, if any, to relieve it from all
federal and state income taxes and federal excise taxes.
The Fund intends to offset any net capital gains with any available capital loss
carry forward until each carry forward has been fully utilized or expires. The
amount of capital loss carry forward, which may offset INVESCO Utilities Fund's
capital gains in any given year may be limited as a result of previous
reorganizations. In addition, no capital gain distribution shall be made until
the capital loss carry forward has been fully utilized or expires.
INVESCO SECTOR FUNDS, INC.
PART C. OTHER INFORMATION
ITEM 15. Indemnification provisions for officers, directors, and employees of
the Company are set forth in Article VII of the Articles of Restatement of the
Articles of Incorporation, and are hereby incorporated by reference. See Item
16(1a) below. Under these Articles, directors and officers will be indemnified
to the fullest extent permitted to directors by the Maryland General Corporation
Law, subject only to such limitations as may be required by the Investment
Company Act of 1940, as amended, and the rules thereunder. Under the Investment
Company Act of 1940, directors and officers of the Company cannot be protected
against liability to the Fund or its shareholders to which they would be subject
because of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties of their office. The Company also maintains liability
insurance policies
ITEM 16. EXHIBITS
(1) Articles of Amendment and Restatement of Articles of
Incorporation filed December 2, 1999.(4)
(a) Articles of Transfer of INVESCO Specialty Funds, Inc.
and INVESCO Sector Funds, Inc. filed February 10,
2000.(5)
(b) Articles of Amendment to the Articles of Amendment and
Restatement of the Articles of Incorporation filed
February 16, 2000.(5)
(c) Articles of Amendment to the Articles of Amendment and
Restatement of the Articles of Incorporation filed May
17, 2000.(5)
(d) Articles Supplementary to the Articles of Amendment and
Restatement of the Articles of Incorporation filed
November 22, 2000.(6)
(e) Articles Supplementary to the Articles of Amendment and
Restatement of the Articles of Incorporation filed
August 20, 2001.(9)
(f) Articles of Correction to the Articles of Amendment and
Restatement of the Articles of Incorporation filed
January 28, 2002.(11)
(g) Articles Supplementary to the Articles of Amendment and
Restatement of Articles of Incorporation filed January
29, 2002.(11)
(h) Certificate of Correction to the Articles of Amendment
to the Articles of Amendment and Restatement of the
Articles of Incorporation filed January 25, 2002.(12)
(i) Certificate of Correction to the Articles of Amendment
to the Articles of Amendment and Restatement of the
Articles of Incorporated filed June 24, 2002.(13)
(j) Articles of Amendment to Articles of Amendment and
Restatement of Articles of Incorporation filed June 24,
2002.(13)
(k) Articles of Restatement of the Articles of
Incorporation filed July 2, 2002.(13)
(2) Bylaws, as amended July 21, 1993.(1)
(3) Voting Trust Agreement - none
(4) (a) Agreement and Plan of Reorganization with respect to
the reorganization of AIM Global Energy Fund is filed
herewith as Appendix I to the Combined Proxy Statement
and Prospectus
of AIM Global Energy Fund and INVESCO Energy Fund
contained in this Registration Statement and is
incorporated herein by reference.
(b) Agreement and Plan of Reorganization with respect to the
reorganization of AIM Global Financial Services Fund is
filed herewith as Appendix I to the Combined Proxy
Statement and Prospectus of AIM Global Financial
Services Fund and INVESCO Financial Services Fund
contained in this Registration Statement and is
incorporated herein by reference.
(c) Agreements and Plans of Reorganization with respect to
the reorganizations of AIM New Technology Fund, AIM
Global Science and Technology Fund and INVESCO
Telecommunications Fund are filed herewith as Appendix I
to the Combined Proxy Statement and Prospectus for AIM
New Technology Fund, AIM Global Science and Technology
Fund, INVESCO Telecommunications Fund and INVESCO
Technology Fund contained in this Registration Statement
and are incorporated herein by reference.
(d) Agreement and Plan of Reorganization with respect to the
reorganization of AIM Global Utilities Fund is filed
herewith as Appendix I to the Combined Proxy Statement
and Prospectus of AIM Global Utilities Fund and INVESCO
Utilities Fund contained in this Registration Statement
and is incorporated herein by reference.
(5) Provisions of instruments defining the rights of holders of
Registrant's securities are contained in Articles III, IV
and VIII of the Articles of Restatement of the Articles of
Incorporation and Articles II, VI, VII, VIII and IX of the
Bylaws of the Registrant.
