As filed with the Securities and Exchange Commission on January 25, 2007
Securities Act Registration No. 333-138762
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. 2 Post-effective Amendment No. ____
(Check appropriate box or boxes)
AIM INVESTMENT FUNDS
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza
Suite 100
Houston, TX 77046
(Address of Principal Executive Offices)
Registrant's Telephone Number: (713) 626-1919
Name and Address of Agent for Service: Copy to:
PETER A. DAVIDSON, ESQUIRE PAUL W. SCOTT, ESQUIRE
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza 1225 17th Street
Suite 100 Suite 2300
Houston, TX 77046 Denver, CO 80202
Approximate Date of Proposed Public Offering: As soon as practicable after
the Registration Statement becomes effective under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
The title of the securities being registered are Class A, B and C shares of
AIM Global Health Care Fund. No filing fee is due in reliance on Section 24(f)
of the Investment Company Act of 1940.
(AIM INVESTMENTS LOGO)
AIM ADVANTAGE HEALTH SCIENCES FUND,
A PORTFOLIO OF AIM COUNSELOR SERIES TRUST
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
JANUARY 31, 2007
Dear Shareholder:
We are seeking your approval of an Agreement and Plan of Reorganization
(the "Agreement") that provides for the sale of the assets of AIM Advantage
Health Sciences Fund (the "Fund") to AIM Global Health Care Fund ("Buying
Fund"). This transaction will result in the combination of the two funds. You
will receive shares of Buying Fund in connection with the transaction if
shareholders approve it.
A I M Advisors, Inc. ("AIM"), the investment advisor to the AIM Funds,
conducted a review of the funds and concluded that it would be appropriate to
consolidate certain funds having similar investment objectives and strategies.
Your Fund is one of the funds that AIM recommended, and your Board of Trustees
approved, for consolidation. The attached Proxy Statement and Prospectus seeks
your approval of the consolidation of your Fund with Buying Fund.
The enclosed Proxy Statement and Prospectus describes the proposed
combination and compares, among other things, the investment objectives and
strategies, operating expenses and performance history of your Fund and Buying
Fund. You should review the enclosed materials carefully.
After careful consideration, the Board of Trustees of AIM Counselor Series
Trust has approved the Agreement and proposed combination. They recommend that
you vote FOR the proposal.
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 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 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, Computershare Fund Services,
reminding you to vote.
Sincerely,
-s- Philip A. Taylor
Philip A. Taylor
President
AIM ADVANTAGE HEALTH SCIENCES FUND,
A PORTFOLIO OF AIM COUNSELOR SERIES TRUST
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 15, 2007
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 AIM Advantage Health Sciences Fund (the "Fund"), an
investment portfolio of AIM Counselor Series Trust ("Trust"), will be
transferred to AIM Global Health Care Fund ("Buying Fund"), an investment
portfolio of AIM Investment Funds ("Buyer"). Buying Fund will assume the
liabilities of the Fund and Buyer will issue shares of each class of Buying Fund
to shareholders of the corresponding class of shares of the Fund.
2. 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 March 15, 2007 at 3:00 p.m., Central Time.
Shareholders of record as of the close of business on January 22, 2007 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 CARD, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES
OF TRUST. YOU MAY ALSO VOTE 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 CARD, BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
SECRETARY OF TRUST OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
-s- John M. Zerr
John M. Zerr
Secretary
January 31, 2007
<Table>
AIM ADVANTAGE HEALTH SCIENCES FUND, AIM GLOBAL HEALTH CARE FUND,
A PORTFOLIO OF A PORTFOLIO OF
AIM COUNSELOR SERIES TRUST 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>
COMBINED PROXY STATEMENT AND PROSPECTUS
JANUARY 31, 2007
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 Advantage Health Sciences Fund. The Special Meeting will be held on March
15, 2007 at 3:00 p.m., Central Time. We intend to mail this Proxy
Statement/Prospectus, the enclosed Notice of Special Meeting of Shareholders and
the enclosed proxy card on or about January 31, 2007 to all shareholders
entitled to vote at the Special Meeting.
At the Special Meeting, we are asking shareholders of AIM Advantage Health
Sciences Fund (your "Fund") to consider and approve an Agreement and Plan of
Reorganization (the "Agreement") that provides for the reorganization of your
Fund, an investment portfolio of AIM Counselor Series Trust ("Trust"), with AIM
Global Health Care Fund ("Buying Fund"), an investment portfolio of AIM
Investment Funds ("Buyer") (the "Reorganization").
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 advisable and 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 both your Fund and Buying Fund. AIM is a wholly
owned subsidiary of AMVESCAP PLC ("AMVESCAP"), an independent global investment
management company.
Your Fund and Buying Fund have similar investment objectives. Your Fund
seeks capital growth and Buying Fund seeks long-term growth of capital. 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. 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 December 29, 2006, as supplemented,
together with the related Statement of Additional Information dated December 29,
2006 (the "Selling Fund Prospectus"), 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 February 28, 2006, as supplemented, (the "Buying Fund Prospectus"), and
the related Statement of Additional Information dated February 28, 2006, as
supplemented, and the Statement of Additional Information relating to the
Reorganization dated January 31, 2007, 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 January 31, 2007, also is incorporated by reference into
this Proxy Statement/Prospectus. The SEC maintains a website at www.sec.gov that
contains the Prospectuses and
i
Statements of Additional Information described above, material incorporated by
reference, and other information about Trust and Buyer.
Copies of the Prospectuses of Buying Fund and your Fund and the related
Statements of Additional Information are available without charge by writing to
A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-
1173, or by calling (800) 959-4246. Additional information about your Fund and
Buying Fund may be obtained on the internet at www.aiminvestments.com.
Trust has previously sent to shareholders the most recent annual report for
your Fund, including financial statements, and the most recent semi-annual
report succeeding the annual report, if any. If you have not received such
reports or would like to receive an additional copy, please contact A I M
Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, or
by calling (800) 959-4246. Such reports 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
SUMMARY............. 1
The
Reorganiza-
tion........... 1
Comparison of
Investment
Objectives and
Principal
Strategies..... 1
Comparison of
Performance.... 3
Comparison of Fees
and Expenses... 5
Comparison of
Multiple Class
Structures..... 11
Comparison of
Sales Charges.. 11
Comparison of
Distribution
and Purchase
and Redemption
Procedures..... 11
The Board's
Recommenda-
tion........... 12
RISK FACTORS........ 12
Risks Associated
with Buying
Fund........... 12
Comparison of
Risks of Buying
Fund and Your
Fund........... 13
INFORMATION ABOUT
BUYING FUND....... 13
Description of
Buying Fund
Shares......... 13
Management's
Discussion of
Fund
Performance.... 13
Financial
Highlights..... 14
ADDITIONAL
INFORMATION ABOUT
THE AGREEMENT..... 14
Terms of the
Reorganiza-
tion........... 14
The
Reorganiza-
tion........... 14
Board
Consider-
ations......... 14
Other Terms....... 17
Federal Income Tax
Consequences... 18
Accounting
Treatment...... 19
RIGHTS OF
SHAREHOLDERS...... 19
CAPITALIZATION...... 19
LEGAL MATTERS....... 19
ADDITIONAL
INFORMATION ABOUT
BUYING FUND AND
YOUR FUND......... 20
INFORMATION FILED
WITH THE
SECURITIES AND
EXCHANGE
COMMISSION........ 20
INFORMATION ABOUT
THE SPECIAL
MEETING AND
VOTING............ 20
Proxy
Statement/Pro-
spectus........ 20
Time and Place of
Special
Meeting........ 21
Voting in Person.. 21
Voting by Proxy... 21
Voting by
Telephone or
the Internet... 21
Quorum Requirement
and
Adjournment.... 21
Vote Necessary to
Approve the
Agreement...... 22
Proxy
Solicitation... 22
Other Matters..... 22
Ownership of
Shares......... 22
Security Ownership
of Management
and Trustees... 22
</Table>
iii
<Table>
EXHIBIT A........ Classes of Shares of Your Fund and Corresponding Classes of
Shares of Buying Fund
EXHIBIT B........ Shares Outstanding of Each Class of Your Fund on Record Date
EXHIBIT C........ Ownership of Shares of Your Fund
EXHIBIT D........ Ownership of Shares of Buying Fund
APPENDIX I....... Agreement and Plan of Reorganization
APPENDIX II...... Prospectus of Buying Fund
APPENDIX III..... Discussion of Performance of Buying Fund
APPENDIX IV...... Financial Highlights of Buying Fund
</Table>
THE AIM FAMILY OF FUNDS, AIM AND DESIGN, AIM, AIM FUNDS, AIM FUNDS AND
DESIGN, AIM INVESTMENTS, AIM INVESTOR, AIM LIFETIME AMERICA, AIM LINK, AIM
INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA FAMILIA AIM DE FONDOS, LA FAMILIA AIM DE
FONDOS AND DESIGN, INVIERTA CON DISCIPLINA AND INVEST WITH DISCIPLINE, THE AIM
COLLEGE SAVINGS PLAN, AIM SOLO 401(K), AIM INVESTMENTS AND DESIGN AND YOUR
GOALS. OUR SOLUTIONS. ARE REGISTERED SERVICE MARKS AND AIM BANK CONNECTION, AIM
INTERNET CONNECT, AIM PRIVATE ASSET MANAGEMENT, AIM PRIVATE ASSET MANAGEMENT AND
DESIGN, AIM STYLIZED AND/OR DESIGN, AIM ALTERNATIVE ASSETS AND DESIGN, AND
MYAIM.COM ARE SERVICE MARKS OF A I M MANAGEMENT GROUP INC. AIM TRIMARK IS A
REGISTERED SERVICE MARK OF A I M MANAGEMENT GROUP INC. AND AIM FUNDS MANAGEMENT
INC.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this
Proxy Statement/Prospectus, and you should not rely on such other information or
representations.
iv
INTRODUCTION
AIM continuously analyzes and reviews its U.S. mutual fund offerings. As
part of its review, AIM concluded that it would be appropriate to consolidate
certain funds having similar investment objectives and strategies. AIM believes
that the shareholders of your Fund will benefit from the proposed Reorganization
because the combination of the funds will allow Buying Fund the best available
opportunities for investment management and potential operating efficiencies.
SUMMARY
The Board, including the independent trustees, has determined that the
Reorganization is advisable and 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. Your Fund and Buying Fund have similar investment objectives
and utilize similar investment strategies, although, as noted below, Buying Fund
does not utilize short selling or leverage as investment techniques. The Board
believes that the combined fund should have greater market presence and may
achieve greater operating efficiencies because certain fixed costs, such as
legal, accounting, shareholder services and trustee expenses, will be spread
over the greater assets of the combined fund. In addition, the total annual
operating expenses of the combined fund are expected to be lower than your
Fund's current total annual operating expenses. For additional information
concerning the factors the Board of Trustees 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, also a Delaware statutory trust.
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, 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 Ballard Spahr Andrews &
Ingersoll, 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. 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 have similar investment objectives and invest in
similar types of securities. Your Fund seeks capital growth and Buying Fund
seeks long-term growth of capital. Both funds focus their investments in equity
securities of companies in the health care industry.
1
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>
AIM ADVANTAGE HEALTH SCIENCES FUND (YOUR AIM GLOBAL HEALTH CARE FUND (BUYING FUND)
FUND)
INVESTMENT OBJECTIVES
- 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, securities of health care industry
plus any borrowings for investment companies
purposes, in the equity securities and - In complying with this 80% investment
equity-related instruments of companies requirement, the fund will invest
that develop, produce, or distribute primarily in marketable equity
products or services related to health securities, including convertible
sciences. securities, but its investments may
include other securities, such as
synthetic instruments.
- Invests in the securities of companies
- - Invests primarily in issuers from at located in at least three different
least three different countries, countries, including the United States,
including the United States. The fund and may invest a significant portion of
may at times invest in fewer than three its assets in the securities of U.S.
countries or even a single country. issuers. Will not invest more than 50%
of its total assets in the securities
of issuers in any one country, other
than the U.S.
- Will not invest more than 50% of its
- - May invest up to 100% of its assets in total assets in the securities of
securities of non-U.S. issuers issuers in any one country, other than
the U.S.
- May invest up to 20% of its total
- - No corresponding strategy assets in companies located in
developing countries.
- May invest up to 5% of its total assets
- - No corresponding strategy in lower-quality debt securities, i.e.,
"junk bonds".
- No corresponding strategy
- - The fund may sell securities short
("short selling"), without holding
corresponding long positions
- No corresponding strategy
- - The fund may utilize bank borrowings
("leverage") to purchase securities
- The fund is diversified
- - The fund is non-diversified, therefore,
it can invest a greater percentage of
its assets in any one issuer than a
diversified fund can.
</Table>
HOW DOES YOUR FUND'S PERFORMANCE COMPARE TO THE BUYING FUND'S PERFORMANCE
A bar chart showing the annual total returns for calendar years ended
December 31, for Class A shares of your Fund and Buying Fund can be found below.
Also included below is a table showing the average annual total returns for the
periods indicated for your Fund and Buying Fund. 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
2
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 PERFORMANCE
AIM ADVANTAGE HEALTH SCIENCES FUND (YOUR FUND)
The bar chart and table shown below provide an indication of the risks of
investing in your Fund. Your Fund's past performance (before and after taxes) is
not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of your 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.
LOGO
<Table>
<Caption>
YEARS
- -----
1996.... 9.32%
1997.... 17.53%
1998.... 32.34%
1999.... (0.76)%
2000.... 32.21%
2001.... (18.50)%
2002.... (27.31)%
2003.... 26.74%
2004.... 7.56%
2005.... 10.47%
2006.... 10.51%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
23.90% (quarter ended June 30, 2000) and the lowest quarterly return was
(24.92)% (quarter ended March 31, 2001).
The following performance table compares your Fund's performance to that of
a broad-based securities market index, a style specific index and a peer group
index. your Fund's performance reflects payment of sales loads, if applicable.
The indices may not reflect payment of fees, expenses or taxes. Your Fund is not
managed to track the performance of any particular index, including the indices
shown below, and consequently, the performance of your Fund may deviate
significantly from the performance of the indices shown below.
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
(FOR THE PERIODS ENDED DECEMBER 31, SINCE INCEPTION
2006) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
- ----------------------------------- ------ ------- -------- ------------ ---------
CLASS A
Return Before Taxes................. 4.43% 2.71% 6.64% 01/23/92
Return After Taxes on
Distributions.................... 3.17 2.46 4.69
Return After Taxes on Distributions
and Sale of Fund Shares.......... 4.58 2.32 4.89
CLASS B
Return Before Taxes................. 4.70 2.46 3.49% 05/15/01
CLASS C
Return Before Taxes................. 8.70 2.47 3.04 05/15/01
S&P 500 Index(2)...................... 15.78 6.19 8.42
Morgan Stanley Health Care Product
Index(2)(3)......................... 9.71 7.82 15.42
Lipper Health/Biotech Fund
Index(3)(4)......................... 4.80 4.69 10.49
</Table>
3
- --------
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 S&P 500 Index measures the performance of the 500 most widely held
common stocks and is considered one of the best indicators of U.S. stock
market performance. Your Fund has also included the Morgan Stanley Health
Care Product Index, which your Fund believes more closely reflects the
performance of securities in which your Fund invests. In addition, the
Lipper Health/Biotech Fund Index (which may or may not include your Fund)
is included for comparison to a peer group.
(3) The Morgan Stanley Health Care Product Index is an equal-dollar weighted
index of 26 companies involved in the business of pharmaceuticals,
including biotechnology and medical technology.
(4) The Lipper Health/Biotech Fund Index is an equally weighted
representation of the 30 largest funds within the Lipper Health/Biotech
Fund category. These funds invest at least 65% of their portfolios in
equity securities of companies engaged in healthcare, medicine, and
biotechnology.
AIM GLOBAL HEALTH CARE FUND (BUYING FUND)
The bar chart and table shown below provide an indication of the risks of
investing in Buying Fund. Buying Fund's past performance (before and after
taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of Buying 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.
LOGO
<Table>
<Caption>
YEARS
- -----
1996.... 23.84%
1997.... 7.96%
1998.... 18.43%
1999.... 5.52%
2000.... 52.08%
2001.... 4.70%
2002.... (22.68)%
2003.... 21.44%
2004.... 9.17%
2005.... 8.68%
2006.... 4.36%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
21.61% (quarter ended December 31, 1998) and the lowest quarterly return was
(11.32)% (quarter ended September 30, 1998).
4
The following performance table compares Buying Fund's performance to that
of a broad-based securities market index, a style specific index and a peer
group index. Buying Fund's performance reflects payment of sales loads, if
applicable. The indices may not reflect payment of fees, expenses or taxes.
Buying Fund is not managed to track the performance of any particular index,
including the indices shown below, and consequently, the performance of Buying
Fund may deviate significantly from the performance of the indices shown below.
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
(FOR THE PERIODS ENDED DECEMBER 31, SINCE INCEPTION
2006) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
- ----------------------------------- ------ ------- -------- ------------ ---------
CLASS A.............................. 08/07/89
Return Before Taxes................ (1.37)% 1.90% 8.97%
Return After Taxes on
Distributions................... (2.77) 1.52 6.85
Return After Taxes on Distributions
and Sale of Fund Shares......... 1.00 1.63 6.68
CLASS B.............................. 04/01/93
Return Before Taxes................ (1.05) 2.10 9.14
CLASS C.............................. 03/01/99
Return Before Taxes................ 2.65 2.46 -- 8.37%
MSCI World Index(2).................. 20.07 9.97 7.64 --
MSCI World Health Care Index(2)(3)... 10.47 4.58 --
Lipper Health/Biotech Fund
Index(2)(4)........................ 4.80 4.69 10.49 --
</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 Morgan Stanley Capital International World Index measures the
performance of securities listed on stock exchanges of 23 developed
countries. Buying Fund has also included the Morgan Stanley Capital
International World Health Care Index, which Buying Fund believes more
closely reflects the performance of the types of securities in which
Buying Fund invests. In addition, Buying Fund has included the Lipper
Health/Biotech Index (which may or may not include Buying Fund) for
comparison to a peer group.
(3) The MSCI World Health Care Index includes health care securities tracked
by Morgan Stanley Capital International.
(4) The Lipper Health/Biotech Fund Index is an equally weighted
representation of the 30 largest funds within the Lipper Health/Biotech
category. These funds invest at least 65% of their portfolios in equity
securities of companies engaged in healthcare, medicine and
biotechnology.
COMPARISON OF FEES AND EXPENSES
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 Advantage Health Sciences Fund ("Your Fund") and Class
A, Class B and Class C shares of AIM Global Health Care Fund ("Buying Fund").
Pro Forma
5
Combined Expense Ratios of Buying Fund giving effect to the Reorganization are
also provided. There is no guarantee that actual expenses will be the same as
those shown in this table.
<Table>
<Caption>
AIM GLOBAL HEALTH
AIM ADVANTAGE HEALTH AIM GLOBAL HEALTH CARE FUND
SCIENCES FUND CARE FUND BUYING FUND
YOUR FUND BUYING FUND PRO FORMA COMBINED
(8/31/06 AS RESTATED) (10/31/06) (10/31/06)
--------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- ------- ------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge (Load) Imposed on
Purchase (as a percentage of offering
price)............................... 5.50% None None 5.50% None None 5.50% None None
Maximum Deferred Sales Charge (as a
percentage of original purchase price
or redemption proceeds, as
applicable).......................... None(1) 5.00% 1.00% 5.00% 1.00% None(1) 5.00% 1.00%
None(1)
Redemption/Exchange Fee (as a
percentage of amount
redeemed/exchanged)(2)............... 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund
assets)
Management fees(3)(4).................. 2.09% 2.09% 2.09% 0.62% 0.62% 0.62% 0.61% 0.61% 0.61%
Distribution and/or Service (12b-1)
Fees................................. 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25% 1.00% 1.00%
Other -- Miscellaneous
Expenses(5)(6).................... 0.40% 0.40% 0.40% 0.36% 0.36% 0.36% 0.36% 0.36% 0.36%
Other -- Interest Expenses........... 0.81% 0.81% 0.81% -- -- -- -- -- --
Total Other Expenses................... 1.21% 1.21% 1.21% 0.36% 0.36% 0.36% 0.36% 0.36% 0.36%
Total Annual Fund Operating Expenses... 3.55% 4.30% 4.30% 1.23% 1.98% 1.98% 1.22% 1.97% 1.97%
Fee Waiver(4).......................... 0.41% 0.41% 0.41% -- -- -- -- -- --
Net Annual Fund Operating Expenses..... 3.14% 3.89% 3.89% 1.23% 1.98% 1.98% 1.22% 1.97% 1.97%
<Caption>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge (Load) Imposed on
Purchase (as a percentage of offering
price)...............................
Maximum Deferred Sales Charge (as a
percentage of original purchase price
or redemption proceeds, as
applicable)..........................
Redemption/Exchange Fee (as a
percentage of amount
redeemed/exchanged)(2)...............
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund
assets)
Management fees(3)(4)..................
Distribution and/or Service (12b-1)
Fees.................................
Other -- Miscellaneous
Expenses(5)(6)....................
Other -- Interest Expenses...........
Total Other Expenses...................
Total Annual Fund Operating Expenses...
Fee Waiver(4)..........................
Net Annual Fund Operating Expenses.....
</Table>
- --------
(1) A contingent deferred sales charge may apply in some cases.
(2) Effective December 29, 2006, you may be charged a 2.00% fee on
redemptions or exchanges of Class A, B and C shares held 30 days or less.
(3) Your Fund pays the advisor a performance-based management fee, and
Management Fees have been restated to reflect the methodology currently
used by the advisor to calculate the performance-based management fee
payable by your fund. Your Fund's base management fee is 1.50%,
annualized, of your Fund's average daily net assets during the current
month. This fee is subject to a monthly performance adjustment upward or
downward of up to 1.00%, annualized, of the average daily net assets of
your Fund's Class A shares during a rolling 12 month performance period,
depending on your Fund's performance compared to the performance of the
Morgan Stanley Health Care Product Index during such performance period.
The total management fee payable by your Fund is not susceptible to
estimation because it depends upon the future relative performance of
your Fund and the Morgan Stanley Health Care Product Index, as well as
changes in the average daily net assets of your Fund and its Class A
shares over the relevant periods. See the section of this proxy entitled
"Summary -- Comparison of Fees and Expenses -- Advisory Fees" for
additional information about the calculation of your Fund's management
fee.
(4) The advisor for your Fund has contractually agreed to waive management
fees monthly through at least June 30, 2008 to the extent necessary such
that the management fee the advisor receives does not exceed a base
management fee of 1.25%, annualized, of your Fund's average daily net
assets during the current month, subject to a monthly performance
adjustment upward or downward of up to 0.75%, annualized, of the average
daily net assets of your Fund's Class A shares during a rolling 12 month
performance period (depending on your Fund's performance compared to the
performance of the Morgan Stanley Health Care Product Index during such
performance period). In addition, under this agreement the maximum
management fee payable monthly by your Fund (consisting of the base
management fee, as adjusted by the performance adjustment) will not
exceed 2.00% of your Fund's average daily net assets during the fiscal
year. Fee Waivers have been restated to reflect the methodology currently
used by the advisor to calculate the applicable waiver amount under this
agreement.
(5) Your Fund is estimated to incur $143,000 of expenses in connection with
the reorganization and your Fund will pay 100% of the expenses. The
Buying Fund is estimated to incur $30,000 of expenses in connection with
the Reorganization and will bear all of those costs and expenses. These
reorganization expenses have not been reflected in the table above.
6
(6) Includes acquired fund fees and expenses which are less than 0.01%.
Acquired fund fees and expenses are not fees or expenses incurred by the
fund directly but are expenses of the investment companies in which the
fund invests. You incur these fees and expenses indirectly through the
valuation of the fund's investment in those investment companies. The
impact of the acquired fund fees and expenses is included in the total
returns of the fund.
EXPENSE EXAMPLE
This Example is intended to help you compare the costs of investing in
different classes of Your 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 Your 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:
You would pay the following expenses if you redeemed your shares:
<Table>
<Caption>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ------ ------ ------
AIM ADVANTAGE HEALTH SCIENCES FUND (YOUR FUND)
Class A....................................... $849 $1,543 $2,256 $4,133
Class B....................................... 891 1,567 2,355 4,275(1)
Class C....................................... 491 1,267 2,155 4,430
AIM GLOBAL HEALTH CARE FUND (BUYING FUND)
Class A....................................... $668 $ 919 $1,188 $1,957
Class B....................................... 701 921 1,268 2,113(1)
Class C....................................... 301 621 1,068 2,306
AIM GLOBAL HEALTH CARE FUND (BUYING
FUND) -- PRO FORMA COMBINED
Class A....................................... $667 $ 916 $1,183 $1,946
Class B....................................... 700 918 1,262 2,102(1)
Class C....................................... 300 618 1,062 2,296
</Table>
- --------
(1) Assumes conversion of Class B shares to Class A shares, which occurs on
or about the end of the month which is at least 8 years after the date on
which shares were purchased, lowering your annual fund operating expenses
from that time on.