(6) Investment Advisory Agreement between Registrant and
INVESCO Funds Group, Inc. dated February 28, 1997.(2)
(a) Amendment dated May 13, 1999 to the Investment
Advisory Agreement.(4)
(b) Amendment dated February 14, 2000 to the Investment
Advisory Agreement.(5)
(7) Underwriting Agreement between Registrant and A I M
Distributors, Inc. dated July 1, 2003.(14)
(8) (a) INVESCO Funds Retirement Plan for Independent Directors
dated October 30, 2001.(11)
(b) Deferred Retirement Plan Account Agreement for
Independent Directors.(14)
(9) Custodian Agreement between Registrant and State Street
Bank and Trust dated May 8, 2001 as amended September 28,
2001, October 5, 2001, October 19, 2001, March 29, 2002,
April 30, 2002, July 31, 2002, August 30, 2002, October 21,
2002, November 1, 2002, November 30, 2002, December 26,
2002, January 31, 2003, and February 10, 2003.(14)
(10) (a)Amended and Restated Master Plan and Agreement of
Distribution adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated July 1, 2003 with
respect to the Funds' Investor Class shares.(14)
(b) Amended and Restated Master Distribution Plan and
Agreement adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated July 1, 2003
with respect to the Funds' Class A shares.(14)
(c) Amended and Restated Master Distribution Plan and
Agreement adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated July 1, 2003
with respect to the Funds' Class B shares. (14)
(d) Amended and Restated Master Distribution Plan and
Agreement adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated July 1, 2003,
with respect to the Funds' Class C shares.(14)
(e) Amended and Restated Master Distribution Plan and
Agreement adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated July 1, 2003,
with respect to the Funds' Class K shares. (14)
(11) (a) Opinion and Consent of Kirkpatrick & Lockhart
LLP regarding the legality of the securities being
registered with respect to the reorganization of AIM
Global Energy Fund (filed herewith).
(b) Opinion and Consent of Kirkpatrick & Lockhart LLP
regarding the legality of the securities being
registered with respect to the reorganization of AIM
Global Utilities Fund (filed herewith).
(c) Opinion and Consent of Kirkpatrick & Lockhart LLP
regarding the legality of the securities being
registered with respect to the reorganization of AIM
Global Financial Services Fund (filed herewith).
(d) Opinion and Consent of Kirkpatrick & Lockhart LLP
regarding the legality of the securities being
registered with respect to the reorganizations of
AIM New Technology Fund, AIM Global Science &
Technology Fund and INVESCO Telecommunications Fund
(filed herewith).
(12) Opinions and Consents of Kirkpatrick & Lockhart LLP
regarding certain tax matters and consequences to
shareholders discussed in the Combined Proxy Statements and
Prospectuses (to be filed).
(13) (a) Transfer Agency Agreement between Registrant and
INVESCO Funds Group, Inc. dated June 1, 2000, as amended
August 23, 2000, November 8, 2000, November 28, 2000,
November 29, 2000, May 15, 2001, September 28, 2001,
October 5, 2001, October 19, 2001, March 29, 2002, April
30, 2002, July 31, 2002, August 30, 2002, October 21, 2002,
November 1, 2002, November 30, 2002, December 26, 2002,
January 31, 2003, and February 10, 2003.(14)
(b) Administrative Services Agreement between Registrant
and INVESCO Funds Group, Inc. dated June 1, 2000, as
amended August 23, 2000, November 8, 2000, November 28,
2000, November 29, 2000, May 15, 2001, September 28, 2001,
October 5, 2001, October 19, 2001, March 29, 2002, April
30, 2002, July 31, 2002, August 30, 2002, October 21, 2002,
November 1, 2002, November 30, 2002, December 26, 2002,
January 31, 2003, and February 10, 2003.(14)
(14) Consent of Independent Accountants (filed herewith).
(15) Financial Statement omitted pursuant to Item 14(a)(1) -
none
(16) Powers of Attorney - Previously filed on July 15, 2003 in
Post-Effective Amendment No. 38 to the Registrant's
Registration Statement on Form N-1A and incorporated by
reference herein.
(17) Proxy Card (filed herewith).
(1)Previously filed with Post-Effective Amendment No. 20 to the Registration
Statement on December 30, 1996, and incorporated by reference herein.
(2)Previously filed with Post-Effective Amendment No. 21 to the Registration
Statement on December 24, 1997 and incorporated by reference herein.