7
You would pay the following expenses if you did not redeem your shares:
<Table>
<Caption>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ------ ------ ------
AIM ADVANTAGE HEALTH SCIENCES FUND (YOUR FUND)
Class A....................................... $849 $1,543 $2,256 $4,133
Class B....................................... 391 1,267 2,155 4,275(1)
Class C....................................... 391 1,267 2,155 4,430
AIM GLOBAL HEALTH CARE FUND (BUYING FUND)
Class A....................................... $668 $ 919 $1,188 $1,957
Class B....................................... 201 621 1,068 2,113(1)
Class C....................................... 201 621 1,068 2,306
AIM GLOBAL HEALTH CARE FUND (BUYING
FUND) -- PRO FORMA COMBINED
Class A....................................... $667 $ 916 $1,183 $1,946
Class B....................................... 200 618 1,062 2,102(1)
Class C....................................... 200 618 1,062 2,296
</Table>
- --------
(1) Assumes conversion of Class B shares to Class A shares, which occurs on
or about the end of the month which is at least 8 years after the date on
which shares were purchased, lowering your annual fund operating expenses
from that time on.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. YOUR 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 YOUR 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.
ADVISORY FEES (YOUR FUND)
For the advisory services it provides to your Fund, AIM is entitled to
receive a performance-based or "fulcrum" advisory fee from your Fund that is
comprised of two components. The first component is a base management fee of
1.50%, annualized, of your Fund's average daily net assets during the current
month (the "Base Fee"). The second component is a monthly performance adjustment
that either increases or decreases the Base Fee (the "Fee Adjustment"). The
maximum monthly Fee Adjustment upward or downward will be 1.00%, annualized, of
the average daily net assets of your Fund's Class A shares during a rolling 12
month performance period.
AIM uses a three step process in determining the Fee Adjustment, if any,
applicable during any month. AIM uses this three step process to ensure that its
determination of the Fee Adjustment complies with applicable law and relevant
SEC guidance regarding the calculation of performance-based advisory fees.
In step one, AIM compares the investment performance of the Class A shares
of your Fund for the 12 month period ending on the last day of the current month
(the "First Performance Period") to the investment record of the Morgan Stanley
Health Care Product Index (the "Index") during the First Performance Period in
order to calculate the fee adjustment rate for the First Performance Period (the
"First Fee Adjustment Rate"). The investment performance of your Fund will be
determined by adding together (i) the change in the net asset value of the Class
A shares during the First Performance Period, (ii) the value of cash
distributions made by your Fund to holders of Class A shares to the end of the
First Performance Period, and (iii) the value of capital gains taxes per share,
if any, paid or payable on undistributed realized long-term capital gains
accumulated to the end of the First Performance Period, and will be expressed as
a percentage of its net asset value per share at the beginning of the First
Performance Period. The investment record of the Index will be determined by
adding together (i) the change in the
8
level of the Index during the First Performance Period and (ii) the value,
computed consistently with the Index, of cash distributions made by companies
whose securities comprise the Index accumulated to the end of the First
Performance Period, and will be expressed as a percentage of the Index level at
the beginning of such period. The First Fee Adjustment Rate either (i) increases
the Base Fee at the rate of 0.20%, on a pro rata basis, for each percentage
point the investment performance of Class A shares of your Fund over the First
Performance Period exceeds the sum of 2.00% and the investment record of the
Index over the First Performance Period, or (ii) decreases the Base Fee at the
rate of 0.20%, on a pro rata basis, for each percentage point the investment
record of the Index over the First Performance Period less 2.00% exceeds the
investment performance of the Class A shares of your Fund over the First
Performance Period.
After it determines any Fee Adjustment for the First Performance Period,
AIM will determine the dollar amount of additional fees or fee reductions to be
paid for a month by multiplying the First Fee Adjustment Rate by the average
daily net assets of the Class A shares of your Fund (net of any investments in
other AIM-advised funds) during the First Performance Period, dividing that
number by the number of days in the First Performance Period, and multiplying
that number by the number of days in such month.
In step two, AIM compares the investment performance of the Class A shares
of your Fund for the 12 month period ending on the last day of the prior month
(the "Second Performance Period") to the investment record of the Index during
the Second Performance Period in order to calculate the fee adjustment rate for
the Second Performance Period (the "Second Fee Adjustment Rate"). The investment
performance of your Fund will be determined by adding together (i) the change in
the net asset value of the Class A shares during the Second Performance Period,
(ii) the value of cash distributions made by your Fund to holders of Class A
shares to the end of the Second Performance Period, and (iii) the value of
capital gains taxes per share, if any, paid or payable on undistributed realized
long-term capital gains accumulated to the end of the Second Performance Period,
and will be expressed as a percentage of its net asset value per share at the
beginning of the Second Performance Period. The investment record of the Index
will be determined by adding together (i) the change in the level of the Index
during the Second Performance Period and (ii) the value, computed consistently
with the Index, of cash distributions made by companies whose securities
comprise the Index accumulated to the end of the Second Performance Period, and
will be expressed as a percentage of the Index level at the beginning of such
period. The Second Fee Adjustment Rate either (i) increases the Base Fee at the
rate of 0.20%, on a pro rata basis, for each percentage point the investment
performance of Class A shares of your Fund over the Second Performance Period
exceeds the sum of 2.00% and the investment record of the Index over the Second
Performance Period, or (ii) decreases the Base Fee at the rate of 0.20%, on a
pro rata basis, for each percentage point the investment record of the Index
over the Second Performance Period less 2.00% exceeds the investment performance
of the Class A shares of your Fund over the Second Performance Period.
After it determines any Fee Adjustment for the Second Performance Period,
AIM will determine the dollar amount of additional fees or fee reductions to be
paid for a month by multiplying the Second Fee Adjustment Rate by the average
daily net assets of the Class A shares of your Fund (net of any investments in
other AIM-advised funds) during the Second Performance Period, dividing that
number by the number of days in the Second Performance Period, and multiplying
that number by the number of days in such month.
In step three, AIM adds whichever of the Fee Adjustments resulting from the
calculations in steps one and two above to the Base Fee that will result in the
lower amount of management fees payable to AIM for the relevant month.
The management fee, as adjusted, is accrued daily based on an estimate of
your Fund's average daily net assets and relative performance for the relevant
Performance Periods and paid after each month end based on actual results for
such month.
AIM receives no management fee on the portion of your Fund's assets, if
any, invested in other funds advised by AIM, including affiliated money market
funds.
AIM has contractually agreed to waive management fees monthly through at
least June 30, 2008 to the extent necessary such that the management fee AIM
receives does not exceed a base management fee of 1.25%, annualized, of your
Fund's average daily net assets during the current month, subject to a monthly
performance
9
adjustment upward or downward of up to 0.75%, annualized, of the average daily
net assets of your Fund's Class A shares during a rolling 12 month performance
period (depending on your Fund's performance compared to the performance of the
Index during such performance period). This waiver agreement provides that in
determining the performance adjustment, the base management fee is adjusted in
increments of 0.15%, on a pro rata basis, upward or downward instead of
increments of 0.20% as provided in the Advisory Agreement. In addition, under
this waiver agreement the maximum management fee payable monthly by your Fund
(consisting of the base management fee, as adjusted by the performance
adjustment) will not exceed 2.00% of your Fund's average daily net assets during
the fiscal year. In determining the performance adjustment required pursuant to
this waiver agreement, if any, applicable during any month, AIM follows the same
three step calculation approach discussed above.
ADVISORY FEES (BUYING FUND)
Buying Fund does not utilize a performance based or "fulcrum" fee. Rather,
Buying Fund's advisory fee is based on a percentage of net assets only and is
equal to:
<Table>
<Caption>
ANNUAL RATE NET ASSETS
- ----------- ----------
0.75%................................................... First $350
million
0.65%................................................... Next $350
million
0.55%................................................... Next $1.3
billion
0.45%................................................... Next $2
billion
0.40%................................................... Next $2.0
billion
0.375%.................................................. Next $2.0
billion
0.35%................................................... Over $8
billion
</Table>
Buying Fund's advisory fee will be applicable to the combined fund if
shareholders approve the Reorganization. This means that you will no longer be
investing in a fund with a performance-based advisory fee. However, depending on
the future performance of your Fund relative to the Index and changes in the
average daily net assets of your Fund and its Class A shares over the relevant
performance periods, the application of Buying Fund's advisory fee could result
in your Fund's shareholders at times paying a higher advisory fee after the
Reorganization. For example, if your Fund underperforms the Morgan Stanley
Health Care Product Index by more than 6%, the performance-based reduction of
your Fund's base fee could result in a lower effective advisory fee than that
which will be applicable to the combined fund. The total performance-based
advisory fee payable by your Fund is not susceptible to estimation because it
depends upon the future relative performance of your Fund and the Index, as well
as changes in the average daily net assets of your Fund and its Class A shares
over the relevant performance periods.
In addition, the Buying Fund is not prohibited from paying advisory fees on
assets invested in other investment companies advised by AIM. The Buying Fund
has a practice of investing available cash balances in affiliated money market
funds. Upon the Reorganization the combined fund will pay advisory fees to AIM
on all assets invested in the affiliated money market funds, including those
assets that were acquired from your Fund in the Reorganization.
As shown in the "Comparison of Fees and Expenses -- Fee Table", based on
the performance of your Fund and the advisory fee waiver agreement in place for
your Fund the gross effective advisory fees, restated to reflect the methodology
currently used by AIM to calculate the performance-based advisory fee payable by
your Fund, are 2.09% before waivers and 1.68% after waivers of 0.41%. The
effective advisory fee rate of the Buying Fund is 0.62% before the
Reorganization and 0.61% after giving pro forma effect to the Reorganization.
Because the investment advisory fee schedule applicable to Buying Fund
after the Reorganization may be higher than the investment advisory fee
applicable to your Fund under certain circumstances, as discussed above, the
advisory agreement of the combined fund could be viewed as being materially
different from that of your Fund. Therefore, shareholders of your Fund must
approve the Reorganization by a "1940 Act Majority." The 1940 Act Majority
requirements are explained more fully below under "Vote Necessary to Approve the
Agreement."
While Buying Fund's advisory fee may be higher under certain circumstances
after the Reorganization, the pro forma net total Expense Ratio of the combined
fund is expected to be lower than your Fund's current expenses.
10
COMPARISON OF MULTIPLE CLASS STRUCTURES
A comparison of the share classes of your Fund that are currently available
to investors and the corresponding share class of Buying Fund that shareholders
of your Fund will receive in the Reorganization can be found at Exhibit A. For
information regarding the features of each of the share classes of your Fund and
Buying Fund, see the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
COMPARISON OF SALES CHARGES
No 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 redemption of shares of Buying Fund received in connection with the
Reorganization will be the same as the holding period of your shares immediately
prior to the Reorganization.
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 above in "Comparison of Fees and Expenses" 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 and the related Statements of Additional Information.
<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 12 redemptions redemptions
or 18 months from the date
of certain purchases
</Table>
<Table>
<Caption>
CLASS R INVESTOR CLASS INSTITUTIONAL CLASS
------- -------------- -------------------
- - 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>
- --------
* 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 trustees and those of
their investment advisor.
The CDSC on redemptions of shares of Buying Fund is computed based on the
lower of their original purchase price or current market value, net of
reinvested dividends and capital gains distributions.
COMPARISON OF DISTRIBUTION AND PURCHASE AND REDEMPTION PROCEDURES
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.
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. Distribution fees are payable to AIM
Distributors for distribution services. The fee tables above in "Comparison of
Fees and Expenses" include comparative information about the distribution and
service fees payable by each class of shares of your
11
Fund and Buying Fund. Each class of shares of Buying Fund will have the same or
lower aggregate distribution and service fees as the corresponding class of
shares of your Fund.
The purchase and redemption procedures of your Fund and Buying Fund are
substantially the same. For information regarding the purchase and redemption
procedures of your Fund and Buying Fund, see the Selling Fund Prospectus and the
Buying Fund Prospectus, respectively.
THE BOARD'S RECOMMENDATION
The Board, including the independent trustees of your Fund, unanimously
recommends that you vote "FOR" this Proposal. For information concerning the
factors the Board considered in approving the Agreement, see "Additional
Information About the Agreement -- Board Considerations," on page 13 of this
Proxy Statement/Prospectus.
RISK FACTORS
RISKS ASSOCIATED WITH BUYING FUND
The following is a discussion of the principal risks associated with Buying
Fund.
There is a risk that you could lose all or a portion of your investment in
Buying Fund. The value of your investment in Buying Fund will go up and down
with the prices of the securities in which Buying Fund invests. The prices of
equity securities change in response to many factors, including the historical
and prospective earnings of the issuer, the value of its assets, general
economic conditions, interest rates, investor perceptions, and market liquidity.
The value of Buying Fund's shares is particularly vulnerable to factors
affecting the health care industry, such as substantial government regulation.
Government regulation may impact the demand for products and services offered by
health care companies. Also, the products and services offered by health care
companies may be subject to rapid obsolescence caused by scientific advances and
technological innovations. Because Buying Fund focuses its investments in the
health care industry, the value of your fund shares may rise and fall more than
the value of shares of a fund that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
- Currency exchange rates -- The dollar value of Buying Fund's foreign
investments will be affected by changes in the exchange rates between the
dollar and the currencies in which those investments are traded.
- Political and economic conditions -- The value of Buying Fund's foreign
investments may be adversely affected by political and social instability
in their home countries and by changes in economic or taxation policies
in those countries.
- Regulations -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available
information about foreign companies than about U.S. companies.
- Markets -- The securities markets of other countries are smaller than
U.S. securities markets. As a result, many foreign securities may be less
liquid and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign
companies and governments located in developing countries more than those in
countries with mature economics. For example, many developing countries have, in
the past, experienced high rates of inflation or sharply devalued their
currencies against the U.S. dollar, thereby causing the value of investments in
companies located in those countries to decline. Transaction costs are often
higher in developing countries and there may be delays in settlement procedures.
IPOs of securities issued by unseasoned companies with little or no
operating history are risky and their prices are highly volatile, but they can
result in very large gains in their initial trading. There can be no assurance
that
12
Buying Fund will have favorable IPO investment opportunities in the future.
Attractive IPOs are often oversubscribed and may not be available to Buying
Fund, or may be available in only very limited quantities.
An investment in Buying 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.
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 the two funds have similar investment
objectives and similar investment strategies.
Your Fund is non-diversified, which means that it may invest in fewer
issuers than if it were a diversified fund. Your Fund also may sell put and
covered call options, and purchase put and call options, on securities,
securities indices and foreign currencies. Your fund may also sell securities
short and borrow money to purchase securities. If your Fund purchases a put or
call option that expires without value, your Fund will have incurred an expense
in the amount of the cost of the option. If your Fund sells a put option that is
exercised, your Fund will have to purchase the security at a price greater than
its market value. If your Fund sells a call option that is exercised, your Fund
will have to sell the security at a price lower than its market value.
If your Fund sells a security short and the security increases in value,
your Fund will have to pay the higher price to purchase the security. Since
there is no limit on how much the price of the security can increase, your
Fund's exposure is unlimited. The more your Fund pays to purchase the security,
the more it will lose on the transaction, and the more the price of your shares
will be affected. Your Fund will also incur transaction costs to engage in this
practice. If your Fund borrows money to buy securities (leverages) and the
prices of those securities decrease, or if the cost of borrowing exceeds any
increases in the prices of those securities, the net asset value of your Fund's
shares will decrease faster than if your Fund had not used leverage. To repay
borrowings, your Fund may have to sell securities at a time and at a price that
is unfavorable. Interest on borrowings is an expense your Fund would not
otherwise incur.
After the Reorganization, you will no longer encounter these risks because
Buying Fund is a diversified fund, does not sell put and covered call options,
does not engage in short sales except where Buying Fund owns an equal amount of
such securities and does not utilize leverage.
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 Trustees of
Buyer. 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 at the end of the month which is eight years after the date on which
shares were purchased, there are no conversion rights.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Buying Fund taken from its semi-annual
report to shareholders for the semi-annual period ended April 30, 2006 is set
forth in Appendix III of this Proxy Statement/Prospectus.
13
FINANCIAL HIGHLIGHTS
For more information about Buying Fund's financial performance, see the
financial highlights for Buying Fund in Appendix IV attached to this Proxy
Statement/Prospectus, which are more current than and should be read in lieu of
the "Financial Highlights" section of the Buying Fund Prospectus that is
attached to this Proxy Statement/Prospectus as Appendix II.
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
or about April 23, 2007, 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 April 20, 2007 (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 August
31, 2006 and for the short taxable year beginning on September 1, 2006 and
ending on the Closing and (b) all of your Fund's net capital gain recognized in
its taxable year ended August 31, 2006 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.
Following receipt of the requisite shareholder vote and as soon as
reasonably practicable after the Closing, Trust will redeem the outstanding
shares of your Fund from shareholders in accordance with the applicable
Agreement and Declaration of Trust, Bylaws and the Delaware Statutory Trust Act.
BOARD CONSIDERATIONS
AIM proposed that the Board consider the Reorganization at an in-person
meeting of the Boards held on November 6-8, 2006, at which discussions of the
Reorganization took place. After careful consideration and after weighing the
pros and cons of the Reorganization, the Board of your Fund determined that the
Reorganization is advisable and in the best interests of your Fund and will not
dilute the interests of your Fund's shareholders. The Board approved the
Agreement and the Reorganization based on the following anticipated benefits to
shareholders:
- The combined fund should have a greater market presence and may achieve
greater operating efficiencies due to certain fixed costs, such as legal,
accounting, shareholder services and trustee expenses, being spread out
over the greater assets of the combined fund. The Board noted that your
Fund's net assets have declined substantially as a result of net
redemptions, which raises questions about your Fund's continued viability
as a
14
stand-alone investment option, and, as a result, your Fund may not be
able to achieve economies of scale unless it is combined with another
fund.
- The more efficient use of AIM's Global Health Care Team. The same
management teams manage both funds. While Buying Fund does not utilize
short selling or leverage as investment techniques, Buying Fund's
investment process has provided better long-term performance to
shareholders.
- The total annual operating expenses of the combined fund are expected to
be lower than your Fund's current total annual operating expenses.
The Board received from AIM 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 giving
effect to the Reorganization. AIM also provided the Board with written materials
concerning the structure of the proposed Reorganization and the Federal tax
consequences of the Reorganization.
The Board also received additional information from AIM with respect to the
following: the availability of suitable merger candidates, current litigation,
contingent assets and liabilities, the calculation of pro forma expense ratios
and the effect on transfer agency fees. In addition, the Board requested a
follow-up report after the consummation of the Reorganization that shows the
actual cost and expenses 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 performance 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 sizes of your Fund and Buying Fund.
- The consequences of the Reorganization for Federal income tax purposes,
including the treatment of any unrealized capital gains and capital loss
carryforwards 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.
- The projected financial impact to AIM and its affiliates of the
Reorganization.
AIM proposed the Reorganization as part of an effort to consolidate the AIM
Funds' retail health industry product offerings. In considering the
Reorganization, the Board noted that the funds have the same portfolio
management teams, and utilize reasonably similar investment strategies. The
Board did note that your Fund will lose the ability to sell securities short and
to utilize leverage because Buying Fund is not permitted to utilize these
investment techniques. As a result, the Board noted that your Fund will incur
certain expenses in covering its short positions and raising cash to return its
borrowings.
The Board considered AIM's recommendation that Buying Fund be the surviving
fund in the Reorganization primarily because the portfolio composition of the
combined fund is expected to be more like Buying Fund's current portfolio
composition as a result of the application of Buying Fund's investment process
after the Reorganization. Consequently Buying Fund's performance track record
more accurately reflects the results of the investment process that the combined
fund will utilize after the Reorganization. The Board also considered the
relative sizes of the two funds, noting that Buying Fund has a significantly
larger asset base. As of June 30, 2006, Buying Fund had net assets of
approximately $1.44 billion, compared to net assets for your Fund of
approximately $145 million.
The Board considered the performance of Buying Fund in relation to the
performance of your Fund as of June 30, 2006 and September 30, 2006. The Board
noted that Buying Fund has provided better long-term returns to
15
its shareholders than your Fund. The relative performance of Class A shares of
your Fund and Class A shares of Buying Fund (without sales loads) was as
follows:
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 2006
<Table>
<Caption>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION INCEPTION DATE
-------- ---------- --------- --------------- --------------
Your Fund................. 12.82% 2.46% 6.06% 8.15% January 23, 1992
Buying Fund............... 7.38% 1.47% 10.33% 12.04% August 7, 1989
</Table>
AVERAGE ANNUAL TOTAL RETURNS AS OF SEPTEMBER 30, 2006
<Table>
<Caption>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION INCEPTION DATE
-------- ---------- --------- --------------- --------------
Your Fund................. 8.62% 4.56% 6.59% 8.34% January 23, 1992
Buying Fund............... 4.59% 3.80% 10.32% 12.20% August 7, 1989
</Table>
For more complete performance information, including calendar year returns
and benchmark comparisons, see "Comparison of Performance."
The Board also considered the operating expenses the funds incur. As a
percentage of average daily net assets, the total annual operating expenses of
Buying Fund, before giving effect to the Reorganization, are lower than the
total annual operating expenses of your Fund.
The Board noted that your Fund utilizes a performance-based advisory fee,
as more fully described above under "Summary -- Comparison of Fees and
Expenses -- Advisory Fees (Your Fund)," and that Buying Fund does not utilize a
performance-based fee. The Board considered AIM's proposal that the investment
advisory fee schedule applicable to Buying Fund apply to the combined fund.
Board noted that where your Fund's performance equals or exceeds the performance
of the Index, your Fund's advisory fee would be higher than Buying Fund's,
assuming that there are no changes in the average daily net assets of your Fund
and its Class A shares over the relevant performance periods. However, the Board
also noted that in circumstances where your Fund underperforms the Index, your
Fund's performance-based fee could be lower than Buying Fund's advisory fee
depending on changes in the average daily net assets of your Fund and its Class
A shares over the relevant performance periods. As a result, shareholders of
your Fund must approve the Reorganization by a "1940 Act Majority," which is
explained more fully below under "Vote Necessary to Approve the Agreement."
Based on AIM's recommendation that the Buying Fund be the surviving fund in
the Reorganization, as described above, the Board noted that it would be
appropriate for the combined fund to utilize the investment advisory fee
schedule of Buying Fund. Buying Fund's advisory fee could, under the
circumstances described above, be lower than that of your Fund, or under
different circumstances, higher than that of your Fund. AIM reported to the
Board that, based upon historical data at a specified date and related projected
data, on a pro forma basis, the total annual operating expense ratios of Buying
Fund, at combined asset levels, are expected to be lower than those of your Fund
for Class A, Class B and Class C shares. The Board considered the fact that your
Fund's dividend expenses attributable to securities sold short and interest
expense are types of expenses not currently incurred by Buying Fund and not
expected to be incurred by the combined fund. The Board noted that, excluding
dividend expenses attributable to securities sold short and interest expense,
based upon historical data at a specified date and related projected data, on a
pro forma basis, the total annual operating expense ratios of Buying Fund, at
combined asset levels, are expected to be higher than those of your Fund for
Class A, Class B and Class C shares, respectively.
The Board noted that as of October 17, 2006, approximately 5.46% of your
Fund's net assets were invested in illiquid private equity securities. Based on
the combined assets of your Fund and Buying Fund as of that date, after giving
effect to the Reorganization approximately 0.46% of the combined fund's net
assets would be invested in private equity securities. Unless market quotations
are available, AIM prices your Fund's private equity securities at fair value in
good faith in accordance with its procedures for valuing securities. The NAV of
Buying Fund is calculated each day for purposes of processing purchases and
redemptions; this NAV calculation includes fair value prices for certain fund
securities, including most of the private equity securities.
16
The Board also considered, based upon historical data at a specified date,
the effect of the Reorganization on the anticipated tax benefits to shareholders
from the utilization of the capital loss carryforwards of your Fund and of
Buying Fund as offsets to future realized capital gains. As of June 30, 2006,
your Fund was estimated to have no capital loss carryforward. However, your Fund
had year-to-date unrealized net capital loss of approximately $11 million.
Buying Fund had year-to-date unrealized net capital gain of approximately $103
million. The Board also noted that the treatment of these tax attributes can be
affected by a variety of different factors occurring after the date of the data
presented to the Board (both before and after the Closing). As a result, the
outcome of these matters is difficult to predict.
The total expenses to be incurred by your Fund in connection with the
Reorganization are expected to be approximately $143,000. AIM proposed that
these costs and expenses be paid by your Fund in light of the reduction in total
operating expenses that will be paid by your Fund's shareholders after the
Reorganization. Buying Fund is expected to incur approximately $30,000 of
expenses in connection with the Reorganization and will bear all of those costs
and expenses.
To determine which party would bear the expenses to be incurred in
connection with the Reorganization, AIM estimated the amount of mailing,
printing, solicitation, and legal and accounting fees to be incurred by both
Buying Fund and your Fund. AIM then performed a qualitative analysis that took
into account, among other things, the expected benefits to be enjoyed by your
Fund's shareholders through reduced expenses on a pro forma basis, the amount of
time estimated for your Fund's shareholders to recoup expenses incurred in the
Reorganization in light of such expected benefits, the effect incurring such
expenses would have on the net asset value of your Fund, whether there was a
financial impact to AIM's profit and loss (positive or negative) and the
relative performance of your Fund and Buying Fund.
The Board also noted that under the terms of your Fund's current advisory
agreement, AIM may not receive advisory fees on your Fund's assets that are
invested in affiliated money market funds. After the Reorganization, this
limitation will no longer apply and AIM will be able to receive advisory fees on
any of your Fund's assets transferred to Buying Fund that are invested in
affiliated money market funds, in accordance with AIM's affiliated money market
fund procedures.
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 Board meeting
discussed above, the Board determined that the Reorganization is advisable and
in the best interests of your Fund and will not dilute the interests of your
Fund's shareholders. Therefore, the Board recommended the approval of the
Agreement by the shareholders of your Fund at the Special Meeting.
OTHER TERMS
If any amendment is made to the Agreement following the mailing of this
Proxy Statement/Prospectus and prior to the Closing that would have a material
adverse effect on shareholders, such change will be submitted to the affected
shareholders for their approval. However, if an amendment is made that would not
have a material adverse effect on shareholders, 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
17
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 Ballard Spahr Andrews
& Ingersoll, 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 Trustees 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
September 30, 2007.
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;
- 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
- 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, Ballard Spahr Andrews & Ingersoll, 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 Ballard Spahr Andrews & Ingersoll,
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. A copy of the opinion will be filed with the Securities
and Exchange Commission. and will be available for public inspection. See
"Information Filed with the Securities and Exchange Commission."
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
18
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
Trust and Buyer are each Delaware statutory trusts. Generally, there are no
material differences between the rights of shareholders under the Agreement and
Declaration of Trust and the rights of shareholders under the Buyer's Agreement
and Declaration of Trust.
CAPITALIZATION
The following table sets forth, as of April 30, 2006 (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 PRO FORMA BUYING FUND
CLASS A SHARES CLASS A SHARES ADJUSTMENTS CLASS A SHARES
-------------- -------------- ----------- --------------
Net Assets...................... $153,450,494 $566,996,553 $ (149,293)(1) $720,297,754
Shares Outstanding.............. 8,571,701 18,575,660 (3,548,925)(2) 23,598,436
Net Asset Value Per Share....... $ 17.90 $ 30.52 $ 30.52
</Table>
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND PRO FORMA BUYING FUND
CLASS B SHARES CLASS B SHARES ADJUSTMENTS CLASS B SHARES
-------------- -------------- ----------- --------------
Net Assets........................ $3,145,023 $149,457,427 $ (5,722)(1) $152,596,728
Shares Outstanding................ 183,482 5,437,503 (69,184)(2) 5,551,801
Net Asset Value Per Share......... $ 17.14 $ 27.49 $ 27.49
</Table>
<Table>
<Caption>
PRO FORMA
YOUR FUND BUYING FUND PRO FORMA BUYING FUND
CLASS C SHARES CLASS C SHARES ADJUSTMENTS CLASS C SHARES
-------------- -------------- ----------- --------------
Net Assets........................ $2,024,887 $46,315,136 $ (2,721)(1) $48,337,302
Shares Outstanding................ 122,108 1,683,895 (48,554)(2) 1,757,449
Net Asset Value Per Share......... $ 16.58 $ 27.50 $ 27.50
</Table>
- --------
(1) Your Fund will incur approximately $143,000 of expenses in connection
with the Reorganization and your Fund will pay 100% of the expenses,
therefore Net Assets have been adjusted for expenses expected to be
incurred in connection with the Reorganization. The Buying Fund will
incur approximately $30,000 of expenses in connection with the
Reorganization of which $14,736 was allocated to Buying Fund Classes A, B
and C shown above based on relative net assets. Net Assets Pro Forma
Adjustments include this amount.
(2) Shares Outstanding have been adjusted for the accumulated change in the
number of shares of your Fund's shareholder accounts based on the
relative value of your Fund's and Buying Fund's Net asset Value Per Share
assuming the Reorganization would have taken place on October 31, 2006.
LEGAL MATTERS
Certain legal matters concerning the tax consequences of the Reorganization
will be passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market
Street, Philadelphia, PA 19103-7599.
19
ADDITIONAL INFORMATION ABOUT
BUYING FUND AND 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
"Performance Information" for more information about the performance of Buying
Fund; (ii) see "Fund Management" for more information about the management of
Buying Fund; (iii) see "Other Information" for more information about Buying
Fund's policy with respect to dividends and distributions; and (iv) see "Other
Information" for more information about the pricing, purchase, redemption and
repurchase of shares of Buying Fund, tax consequences to shareholders of various
transactions in shares of Buying Fund, distribution arrangements and the
multiple class structure of Buying 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 have been made a part of this Proxy Statement/ Prospectus by reference:
(i) see "Fund Performance" for more information about the performance of your
Fund; (ii) see "Fund Management" and "Portfolio Managers" for more information
about the management of your Fund; (iii) see "Shareholder Information" for more
information about the pricing of shares of your Fund; (iv) see "Taxes" for more
information about tax consequences to shareholders of various transactions in
shares of your Fund; and (v) see "Dividends And Capital Gain Distributions" for
more information about your Fund's policy with respect to dividends and
distributions.
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 and semiannual 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
Prospectuses and related Statement of Additional Information is Registration No.
811-09913. Such Selling Fund Prospectuses are 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. 811-05426. 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
files reports and other information with the SEC. Reports, proxy material,
registration statements and other information filed by Trust (including the
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 1580,
100 F Street, NE, Washington, DC 20549, and at the following regional office of
the SEC: 1801 California Street, Suite 4800, Denver, Colorado 80202. 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
other registrants that file electronically with the SEC.
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.
20
Trust intends to mail this Proxy Statement/Prospectus, the enclosed Notice
of Special Meeting of Shareholders and the enclosed proxy card on or about
January 31, 2007 to all shareholders entitled to vote. Shareholders of record of
your Fund as of the close of business on January 22, 2007 (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 D.
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 March 15, 2007, at 3:00 p.m., Central Time.
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 FOR the
proposal to approve the Agreement, as recommended by the Board, and in
accordance with management's recommendation on other matters.
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 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.
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.
21
If a quorum is not present at the Special Meeting or a quorum is present
but sufficient votes to approve the Agreement 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 the votes cast 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 the Reorganization in favor of such an adjournment
and will vote those proxies required to be voted AGAINST the Reorganization
against such adjournment. A shareholder vote may be taken on the Reorganization
prior to any such adjournment if sufficient votes have been received and it is
otherwise appropriate.
VOTE NECESSARY TO APPROVE THE AGREEMENT
Approval of the Agreement and, in connection therewith, the sale of all of
your Fund's assets and the termination of your Fund as a designated series of
the Trust, requires a 1940 Act Majority, which is 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 the Agreement because approval of the
Agreement requires the affirmative vote of a percentage of the voting securities
present or represented by proxy or a percentage of the outstanding voting
securities.
PROXY SOLICITATION
Trust will solicit proxies for the Special Meetings. Trust expects to
solicit proxies principally by mail, but Trust 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 100% of its costs and expenses incurred in connection with the
reorganization, including solicitation costs. Solicitation costs are expected to
be approximately $16,000.
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.
OWNERSHIP OF SHARES
A list of the name, address and percent ownership of each person who, as of
January 22, 2007, to the knowledge of Trust owned 5% or more of any class of the
outstanding shares of your Fund can be found at Exhibit C.
A list of the name, address and percent ownership of each person who, as of
January 22, 2007, to the knowledge of Buyer owned 5% or more of any class of the
outstanding shares of Buying Fund can be found at Exhibit D.
SECURITY OWNERSHIP OF MANAGEMENT AND TRUSTEES
Information regarding the ownership of each class of each your Fund's
shares and Buying Fund's shares by trustees and current executive officers of
Trust can be found in Exhibits C and D, respectively.
22
EXHIBIT A
CLASSES OF SHARES OF YOUR FUND AND CORRESPONDING CLASSES OF SHARES OF BUYING
FUND
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF SHARES OF YOUR FUND SHARES OF BUYING FUND
------------------------------ ------------------------
Class A Class A
Class B Class B
Class C Class C
</Table>
A-1
EXHIBIT B
Shares Outstanding of Each Class of Your Fund on Record Date
As of January 22, 2007, there were the following number of shares
outstanding of each class of your Fund:
YOUR FUND
- ---------
Class A Shares:
Class B Shares:
Class C Shares:
B-1
EXHIBIT C
OWNERSHIP OF SHARES OF YOUR FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of January 22, 2007, 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.
C-1
EXHIBIT D
OWNERSHIP OF SHARES OF BUYING FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of January 22, 2007, 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.
SECURITY OWNERSHIP OF MANAGEMENT AND TRUSTEES
To the best of the knowledge of Trust, the ownership of shares of each
Selling Fund by executive officers and trustees of Trust as a group constituted
less than 1% of the outstanding shares of each class of each Selling Fund as of
January 22, 2007.
D-1
APPENDIX I
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
AIM ADVANTAGE HEALTH SCIENCES FUND,
A SEPARATE PORTFOLIO OF
AIM COUNSELOR SERIES TRUST
NOVEMBER 8, 2006
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE 1 DEFINITIONS........................................................ 1
SECTION 1.1. Definitions............................................... 1
ARTICLE 2 TRANSFER OF ASSETS................................................. 4
SECTION 2.1. Reorganization of Selling Fund............................ 4
SECTION 2.2. Computation of Net Asset Value............................ 4
SECTION 2.3. Valuation Date............................................ 4
SECTION 2.4. Delivery.................................................. 4
SECTION 2.5. Termination of Series and Redemption of Selling Fund 5
Shares....................................................
SECTION 2.6. Issuance of Buying Fund Shares............................ 5
SECTION 2.7. Investment Securities..................................... 5
SECTION 2.8. Liabilities............................................... 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER........................... 5
SECTION 3.1. Organization; Authority................................... 5
SECTION 3.2. Registration and Regulation of Seller..................... 5
SECTION 3.3. Financial Statements...................................... 6
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities....... 6
SECTION 3.5. Selling Fund Shares; Business Operations.................. 6
SECTION 3.6. Accountants............................................... 6
SECTION 3.7. Binding Obligation........................................ 7
SECTION 3.8. No Breaches or Defaults................................... 7
SECTION 3.9. Authorizations or Consents................................ 7
SECTION 3.10. Permits................................................... 7
SECTION 3.11. No Actions, Suits or Proceedings.......................... 7
SECTION 3.12. Contracts................................................. 8
SECTION 3.13. Properties and Assets..................................... 8
SECTION 3.14. Taxes..................................................... 8
SECTION 3.15. Benefit and Employment Obligations........................ 8
SECTION 3.16. Brokers................................................... 8
SECTION 3.17. Voting Requirements....................................... 8
SECTION 3.18. State Takeover Statutes................................... 8
SECTION 3.19. Books and Records......................................... 9
SECTION 3.20. Prospectus and Statement of Additional Information........ 9
SECTION 3.21. No Distribution........................................... 9
SECTION 3.22. Liabilities of Selling Fund............................... 9
SECTION 3.23. Value of Shares........................................... 9
SECTION 3.24. Intercompany Indebtedness; Consideration.................. 9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............................ 9
SECTION 4.1. Organization; Authority................................... 9
SECTION 4.2. Registration and Regulation of Buyer...................... 9
SECTION 4.3. Financial Statements...................................... 9
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities....... 10
SECTION 4.5. Registration of Buying Fund Shares........................ 10
SECTION 4.6. Accountants............................................... 10
SECTION 4.7. Binding Obligation........................................ 10
SECTION 4.8. No Breaches or Defaults................................... 10
</Table>
i
<Table>
<Caption>
PAGE
----
SECTION 4.9. Authorizations or Consents................................ 11
SECTION 4.10. Permits................................................... 11
SECTION 4.11. No Actions, Suits or Proceedings.......................... 11
SECTION 4.12. Taxes..................................................... 11
SECTION 4.13. Brokers................................................... 12
SECTION 4.14. Representations Concerning the Reorganization............. 12
SECTION 4.15. Prospectus and Statement of Additional Information........ 12
SECTION 4.16. Value of Shares........................................... 12
SECTION 4.17. Intercompany Indebtedness; Consideration.................. 12
ARTICLE 5 COVENANTS.......................................................... 13
SECTION 5.1. Conduct of Business....................................... 13
SECTION 5.2. Expenses.................................................. 13
SECTION 5.3. Further Assurances........................................ 13
SECTION 5.4. Notice of Events.......................................... 13
SECTION 5.5. Consents, Approvals and Filings........................... 13
SECTION 5.6. Submission of Agreement to Shareholders................... 14
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION......................... 14
SECTION 6.1. Conditions Precedent of Buyer............................. 14
SECTION 6.2. Mutual Conditions......................................... 14
SECTION 6.3. Conditions Precedent of Seller............................ 15
ARTICLE 7 TERMINATION OF AGREEMENT........................................... 15
SECTION 7.1. Termination............................................... 15
SECTION 7.2. Survival After Termination................................ 16
ARTICLE 8 MISCELLANEOUS...................................................... 16
SECTION 8.1. Survival of Representations, Warranties and Covenants..... 16
SECTION 8.2. Governing Law............................................. 16
SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment......... 16
SECTION 8.4. Obligations of Buyer and Seller........................... 16
SECTION 8.5. Amendments................................................ 17
SECTION 8.6. Enforcement............................................... 17
SECTION 8.7. Interpretation............................................ 17
SECTION 8.8. Counterparts.............................................. 17
SECTION 8.9. Entire Agreement; Exhibits and Schedules.................. 17
SECTION 8.10. Notices................................................... 17
SECTION 8.11. Representations by Investment Adviser..................... 18
SECTION 8.12. Successors and Assigns; Assignment........................ 18
Excluded Liabilities of Selling Fund
EXHIBIT A
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 4.4 Certain Contingent Liabilities of Buying Fund
SCHEDULE 4.5(a) Classes of Shares of Buying Fund
SCHEDULE 4.14(b) Permitted Reorganizations of Funds
SCHEDULE 6.2(f) Tax Opinions
</Table>
ii
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of November 8, 2006 (this
"Agreement"), by and among AIM Counselor Series Trust, a Delaware statutory
trust ("Seller"), acting on behalf of AIM Advantage Health Sciences Fund
("Selling Fund"), a separate series of Seller, AIM Investment Funds, a Delaware
statutory trust ("Buyer"), acting on behalf of AIM Global Health Care Fund
("Buying Fund"), a separate series of Buyer, and A I M Advisors, 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, Seller desires to provide for the reorganization of Selling Fund
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, the Investment Adviser (as defined below) serves as the investment
advisor to both Buying Fund and Selling Fund and is making certain
representations, warranties and agreements set forth in this Agreement;
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 and Buyer 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 of Delaware
and shall include the Delaware Statutory Trust Act.
"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 AIM Investment Funds, a Delaware statutory trust.
"Buyer Counsel" means Ballard Spahr Andrews & Ingersoll, LLP.
1
"Buyer Custodian" means State Street Bank and Trust Company acting in
its capacity as custodian for the assets of Buying Fund.
"Buyer Registration Statement" means the registration statement on
Form N-1A of Buyer, as amended, 1940 Act Registration No. 811-01540.
"Buying Fund" means AIM Global Health Care 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 October 31, 2006.
"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 March 16, 2007, 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.
"Governing Documents" means the organic documents which govern the
business and operations of each of Buyer and Seller and shall include, as
applicable, 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 Adviser" means A I M Advisors, Inc.
"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.
2
"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, if a quorum is present, a 1940 Act
Majority, which is 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 Special Meeting, if the holders of more than 50% of the outstanding
voting securities of such Selling Fund are present or represented by proxy,
or (b) the affirmative vote of more than 50% of the outstanding voting
securities of such 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 Counselor Series Trust, a Delaware statutory trust.
"Seller Custodian" means State Street Bank and Trust acting in its
capacity as custodian for the assets of Selling Fund.
"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 Advantage Health Sciences 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 August 31, 2006.
"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.
"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 September 30, 2007, or such later date as the
parties may mutually agree upon.
"Treasury Regulations" means the Federal income tax regulations
adopted pursuant to the Code.
"Trustee Benefit Plans" means the Deferred Compensation Agreement for
the Directors/Trustees of the AIM Funds, the AIM Funds Retirement Plan for
Eligible Directors/Trustees, the Deferred Fee Agreement, the
3
INVESCO Funds Retirement Plan for Independent Directors and the Deferred
Retirement Plan Account Agreement.
"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 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
4
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 and Redemption of Selling Fund
Shares. Following receipt of the Required Shareholder Vote and as soon as
reasonably practicable after the Closing, the status of Selling Fund as a
designated series of Seller shall be terminated and Seller shall redeem the
outstanding shares of Selling Fund from Selling Fund Shareholders in accordance
with its Governing Documents and all issued and outstanding shares of Selling
Fund shall thereupon be canceled on the books of Seller.
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 in accordance with Sections 2.1 and 2.2. 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 Buying Fund Auditors 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 trust
power 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
5
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 Selling Fund Financial Statements
previously delivered to Buyer present fairly in all material respects the
financial position of Selling Fund as of the dates indicated and the results of
operations and changes in net assets for the periods then ended in accordance
with generally accepted accounting principles applied on a consistent basis for
the periods then ended.
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of 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
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. As of the Closing Date,
at least 33 1/3% of Selling Fund's portfolio assets will meet the investment
objectives, strategies, policies, risks and restrictions of Buying Fund. Selling
Fund did not alter its portfolio in anticipation of the Reorganization to meet
the 33 1/3% threshold.
(e) Except for the Senior Officer Seller is required to employ pursuant to
the Assurance of Discontinuance entered into by the Investment Adviser with the
Attorney General of the State of New York on or about October 7, 2004, 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 ending October 31,
2006, are independent registered public accountants as required by the
Securities Act and the Exchange Act.
6
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 trust action 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. Except for the absence of, or default under,
Permits (as defined below) that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, 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. 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, other than as has been disclosed to Seller's Board of Trustees.
7
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. Since inception, Selling Fund has qualified
for treatment as a regulated investment company for each taxable year 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 August
31, 2006 and for the short taxable year beginning on September 1, 2006 and
ending on the Closing Date and (B) all of Selling Fund's net capital gain
recognized in its taxable year ended August 31, 2006 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. Except for any
obligations under the Trustee Benefit Plans and the Amended and Restated AIM
Funds' Incentive/Retention Bonus Plan, Selling Fund has no obligation to provide
any post-retirement or post-employment benefit to any Person, including but not
limited to, under any Benefit Plan, and has 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.
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.
8
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.
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, as of the Effective Time, to the
fair market value of the shares of each corresponding class of Selling Fund to
be constructively surrendered in exchange therefor.
SECTION 3.24. 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 Buying Fund Financial Statements
previously delivered to Seller present fairly in all material respects the
financial position of Buying Fund as of the dates indicated and the results of
operations and changes in net assets for the periods then ended in accordance
with generally accepted accounting principles applied on a consistent basis for
the periods then ended.
9
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of 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.
SECTION 4.5. Registration of Buying Fund Shares.
(a) Buying Fund currently has those classes of shares that are set forth on
Schedule 4.5(a). Under its Governing Documents, Buyer is authorized to issue an
unlimited number of shares of each such class.
(b) 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.
(c) 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.
(d) 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 in accordance with normal market practice for
such transactions. The Combined Proxy Statement/Prospectus and related Statement
of Additional Information of Buying Fund, when they become effective, shall
conform in all material respects 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.
(e) 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 ending August 31, 2006,
are independent registered 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 of 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 trust action on
the part of Buyer and (i) do not, and on the Closing Date will not, result in
any violation of the
10
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. Except for the absence of, or default under,
Permits that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, 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. 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, other than as has been disclosed to Buyer's Board of Trustees.
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. Since inception, Buying Fund has qualified for
treatment as a regulated investment company for each taxable year 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,
11
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) There is no plan or intention by Buyer or any person related to Buyer
to acquire or redeem any Buying Fund Shares issued in the Reorganization, either
directly or through any transaction, agreement, or arrangement with any other
person, 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 as required by the Investment Company Act.
(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 reorganizations of funds
set forth on Schedule 4.14(b).
(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
reorganizations of funds set forth on Schedule 4.14(b).
(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.
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, as of the Effective Time, to the
fair market value of the shares of each corresponding class of Selling Fund to
be constructively surrendered in exchange therefor. The fair market value of the
assets of Buying Fund will exceed the amount of its liabilities immediately
after the exchange.
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.
12
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 reorganizations of funds set forth on
Schedule 4.14(b).
(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 reorganizations of funds set forth on
Schedule 4.14(b).
SECTION 5.2. Expenses. Buying Fund shall bear all of its costs and
expenses incurred in connection with this Agreement and the Reorganization
without any reimbursement therefor. Prior to the submission of the Agreement to
the Boards of Trustees of Buyer and Seller for approval, the Investment Adviser,
in the ordinary course of its business as a registered investment advisor
operating under the Advisors Act, agreed to bear all of the costs and expenses
of Selling Fund incurred in connection with this Agreement and the
Reorganization and other transactions contemplated hereby; provided that any
such expenses incurred by Selling Fund shall not be reimbursed or paid for by
the Investment Advisor unless those expenses are solely and directly related to
the Reorganization. Except as provided in the preceding sentence, Selling Fund
shall bear all of its costs and expenses incurred in connection with this
Agreement and the Reorganization without any reimbursement therefor. Neither
Selling Fund nor Buying Fund (nor any Person related to Selling Fund or Buying
Fund) will pay or assume any expenses of the Selling Fund Shareholders
(including, but not limited to, any expenses of Selling Fund Shareholders that
are solely and directly related to the Reorganization).
SECTION 5.3. 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 5.4. 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 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 5.5. 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 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
13
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
SECTION 5.6. 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 Trustees, recommend to the shareholders of Selling Fund approval of this
Agreement. Seller shall use its reasonable best efforts to hold a Shareholders
Meeting as soon as practicable and advisable after the date hereof.
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 (in such capacity) 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, the 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 the Investment
Adviser pursuant to voluntary and contractual fee waiver or expense limitation
commitments between the 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.
14
(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
shall include an undertaking therein to file the opinion referenced in Section
6.2(f) as a post-effective amendment to such Registration Statement after the
Closing Date, 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 (in such capacity) 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
15
(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 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. Seller further acknowledges and agrees that this
Agreement has been executed by a duly authorized officer of Buyer in his or her
capacity as an officer of Buyer intending to bind Buyer as provided herein, and
that no officer, trustee or shareholder of Buyer shall be personally liable for
the liabilities or obligations of Buyer incurred hereunder. Finally, Seller
acknowledges and agrees that the liabilities and obligations of Buying Fund
pursuant to this Agreement shall be enforceable against the assets of Buying
Fund only and not against the assets of Buyer generally or assets belonging to
any other series of Buyer.
(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 obligations of Seller incurred hereunder. Finally, Buyer
acknowledges and agrees that the liabilities and obligations of Selling Fund
pursuant to this Agreement shall
16
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.
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 Counselor Series Trust
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Attn: John M. Zerr
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:
AIM Investment Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Attn: John M. Zerr
17
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attn: Martha J. Hays
SECTION 8.11. Representations by Investment Adviser.
(a) In its capacity as investment adviser to Seller, the 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(a),
the best knowledge standard shall be deemed to mean that the officers of the
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.
(b) In its capacity as investment adviser to Buyer, the 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 8.11(b),
the best knowledge standard shall be deemed to mean that the officers of the
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 8.12. 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 permitted
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 reorganizations of funds
set forth on Schedule 4.14(b).
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM COUNSELOR SERIES TRUST, acting on
behalf of
AIM ADVANTAGE HEALTH SCIENCES FUND
By: /s/ Philip A. Taylor
------------------------------------
Name: Philip A. Taylor
Title: Principal Executive Officer
AIM INVESTMENT FUNDS, acting on behalf
of AIM GLOBAL HEALTH CARE FUND
By: /s/ Philip A. Taylor
------------------------------------
Name: Philip A. Taylor
Title: Principal Executive Officer
A I M ADVISORS, INC.
By: /s/ Philip A. Taylor
------------------------------------
Name: Philip A. Taylor
Title: President
19
EXHIBIT A
EXCLUDED LIABILITIES OF SELLING FUND
None.