(3)Previously filed with Post-Effective Amendment No. 22 to the Registration
Statement on December 30, 1998 and incorporated by reference herein.
(4)Previously filed with Post-Effective Amendment No. 26 to the Registration
Statement on January 24, 2000 and incorporated by reference herein.
(5)Previously filed with Post-Effective Amendment No. 27 to the Registration
Statement on July 24, 2000 and incorporated by reference herein.
(6)Previously filed with Post-Effective Amendment No. 29 to the Registration
Statement on November 28, 2000 and incorporated by reference herein.
(7)Previously filed with Post-Effective Amendment No. 30 to the Registration
Statement on July 26, 2001 and incorporated by reference herein.
(8)Previously filed with Post-Effective Amendment No. 31 to the Registration
Statement on August 1, 2001 and incorporated by reference herein.
(9)Previously filed with Post-Effective Amendment No. 32 to the Registration
Statement on September 28, 2001 and incorporated by reference herein.
(10)Previously filed with Post-Effective Amendment No. 33 to the Registration
Statement on December 3, 2001 and incorporated by reference herein.
(11)Previously filed with Post-Effective Amendment No. 34 to the Registration
Statement on January 30, 2002 and incorporated by reference herein.
(12)Previously filed with Post-Effective Amendment No. 35 to the Registration
Statement on May 14, 2002 and incorporated by reference herein.
(13)Previously filed with Post-Effective Amendment No. 36 to the Registration
Statement on July 12, 2002 and incorporated by reference herein.
(14)Previously filed with Post-Effective Amendment No. 38 to the Registration
Statement on July 15, 2003 and incorporated by reference herein.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
as amended ("1933 Act") the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The undersigned Registrant agreees that every prospectus that
is filed under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
SIGNATURES
As required by the Securities Act of 1933, as amended, the Registrant
has duly caused this Registration Statement on Form N-14 to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Denver and
the State of Colorado, on this 13th day of August, 2003.
ATTEST: INVESCO Sector Funds, Inc.
/s/ GLEN A. PAYNE By: /s/ RAYMOND R. CUNNINGHAM
- ------------------------------------ ---------------------------------
Glen A. Payne Raymond R. Cunningham
Secretary President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated:
<Table>
<Caption>
Signature Title Date
- --------- ----- ----
/s/ RAYMOND R. CUNNINGHAM President, Director and Chief August 13, 2003
- --------------------------------------- Executive Officer
Raymond R. Cunningham
/s/ RONALD L. GROOMS Treasurer and Chief Financial August 13, 2003
- --------------------------------------- and Accounting Officer
Ronald L. Grooms
* Director August 13, 2003
- ---------------------------------------
Sueann Ambron
* Director August 13, 2003
- ---------------------------------------
Victor L. Andrews
* Director August 13, 2003
- ---------------------------------------
Bob R. Baker
* Director August 13, 2003
- ---------------------------------------
Lawrence H. Budner
* Director August 13, 2003
- ---------------------------------------
James T. Bunch
* Director August 13, 2003
- ---------------------------------------
Richard W. Healey
* Director August 13, 2003
- ---------------------------------------
Gerald J. Lewis
* Director August 13, 2003
- ---------------------------------------
John W. McIntyre
* Director August 13, 2003
- ---------------------------------------
Larry Soll
By: * August 13, 2003
----------------------------------
Edward F. O'Keefe
Attorney in Fact
By: /s/ GLEN A. PAYNE August 13, 2003
----------------------------------
Glen A. Payne
Attorney in Fact
</Table>
- ----------------------
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this Registration Statement of the Registrant on
behalf of the above-named directors and officers of the Registrant have been
filed with the Securities and Exchange Commission on July 28, 2003.
Exhibit Index
<Table>
<Caption>
Exhibit Number Exhibit
- -------------- -------
11 (a) Opinion and Consent of Kirkpatrick & Lockhart LLP with
respect to the reorganization of AIM Global Energy Fund
11 (b) Opinion and Consent of Kirkpatrick & Lockhart LLP with
respect to the reorganization of AIM Global Utilities Fund
11 (c) Opinion and Consent of Kirkpatrick & Lockhart LLP with
respect to the reorganization of AIM Global Financial
Services Fund
11 (d) Opinion and Consent of Kirkpatrick & Lockhart LLP with
respect to the reorganizations of AIM New Technology Fund,
AIM Global Science & Technology Fund and INVESCO
Telecommunications Fund
14 Consent of Independent Accountants
17 Proxy Card
</Table>