A-1
SCHEDULE 2.1
CLASSES OF SHARES OF SELLING FUND AND CORRESPONDING CLASSES OF SHARES OF BUYING
FUND
<Table>
<Caption>
CORRESPONDING CLASSES OF
CLASSES OF SHARES OF SELLING FUND SHARES OF BUYING FUND
--------------------------------- ------------------------
AIM Advantage Health Sciences Fund AIM Global Health Care Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
</Table>
1
SCHEDULE 3.4
CERTAIN CONTINGENT LIABILITIES OF SELLING FUND
None.
1
SCHEDULE 4.4
CERTAIN CONTINGENT LIABILITIES OF BUYING FUND
None.
1
SCHEDULE 4.5(A)
CLASSES OF SHARES OF BUYING FUND
<Table>
<Caption>
CLASSES OF SHARES OF BUYING FUND
--------------------------------
Class A Shares
Class B Shares
Class C Shares
</Table>
1
SCHEDULE 4.14(B)
PERMITTED REORGANIZATIONS OF FUNDS
AIM Opportunities I Fund into AIM Small Cap Equity Fund
AIM Opportunities II Fund into AIM Select Equity Fund
AIM Opportunities III Fund into AIM Select Equity Fund
1
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 each 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.
(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.
1
Appendix II
AIM GLOBAL HEALTH CARE FUND -- CLASS A, B, C AND INVESTOR CLASS SHARES
Supplement dated September 20, 2006
to the Prospectus dated February 28, 2006
as supplemented April 21, 2006,
May 8, 2006 and July 5, 2006
Effective December 29, 2006, shareholders of AIM Global Health Care Fund may be
charged a 2% redemption fee (on redemption proceeds) if shares are redeemed,
including redeeming by exchange, within 30 days of their purchase.
Also effective December 29, 2006, AIM Global Health Care Fund is added to the
list of funds appearing immediately under the heading "SHAREHOLDER INFORMATION
- -- REDEEMING SHARES -- REDEMPTION FEE" in the prospectus.
The following information replaces in its entirety the information appearing
under the heading "FEE TABLE AND EXPENSE EXAMPLE" on page 5 of the prospectus:
"FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
<Table>
<Caption>
SHAREHOLDER FEES
- ---------------------------------------------------------------------------------------------------------------------------
(fees paid directly from CLASS A CLASS B CLASS C INVESTOR
your investment) CLASS
- ---------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase price
or redemption proceeds,
whichever is less) None(1) 5.00% 1.00% None
Redemption/Exchange
Fee (as a percentage
of amount redeemed/exchanged)(2) 2.00% 2.00% 2.00% 2.00%
- ---------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(3),(4)
- ---------------------------------------------------------------------------------------------------------------------------
(expenses that are deducted CLASS A CLASS B CLASS C INVESTOR
from fund assets) CLASS
- ---------------------------------------------------------------------------------------------------------------------------
Management Fees(5) 0.62% 0.62% 0.62% 0.62%
Distribution and/or
Service (12b-1) Fees(6) 0.25 1.00 1.00 0.25
Other Expenses(5) 0.38 0.38 0.38 0.38
Total Annual Fund
Operating Expenses(7) 1.25 2.00 2.00 1.25
</Table>
(1) A contingent deferred sales charge may apply in some cases. See
"Shareholder Information -- Choosing a Share Class -- Sales Charges."
(2) Effective December 29, 2006, you may be charged a 2.00% fee on
redemptions or exchanges of Class A, B, C and Investor Class shares
held 30 days or less. See "Shareholder Information -- Redeeming Shares
-- Redemption Fee" for more information.
(3) There is no guarantee that actual expenses will be the same as those
shown in the table.
(4) Total Annual Fund Operating Expenses have been restated to reflect the
current fees in effect upon the closing of the reorganization of AIM
Health Sciences Fund into the fund on July 18, 2005.
1
(5) Effective July 18, 2005, the Board of Trustees approved a permanent
reduction of the advisory fee of the fund to 0.75% of the first $350
million, plus 0.65% of the next $350 million, plus 0.55% of the next
$1.3 billion, plus 0.45% of the next $2 billion, plus 0.40% of the next
$2 billion, plus 0.375% of the next $2 billion, plus 0.35% of the
Fund's average daily net assets in excess of $8 billion.
(6) The Board of Trustees approved a permanent reduction of the Rule 12b-1
fees applicable to Class A shares to 0.25% effective July 1, 2005.
Distribution and/or Service (12b-1) Fees reflect this agreement.
(7) At the request of the Board of Trustees, AMVESCAP PLC has agreed to
reimburse the fund for expenses related to market timing matters.
If a financial institution is managing your account, you may also be
charged a transaction or other fee by such financial institution.
As a result of 12b-1 fees, long-term shareholders in the fund may pay
more than the maximum permitted initial sales charge."
2
AIM COUNSELOR SERIES TRUST
AIM Advantage Health Sciences Fund -- Class A, B and C
Supplement dated July 5, 2006 to the
Prospectus dated December 20, 2005 as supplemented
January 17, 2006, April 21, 2006 and May 8, 2006
AIM Multi-Sector Fund -- Class A, B and C
Supplement dated July 5, 2006 to the
Prospectus dated December 20, 2005 as supplemented
January 17, 2006, April 13, 2006, April 21, 2006,
and May 8, 2006
AIM Structured Core Fund -- Class A, B, C and R
AIM Structured Growth Fund -- Class A, B, C and R
AIM Structured Value Fund -- Class A, B, C and R
Supplement dated July 5, 2006 to the
Prospectuses dated March 31, 2006 as supplemented
April 21, 2006 and May 8, 2006
AIM EQUITY FUNDS
AIM Capital Development Fund -- Class A, B, C, R and Investor
AIM Charter Fund -- Class A, B, C and R
AIM Constellation Fund -- Class A, B, C and R
AIM Diversified Dividend Fund -- Class A, B, C, R and Investor
AIM Large Cap Basic Value Fund -- Class A, B, C, R and Investor
AIM Large Cap Growth Fund -- Class A, B, C, R and Investor
Supplement dated July 5, 2006 to the
Prospectuses dated February 28, 2006 as supplemented
April 21, 2006 and May 8, 2006
AIM FUNDS GROUP
AIM European Small Company Fund -- Class A, B and C
AIM Global Value Fund -- Class A, B and C
AIM International Small Company Fund -- Class A, B and C
AIM Mid Cap Basic Value Fund -- Class A, B, C and R
AIM Select Equity Fund -- Class A, B and C
AIM Small Cap Equity Fund -- Class A, B, C and R
Supplement dated July 5, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006
AIM Basic Balanced Fund -- Class A, B, C, R and Investor
Supplement dated July 5, 2006 to the
Prospectus dated April 24, 2006 as supplemented
May 1, 2006 and May 8, 2006
AIM GROWTH SERIES
AIM Basic Value Fund -- Class A, B, C and R
AIM Conservative Allocation Fund -- Class A, B, C and R
AIM Global Equity Fund -- Class A, B, C and R
AIM Growth Allocation Fund -- Class A, B, C and R
AIM Income Allocation Fund -- Class A, B, C and R
AIM International Allocation Fund -- Class A, B, C and R
AIM Mid Cap Core Equity Fund -- Class A, B, C and R
AIM Moderate Allocation Fund -- Class A, B, C and R
AIM Moderate Growth Allocation Fund -- Class A, B, C and R
AIM Moderately Conservative Allocation Fund --
Class A, B, C and R
AIM Small Cap Growth Fund -- Class A, B, C, R and Investor
Supplement dated July 5, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006
AIM INTERNATIONAL MUTUAL FUNDS
AIM Asia Pacific Growth Fund -- Class A, B and C
AIM European Growth Fund -- Class A, B, C, R and Investor
AIM Global Aggressive Growth Fund -- Class A, B and C
AIM Global Growth Fund -- Class A, B and C
Supplement dated July 5, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006 and May 8, 2006
AIM International Core Equity Fund -- Class A, B, C, R and Investor
AIM International Growth Fund -- Class A, B, C and R
Supplement dated July 5, 2006 to the
Prospectuses dated February 28, 2006 as supplemented
April 21, 2006, May 1, 2006 and May 8, 2006
AIM INVESTMENT FUNDS
AIM China Fund -- Class A, B and C
Supplement dated July 5, 2006 to the
Prospectus dated March 31, 2006 as supplemented
April 21, 2006, May 8, 2006 and June 27, 2006
AIM International Bond Fund -- Class A, B and C
AIM Japan Fund -- Class A, B and C
Supplement dated July 5, 2006 to the
Prospectuses dated March 31, 2006 as supplemented
April 21, 2006 and May 8, 2006
AIM Developing Markets Fund -- Class A, B and C
AIM Global Health Care Fund -- Class A, B, C and Investor
AIM Trimark Endeavor Fund -- Class A, B, C and R
AIM Trimark Fund -- Class A, B, C and R
Supplement dated July 5, 2006 to the
Prospectuses dated February 28, 2006 as supplemented
April 21, 2006 and May 8, 2006
AIM Trimark Small Companies Fund -- Class A, B, C and R
Supplement dated July 5, 2006 to the
Prospectus dated February 28, 2006 as supplemented
March 24, 2006, April 21, 2006 and May 8, 2006
AIM INVESTMENT SECURITIES FUNDS
AIM Global Real Estate Fund -- Class A, B, C and R
AIM Money Market Fund -- AIM Cash Reserve Shares,
Class B, C, R and Investor
AIM Real Estate Fund -- Class A, B, C, R and Investor
Supplement dated July 5, 2006 to the
Prospectuses dated October 25, 2005 as supplemented
December 8, 2005, April 21, 2006 and May 8, 2006
AIM High Yield Fund -- Class A, B, C and Investor
AIM Intermediate Government Fund --
Class A, B, C, R and Investor
AIM Municipal Bond Fund -- Class A, B, C and Investor
Supplement dated July 5, 2006 to the
Prospectuses dated October 25, 2005 as supplemented
December 8, 2005, March 31, 2006,
April 21, 2006 and May 8, 2006
AIM Income Fund -- Class A, B, C, R and Investor
AIM Total Return Bond Fund -- Class A, B, C and R
Supplement dated July 5, 2006 to the
Prospectuses dated October 25, 2005 as supplemented
December 8, 2005, March 31, 2006, April 21, 2006,
May 1, 2006 and May 8, 2006
1
AIM SECTOR FUNDS
AIM Energy Fund -- Class A, B, C and Investor
AIM Financial Services Fund -- Class A, B, C and Investor
AIM Gold & Precious Metals Fund -- Class A, B, C and Investor
AIM Leisure Fund -- Class A, B, C, R and Investor
AIM Technology Fund -- Class A, B, C and Investor
AIM Utilities Fund -- Class A, B, C and Investor
Supplement dated July 5, 2006 to the
Prospectus dated October 25, 2005 as supplemented
December 8, 2005, March 31, 2006,
April 13, 2006, April 21, 2006 and May 8, 2006
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Opportunities I Fund -- Class A, B and C
AIM Opportunities II Fund -- Class A, B and C
AIM Opportunities III Fund -- Class A, B and C
Supplement dated July 5, 2006 to the
Prospectuses dated February 28, 2006 as supplemented
April 21, 2006, May 8, 2006, June 2, 2006 and June 30, 2006
AIM STOCK FUNDS
AIM Dynamics Fund -- Class A, B, C, R and Investor
Supplement dated July 5, 2006 to the
Prospectus dated October 25, 2005 as supplemented
December 8, 2005, April 21, 2006 and May 8, 2006
AIM SUMMIT FUND -- Class A, B and C
Supplement dated July 5, 2006 to the
Prospectus dated February 28, 2006 as supplemented
April 21, 2006 and May 8, 2006
AIM TAX-EXEMPT FUNDS
AIM High Income Municipal Fund -- Class A, B and C
Supplement dated July 5, 2006 to the
Prospectus dated July 29, 2005 as revised
April 13, 2006 and as supplemented
April 21, 2006 and May 8, 2006
The Boards of Trustees for the series portfolios listed above (each, a "Fund")
approved the conversion of certain Class B shares (the "Legacy Class B Shares")
of the Funds into Class A shares of such Fund and in the case of AIM Money
Market Fund, into AIM Cash Reserve Shares. The Legacy Class B Shares are those
Class B shares that were acquired by (i) exchange offer from the closed-end fund
predecessor of AIM Floating Rate Fund, or (ii) exchange offer from another Fund
if such shares were previously acquired by exchange offer from the closed-end
fund predecessor of AIM Floating Rate Fund. The conversion of the Legacy Class B
Shares to Class A shares or AIM Cash Reserve Shares, as applicable, is scheduled
to occur July 27, 2006 at 5:00 p.m. Eastern time (the "Conversion Date"). On the
Conversion Date, each shareholder of record of Legacy Class B Shares of a Fund
will receive that number of Class A shares of such Fund or AIM Cash Reserve
shares of AIM Money Market Fund having an aggregate net asset value equal to the
net asset value of the Legacy Class B Shares of such Fund held by such
shareholder immediately prior to the Conversion Date. No Fund or holder of
Legacy Class B Shares is expected to recognize gain or loss for federal income
tax purposes in connection with the Legacy Class B Shares conversion.
After the conversion, and as a result of owning Class A shares, the 12b-1 fees
paid by former holders of Legacy Class B Shares will be reduced from 1.00% to
0.25%.
* * * * *
Effective July 17, 2006, you will not pay a contingent deferred sales charge if
you redeem Class B shares that were acquired by (i) exchange offer from the
closed-end fund predecessor of AIM Floating Rate Fund, or (ii) exchange offer
from another series portfolio listed above if such shares were previously
acquired by exchange offer from the closed-end fund predecessor of AIM Floating
Rate Fund.
2
AIM COUNSELOR SERIES TRUST AIM INTERNATIONAL MUTUAL FUNDS
AIM Advantage Health Sciences Fund -- Class A, B and C AIM Asia Pacific Growth Fund -- Class A, B and C
Supplement dated May 8, 2006 to the AIM European Growth Fund -- Class A, B, C, R and Investor
Prospectus dated December 20, 2005 AIM Global Aggressive Growth Fund -- Class A, B and C
as supplemented January 17, 2006 and April 21, 2006 AIM Global Growth Fund -- Class A, B and C
Supplement dated May 8, 2006 to the
AIM Floating Rate Fund-Class A, B1, C and R Prospectuses dated February 28, 2006
Supplement dated May 8, 2006 to the as supplemented April 21, 2006
Prospectus dated April 14, 2006
AIM International Core Equity Fund --
AIM Multi-Sector Fund -- Class A, B and C Class A, B, C, R and Investor
Supplement dated May 8, 2006 to the AIM International Growth Fund -- Class A, B, C and R
Prospectus dated December 20, 2005 Supplement dated May 8, 2006 to the
as supplemented January 17, 2006, April 13, 2006 Prospectuses dated February 28, 2006
and April 21, 2006 as supplemented April 21, 2006 and May 1, 2006
AIM Structured Core Fund -- Class A, B, C and R AIM INVESTMENT FUNDS
AIM Structured Growth Fund -- Class A, B, C and R
AIM Structured Value Fund -- Class A, B, C and R AIM China Fund -- Class A, B and C
Supplement dated May 8, 2006 to the AIM Enhanced Short Bond Fund -- Class A, C and R
Prospectuses dated March 31, 2006 AIM International Bond Fund -- Class A, B and C
as supplemented April 21, 2006 AIM Japan Fund -- Class A, B and C
Supplement dated May 8, 2006 to the
AIM EQUITY FUNDS Prospectuses dated March 31, 2006
as supplemented April 21, 2006
AIM Capital Development Fund --
Class A, B, C, R and Investor AIM Developing Markets Fund -- Class A, B and C
AIM Charter Fund -- Class A, B, C and R AIM Global Health Care Fund -- Class A, B, C and Investor
AIM Constellation Fund -- Class A, B, C and R AIM Trimark Endeavor Fund -- Class A, B, C and R
AIM Diversified Dividend Fund -- AIM Trimark Fund -- Class A, B, C and R
Class A, B, C, R and Investor Supplement dated May 8, 2006 to the
AIM Large Cap Basic Value Fund -- Prospectuses dated February 28, 2006
Class A, B, C, R and Investor as supplemented April 21, 2006
AIM Large Cap Growth Fund -- Class A, B, C, R and Investor
Supplement dated May 8, 2006 to the AIM Trimark Small Companies Fund -- Class A, B, C and R
Prospectuses dated February 28, 2006 Supplement dated May 8, 2006 to the
as supplemented April 21, 2006 Prospectus dated February 28, 2006
as supplemented March 24, 2006 and April 21, 2006
AIM FUNDS GROUP
AIM INVESTMENT SECURITIES FUNDS
AIM European Small Company Fund -- Class A, B and C
AIM Global Value Fund -- Class A, B and C AIM Global Real Estate Fund -- Class A, B, C and R
AIM International Small Company Fund -- Class A, B and C AIM Money Market Fund -- AIM Cash Reserve Shares,
AIM Mid Cap Basic Value Fund -- Class A, B, C and R Class B, C, R and Investor
AIM Select Equity Fund -- Class A, B and C AIM Real Estate Fund -- Class A, B, C, R and Investor
AIM Small Cap Equity Fund -- Class A, B, C and R Supplement dated May 8, 2006 to the
Supplement dated May 8, 2006 to the Prospectuses dated October 25, 2005
Prospectuses dated April 24, 2006 as supplemented December 8, 2005
and April 21, 2006
AIM Basic Balanced Fund -- Class A, B, C, R and Investor
Supplement dated May 8, 2006 to the AIM High Yield Fund -- Class A, B, C and Investor
Prospectus dated April 24, 2006 AIM Intermediate Government Fund --
as supplemented May 1, 2006 Class A, B, C, R and Investor
AIM Limited Maturity Treasury Fund -- Class A and A3
AIM GROWTH SERIES AIM Municipal Bond Fund -- Class A, B, C and Investor
Supplement dated May 8, 2006 to the
AIM Basic Value Fund -- Class A, B, C and R Prospectuses dated October 25, 2005
AIM Conservative Allocation Fund -- Class A, B, C and R as supplemented December 8, 2005, March 31, 2006
AIM Global Equity Fund -- Class A, B, C and R and April 21, 2006
AIM Growth Allocation Fund -- Class A, B, C and R
AIM Income Allocation Fund -- Class A, B, C and R AIM Income Fund -- Class A, B, C, R and Investor
AIM International Allocation Fund -- Class A, B, C and R AIM Total Return Bond Fund -- Class A, B, C and R
AIM Mid Cap Core Equity Fund -- Class A, B, C and R Supplement dated May 8, 2006 to the
AIM Moderate Allocation Fund -- Class A, B, C and R Prospectuses dated October 25, 2005
AIM Moderate Growth Allocation Fund -- Class A, B, C and R as supplemented December 8, 2005, March 31, 2006,
AIM Moderately Conservative Allocation Fund -- April 21, 2006 and May 1, 2006
Class A, B, C and R
AIM Small Cap Growth Fund -- Class A, B, C, R and Investor
Supplement dated May 8, 2006 to the
Prospectuses dated April 24, 2006
1
AIM Short Term Bond Fund -- Class A, C and R AIM SUMMIT FUND -- Class A, B and C
Supplement dated May 8, 2006 to the Supplement dated May 8, 2006 to the
Prospectus dated October 25, 2005 Prospectus dated February 28, 2006
as supplemented December 8, 2005, February 3, 2006, as supplemented April 21, 2006
March 31, 2006 and April 21, 2006
AIM TAX-EXEMPT FUNDS
AIM SECTOR FUNDS
AIM High Income Municipal Fund -- Class A, B and C
AIM Energy Fund -- Class A, B, C and Investor Supplement dated May 8, 2006 to the
AIM Financial Services Fund -- Class A, B, C and Investor Prospectus dated July 29, 2005
AIM Gold & Precious Metals Fund -- Class A, B, C and Investor as revised April 13, 2006 and
AIM Leisure Fund -- Class A, B, C, R and Investor as supplemented April 21, 2006
AIM Technology Fund -- Class A, B, C and Investor
AIM Utilities Fund -- Class A, B, C and Investor AIM Tax-Exempt Cash Fund -- Class A and Investor
Supplement dated May 8, 2006 to the Supplement dated May 8, 2006 to the
Prospectus dated October 25, 2005 Prospectus dated July 29, 2005
as supplemented December 8, 2005, March 31, 2006 as supplemented December 8, 2005,
April 13, 2006 and April 21, 2006 December 23, 2005 and April 21, 2006
AIM SPECIAL OPPORTUNITIES FUNDS AIM Tax-Free Intermediate Fund -- Class A and A3
Supplement dated May 8, 2006 to the
AIM Opportunities I Fund -- Class A, B and C Prospectus dated July 29, 2005
AIM Opportunities II Fund -- Class A, B and C as supplemented December 8, 2005, December 23, 2005,
AIM Opportunities III Fund -- Class A, B and C March 31, 2006 and April 21, 2006
Supplement dated May 8, 2006 to the
Prospectuses dated February 28, 2006 AIM TREASURER'S SERIES TRUST
as supplemented April 21, 2006
Premier Portfolio -- Investor Class
AIM STOCK FUNDS Premier Tax-Exempt Portfolio -- Investor Class
Premier U.S. Government Money Portfolio -- Investor Class
AIM Dynamics Fund -- Class A, B, C, R and Investor Supplement dated May 8, 2006 to the
Supplement dated May 8, 2006 to the Prospectus dated December 20, 2005
Prospectus dated October 25, 2005 as as supplemented April 21, 2006
supplemented December 8, 2005 and April 21, 2006
AIM S&P 500 Index Fund -- Investor Class
Supplement dated May 8, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2005,
January 31, 2006 and April 21, 2006
Reference is made to the "SHAREHOLDER INFORMATION -- REDEEMING SHARES --
Permitted Exchanges" section of the above referenced prospectuses.
Class B1 Shares of AIM Floating Rate Fund may be exchanged for Class A, Class
A3, Investor Class or AIM Cash Reserve Shares. Exceptions are: (1) Class A
Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund
are currently closed to new investors and (2) Investor Class Shares are
currently offered to new investors only on a limited basis (see "SHAREHOLDER
INFORMATION -- PURCHASING SHARES -- Grandfathered Investors" section of the
above referenced prospectuses). You will not pay a sales charge, contingent
deferred sales charge or other sales charge when exchanging such Class B1
shares.
Class B1 Shares of AIM Floating Rate Fund may not be exchanged for Class B,
Class C, Class P, Class R or Institutional Class Shares.
2
AIM EQUITY FUNDS
AIM Capital Development Fund - Class A, B, C, R and Investor
AIM Charter Fund - Class A, B, C and R
AIM Constellation Fund - Class A, B, C and R
AIM Diversified Dividend Fund - Class A, B, C, R and Investor
AIM Large Cap Basic Value Fund - Class A, B, C, R and Investor
AIM Large Cap Growth Fund - Class A, B, C, R and Investor
Supplement dated April 21, 2006 to the
Prospectuses dated February 28, 2006
AIM INTERNATIONAL MUTUAL FUNDS
AIM Asia Pacific Growth Fund - Class A, B and C
AIM European Growth Fund - Class A, B, C, R and Investor
AIM Global Aggressive Growth Fund - Class A, B and C
AIM Global Growth Fund - Class A, B and C
AIM International Core Equity Fund - Class A, B, C, R and Investor
AIM International Growth Fund - Class A, B, C and R
Supplement dated April 21, 2006 to the
Prospectuses dated February 28, 2006
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A, B and C
AIM Global Health Care Fund - Class A, B, C and Investor
AIM Trimark Endeavor Fund - Class A, B, C and R
AIM Trimark Fund - Class A, B, C and R
Supplement dated April 21, 2006 to the
Prospectuses dated February 28, 2006
AIM Trimark Small Companies Fund - Class A, B, C and R
Supplement dated April 21, 2006 to the
Prospectus dated February 28, 2006
as supplemented March 24, 2006
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Opportunities I Fund - Class A, B and C
AIM Opportunities II Fund - Class A, B and C
AIM Opportunities III Fund - Class A, B and C
Supplement dated April 21, 2006 to the
Prospectuses dated February 28, 2006
AIM SUMMIT FUND - Class A, B and C
Supplement dated April 21, 2006 to the
Prospectus dated February 28, 2006
The following replaces in its entirety the heading and the information appearing
under the heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - SALES
CHARGES - AIM SHORT TERM BOND FUND INITIAL SALES CHARGES" on page A-2 of the
prospectus:
"AIM ENHANCED SHORT BOND FUND, AIM FLOATING RATE FUND AND AIM SHORT TERM
BOND FUND INITIAL SALES CHARGES
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- --------------------- -------------- ----------
Less than $ 100,000 2.50% 2.56%
$100,000 but less than $ 250,000 2.00 2.04
$250,000 but less than $ 500,000 1.50 1.52
$500,000 but less than $1,000,000 1.25 1.27"
The following replaces in their entirety the first two paragraphs appearing
under the heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - PURCHASES
OF CLASS A SHARES AT NET ASSET VALUE - CONTINGENT DEFERRED SALES CHARGES FOR
CLASS A SHARES AND AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND" on page A-3
of the prospectus:
"You can purchase $1,000,000 or more (a Large Purchase) of Class A shares
of Category I and II funds, AIM Enhanced Short Bond Fund, AIM Floating Rate
Fund and AIM Short Term Bond Fund at net asset value. However, if you
redeem these shares prior to 18 months after the date of purchase, they
will be subject to a CDSC of 1%.
If you currently own Class A shares of a Category I or II fund, AIM
Enhanced Short Bond Fund, AIM Floating Rate Fund or AIM Short Term Bond
Fund and make additional purchases at net asset value that result in
account balances of $1,000,000 or more, the additional shares purchased
will be subject to an 18-month, 1% CDSC."
The following replaces in its entirety the heading and the information appearing
under the heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - SALES
CHARGES - CONTINGENT DEFERRED SALES CHARGES FOR CLASS C SHARES OF AIM SHORT TERM
BOND FUND " on page A-3 of the prospectus:
1
"CONTINGENT DEFERRED SALES CHARGES FOR CLASS C SHARES OF AIM ENHANCED SHORT
BOND FUND AND AIM SHORT TERM BOND FUND
You can purchase Class C shares of AIM Enhanced Short Bond Fund and AIM
Short Term Bond Fund at their net asset value and not subject to a CDSC.
However, you may be charged a CDSC when you redeem Class C shares of AIM
Enhanced Short Bond Fund and AIM Short Term Bond Fund if you acquired those
shares through an exchange, and the shares originally purchased were
subject to a CDSC."
The following new section is added immediately after the above information:
"CONTINGENT DEFERRED SALES CHARGES FOR CLASS B1 SHARES OF AIM FLOATING RATE
FUND
On April 13, 2006, AIM Floating Rate Fund, a closed-end fund, was
reorganized as an open-end fund. Certain shareholders of Class B shares of
closed-end AIM Floating Rate Fund (Closed-End Fund) received Class B1
shares of the open-end AIM Floating Rate Fund in the reorganization. Class
B1 shares are not available for purchase. If you redeem those shares, they
are subject to a CDSC in the following percentages:
YEAR SINCE PURCHASE MADE (HOLDING PERIOD) CLASS B1
- ----------------------------------------- --------
First 3.0%
Second 2.5%
Third 2.0%
Fourth 1.0%
Longer than Four Years None
For purposes of determining the holding period, the date you acquired Class
B shares of the Closed-End Fund is the start of the holding period."
The following replaces the information appearing under the heading "SHAREHOLDER
INFORMATION - CHOOSING A SHARE CLASS - REDUCED SALES CHARGES AND SALES CHARGE
EXCEPTIONS - REDUCED SALES CHARGES" on page A-4 of the prospectus:
"You may be eligible to buy Class A shares at reduced initial sales charge
rates under Rights of Accumulation or Letters of Intent under certain
circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM
Cash Reserve Shares of AIM Money Market Fund and Investor Class shares of
any fund will not be taken into account in determining whether a purchase
qualified for a reduction in initial sales charges pursuant to Rights of
Accumulation or Letters of Intent."
The following replaces the information appearing under the heading "SHAREHOLDER
INFORMATION - CHOOSING A SHARE CLASS - REDUCED SALES CHARGES AND SALES CHARGE
EXCEPTIONS - REDUCED SALES CHARGES- RIGHTS OF ACCUMULATION" on page A-4 of the
prospectus:
"You may combine your new purchases of Class A shares of a fund with fund
shares currently owned (Class A, B, B1, C or R) and investments in the AIM
College Savings Plan(SM) for the purpose of qualifying for the lower
initial sales charge rates that apply to larger purchases. The applicable
initial sales charge for the new purchase is based on the total of your
current purchase and the public offering price of all other shares you own.
The transfer agent may automatically link certain accounts registered in
the same name, with the same taxpayer identification number, for the
purpose of qualifying you for lower initial sales charge rates."
The following replaces in its entirety the information appearing under the
heading "SHAREHOLDER INFORMATION - CHOOSING A SHARE CLASS - REDUCED SALES
CHARGES AND SALES CHARGE EXCEPTIONS - CONTINGENT DEFERRED SALES CHARGE (CDSC)
EXCEPTIONS" on page A-4 of the prospectus:
2
"You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class B1 shares you held for more than four years from
date of purchase of Class B shares of AIM Floating Rate Fund's
predecessor, the Closed-End Fund;
- if you redeem Class C shares you held for more than one year;
- if you redeem Class C shares of a fund other than AIM Enhanced Short
Bond Fund or AIM Short Term Bond Fund and you received such Class C
shares by exchanging Class C shares of AIM Enhanced Short Bond Fund or
AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Enhanced Short Bond Fund or AIM
Short Term Bond Fund unless you received such Class C shares by
exchanging Class C shares of another fund and the original purchase
was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems,
at any time, less than all of the Class A, C or Class R shares held
through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems,
after having held them for more than one year from the date of the
plan's initial purchase, all of the Class A, C or Class R shares held
through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a qualified retirement plan and redeem
Class A, Class C or Class R shares in order to fund a distribution;
- if you participate in the Systematic Redemption Plan and withdraw up
to 12% of the value of your shares that are subject to a CDSC in any
twelve-month period;
- if you redeem shares to pay account fees;
- for redemptions following the death or post-purchase disability of a
shareholder or beneficial owner;
- if you redeem shares acquired through reinvestment of dividends and
distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem
shares at reduced or without sales charges. Consult the fund's Statement of
Additional Information for details."
The following replaces the first paragraph appearing under the heading
"SHAREHOLDER INFORMATION - REDEEMING SHARES - REDEMPTION FEE" on page A-9 of the
prospectus:
"You may be charged a 2% redemption fee (on redemption proceeds) if you
redeem, including redeeming by exchange, shares of the following funds
within 30 days of their purchase:
AIM Asia Pacific Growth Fund
AIM China Fund
AIM Developing Markets Fund
AIM European Growth Fund
AIM European Small Company Fund
AIM Floating Rate Fund
AIM Global Aggressive Growth Fund
AIM Global Equity Fund
AM Global Growth Fund
AIM Global Real Estate Fund
AIM Global Value Fund
AIM High Yield Fund
AIM International Allocation Fund
AIM International Bond Fund
AIM International Core Equity Fund
AIM International Growth Fund
AIM International Small Company Fund
AIM Japan Fund
AIM S&P 500 Index Fund
AIM Trimark Fund"
The following replaces in its entirety the information appearing under the
heading "SHAREHOLDER INFORMATION - REDEEMING SHARES - REDEMPTION OF CLASS A
SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE" on page A-10
"If you purchase $1,000,000 or more of Class A shares of any fund, or if
you make additional purchases of Class A shares at net asset value, your
shares may be subject to a CDSC upon redemption as described below.
3
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- - Class A shares of - Class A shares of Category I or - 1% if shares are
Category I or II Fund, AIM II Fund, AIM Enhanced Short Bond redeemed within 18
Enhanced Short Bond Fund, Fund, AIM Floating Rate Fund or AIM months of initial
AIM Floating Rate Fund or Short Term Bond Fund purchase of Category I
AIM Short Term Bond Fund - Class A shares of Category III or II Fund, AIM Enhanced
Fund(2) Short Bond Fund, AIM
- AIM Cash Reserve Shares of AIM Floating Rate Fund or
Money Market Fund AIM Short Term Bond Fund
shares
- - Class A shares of - Class A shares of Category I or - 1% if shares are
Category III Fund(1) II Fund, AIM Enhanced Short Bond redeemed within 18
Fund, AIM Floating Rate Fund or AIM months of initial
Short Term Bond Fund purchase of Category III
Fund shares
- - Class A shares of - Class A shares of Category III - No CDSC
Category III Fund(1) Fund(2)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Class A shares of a Category I, II or III Fund, AIM Enhanced Short Bond
Fund, AIM Floating Rate Fund or AIM Short Term Bond Fund may not be
exchanged for Class A shares of a Category III Fund."
The following replaces in its entirety the information appearing under the
heading "SHAREHOLDER INFORMATION - REDEEMING SHARES - REDEMPTION OF CLASS B
SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND" on page A-10 of the
prospectus:
"If you redeem Class B shares you acquired by exchange via a repurchase
offer by closed-end AIM Floating Rate Fund prior to April 13, 2006, the
early withdrawal charge applicable to shares of closed-end AIM Floating
Rate Fund will be applied instead of the CDSC normally applicable to Class
B shares."
The following replaces in its entirety the information appearing under the
heading "SHAREHOLDER INFORMATION - EXCHANGING SHARES - PERMITTED EXCHANGES" on
page A-12 of the prospectus:
"Except as otherwise stated under "Exchanges Not Permitted," you generally
may exchange your shares for shares of the same class of another fund.
4
EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED
------------- ----------- ------- ----------
Class A Class A, A3, Investor Class, or AIM Cash Reserve
Shares. Exceptions are:
- Class A Shares of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund are
currently closed to new investors.
- Class A Shares of AIM Limited Maturity Treasury X
Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free
Intermediate Fund cannot be exchanged for Class
A3 Shares of those funds.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
Class A Class B, B1, C, P, R or Institutional Class Shares. X
Class A3 Class A, A3, Investor Class, or AIM Cash Reserve
Shares. Exceptions are:
- Class A3 Shares of AIM Limited Maturity Treasury X
Fund and AIM Tax-Free Intermediate Fund cannot be
exchanged for Class A Shares of those funds.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
Class A3 Class B, B1, C, P, R or Institutional Class Shares. X
Class B Class B. X
Class B Class A, A3, B1, C, P, R, AIM Cash Reserve Shares, X
Institutional or Investor Class Shares.
Class B1 Class A. X
Class B1 Class B, A3, C, P, R, AIM Cash Reserve Shares, X
Institutional or Investor Class Shares.
Class C Class C. X
Class C Class A, A3, B, B1, P, R, AIM Cash Reserve Shares, X
Institutional or Investor Class Shares.
Class R Class R. X
Class R Class A, A3, B, B1, C, P, AIM Cash Reserve Shares, X
Institutional or Investor Class Shares.
AIM Cash Reserve Shares Class A, A3, B, C, R, or Investor Class Shares.
Exceptions are:
- Class A shares of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund are
currently closed to new investors.
- Shares to be exchanged for Class B, C or R shares X
must not have been acquired by exchange from
Class A shares of any fund.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
AIM Cash Reserve Shares Class B1, P or Institutional Class shares. X
Institutional Class Institutional Class. X
5
EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED
------------- ----------- ------- ----------
Institutional Class Class A, A3, B, B1, C, P, R, AIM Cash Reserve Shares X
or Investor Class shares.
Investor Class A, A3, or Investor Class. Exceptions are:
- Investor Class shares cannot be exchanged for X
Class A shares of any fund which offers Investor
Class shares.
- Class a shares of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund are
currently closed to new investors.
Investor Class Class B, B1, C, P, R, AIM Cash Reserve Shares or X
Institutional Class shares.
Class P Class A, A3, or AIM Cash Reserve Shares. Exceptions
are:
- Class A shares of AIM Limited Maturity Treasury X
Fund and AIM Tax-Free Intermediate Fund are
currently closed to new investors.
Class P Class B, B1, C, R, Institutional or Investor Class X"
shares.
The following replaces in its entirety the information appearing under the
heading "SHAREHOLDER INFORMATION - EXCHANGING SHARES - EXCHANGES NOT PERMITTED"
on page A-13 of the prospectus:
"For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II funds (i) subject to an initial
sales charge or (ii) purchased at net asset value and subject to a
contingent deferred sales charge (CDSC) for Class A shares of AIM
Tax-Exempt Cash Fund;
(2) Class A shares of Category III funds purchased at net asset value for
Class A shares of a Category I or II fund, Class A shares of AIM
Enhanced Short Bond Fund, AIM Floating Rate Fund or Class A shares of
AIM Short Term Bond Fund;
(3) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money
Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A
shares of Category III AIM Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II funds, Class a shares of AIM
Enhanced Short Bond Fund, AIM Floating Rate Fund or Class A shares of
AIM Short Term Bond Fund (i) subject to an initial sales charge or
(ii) purchased at net asset value and subject to a CDSC for Class A
shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any
other fund (i) subject to an initial sales charge or (ii) purchased at
net asset value and subject to a CDSC or for AIM Cash Reserve Shares
of AIM Money Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class
C shares of any fund or for Class A shares of any fund that are
subject to a CDSC, however, if you originally purchased Class A shares
of a Category I or II fund, AIM Enhanced Short Bond Fund, AIM Floating
Rate Fund or AIM Short Term Bond Fund, and exchanged those shares for
AIM Cash Reserve Shares of AIM Money Market Fund, you may further
exchange the AIM Cash Reserve Shares for Class A shares of a Category
I or II fund, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund or
AIM Short Term Bond Fund."
6
The following replaces in its entirety the heading and the first paragraph
appearing under the heading "SHAREHOLDER INFORMATION - EXCHANGING SHARES -
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES" on page A-14 of the prospectus:
"EXCHANGING CLASS B, CLASS B1, CLASS C AND CLASS R SHARES
If you make an exchange involving Class B, Class C shares or Class R
shares, subject to a CDSC, the amount of time you held the original shares
will be credited to the holding period of the Class B, Class C or Class R
shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem
the exchanged shares.
If you redeem Class B or Class C shares acquired by exchange via a
repurchase offer by the closed-end AIM Floating Rate Fund, prior to April
13, 2006, you will be credited with the time period you held the Class B or
Class C shares of the closed-end AIM Floating Rate Fund for the purpose of
computing the CDSC applicable to those exchanged shares.
If you redeem Class B1 or Class C shares of AIM Floating Rate Fund
that were acquired on April 13, 2006 when AIM Floating Rate Fund was
reorganized as an open-end fund, you will be credited with the time period
you held Class B or Class C shares of the closed-end AIM Floating Rate
Fund, for the purpose of computing the CDSC if you later redeem such
shares."
The following new section is added immediately before the paragraph entitled
"Domestic Exchange Traded Equity Securities:" appearing under the heading
"PRICING OF SHARES - DETERMINATION OF NET ASSET VALUE" appearing on page A-15 of
the prospectus:
"Senior Secured Floating Rate Loans and Senior Secured Floating Rate Debt
Securities: Senior secured floating rate loans and senior secured floating
rate debt securities are fair valued using an evaluated quote provided by
an independent pricing service. Evaluated quotes provided by the pricing
service may reflect appropriate factors such as ratings, trance type,
industry, company performance, spread, individual trading characteristics,
institution-size trading in similar groups of securities and other market
data."
7
AIM GLOBAL HEALTH CARE FUND
PROSPECTUS
FEBRUARY 28, 2006
AIM Global Health Care Fund seeks long-term growth of capital.
- --------------------------------------------------------------------------------
This prospectus contains important information about the Class A, B, C, and
Investor Class shares of the fund. Please read it before investing and keep it
for future reference.
Investor Class shares offered by this prospectus are offered only to
grandfathered investors. Please see the section of the prospectus entitled
"Purchasing Shares--Grandfathered Investors."
As with all other mutual fund securities, the Securities and Exchange Commission
has not approved or disapproved these securities or determined whether the
information in this prospectus is adequate or accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- - is not FDIC insured;
- - may lose value; and
- - is not guaranteed by a bank.
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<Table>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- ------------------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- ------------------------------------------------------
PERFORMANCE INFORMATION 3
- ------------------------------------------------------
Annual Total Returns 3
Performance Table 4
FEE TABLE AND EXPENSE EXAMPLE 5
- ------------------------------------------------------
Fee Table 5
Expense Example 5
HYPOTHETICAL INVESTMENT AND EXPENSE
INFORMATION 6
- ------------------------------------------------------
DISCLOSURE OF PORTFOLIO HOLDINGS 7
- ------------------------------------------------------
FUND MANAGEMENT 8
- ------------------------------------------------------
The Advisor 8
Advisor Compensation 8
Portfolio Manager(s) 9
OTHER INFORMATION 9
- ------------------------------------------------------
Sales Charges 9
Dividends and Distributions 9
FINANCIAL HIGHLIGHTS 10
- ------------------------------------------------------
SHAREHOLDER INFORMATION A-1
- ------------------------------------------------------
Choosing a Share Class A-1
Excessive Short-Term Trading Activity
Disclosures A-5
Purchasing Shares A-7
Redeeming Shares A-9
Exchanging Shares A-12
Pricing of Shares A-14
Taxes A-16
OBTAINING ADDITIONAL INFORMATION Back Cover
- ------------------------------------------------------
</Table>
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design,
AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and
Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings
Plan, AIM Solo 401(k), AIM Investment and Design and Your goals. Our solutions.
are registered service marks and AIM Bank Connection, AIM Internet Connect, AIM
Private Asset Management, AIM Private Asset Management and Design, AIM Stylized
and/or Design, AIM Alternative Assets and Design and myaim.com are service marks
of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M
Management Group Inc. and AIM Funds Management Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of
its assets in securities of health care industry companies. In complying with
this 80% investment requirement, the fund will invest primarily in marketable
equity securities, including convertible securities, but its investments may
include other securities, such as synthetic instruments. Synthetic instruments
are investments that have economic characteristics similar to the fund's direct
investments, and may include warrants, futures, options, exchange-traded funds
and American Depositary Receipts. The fund considers a health care industry
company to be one that (1) derives at least 50% of its revenues or earnings from
health care activities; or (2) devotes at least 50% of its assets to such
activities, based on its most recent fiscal year. Such companies include those
that design, manufacture, or sell products or services used for or in connection
with health care or medicine (such as pharmaceutical companies, biotechnology
research firms, companies that sell medical products, and companies that own or
operate health care facilities). The fund may invest in debt securities issued
by health care industry companies, or in equity and debt securities of other
companies the portfolio managers believe will benefit from developments in the
health care industry.
The fund will normally invest in the securities of companies located in at
least three different countries, including the United States, and may invest a
significant portion of its assets in the securities of U.S. issuers. However,
the fund will invest no more than 50% of its total assets in the securities of
issuers in any one country, other than the U.S.
The fund may invest up to 20% of its total assets in companies located in
developing countries, i.e., those countries that are in the initial stages of
their industrial cycles. The fund may also invest up to 5% of its total assets
in lower-quality debt securities, i.e., "junk bonds." For cash management
purposes, the fund may also hold a portion of its assets in cash or cash
equivalents, including shares of affiliated money market funds. Any percentage
limitations with respect to assets of the fund are applied at the time of
purchase. When suitable opportunities are available, the fund may invest in
initial public offerings ("IPOs") of securities.
The portfolio managers allocate the fund's assets among securities of
countries and in currency denominations that are expected to provide the best
opportunities for meeting the fund's investment objective. In analyzing specific
companies for possible investment, the portfolio managers ordinarily look for
several of the following characteristics: above-average per share earnings
growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
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. The
portfolio managers consider whether to sell a particular security when any of
these factors materially changes.
In anticipation of or in response to adverse market or other conditions, or
atypical circumstances such as unusually large cash inflows or redemptions, the
fund may temporarily hold all or a portion of its assets in cash, cash
equivalents or high-quality debt instruments. As a result, the fund may not
achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities
to achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors
affecting the health care industry, such as substantial government regulation.
Government regulation may impact the demand for products and services offered by
health care companies. Also, the products and services offered by health care
companies may be subject to rapid obsolescence caused by scientific advances and
technological innovations. Because the fund focuses its investments in the
health care industry, the value of your fund shares may rise and fall more than
the value of shares of a fund that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social
1
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
instability in their home countries and by changes in economic or taxation
policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign
companies and governments located in developing countries more than those in
countries with mature economies. For example, many developing countries have, in
the past, experienced high rates of inflation or sharply devalued their
currencies against the U.S. dollar, thereby causing the value of investments in
companies located in those countries to decline. Transaction costs are often
higher in developing countries and there may be delays in settlement procedures.
IPOs of securities issued by unseasoned companies with little or no
operating history are risky and their prices are highly volatile, but they can
result in very large gains in their initial trading. There can be no assurance
that the fund will have favorable IPO investment opportunities in the future.
Attractive IPOs are often oversubscribed and may not be available to the fund,
or may be available in only very limited quantities.
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.
2
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance (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.
(PERFORMANCE GRAPH)
<Table>
<Caption>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
1996................................................................... 23.84%
1997................................................................... 7.96%
1998................................................................... 18.43%
1999................................................................... 5.52%
2000................................................................... 52.08%
2001................................................................... 4.70%
2002................................................................... -22.68%
2003................................................................... 21.44%
2004................................................................... 9.17%
2005................................................................... 8.68%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
21.61% (quarter ended December 31, 1998) and the lowest quarterly return was
- -11.32% (quarter ended September 30, 1998).
3
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
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, if applicable.
The indices may not reflect payment of fees, expenses or taxes. The fund is not
managed to track the performance of any particular index, including the indices
shown below, and consequently, the performance of the fund may deviate
significantly from the performance of the indices shown below.
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------------------
(for the periods ended December SINCE INCEPTION
31, 2005) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
- ----------------------------------------------------------------------------------------
Class A 08/07/89
Return Before Taxes 2.71% 1.97% 10.85%
Return After Taxes on
Distributions 2.25 1.13 8.52
Return After Taxes on
Distributions and Sale of
Fund Shares 2.38 1.31 8.14
Class B 04/01/93
Return Before Taxes 2.94 2.23 11.04
Class C 03/01/99
Return Before Taxes 6.93 2.58 -- 9.09 %
Investor Class(2) 08/07/89(2)
Return Before Taxes 8.72 3.13 11.48
- ----------------------------------------------------------------------------------------
MSCI World Index(3) 9.49 2.18 7.04 --
MSCI World Health Care Index(3,4) 9.43 0.01 --
Lipper Health/Biotech Fund
Index(3,5) 11.48 1.44 11.32 --
- ----------------------------------------------------------------------------------------
</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, C and Investor will vary.
(1) Since inception performance is only provided for a class with less than ten
calendar years of performance.
(2) The returns shown for these periods are the blended returns of the
historical performance of the fund's Investor Class shares since their
inception and the restated historical performance of the fund's Class A
shares (for the periods prior to the inception of the Investor Class shares)
at net asset value, which restated performance will reflect the Rule 12b-1
fees applicable to the Class A shares. The inception date shown is that of
the fund's Class A shares. The inception date of the Investor Class shares
is July 15, 2005.
(3) The Morgan Stanley Capital International World Index measures the
performance of securities listed on stock exchanges of 23 developed
countries. The fund has also included the Morgan Stanley Capital
International World Health Care Index, which the fund believes more closely
reflects the performance of the types of securities in which the fund
invests. In addition, the fund has included the Lipper Health/Biotech Index
(which may or may not include the fund) for comparison to a peer group.
(4) The MSCI World Health Care Index includes health care securities tracked by
Morgan Stanley Capital International.
(5) The Lipper Health/Biotech Fund Index is an equally weighted representation
of the 30 largest funds within the Lipper Health/Biotech category. These
funds invest at least 65% of their portfolios in equity securities of
companies engaged in healthcare, medicine and biotechnology.
4
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
<Table>
<Caption>
SHAREHOLDER FEES
- ----------------------------------------------------------------------------------------------------
(fees paid directly from INVESTOR
your investment) CLASS A CLASS B CLASS C CLASS
- ----------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of offering price) 5.50% None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None
- ----------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
ANNUAL FUND OPERATING EXPENSES(3,4)
- -------------------------------------------------------------------------------------------------
(expenses that are deducted INVESTOR
from fund assets) CLASS A CLASS B CLASS C CLASS
- -------------------------------------------------------------------------------------------------
Management Fees(5) 0.62% 0.62% 0.62% 0.62%
Distribution and/or Service (12b-1) Fees(6) 0.25 1.00 1.00 0.25
Other Expenses 0.38 0.38 0.38 0.38
Total Annual Fund Operating Expenses(7) 1.25 2.00 2.00 1.25
- -------------------------------------------------------------------------------------------------
</Table>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1.00% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) If you are a retirement plan participant and your retirement plan bought
$1,000,000 or more of Class A shares, you may pay a 1.00% CDSC if a total
redemption of the retirement plan assets occurs within 12 months from the
date of the retirement plan's initial purchase.
(3) There is no guarantee that actual expenses will be the same as those shown
in the table.
(4) Total Annual Fund Operating Expenses have been restated to reflect the
current fees in effect upon the closing of the reorganization of AIM Health
Sciences Fund into the fund on July 18, 2005.
(5) Effective July 18, 2005, the Board of Trustees has approved a permanent
reduction of the advisory fee of the fund to 0.75% of the first $350
million, plus 0.65% of the next $350 million, plus 0.55% of the next $1.3
billion, plus 0.45% of the next $2 billion, plus 0.40% of the next $2
billion, plus 0.375% of the next $2 billion, plus 0.35% of the Fund's
average daily net assets in excess of $8 billion.
(6) The Board of Trustees has approved a permanent reduction of the Rule 12b-1
fees applicable to Class A shares to 0.25% effective July 1, 2005.
Distribution and/or Services (12b-1) Fees reflect this agreement.
(7) At the request of the Board of Trustees, AMVESCAP PLC has agreed to
reimburse the fund for expenses related to market timing matters.
If a financial institution is managing your account you may also be charged a
transaction or other fee by such financial institution.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, that the
fund's operating expenses remain the same and includes the effect of any
contractual fee waivers and/or expense reimbursements, if any. To the extent
fees are waived and/or expenses are reimbursed voluntarily, your expenses will
be lower. Although your actual returns and costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A $670 $925 $1,199 $1,978
Class B 703 927 1,278 2,134
Class C 303 627 1,078 2,327
Investor Class 127 397 686 1,511
- --------------------------------------------------------------------------------
</Table>
You would pay the following expenses if you did not redeem your shares:
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A $670 $925 $1,199 $1,978
Class B 203 627 1,078 2,134
Class C 203 627 1,078 2,327
Investor Class 127 397 686 1,511
- --------------------------------------------------------------------------------
</Table>
5
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION
- --------------------------------------------------------------------------------
The settlement agreement between A I M Advisors, Inc. and certain of its
affiliates and the New York Attorney general requires A I M Advisors, Inc. and
certain of its affiliates to provide certain hypothetical information regarding
investment and expense information. The chart below is intended to reflect the
annual and cumulative impact of the fund's expenses, including investment
advisory fees and other fund costs, on the fund's return over a 10-year period.
The example reflects the following:
- - You invest $10,000 in the fund and hold it for the entire 10 year period;
- - Your investment has a 5% return before expenses each year;
- - Hypotheticals both with and without any applicable initial sales charge
applied (see "Shareholder Information--Choosing a Share Class" section of this
prospectus for applicability of initial sales charge); and
- - There is no sales charge on reinvested dividends.
There is no assurance that the annual expense ratio will be the expense
ratio for the fund classes for any of the years shown. To the extent that A I M
Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense
reimbursements pursuant to voluntary arrangement, your actual expenses may be
less. This is only a hypothetical presentation made to illustrate what expenses
and returns would be under the above scenarios, your actual returns and expenses
are likely to differ (higher or lower) from those shown below.
<Table>
<Caption>
CLASS A (INCLUDES MAXIMUM
SALES CHARGE) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- ----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses (1.75)% 1.93% 5.76% 9.72% 13.84%
End of Year Balance $ 9,804.38 $10,172.04 $10,553.49 $10,949.25 $11,359.84
Estimated Annual Expenses $ 670.34 $ 124.85 $ 129.53 $ 134.39 $ 139.43
- ----------------------------------------------------------------------------------------------
<Caption>
CLASS A (INCLUDES MAXIMUM
SALES CHARGE) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 18.11% 22.54% 27.13% 31.90% 36.84%
End of Year Balance $11,785.84 $12,227.81 $12,686.35 $13,162.09 $13,655.67
Estimated Annual Expenses $ 144.66 $ 150.09 $ 155.71 $ 161.55 $ 167.61
- ----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS A (WITHOUT MAXIMUM SALES
CHARGE) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- ----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.75% 7.64% 11.68% 15.87% 20.21%
End of Year Balance $10,375.00 $10,764.06 $11,167.71 $11,586.50 $12,021.00
Estimated Annual Expenses $ 127.34 $ 132.12 $ 137.07 $ 142.21 $ 147.55
- ----------------------------------------------------------------------------------------------
<Caption>
CLASS A (WITHOUT MAXIMUM SALES
CHARGE) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- ----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 24.72% 29.39% 34.25% 39.28% 44.50%
End of Year Balance $12,471.79 $12,939.48 $13,424.71 $13,928.13 $14,450.44
Estimated Annual Expenses $ 153.08 $ 158.82 $ 164.78 $ 170.96 $ 177.37
- ----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS B(2) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- ----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.00% 2.00% 2.00% 2.00% 2.00%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.00% 6.09% 9.27% 12.55% 15.93%
End of Year Balance $10,300.00 $10,609.00 $10,927.27 $11,255.09 $11,592.74
Estimated Annual Expenses $ 203.00 $ 209.09 $ 215.36 $ 221.82 $ 228.48
- ----------------------------------------------------------------------------------------------
<Caption>
CLASS B(2) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- ----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.00% 2.00% 2.00% 1.25% 1.25%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 19.41% 22.99% 26.68% 31.43% 36.36%
End of Year Balance $11,940.52 $12,298.74 $12,667.70 $13,142.74 $13,635.59
Estimated Annual Expenses $ 235.33 $ 242.39 $ 249.66 $ 161.32 $ 167.36
- ----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS C(2) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- ----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.00% 2.00% 2.00% 2.00% 2.00%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.00% 6.09% 9.27% 12.55% 15.93%
End of Year Balance $10,300.00 $10,609.00 $10,927.27 $11,255.09 $11,592.74
Estimated Annual Expenses $ 203.00 $ 209.09 $ 215.36 $ 221.82 $ 228.48
- ----------------------------------------------------------------------------------------------
<Caption>
CLASS C(2) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- ----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.00% 2.00% 2.00% 2.00% 2.00%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 19.41% 22.99% 26.68% 30.48% 34.39%
End of Year Balance $11,940.52 $12,298.74 $12,667.70 $13,047.73 $13,439.16
Estimated Annual Expenses $ 235.33 $ 242.39 $ 249.66 $ 257.15 $ 264.87
- ----------------------------------------------------------------------------------------------
</Table>
6
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
<Table>
<Caption>
INVESTOR CLASS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- ----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.75% 7.64% 11.68% 15.87% 20.21%
End of Year Balance $10,375.00 $10,764.06 $11,167.71 $11,586.50 $12,021.00
Estimated Annual Expenses $ 127.34 $ 132.12 $ 137.07 $ 142.21 $ 147.55
- ----------------------------------------------------------------------------------------------
<Caption>
INVESTOR CLASS YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- ----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.25% 1.25% 1.25% 1.25% 1.25%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 24.72% 29.39% 34.25% 39.28% 44.50%
End of Year Balance $12,471.79 $12,939.48 $13,424.71 $13,928.13 $14,450.44
Estimated Annual Expenses $ 153.08 $ 158.82 $ 164.78 $ 170.96 $ 177.37
- ----------------------------------------------------------------------------------------------
</Table>
(1) Your actual expenses may be higher or lower than those shown.
(2) The hypothetical assumes you hold your investment for a full 10 years.
Therefore, any applicable deferred sales charge that might apply in years
one through five for Class B and year one for Class C, have not been
deducted.
DISCLOSURE OF PORTFOLIO HOLDINGS
- --------------------------------------------------------------------------------
The fund's portfolio holdings are disclosed on a regular basis in its
semi-annual and annual reports to shareholders, and on Form N-Q, which is filed
with the Securities and Exchange Commission (SEC) within 60 days of the fund's
first and third fiscal quarter-ends. In addition, portfolio holdings information
for the fund is available at http://www.aiminvestments.com. To reach this
information, access the fund's overview page on the website. Links to the
following fund information are located in the upper right side of this website
page:
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
APPROXIMATE DATE OF INFORMATION REMAINS
INFORMATION WEBSITE POSTING POSTED ON WEBSITE
- ---------------------------------------------------------------------------------------------------------------------------------
Top ten holdings as of month-end 15 days after month-end Until posting of the following month's top
ten holdings
- ---------------------------------------------------------------------------------------------------------------------------------
Complete portfolio holdings as of 30 days after calendar quarter-end For one year
calendar quarter-end
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
A description of the fund's policies and procedures with respect to the
disclosure of the fund's portfolio holdings is available in the fund's Statement
of Additional Information, which is available at http://www.aiminvestments.com.
7
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment
advisor and is responsible for its day-to-day management. The advisor is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor
supervises all aspects of the fund's operations and provides investment advisory
services to the fund, including obtaining and evaluating economic, statistical
and financial information to formulate and implement investment programs for the
fund.
The advisor has acted as investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 200
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment
advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the
distributor of the retail AIM funds) reached final settlements with certain
regulators, including the SEC, the New York Attorney General and the Colorado
Attorney General, to resolve civil enforcement actions and/or investigations
related to market timing and related activity in the AIM funds, including those
formerly advised by IFG. As part of the settlements, a $325 million fair fund
($110 million of which is civil penalties) has been created to compensate
shareholders harmed by market timing and related activity in funds formerly
advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30
million of which is civil penalties) to compensate shareholders harmed by market
timing and related activity in funds advised by AIM, which was done pursuant to
the terms of the settlements. These two fair funds may increase as a result of
contributions from third parties who reach final settlements with the SEC or
other regulators to resolve allegations of market timing and/or late trading
that also may be harmed applicable AIM funds. These two fair funds will be
distributed in accordance with a methodology to be determined by AIM's
independent distribution consultant, in consultation with AIM and the
independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action
and shareholder derivative suits, have been filed against certain AIM funds,
IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit,
alleging among other things: (i) that the defendants permitted improper market
timing and related activity in the funds; (ii) that certain funds inadequately
employed fair value pricing; (iii) that the defendants charged excessive
advisory and/or distribution fees and failed to pass on to shareholders the
perceived savings generated by economies of scale and that the defendants
adopted unlawful distribution plans; and (iv) that the defendants improperly
used the assets of the funds to pay brokers to aggressively promote the sale of
the funds over other mutual funds and that the defendants concealed such
payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed
by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or
related entities and individuals in the future. You can find more detailed
information concerning all of the above matters, including the parties to the
civil lawsuits and summaries of the various allegations and remedies sought in
such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM funds might
react by redeeming their investments. This might require the funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the funds.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 2005, the advisor received compensation
of 0.68% of average daily net assets.
A discussion regarding the basis for the Board of Trustees' approval of the
investment advisory agreement of the fund is available in the fund's annual
report to shareholders for the twelve month period ended October 31, 2005.
8
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the
day-to-day management of the fund's portfolio:
Derek M. Taner, Portfolio Manager, is primarily responsible for the
day-to-day management of the fund's portfolio. He has been responsible for the
fund since 2005 and has been associated with the advisor and/or its affiliates
since 2005. From 2000 to 2005, he was a portfolio manager and analyst for
Franklin Advisers, Inc.
He is assisted by the advisor's Global Health Care Team, which is comprised
of portfolio managers and research analysts. Team members provide research
support and make securities recommendations with respect to the fund's
portfolio, but do not have day-to-day management responsibilities with respect
to the fund's portfolio. Members of the team may change from time to time.
More information on the portfolio manager and the team, including
biographies of other members of the team, may be found on the advisor's website
(http://www.aiminvestments.com). The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional
information about the portfolio managers' investments in the fund, a description
of his compensation structure, and information regarding other accounts he
manages.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Health Care Fund are subject to the
maximum of 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Certain purchases of Class A shares at net asset
value may be subject to the contingent deferred sales charge listed in that
section. Purchases of Class B and Class C shares are subject to the contingent
deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
9
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would
have earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose
report, along with the fund's financial statements, is included in the fund's
annual report, which is available upon request.
<Table>
<Caption>
CLASS A
------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 26.38 $ 24.09 $ 22.41 $ 29.93 $ 30.12
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.18)(a) (0.17)(a) (0.13) (0.29)(a) (0.39)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 3.57 2.46 1.81 (3.17) 3.44
============================================================================================================================
Total from investment operations 3.39 2.29 1.68 (3.46) 3.05
============================================================================================================================
Less distributions from net realized gains -- -- -- (4.06) (3.24)
============================================================================================================================
Net asset value, end of period $ 29.77 $ 26.38 $ 24.09 $ 22.41 $ 29.93
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 12.85% 9.51% 7.50% (13.76)% 10.85%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $554,679 $550,319 $536,746 $533,216 $588,072
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.48%(c) 1.89% 1.94% 1.86% 1.75%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.60%(c) 1.91% 1.94% 1.86% 1.75%
============================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.64)%(c) (0.63)% (0.56)% (1.10)% (1.28)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 92% 64% 99% 153% 207%
____________________________________________________________________________________________________________________________
============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $551,685,420.
<Table>
<Caption>
CLASS B
------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 24.08 $ 22.09 $ 20.66 $ 28.03 $ 28.53
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.33)(a) (0.27)(a) (0.23) (0.38)(a) (0.51)(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 3.24 2.26 1.66 (2.93) 3.25
============================================================================================================================
Total from investment operations 2.91 1.99 1.43 (3.31) 2.74
============================================================================================================================
Less distributions from net realized gains -- -- -- (4.06) (3.24)
============================================================================================================================
Net asset value, end of period $ 26.99 $ 24.08 $ 22.09 $ 20.66 $ 28.03
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 12.08% 9.01% 6.92% (14.21)% 10.32%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $153,766 $168,468 $179,646 $187,793 $219,036
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.14%(c) 2.39% 2.44% 2.36% 2.25%
- ----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.26%(c) 2.41% 2.44% 2.36% 2.25%
============================================================================================================================
Ratio of net investment income (loss) to average
net assets (1.30)%(c) (1.13)% (1.06)% (1.60)% (1.78)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 92% 64% 99% 153% 207%
____________________________________________________________________________________________________________________________
============================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $159,641,010.
10
---------------------------
AIM GLOBAL HEALTH CARE FUND
---------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
CLASS C
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- --------
Net asset value, beginning of period $ 24.09 $ 22.11 $ 20.67 $ 28.03 $ 28.53
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.33)(a) (0.27)(a) (0.23) (0.38)(a) (0.51)(a)
- ---------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 3.25 2.25 1.67 (2.92) 3.25
=====================================================================================================================
Total from investment operations 2.92 1.98 1.44 (3.30) 2.74
=====================================================================================================================
Less distributions from net realized gains -- -- -- (4.06) (3.24)
=====================================================================================================================
Net asset value, end of period $ 27.01 $ 24.09 $ 22.11 $ 20.67 $ 28.03
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) 12.12% 8.95% 6.97% (14.18)% 10.32%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $45,591 $42,863 $43,482 $46,759 $ 36,366
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.14%(c) 2.39% 2.44% 2.36% 2.25%
- ---------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.26%(c) 2.41% 2.44% 2.36% 2.25%
=====================================================================================================================
Ratio of net investment income (loss) to average
net assets (1.30)%(c) (1.13)% (1.06)% (1.60)% (1.78)%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate 92% 64% 99% 153% 207%
_____________________________________________________________________________________________________________________
=====================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $43,980,251.
<Table>
<Caption>
INVESTOR
CLASS
-------------
JULY 15, 2005
(DATE SALES
COMMENCED) TO
OCTOBER 31,
2005
-------------
Net asset value, beginning of period $ 28.95
- -----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a)
- -----------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.86
=============================================================================
Total from investment operations 0.82
=============================================================================
Net asset value, end of period $ 29.77
_____________________________________________________________________________
=============================================================================
Total return(b) 2.83%
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $807,560
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets 1.25%(c)
=============================================================================
Ratio of net investment income (loss) to average net assets (0.41)%(c)
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate 92%
_____________________________________________________________________________
=============================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $808,033,776.
11
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, AIM serves as investment advisor to many other mutual
funds (the funds). The following information is about all the funds.
CHOOSING A SHARE CLASS
Most of the funds have multiple classes of shares, each class representing an
interest in the same portfolio of investments. Certain classes have higher
expenses than other classes which may lower the return on your investment
relative to a less expensive class. In deciding which class of shares to
purchase, you should consider, among other things, (i) the length of time you
expect to hold your shares, (ii) the provisions of the distribution plan, if
any, applicable to the class (iii) the eligibility requirements that apply to
purchases of a particular class, and (iv) any services you may receive in making
your investment determination. In addition, you should consider the other
factors described below. Please contact your financial advisor to assist you in
making your decision.
<Table>
<Caption>
CLASS A(1) CLASS A3 CLASS B(4) CLASS C CLASS R INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------------------
- - Initial sales - No initial - No initial sales - No initial - No initial - No initial
charge sales charge charge sales charge sales charge sales charge
- - Reduced or waived - No contingent - Contingent - Contingent - Generally, no - No contingent
initial sales deferred sales deferred sales deferred sales contingent deferred sales
charge for charge charge on charge on deferred sales charge
certain redemptions redemptions charge(2)
purchases(2) within six years within one
year(7)
- - Lower - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of
distribution and 0.25% 1.00% 1.00% 0.50% 0.25%(3)
service (12b-1)
fee than Class B,
Class C or Class
R shares (See
"Fee Table and
Expense
Example")(3)
- Does not - Converts to - Does not - Does not - Does not
convert to Class A shares convert to convert to convert to
Class A shares on or about the Class A shares Class A shares Class A shares
end of the month
which is at
least eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(5)
- - Generally more - Available only - Purchase orders - Generally more - Generally, - Closed to new
appropriate for for a limited limited to appropriate only available investors,
long-term number of amount less than for short-term to employee except as
investors funds $100,000(6) investors benefit described in
- Purchase plans(9) the
orders limited "Purchasing
to amount less Shares -- Grandfathered
than Investors"
$1,000,000(8) section of
your
prospectus
- ---------------------------------------------------------------------------------------------------------------
</Table>
Certain funds also offer Institutional Class shares to certain eligible
institutional investors; consult the fund's Statement of Additional Information
for the Institutional Class shares for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM
Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were
closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) Class A shares of AIM Tax-Free Intermediate Fund and Investor Class shares
of AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio,
Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio do
not have a 12b-1 fee.
(4) Class B shares are not available as an investment for retirement plans
maintained pursuant to Section 401 of the Internal Revenue Code. These plans
include 401(k) plans (including AIM Solo 401(k) plans), money purchase
pension plans and profit sharing plans. Plans that have existing accounts
invested in Class B shares will continue to be allowed to make additional
purchases.
(5) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares.
(6) Any purchase order for Class B shares in an amount equal to or in excess of
$100,000 will be rejected. Although our ability to monitor or enforce this
limitation for underlying shareholders of omnibus accounts is severely
limited, we have advised the administrators of omnibus accounts maintained
by brokers, retirement plans and approved fee-based programs of this
limitation.
(7) A contingent deferred sales charge (CDSC) does not apply to redemption of
Class C shares of AIM Short Term Bond Fund unless you exchange Class C
shares of another fund that are subject to a CDSC into AIM Short Term Bond
Fund.
(8) Any purchase order for Class C shares in an amount equal to or in excess of
$1,000,000 will be rejected. Although our ability to monitor or enforce this
limitation for underlying shareholders of omnibus accounts is severely
limited, we have advised the administrators of omnibus accounts maintained
by brokers, retirement plans and approved fee-based programs of this
limitation.
(9) Generally, Class R shares are only available to employee benefit plans.
These may include, for example, retirement and deferred compensation plans
maintained pursuant to Sections 401, 403, 457 of the Internal Revenue Code;
nonqualified deferred compensation plans; health savings accounts maintained
pursuant to Section 223 of the Internal Revenue Code, respectively; and
voluntary employees' beneficiary arrangements maintained pursuant to Section
501(c)(9) of the Internal Revenue Code. Retirement plans maintained pursuant
to Section 401 generally include 401(k) plans, profit sharing plans, money
purchase pension plans, and defined benefit plans. Retirement plans
maintained pursuant to Section 403 must be established and maintained by
non-profit organizations operating pursuant to Section 501(c)(3) of the
Internal Revenue Code in order to purchase Class R shares. Class R shares
are generally not available for individual retirement accounts such as
traditional, Roth, SEP, SAR-SEP and SIMPLE IRAs.
- --------------------------------------------------------------------------------
MCF--02/06
A-1
-------------
THE AIM FUNDS
-------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each fund (except AIM Tax-Free Intermediate Fund with respect to its Class A
shares and AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio,
Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio with
respect to their Investor Class shares) has adopted 12b-1 plans that allow the
fund to pay distribution fees to A I M Distributors, Inc. (ADI) for the sale and
distribution of its shares and fees for services provided to shareholders, all
or a substantial portion of which are paid to the dealer of record. Because the
fund pays these fees out of its assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
SALES CHARGES
Sales charges on the funds and classes of those funds are detailed below. As
used below, the term "offering price" with respect to all categories of Class A
shares includes the initial sales charge.
INITIAL SALES CHARGES
The funds (except AIM Short Term Bond Fund) are grouped into three categories
with respect to initial sales charges. The "Other Information" section of your
prospectus will tell you in what category your particular fund is classified.
CATEGORY I INITIAL SALES CHARGES
- -------------------------------------------------------------
<Table>
<Caption>
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ------------------------------------------------------------------------------
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ------------------------------------------------------------------------------
</Table>
CATEGORY II INITIAL SALES CHARGES
- -------------------------------------------------------------
<Table>
<Caption>
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ------------------------------------------------------------------------------
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ------------------------------------------------------------------------------
</Table>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
<Table>
<Caption>
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ------------------------------------------------------------------------------
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ------------------------------------------------------------------------------
</Table>
AIM SHORT TERM BOND FUND INITIAL SALES CHARGES
- -------------------------------------------------------------
<Table>
<Caption>
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ------------------------------------------------------------------------------
Less than $ 100,000 2.50% 2.56%
$100,000 but less than $ 250,000 2.00 2.04
$250,000 but less than $ 500,000 1.50 1.52
$500,000 but less than $1,000,000 1.25 1.27
- ------------------------------------------------------------------------------
</Table>
SHARES SOLD WITHOUT A SALES CHARGE
You will not pay:
- - an initial sales charge on purchases of Class A shares of AIM Tax-Exempt Cash
Fund or AIM Cash Reserve Shares of AIM Money Market Fund;
- - an initial sales charge or a contingent deferred sales charge (CDSC) on Class
A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate
Fund; or
- - an initial sales charge or a CDSC on Investor Class shares of any fund.
PURCHASE OF CLASS A SHARES AT NET ASSET VALUE
Certain categories of persons are permitted to purchase Class A shares of the
funds without paying an initial sales charge because their transactions involve
little expense, such as persons who have a relationship with the funds or with
AIM and certain programs for purchase.
MCF--02/06
A-2
-------------
THE AIM FUNDS
-------------
Accordingly, the following purchasers will not pay initial sales charges on
purchases of Class A shares:
- - A I M Management Group Inc., and its affiliates, or their clients;
- - Any current or retired officer, director, trustee or employee (and members of
their Immediate Family) of A I M Management Group Inc., its affiliates or The
AIM Family of Funds, and any foundation, trust, employee benefit plan or
deferred compensation plan established exclusively for the benefit of, or by,
such persons;
- - Sales representatives and employees (and members of their Immediate Family) of
selling group members of financial institutions that have arrangements with
such selling group members;
- - Purchases through approved fee-based programs;
- - Employer-sponsored retirement plans that are Qualified Purchasers, provided
that:
a. a plan's assets are at least $1 million;
b. there are at least 100 employees eligible to participate in the plan; or
c. all plan transactions are executed through a single omnibus account per AIM
fund and the financial institution or service organization has entered into
the appropriate agreement with the distributor; further provided that
retirement plans maintained pursuant to Section 403(b) of the Internal
Revenue Code of 1986, as amended, (the Code) are not eligible to purchase
shares at net asset value based on the aggregate investment made by the plan
or the number of eligible employees unless the employer or plan sponsor is a
tax-exempt organization operated pursuant to Section 501(c)(3) of the Code;
- - Shareholders of Investor Class shares of an AIM fund;
- - Qualified Tuition Programs created and maintained in accordance with Section
529 of the Code;
- - Insurance company separate accounts;
- - Transfers to IRAs that are attributable to AIM fund investments held in
403(b)(7)s, SIMPLEs, SEPs, SARSEPs, Traditional or Roth IRAs; and
- - Rollovers from AIM-held 403(b)(7)s, 401(K)s, SEPs, SIMPLEs, SARSEPS, Money
Purchase Plans, and Profit Sharing Plans if the assets are transferred to an
AIM IRA.
For more detailed information regarding eligibility to purchase or redeem shares
at reduced or without sales charges, or a description of any defined term used
above, please consult the fund's website at www.aiminvestments.com and click on
the links "My Account", Service Center, or consult the fund's Statement of
Additional Information, which is available on that same website or upon request
free of charge.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II funds and AIM Short Term Bond Fund at net asset value.
However, if you redeem these shares prior to 18 months after the date of
purchase, they will be subject to a CDSC of 1%.
If you currently own Class A shares of a Category I or II fund or AIM Short
Term Bond Fund and make additional purchases at net asset value that result in
account balances of $1,000,000 or more, the additional shares purchased will be
subject to an 18-month, 1% CDSC.
Some retirement plans can purchase Class A shares at their net asset value
per share. If ADI paid a concession to the dealer of record in connection with a
Large Purchase of Class A shares by a retirement plan, the Class A shares may be
subject to a 1% CDSC at the time of redemption if all retirement plan assets are
redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM
Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired
those shares through an exchange, and the shares originally purchased were
subject to a CDSC.
ADI may pay a dealer concession and/or a service fee for Large Purchases and
purchases by certain retirement plans.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES OF FUNDS OTHER
THAN AIM SHORT-TERM BOND FUND
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<Table>
<Caption>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- --------------------------------------------------------------------------------
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- --------------------------------------------------------------------------------
</Table>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS C SHARES OF AIM SHORT-TERM BOND FUND
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset
value and not subject to a CDSC. However, you may be charged a CDSC when you
redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares
through an exchange, and the shares originally purchased were subject to a CDSC.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If ADI pays
a concession to the dealer of record, however, the Class R shares are subject to
a 0.75% CDSC at the time of redemption if all retirement plan assets are
redeemed within 12 months from the date of the retirement plan's initial
purchase.
MCF--02/06
A-3
-------------
THE AIM FUNDS
-------------
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you are redeeming shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial advisor must notify
the transfer agent at the time of purchase that your purchase qualifies for such
treatment. Certain individuals and employer-sponsored retirement plans may link
accounts for the purpose of qualifying for lower initial sales charges. You or
your financial consultant must provide other account numbers to be considered
for Rights of Accumulation, or mark the Letter of Intent section on the account
application, or provide other relevant documentation, so that the transfer agent
can verify your eligibility for the reduction or exception. Consult the fund's
Statement of Additional Information for details.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash
Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM
Floating Rate Fund and Investor Class shares of any fund will not be taken into
account in determining whether a purchase qualifies for a reduction in initial
sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares of a fund with fund shares
currently owned (Class A, B, C or R) and investments in the AIM College Savings
Plan(SM) for the purpose of qualifying for the lower initial sales charge rates
that apply to larger purchases. The applicable initial sales charge for the new
purchase is based on the total of your current purchase and the public offering
price of all other shares you own. The transfer agent may automatically link
certain accounts registered in the same name, with the same taxpayer
identification number, for the purpose of qualifying you for lower initial sales
charge rates.
LETTERS OF INTENT
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of the funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain funds; or
- - when a merger, consolidation, or acquisition of assets of a fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem Class C shares of a fund other than AIM Short Term Bond Fund and
you received such Class C shares by exchanging Class C shares of AIM Short
Term Bond Fund;
- - if you redeem Class C shares of AIM Short Term Bond Fund unless you received
such Class C shares by exchanging Class C shares of another fund and the
original purchase was subject to a CDSC;
- - if you are a participant in a retirement plan and your plan redeems, at any
time, less than all of the Class A, C or Class R shares held through such plan
that would otherwise be subject to a CDSC;
- - if you are a participant in a retirement plan and your plan redeems, after
having held them for more than one year from the date of the plan's initial
purchase, all of the Class A, C or Class R shares held through such plan that
would otherwise be subject to a CDSC;
- - if you are a participant in a qualified retirement plan and redeem Class A,
Class C or Class R shares in order to fund a distribution;
- - if you participate in the Systematic Redemption Plan and withdraw up to 12% of
the value of your shares that are subject to a CDSC in any twelve-month
period;
- - if you redeem shares to pay account fees;
- - for redemptions following the death or post-purchase disability of a
shareholder or beneficial owner;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
ADDITIONAL PAYMENTS TO FINANCIAL ADVISORS
The financial advisor through which you purchase your shares may receive all or
a portion of the sales charges and Rule 12b-1 distribution fees discussed above.
In addition to those payments, ADI or one or more of its corporate affiliates
(collectively, ADI Affiliates) may make additional cash payments to financial
advisors in connection with the promotion and sale of shares of the funds. These
MCF--02/06
A-4
-------------
THE AIM FUNDS
-------------
additional cash payments may include cash revenue sharing payments and other
payments for certain administrative services, transaction processing services
and certain other marketing support services. ADI Affiliates make these payments
from their own resources, from ADI's retention of underwriting concessions and
from payments to ADI under Rule 12b-1 plans. In this context, "financial
advisors" include any broker, dealer, bank (including bank trust departments),
registered investment advisor, financial planner, retirement plan administrator
and any other financial intermediary having a selling, administration or similar
agreement with ADI Affiliates.
ADI Affiliates make revenue sharing payments as incentives to certain
financial advisors to promote and sell shares of the funds. The benefits ADI
Affiliates receive when they make these payments include, among other things,
placing the funds on the financial advisor's funds sales system, placing the
funds on the financial advisor's preferred or recommended fund list, and access
(in some cases on a preferential basis over other competitors) to individual
members of the financial advisor's sales force or to the financial advisor's
management. Revenue sharing payments are sometimes referred to as "shelf space"
payments because the payments compensate the financial advisor for including the
funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate
financial advisors differently depending typically on the level and/or type of
considerations provided by the financial advisor. The revenue sharing payments
ADI Affiliates make may be calculated on sales of shares of the funds
(Sales-Based Payments), in which case the total amount of such payments shall
not exceed 0.25% of the public offering price of all shares sold by the
financial advisor during the particular period. Such payments also may be
calculated on the average daily net assets of the applicable AIM funds
attributable to that particular financial advisor (Asset-Based Payments), in
which case the total amount of such cash payments shall not exceed 0.25% per
annum of those assets during a defined period. Sales-Based Payments primarily
create incentives to make new sales of shares of the funds and Asset-Based
Payments primarily create incentives to retain previously sold shares of the
funds in investor accounts. ADI Affiliates may pay a financial advisor either or
both Sales-Based Payments and Asset-Based Payments.
ADI Affiliates also may make other payments to certain financial advisors
for processing certain transactions or account maintenance activities (such as
processing purchases, redemptions or exchanges or producing customer account
statements) or for providing certain other marketing support services (such as
financial assistance for conferences, seminars or sales or training programs at
which ADI Affiliates personnel may make presentations on the funds to the
financial advisor's sales force). Financial advisors may earn profits on these
payments for these services, since the amount of the payment may exceed the cost
of providing the service. Certain of these payments are subject to limitations
under applicable law.
ADI Affiliates are motivated to make the payments described above since they
promote the sale of fund shares and the retention of those investments by
clients of financial advisors. To the extent financial advisors sell more shares
of the funds or retain shares of the funds in their clients' accounts, ADI
Affiliates benefit from the incremental management and other fees paid to ADI
Affiliates by the funds with respect to those assets.
You can find further details in the fund's Statement of Additional
Information about these payments and the services provided by financial
advisors. In certain cases these payments could be significant to the financial
advisor. Your financial advisor may charge you additional fees or commissions
other than those disclosed in this prospectus. You can ask your financial
advisor about any payments it receives from ADI Affiliates or the funds, as well
as about fees and/or commissions it charges.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
While the funds provide their shareholders with daily liquidity, their
investment programs are designed to serve long-term investors and are not
designed to accommodate excessive short-term trading activity in violation of
our policies described below. Excessive short-term trading activity in the
funds' shares (i.e., a purchase of fund shares followed shortly thereafter by a
redemption of such shares, or vice versa) may hurt the long-term performance of
certain funds by requiring them to maintain an excessive amount of cash or to
liquidate portfolio holdings at a disadvantageous time, thus interfering with
the efficient management of such funds by causing them to incur increased
brokerage and administrative costs. Where excessive short-term trading activity
seeks to take advantage of arbitrage opportunities from stale prices for
portfolio securities, the value of fund shares held by long-term investors may
be diluted. The Boards of Trustees have adopted policies and procedures designed
to discourage excessive or short-term trading of fund shares for all funds
except the money market funds. However, there is the risk that these funds'
policies and procedures will prove ineffective in whole or in part to detect or
prevent excessive or short-term trading. These funds may alter their policies at
any time without prior notice to shareholders if the advisor believes the change
would be in the best interests of long-term shareholders.
AIM and its affiliates (collectively, AIM Affiliates) currently use the
following tools designed to discourage excessive short-term trading in the
retail funds:
(1) trade activity monitoring;
(2) trading guidelines;
(3) redemption fee on trades in certain funds; and
(4) use of fair value pricing consistent with procedures approved by the Boards
of Trustees of the funds.
Each of these tools is described in more detail below. Although these tools are
designed to discourage excessive short-term trading, you should understand that
none of these tools alone nor all of them taken together eliminate the
possibility that excessive short-term trading activity in the funds will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a
MCF--02/06
A-5
-------------
THE AIM FUNDS
-------------
manner that they believe is consistent with long-term shareholder interests.
AIM Money Market Funds. The Boards of Trustees of AIM Money Market Fund, AIM
Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and
Premier U.S. Government Money Portfolio (the money market funds) have not
adopted any policies and procedures that would limit frequent purchases and
redemptions of such funds' shares. The Boards do not believe that it is
appropriate to adopt any such policies and procedures for the money market funds
for the following reasons:
- - The money market funds are offered to investors as cash management vehicles.
Investors must perceive an investment in such funds as an alternative to cash,
and must be able to purchase and redeem shares regularly and frequently.
- - One of the advantages of a money market fund as compared to other investment
options is liquidity. Any policy that diminishes the liquidity of the money
market funds will be detrimental to the continuing operations of such funds.
- - The money market funds' portfolio securities are valued on the basis of
amortized cost, and such funds seeks to maintain a constant net asset value.
As a result, there are no price arbitrage opportunities.
- - Because the money market funds seek to maintain a constant net asset value,
investors expect to receive upon redemption the amount they originally
invested in such funds. Imposition of redemption fees would run contrary to
investor expectations.
AIM Money Market Funds The Boards considered the risks of not having a
specific policy that limits frequent purchases and redemptions, and it
determined that those risks are minimal, especially in light of the reasons for
not having such a policy as described above. Nonetheless, to the extent that the
fund must maintain additional cash and/or securities with short-term durations
than may otherwise be required, the fund's yield could be negatively impacted.
TRADE ACTIVITY MONITORING
The AIM Affiliates monitor selected trades on a daily basis in an effort to
detect excessive short-term trading activities. If, as a result of this
monitoring, the AIM Affiliates believe that a shareholder has engaged in
excessive short-term trading, they will seek to act in a manner that they
believe is consistent with the best interests of long-term investors, which may
include taking steps such as (i) asking the shareholder to take action to stop
such activities or (ii) refusing to process future purchases or exchanges
related to such activities in the shareholder's accounts other than exchanges
into a money market fund. AIM Affiliates will use reasonable efforts to apply
the fund's policies uniformly given the practical limitations described above.
The ability of the AIM Affiliates to monitor trades that are placed by the
underlying shareholders of omnibus accounts maintained by brokers, retirement
plan accounts and approved fee-based program accounts is severely limited or
non-existent in those instances in which the broker, retirement plan
administrator or fee-based program sponsor maintains the underlying shareholder
accounts. This is one reason why this tool cannot eliminate the possibility of
excessive short-term trading.
TRADING GUIDELINES
If you exceed four exchanges out of a fund (other than AIM Money Market Fund,
AIM Tax-Exempt Cash Fund, AIM Limited Maturity Treasury Fund, Premier Portfolio,
Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio) per
calendar year, or a fund or an AIM Affiliate determines, in its sole discretion,
that your short-term trading activity is excessive (regardless of whether or not
you exceed such guidelines), it may, in its discretion, reject any additional
purchase and exchange orders. Each fund and the AIM Affiliates may grant a
hardship exception and accept exchanges in excess of these guidelines on a
case-by-case basis, if they believe that granting such exceptions would not
injure other shareholders. An exchange is the purchase of shares in one fund
which is paid for with the proceeds from a redemption of shares of another fund
effectuated on the same day. The movement out of one fund (redemption) and into
one or more other funds (purchase) on the same day shall be counted as one
exchange. Exchanges effected as part of programs that have been determined by an
AIM Affiliate to be non-discretionary, such as dollar cost averaging, portfolio
rebalancing, or other automatic non-discretionary programs that involve
exchanges, generally will not be counted toward the trading guidelines
limitation of four exchanges out of a fund per calendar year.
The ability of the AIM Affiliates to monitor exchanges made by the
underlying shareholders of omnibus accounts maintained by brokers, retirement
plan accounts and approved fee-based program accounts is severely limited or
non-existent in those instances in which the broker, retirement plan
administrator or fee-based program sponsor maintains the underlying shareholder
accounts and is unwilling or unable to implement these trading guidelines and
may be further limited by systems limitations applicable to those types of
accounts.
Some investments in the funds are made indirectly through vehicles such as
qualified tuition plans, variable annuity and insurance contracts, and funds of
funds which use the funds as underlying investments (each a conduit investment
vehicle). If shares of the funds are held in the name of a conduit investment
vehicle and not in the names of the individual investors who have invested in
the funds through the conduit investment vehicle, the conduit investment vehicle
may be considered an individual shareholder of the funds. To the extent that a
conduit investment vehicle is considered an individual shareholder of the funds,
the funds are likely to be limited in their ability to impose exchange
limitations on individual transactions initiated by investors who have invested
in the funds through the conduit investment vehicle.
REDEMPTION FEE
You may be charged a 2% redemption fee if you redeem, including redeeming by
exchange, shares of certain funds within 30 days of purchase. See "Redeeming
Shares -- Redemption Fee" for more information.
MCF--02/06
A-6
-------------
THE AIM FUNDS
-------------
The ability of a fund to assess a redemption fee on the underlying
shareholders of omnibus accounts maintained by brokers, retirement plan accounts
and approved fee-based program accounts is severely limited or non-existent in
those instances in which the broker, retirement plan administrator or fee-based
program sponsor maintains the underlying shareholder accounts and is unwilling
or unable to assess such fees and may be further limited by systems limitations
applicable to these types of accounts.
For additional discussion of the applicability of redemption fees on shares
of the fund held through omnibus accounts, retirement plan accounts, approved
fee-based program accounts and conduit investment vehicles, see "Redeeming
Shares -- Redemption Fee".
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of Trustees of
the fund. Fair value pricing may reduce the ability of frequent traders to take
advantage of arbitrage opportunities resulting from potentially "stale" prices
of portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares -- Determination of Net Asset Value" for more
information.
PURCHASING SHARES
If you hold your shares through a broker/dealer or other financial institution,
your eligibility to purchase those shares, the conditions for purchase and sale,
and the minimum and maximum amounts allowed may differ depending on that
institution's policies.
MINIMUM INVESTMENTS PER FUND ACCOUNT
There are no minimum investments with respect to Class R shares for fund
accounts. The minimum investments with respect to Class A, A3, B and C shares
and Investor Class shares for fund accounts are as follows:
<Table>
<Caption>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -------------------------------------------------------------------------------------------------------------------------
Employer-Sponsored Retirement Plans (includes section 401, $ 0 ($25 per fund investment for $25
403 and 457 plans, and SEP, SARSEP and SIMPLE IRA plans) salary deferrals from
Employer-Sponsored Retirement
Plans)
Systematic Purchase Plan 50 50
IRA, Roth IRA or Coverdell ESA 250 25
All other accounts 1,000 50
ADI has the discretion to accept orders for lesser amounts.
- -------------------------------------------------------------------------------------------------------------------------
</Table>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not
be processed unless the account application and purchase payment are received in
good order. In accordance with the USA PATRIOT Act, if you fail to provide all
the required information requested in the current account application, your
purchase order will not be processed. Additionally, Federal law requires that
the fund verify and record your identifying information.
PURCHASE OPTIONS
- --------------------------------------------------------------------------------
<Table>
<Caption>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------
Through a Financial Advisor Contact your financial advisor. Same
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, AIM from your confirmation statement to the
Investment Services, Inc., P.O. Box transfer agent.
4739, Houston, TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
reference number. Then, use the
following wire instructions:
Beneficiary Bank ABA/Routing #:
021000021
Beneficiary Account Number: 00100366807
Beneficiary Account Name: AIM
Investment Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
</Table>
MCF--02/06
A-7
-------------
THE AIM FUNDS
-------------
<Table>
<Caption>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------
By Telephone Open your account using one of the Select the AIM Bank
methods described above. Connection--Servicemark-- option on
your completed account application or
complete an AIM Bank Connection form.
Mail the application or form to the
transfer agent. Once the transfer agent
has received the form, call the
transfer agent to place your purchase
order.
Call the AIM 24-hour Automated Investor
Line at 1-800-246-5463. You may place
your order after you have provided the
bank instructions that will be
requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in retirement accounts on the
internet.
- -------------------------------------------------------------------------------------------------------------------------
</Table>
GRANDFATHERED INVESTORS
Investor Class shares of a fund may be purchased only by: (1) persons or
entities who had established an account, prior to April 1, 2002, in Investor
Class shares of any of the funds currently distributed by ADI (the Grandfathered
Funds) and have continuously maintained such account in Investor Class shares
since April 1, 2002; (2) any person or entity listed in the account registration
for any Grandfathered Funds, which account was established prior to April 1,
2002 and continuously maintained since April 1, 2002, such as joint owners,
trustees, custodians and designated beneficiaries; (3) customers of certain
financial institutions, wrap accounts or other fee-based advisory programs, or
insurance company separate accounts, which have had relationships with ADI
and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously
maintained such relationships since April 1, 2002; (4) defined benefit, defined
contribution and deferred compensation plans; and (5) fund trustees, employees
of AMVESCAP PLC and its subsidiaries, AMVESCAP directors, and their immediate
families.
SPECIAL PLANS
SYSTEMATIC PURCHASE PLAN
You can arrange for periodic investments in any of the funds by authorizing the
transfer agent to withdraw the amount of your investment from your bank account
on a day or dates you specify and in an amount of at least $50. You may stop the
Systematic Purchase Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one fund account to one or more other fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the day of the month you specify, in the
amount you specify. Dollar Cost Averaging cannot be set up for the 29th through
the 31st of the month. The minimum amount you can exchange to another fund is
$50. You may participate in a dollar cost averaging program hosted by your
dealer of record, your financial advisor or another financial intermediary. If
such program is the same or similar to AIM's Dollar Cost Averaging program and
is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same fund. You may invest
your dividends and distributions per the rules listed in the "Permitted
Exchanges" section.
You must comply with the following requirements to be eligible to invest
your dividends and distributions in shares of another fund:
(1) Your account balance (a) in the fund paying the dividend must be at least
$5,000; and (b) in the fund receiving the dividend must be at least $500;
and
(2) Both accounts must have identical registration information.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your fund holdings should be rebalanced, on a percentage basis,
between two and ten of your funds on a quarterly, semiannual or annual basis.
Your portfolio will be rebalanced through the exchange of shares in one or more
of your funds for shares of the same class of one or more other funds in your
portfolio. Rebalancing will NOT occur if your portfolio is within 2% of your
stated allocation. If you wish to participate in the Program, make changes or
cancel the Program, the transfer agent must receive your request to participate,
changes, or cancellation in good order at least five business days prior to the
next rebalancing date, which is normally the 28th day of the last month of the
period you choose. You may realize taxable gains from these exchanges. We
MCF--02/06
A-8
-------------
THE AIM FUNDS
-------------
may modify, suspend or terminate the Program at any time on 60 days prior
written notice. You may participate in a portfolio rebalancing program hosted by
your dealer of record, your financial advisor or another financial intermediary.
If such program is the same or similar to AIM's Portfolio Rebalancing Program
and is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
RETIREMENT PLANS
Shares of most of the funds can be purchased through tax-sheltered retirement
plans made available to corporations, individuals and employees of non-profit
organizations and public schools. A plan document must be adopted to establish a
retirement plan. You may use ADI sponsored retirement plans, which include IRAs,
Roth IRAs, SIMPLE IRA plans, SEP/SARSEP plans, 403(b) plans, Solo 401(k) plans
and Money Purchase/Profit Sharing plans, or another sponsor's retirement plan.
AIM Investment Services, Inc. assesses certain fees associated with the
maintenance of certain types of retirement plan accounts and the provision of
specialized recordkeeping services for those plan accounts. ADI also assesses
certain fees associated with the maintenance of retirement plan documents for
which it acts as the prototype sponsor. Contact your financial advisor for
details.
REDEEMING SHARES
REDEMPTION FEE
You may be charged a 2% redemption fee (on redemption proceeds) if you redeem,
including redeeming by exchange, shares of the following funds within 30 days of
their purchase:
<Table>
AIM Asia Pacific Growth Fund AIM Global Value Fund
AIM Developing Markets Fund AIM High Yield Fund
AIM European Growth Fund AIM International Allocation Fund
AIM European Small Company Fund AIM International Core Equity Fund
AIM Global Aggressive Growth Fund AIM International Growth Fund
AIM Global Equity Fund AIM International Small Company Fund
AIM Global Growth Fund AIM S&P 500 Index Fund
AIM Global Real Estate Fund AIM Trimark Fund
</Table>
The redemption fee will be retained by the fund from which you are redeeming
shares (including redemptions by exchange), and is intended to offset the
trading costs, market impact and other costs associated with short-term money
movements in and out of the fund. The redemption fee is imposed to the extent
that the number of fund shares you redeem exceeds the number of fund shares that
you have held for more than 30 days. In determining whether the minimum 30 day
holding period has been met, only the period during which you have held shares
of the fund from which you are redeeming is counted. For this purpose, shares
held longest will be treated as being redeemed first and shares held shortest as
being redeemed last.
The 2% redemption fee generally will not be charged on transactions
involving the following:
(1) total or partial redemptions of shares by omnibus accounts maintained by
brokers that do not have the systematic capability to process the redemption
fee;
(2) total or partial redemptions of shares by approved fee-based programs that
do not have the systematic capability to process the redemption fee;
(3) total or partial redemptions of shares held through retirement plans
maintained pursuant to Sections 401, 403, 408, 408A and 457 of the Internal
Revenue Code (the Code) where the systematic capability to process the
redemption fee does not exist;
(4) total or partial redemptions effectuated by funds of funds, qualified
tuition plans maintained pursuant to Section 529 of the Code, and insurance
company separate accounts which use the funds as underlying investments;
(5) total or partial redemptions effectuated pursuant to an automatic
non-discretionary rebalancing program or a systematic withdrawal plan
established with the funds or a financial intermediary;
(6) total or partial redemptions requested within 30 days following the death or
post-purchase disability of (i) any registered shareholder on an account or
(ii) the settlor of a living trust which is the registered shareholder of an
account, of shares held in the account at the time of death or initial
determination of post-purchase disability;
(7) total or partial redemption of shares acquired through investment of
dividends and other distributions; or
(8) redemptions initiated by a fund.
The AIM Affiliates' goals are to apply the redemption fee on all classes of
shares of the above funds regardless of the type of account in which such shares
are held. This goal is not immediately achievable because of systems limitations
and marketplace resistance. Brokers that maintain omnibus accounts, sponsors of
fee-based program accounts and retirement plan administrators for accounts that
are exempt from the redemption fee pursuant to (1) through (8) above may impose
a redemption fee that has different characteristics, which may be more or less
restrictive, than those set forth above.
Some investments in the funds are made indirectly through conduit investment
vehicles. If shares of the funds are held in the name of a conduit investment
vehicle and not in the names of the individual investors who have invested in
the funds through the conduit investment vehicle, the conduit investment vehicle
may be considered an individual shareholder of the funds. To the extent that a
conduit investment vehicle is considered an individual shareholder of the funds,
the funds are likely to be limited in their ability to assess redemption fees on
individual transactions initiated by investors who
MCF--02/06
A-9
-------------
THE AIM FUNDS
-------------
have invested in the funds through the conduit investment vehicle. In these
cases, the applicability of redemption fees will be determined based on the
aggregate holdings and redemptions of the conduit investment vehicle in a fund.
The funds have the discretion to waive the 2% redemption fee if a fund is in
jeopardy of losing its registered investment company qualification for tax
purposes.
Your broker or financial advisor may charge service fees for handling
redemption transactions. Your shares also may be subject to a contingent
deferred sales charge (CDSC) in addition to the redemption fee.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE
If you purchase $1,000,000 or more of Class A shares of any fund, or if you make
additional purchases of Class A shares at net asset value, your shares may be
subject to a CDSC upon redemption as described below.
<Table>
<Caption>
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- - Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or AIM Short or II Fund or AIM Short Term within 18 months of initial
Term Bond Fund Bond Fund purchase of Category I or II
- Class A shares of Category III Fund or AIM Short Term Bond
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- - Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund or AIM Short Term within 18 months of initial
Bond Fund purchase of Category III Fund
shares
- - Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
</Table>
(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund or AIM Short Term Bond Fund may not be exchanged for Class A shares of
Category III Fund.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--02/06
A-10
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<Table>
Through a Financial Advisor Contact your financial advisor, including your retirement
plan or program sponsor.
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered
owners/trustees; (2) the name of the fund and your account
number; (3) if the transfer agent does not hold your shares,
endorsed share certificates or share certificates
accompanied by an executed stock power; and (4) signature
guarantees, if necessary (see below). The transfer agent may
require that you provide additional information, such as
corporate resolutions or powers of attorney, if applicable.
If you are redeeming from an IRA account, you must include a
statement of whether or not you are at least 59 1/2 years
old and whether you wish to have federal income tax withheld
from your proceeds. The transfer agent may require certain
other information before you can redeem from an
employer-sponsored retirement plan. Contact your employer
for details.
By Telephone Call the transfer agent at 1-800-959-4246 or our AIM 24-hour
Automated Investor Line at 1-800-246-5463. You will be
allowed to redeem by telephone if (1) the proceeds are to be
mailed to the address on record (if there has been no change
communicated to us within the last 30 days) or transferred
electronically to a pre-authorized checking account; (2) you
do not hold physical share certificates; (3) you can provide
proper identification information; (4) the proceeds of the
redemption do not exceed $250,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain retirement accounts and 403(b) plans, may not be
redeemed by telephone. For funds other than Premier
Portfolio, Premier Tax-Exempt Portfolio and Premier U.S.
Government Money Portfolio, the transfer agent must receive
your call during the hours of the customary trading session
of the New York Stock Exchange (NYSE) in order to effect the
redemption at that day's closing price. For Premier
Portfolio, Premier Tax-Exempt Portfolio and Premier U.S.
Government Money Portfolio, the transfer agent must receive
your call before the last net asset value determination on a
business day in order to effect the redemption at that day's
closing price. You may, with limited exceptions, redeem from
an IRA account by telephone. Redemptions from other types of
retirement accounts may be requested in writing.
By Internet Place your redemption request at www.aiminvestments.com. You
will be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $250,000; and (4) you have already
provided proper bank information. AIM prototype retirement
accounts may not be redeemed on the internet. For funds
other than Premier Portfolio, Premier Tax-Exempt Portfolio
and Premier U.S. Government Money Portfolio, the transfer
agent must confirm your transaction during the hours of the
customary trading session of the NYSE in order to effect the
redemption at that day's closing price. For Premier
Portfolio, Premier Tax-Exempt Portfolio and Premier U.S.
Government Money Portfolio, the transfer agent must confirm
your transaction before the last net asset value
determination on a business day in order to effect the
redemption at that day's closing price.
</Table>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared. Payment may be
postponed in cases where the SEC declares an emergency or normal trading is
halted.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine, but we are
not liable for telephone instructions that are reasonably believed to be
genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine, but we are
not liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC REDEMPTIONS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Redemption Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same
MCF--02/06
A-11
-------------
THE AIM FUNDS
-------------
day. If we receive your redemption order after 11:30 a.m. Eastern Time and
before the close of the customary trading session of the NYSE, we generally will
transmit payment on the next business day.
REDEMPTIONS BY CHECK
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND, AIM CASH RESERVE SHARES OF AIM
MONEY MARKET FUND AND INVESTOR CLASS SHARES OF AIM MONEY MARKET FUND, AIM
TAX-EXEMPT CASH FUND, PREMIER PORTFOLIO, PREMIER TAX-EXEMPT PORTFOLIO AND
PREMIER U.S. GOVERNMENT MONEY PORTFOLIO ONLY)
You may redeem shares of these funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $250,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REDEMPTIONS IN KIND
Although the funds generally intend to pay redemption proceeds solely in cash,
the funds reserve the right to determine, in their sole discretion, whether to
satisfy redemption requests by making payment in securities or other property
(known as a redemption in kind).
REDEMPTIONS BY THE FUNDS
If your account (Class A, Class A3, Class B, Class C and Investor Class shares
only) has been open at least one year, you have not made an additional purchase
in the account during the past six calendar months, and the value of your
account falls below $500 ($250 for Investor Class shares) for three consecutive
months due to redemptions or exchanges (excluding retirement accounts), the
funds have the right to redeem the account after giving you 60 days' prior
written notice. You may avoid having your account redeemed during the notice
period by bringing the account value up to $500 ($250 for Investor Class shares)
or by utilizing the Automatic Investment Plan.
If the fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, or the fund is not able to
verify your identity as required by law, the fund may, at its discretion, redeem
the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one fund for those of
another fund. An exchange is the purchase of shares in one fund which is paid
for with the proceeds from a redemption of shares of another fund effectuated on
the same day. Before requesting an exchange, review the prospectus of the fund
you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
You may be charged a redemption fee on certain redemptions, including
exchanges. See "Redeeming Shares -- Redemption Fee."
PERMITTED EXCHANGES
Except as otherwise stated under "Exchanges Not Permitted," you generally may
exchange your shares for shares of the same class of another fund.
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class A, A3, Investor Class, or AIM Cash Reserve
Shares. Exceptions are:
- Class A Shares of AIM Limited Maturity Treasury Fund
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
- Class A Shares of AIM Limited Maturity Treasury Fund, X
AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate
Fund cannot be exchanged for Class A3 Shares of those
funds.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B, C, P, R or Institutional Class Shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class A3 Class A, A3, Investor Class, or AIM Cash Reserve
Shares. Exceptions are:
- Class A3 Shares of AIM Limited Maturity Treasury Fund
and AIM Tax-Free Intermediate Fund cannot be exchanged X
for Class A Shares of those funds.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
- ------------------------------------------------------------------------------------------------------------------------------------
Class A3 Class B, C, P, R or Institutional Class Shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Class B. Exceptions are:
- Class B Shares of other funds cannot be exchanged for X
Class B Shares of AIM Floating Rate Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Class A, A3, C, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class Shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
MCF--02/06
A-12
-------------
THE AIM FUNDS
-------------
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED
- ------------------------------------------------------------------------------------------------------------------------------------
Class C Class C. Exceptions are:
- Class C shares of other funds cannot be exchanged for X
Class C shares of AIM Floating Rate Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
Class C Class A, A3, B, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class R Class R X
- ------------------------------------------------------------------------------------------------------------------------------------
Class R Class A, A3, B, C, P, AIM Cash Reserve Shares,
Institutional or Investor Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares Class A, A3, B, C, R, or Investor Class shares.
Exceptions are:
- Class A shares of AIM Limited Maturity Treasury Fund
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
- Shares to be exchanged for Class B, C or R shares X
must not have been acquired by exchange from Class A
shares of any fund.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
- ------------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares Class P or Institutional Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Class Institutional Class X
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Class Class A, A3, B, C, P, R, AIM Cash Reserve Shares or
Investor Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Investor Class A, A3, or Investor Class. Exceptions are:
- Investor Class shares cannot be exchanged for Class A
shares of any fund which offers Investor Class shares.
- Class A shares of AIM Limited Maturity Treasury Fund X
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
- ------------------------------------------------------------------------------------------------------------------------------------
Investor Class Class B, C, P, R, AIM Cash Reserve Shares or
Institutional Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class P Class A, A3, or AIM Cash Reserve Shares. Exceptions
are:
- Class A shares of AIM Limited Maturity Treasury Fund X
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
- ------------------------------------------------------------------------------------------------------------------------------------
Class P Class B, C, R, Institutional or Investor Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
You may be required to pay an initial sales charge when exchanging from a
fund with a lower initial sales charge than the one into which you are
exchanging. If you exchange into shares that are subject to a CDSC, we will
begin the holding period for purposes of calculating the CDSC on the date you
made your initial purchase.
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM
Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free
Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund with an initial sales charge for
(a) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(b) Class A shares of another Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) Class A shares of a fund subject to an initial sales charge (excluding
Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (excluding Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free
Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund; or
(5) Investor Class shares for Class A or Class A3 shares of any fund which does
not offer Investor Class shares.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares;
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II funds (i) subject to an initial sales
charge or (ii) purchased at net asset value and subject to a contingent
deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
MCF--02/06
A-13
-------------
THE AIM FUNDS
-------------
(2) Class A shares of Category III funds purchased at net asset value for Class
A shares of a Category I or II fund, Class A shares of AIM Short Term Bond
Fund;
(3) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market
Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of
Category III AIM Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II fund, Class A shares of AIM Short Term
Bond Fund (i) subject to an initial sales charge or (ii) purchased at net
asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash
Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other
fund (i) subject to an initial sales charge or (ii) purchased at net asset
value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money
Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C
shares of any fund or for Class A shares of any fund that are subject to a
CDSC, however, if you originally purchased Class A shares of a Category I or
II fund or AIM Short Term Bond Fund, and exchanged those shares for AIM Cash
Reserve Shares of AIM Money Market Fund, you may further exchange the AIM
Cash Reserve Shares for Class A shares of a Category I or II fund or AIM
Short Term Bond Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - Shares of the fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange with the
exception of dividends that are reinvested; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, a fund may delay the purchase of shares being
acquired in an exchange for up to five business days if it determines that it
would be materially disadvantaged by the immediate transfer of exchange
proceeds. The exchange privilege is not an option or right to purchase shares.
Any of the participating funds or the distributor may modify or terminate this
privilege at any time. The fund or the distributor will provide you with notice
of such modification or termination whenever it is required to do so by
applicable law, but may impose changes at any time for emergency purposes.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the funds from which and into which the exchange is
to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if you do not hold physical share
certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
If you make an exchange involving Class B or Class C shares or Class R shares
subject to a CDSC, the amount of time you held the original shares will be
credited to the holding period of the Class B, Class C or Class R shares,
respectively, into which you exchanged for the purpose of calculating contingent
deferred sales charges (CDSC) if you later redeem the exchanged shares. If you
redeem Class B or Class C shares acquired by exchange via a repurchase offer by
AIM Floating Rate Fund, you will be credited with the time period you held the
Class B or Class C shares of AIM Floating Rate Fund for the purpose of computing
the early withdrawal charge applicable to those exchanged shares.
- --------------------------------------------------------------------------------
EACH FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ALL OR ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE SYSTEMATIC PURCHASE PLAN AND
SYSTEMATIC REDEMPTION PLAN OPTIONS ON THE SAME ACCOUNT; OR
- SUSPEND, CHANGE OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS
PROSPECTUS.
- --------------------------------------------------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each fund's shares is the fund's net asset value per share. The
funds value portfolio securities for which market quotations are readily
available at market value. The funds value all other securities and assets for
which market quotations are unavailable or unreliable at their fair value in
good faith using procedures approved by the
MCF--02/06
A-14
-------------
THE AIM FUNDS
-------------
Boards of Trustees of the funds. Securities and other assets quoted in foreign
currencies are valued in U.S. dollars based on the prevailing exchange rates on
that day.
Even when market quotations are available, they may be stale or unreliable
because the security is not traded frequently, trading on the security ceased
before the close of the trading market or issuer specific events occurred after
the security ceased trading or because of the passage of time between the close
of the market on which the security trades and the close of the NYSE and when
the fund calculates its net asset value. Issuer specific events may cause the
last market quotation to be unreliable. Such events may include a merger or
insolvency, events which affect a geographical area or an industry segment, such
as political events or natural disasters, or market events, such as a
significant movement in the U.S. market. Where market quotations are not readily
available, including where AIM determines that the closing price of the security
is unreliable, AIM will value the security at fair value in good faith using
procedures approved by the Boards of Trustees. Fair value pricing may reduce the
ability of frequent traders to take advantage of arbitrage opportunities
resulting from potentially "stale" prices of portfolio holdings. However, it
cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive
for the security upon its current sale. Fair value requires consideration of all
appropriate factors, including indications of fair value available from pricing
services. A fair value price is an estimated price and may vary from the prices
used by other mutual funds to calculate their net asset values.
AIM may use indications of fair value from pricing services approved by the
Boards of Trustees. In other circumstances, the AIM valuation committee may fair
value securities in good faith using procedures approved by the Boards of
Trustees. As a means of evaluating its fair value process, AIM routinely
compares closing market prices, the next day's opening prices for the security
in its primary market if available, and indications of fair value from other
sources. Fair value pricing methods and pricing services can change from time to
time as approved by the Boards of Trustees.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally
available and reliable for domestic exchange traded equity securities. If market
quotations are not available or are unreliable, AIM will value the security at
fair value in good faith using procedures approved by the Boards of Trustees.
Foreign Securities: If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at the
market quotations. Because trading hours for certain foreign securities end
before the close of the NYSE, closing market quotations may become unreliable.
If between the time trading ends on a particular security and the close of the
customary trading session on the NYSE events occur that are significant and may
make the closing price unreliable, the fund may fair value the security. If an
issuer specific event has occurred that AIM determines, in its judgment, is
likely to have affected the closing price of a foreign security, it will price
the security at fair value. AIM also relies on a screening process from a
pricing vendor to indicate the degree of certainty, based on historical data,
that the closing price in the principal market where a foreign security trades
is not the current market value as of the close of the NYSE. For foreign
securities where AIM believes, at the approved degree of certainty, that the
price is not reflective of current market value, AIM will use the indication of
fair value from the pricing service to determine the fair value of the security.
The pricing vendor, pricing methodology or degree of certainty may change from
time to time.
Fund securities primarily traded on foreign markets may trade on days that
are not business days of the fund. Because the net asset value of fund shares is
determined only on business days of the fund, the value of the portfolio
securities of a fund that invests in foreign securities may change on days when
you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal
bonds, convertible securities, including high yield or junk bonds, and loans,
normally are valued on the basis of prices provided by independent pricing
services. Prices provided by the pricing services may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments related
to special securities, dividend rate, maturity and other market data. Prices
received from pricing services are fair value prices. In addition, if the price
provided by the pricing service and independent quoted prices are unreliable,
the AIM valuation committee will fair value the security using procedures
approved by the Boards of Trustees.
Short-term Securities: The funds' short-term investments are valued at
amortized cost when the security has 60 days or less to maturity. AIM Money
Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt
Portfolio and Premier U.S. Government Money Portfolio value all their securities
at amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund and
AIM Tax-Free Intermediate Fund value variable rate securities that have an
unconditional demand or put feature exercisable within seven days or less at
par, which reflects the market value of such securities.
Futures and Options: Futures and options are valued on the basis of market
quotations, if available.
Open-end Funds: To the extent a fund invests in other open-end funds, the
investing fund will calculate its net asset value using the net asset value of
the underlying fund in which it invests.
Each fund determines the net asset value of its shares on each day the NYSE
is open for business (a business day), as of the close of the customary trading
session, or earlier NYSE closing time that day. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each business
day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government
Money Portfolio determine the net asset value of their shares every fifteen
minutes on each business day, beginning at 8:00 a.m. Eastern Time. The last net
asset value determination on any business day for Premier Portfolio and Premier
U.S. Government Money Portfolio will
MCF--02/06
A-15
-------------
THE AIM FUNDS
-------------
generally occur at 5:30 p.m. Eastern Time, and the last net asset value
determination on any business day for Premier Tax-Exempt Portfolio will
generally occur at 4:30 p.m. Eastern Time. Premier Portfolio, Premier Tax-Exempt
Portfolio and Premier U.S. Government Money Portfolio are authorized not to open
for trading on a day that is otherwise a business day if the Bond Market
Association recommends that government securities dealers not open for trading
and any such day will not be considered a business day. Premier Portfolio,
Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio also
may close early on a business day if the Bond Market Association recommends that
government securities dealers close early. If Premier Portfolio, Premier
Tax-Exempt Portfolio or Premier U.S. Government Money Portfolio uses its
discretion to close early on a business day, the last net asset value
calculation will occur as of the time of such closing.
TIMING OF ORDERS
For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio, you can purchase or redeem shares on each
business day prior to the close of the customary trading session or any earlier
NYSE closing time that day. For funds other than Premier Portfolio, Premier
Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, purchase
orders that are received and accepted before the close of the customary trading
session or any earlier NYSE closing time on a business day generally are
processed that day and settled on the next business day.
For Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S.
Government Money Portfolio, you can purchase or redeem shares on each business
day, prior to the last net asset value determination on such business day;
however, if your order is received and accepted after the close of the customary
trading session or any earlier NYSE closing time that day, your order generally
will be processed on the next business day and settled on the second business
day following the receipt and acceptance of your order.
For all funds, you can exchange shares on each business day, prior to the
close of the customary trading session or any earlier NYSE closing time that
day. Shareholders of Premier Portfolio, Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio therefore cannot exchange their shares after the
close of the customary trading session or any earlier NYSE closing time on a
particular day, even though these funds remain open after such closing time.
The funds price purchase, exchange and redemption orders at the net asset
value calculated after the transfer agent receives an order in good order. Any
applicable sales charges are applied at the time an order is processed. A fund
may postpone the right of redemption only under unusual circumstances, as
allowed by the Securities and Exchange Commission, such as when the NYSE
restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
generally taxable to you at different rates depending on the length of time the
fund holds its assets and the type of income that the fund earns. Different tax
rates apply to ordinary income, qualified dividend income, and long-term capital
gain distributions. Every year, you will be sent information showing the amount
of dividends and distributions you received from each fund during the prior
year.
Any long-term or short-term capital gains realized from redemptions of fund
shares will be subject to federal income tax. Exchanges of shares for shares of
another fund are treated as a sale, and any gain realized on the transaction
will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in fund shares
may differ materially from the federal income tax consequences described above.
In addition, the preceding discussion concerning the taxability of fund
dividends and distributions and of redemptions and exchanges of fund shares is
inapplicable to investors that are generally exempt from federal income tax,
such as retirement plans that are qualified under Section 401, 403, 408, 408A
and 457 of the Internal Revenue Code, individual retirement accounts (IRAs) and
Roth IRAs. You should consult your tax advisor before investing.
MCF--02/06
A-16
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of the
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year. The fund also files
its complete schedule of portfolio holdings with the SEC for the 1st and 3rd
quarters of each fiscal year on Form N-Q.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us by
mail at AIM Investment Services, Inc., P.O. Box 4739, Houston, TX 77210-4739 or
<Table>
BY TELEPHONE: (800) 959-4246
ON THE INTERNET: You can send us a request by
e-mail or download
prospectuses, SAIs, annual or
semiannual reports via our
website:
http://www.aiminvestments.com
</Table>
<Table>
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, ARE ALSO
AVAILABLE AT HTTP://WWW.AIMINVESTMENTS.COM.
</Table>
You can also review and obtain copies of the fund's SAI, financial reports, the
fund's Forms N-Q and other information at the SEC's Public Reference Room in
Washington, DC; on the EDGAR database on the SEC's Internet website
(http://www.sec.gov); or, after paying a duplication fee, by sending a letter to
the SEC's Public Reference Room, Washington, DC 20549-0102 or by sending an
electronic mail request to publicinfo@sec.gov. Please call the SEC at
1-202-942-8090 for information about the Public Reference Room.
- ----------------------------------------
AIM Global Health Care Fund
SEC 1940 Act file number: 811-05426
- ----------------------------------------
AIMinvestments.com GHC-PRO-1
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
Appendix III
AIM Global Health Care Fund
Management's discussion o Diversifying across industries.
of Fund performance
o Monitoring political trends that could
====================================================================================== negatively affect a specific industry.
PERFORMANCE SUMMARY
We may sell a holding when:
The fiscal year ended October 31, 2006, was a mixed year for health care stocks.
The Fund underperformed the S&P 500 Index for the fiscal year due to the strong o We identify a more attractive
returns in the broad market over the period. While the Fund performed largely in investment opportunity.
line with its peer group, our strategy caused us to underperform the MSCI World
Health Care Index due primarily to an underweight position in large-cap o We see a deterioration of a company's
pharmaceutical stocks. It is important to know that the benchmark is over 60% fundamentals.
weighted in pharmaceuticals while the Fund is more diversified.
o A company fails to capitalize on a
Your Fund's long-term performance appears on pages 8 and 9. market opportunity.
FUND VS. INDEXES o A change in management occurs.
Total returns, 10/31/05-10/31/06, excluding applicable sales charges. If sales
charges were included, returns would be lower. o A stock's price target has been met.
Class A Shares 8.31% MARKET CONDITIONS AND YOUR FUND
Class B Shares 7.52
Class C Shares 7.51 The economy has enjoyed several years of
Investor Shares 8.35 economic growth fueled by a low interest
MSCI World Index (Broad Market Index) 21.32 rate environment, a strong real estate
MSCI World Health Care Index (Style-Specific Index) 13.53 market and resilient consumer spending.
Lipper Health/Biotechnology Funds Index (Peer Group Index) 8.71 However, in the past year, we have begun
to see a moderation of economic growth
SOURCE: LIPPER INC. as the U.S. Federal Reserve Board (the
====================================================================================== Fed) raised short-term interest rates 17
times since June 2004 before pausing at
HOW WE INVEST services. We look for companies that are 5.25%. Although the current level of
financially healthy and, in our opinion, interest rates is low by historical
We seek health care stocks of all market likely to sustain their profitability. standards, a five-fold increase over a
capitalizations from around the world We assess the long-term commercial two-year period can potentially affect
that we believe are attractively priced potential of each company's current and the economy.
and have the potential to benefit from prospective products, especially
long-term earnings and cash flow growth. products that fill otherwise unfilled Gross domestic product, a measure of
market segments. economic growth, has slowed to 2.2% in
We typically invest in four broad the third quarter of 2006 compared to
segments of the health care sector: We seek to manage risk by generally: the average from the fourth quarter of
pharmaceuticals, biotechnology, medical 2002 to the first quarter 2006 of 3.6%.
technology and health o Limiting the size of investment in a Additionally, inflation, as measured by
single position. the consumer price index, was at an
annualized rate of 3.4% for September
2006, which is in line with the
inflation rate for
(continued)
======================================== ======================================== =========================================
PORTFOLIO COMPOSITION TOP FIVE COUNTRIES* TOP 10 EQUITY HOLDINGS*
By industry 1. United States 76.6% 1. Roche Holding A.G. (Switzerland) 5.6%
Pharmaceuticals 35.8% 2. Switzerland 9.7 2. Novartis A.G.-ADR (Switzerland) 4.1
Biotechnology 22.0 3. France 3.5 3. Johnson & Johnson 4.0
Health Care Equipment 12.6 4. United Kingdom 2.1 4. Pfizer Inc. 3.5
Health Care Services 7.2 5. Japan 2.0 5. Amgen Inc. 3.4
Managed Health Care 7.2 6. Genzyme Corp. 3.0
Life Sciences Tools & Services 6.1 Total Net Assets $1.46 billion 7. Gilead Sciences, Inc. 3.0
Other Industries, Each Less Than 8. Medco Health Solutions, Inc. 2.7
2.0% of Portfolio 5.9 Total Number of Holdings* 97 9. Wyeth 2.5
Money Market Funds Plus 10. UnitedHealth Group Inc. 2.0
Other Assets Less Liabilities 3.2
The Fund's holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.
*Excluding money market fund holdings.
======================================== ======================================== =========================================
5
AIM Global Health Care Fund
2005. Despite a moderating economic position in MEDTRONIC, a company that Derek M. Taner
environment, the labor force has develops and manufactures therapeutic Chartered Financial
remained intact with the unemployment medical devices for chronic diseases, as [TANER Analyst, portfolio
rate at 4.4% as of October 31, 2006. we saw fundamentals in implantable PHOTO] manager, is manager
Overall, we believed the economic cardiac defibrillator growth of AIM Global Health
outlook remained positive although deteriorate. Care Fund. Mr. Taner
growth has slowed to a more subdued began his investment career in 1993 with
level than what we have seen in the past We maintained our foreign exposure another employer, where he worked as a
several years. with moderate weightings in Japan, fixed income analyst, assistant
France, Germany, UK and Switzerland. We portfolio manager and manager of a
Large-cap pharmaceuticals was the reduced our Japanese holdings due to health care fund. Mr. Taner joined AIM
best performing sector for the fiscal profit-taking and increased our position in 2005. He earned a bachelor of science
year. Sentiment has improved after four in U.S. equities as we identified degree in accounting and an M.B.A. from
years of underperformance due to attractive buying opportunities in the the Hass School of Business at the
improving growth rates driven by cost region. University of California at Berkeley.
restructurings, less patent expirations
and improving product pipelines. ROCHE At the close of the fiscal year, Assisted by the Global Health Care Team
HOLDING, a Swiss drug company with very economic indicators showed that the
few expiring patents, experienced strong economy had slowed, which tended to
sales of its cancer drug, Avastin. The favor defensive growth sectors such as
company remained our top performing health care. Historically, the health
stock due to its significant ownership care sector has performed well in an
of GENENTECH, the biotech company that environment of decelerating earnings
developed Avastin. The company continued growth for the broader market. Moreover,
to perform well and showed positive health care was one of the better
profit margin improvement. performing sectors in the past two
quarters when the yield curve has been
SHIRE PLC, a specialty pharmaceutical completely inverted. This is the
company focused in areas of central environment at the close of the fiscal
nervous system, gastrointestinal and year. We continued to balance growth
human genetic therapies, contributed to prospects with valuation to determine
Fund performance for the fiscal year. the optimal portfolio structure.
The stock rose due to the patent
settlement for its largest product, IN CLOSING
Adderall XR. Furthermore, the company
has a solid pipeline with new products We would like to thank any new
in process for FDA approval. shareholders who joined the Fund during
the period and thank existing
UNITEDHEALTH, a U.S. health care shareholders for their continued
insurer, detracted from performance for commitment to AIM Global Health Care
the fiscal year. The stock was trimmed Fund.
due largely to uncertainty surrounding
the options scandal at the company. THE VIEWS AND OPINIONS EXPRESSED IN
Important to note is that the company MANAGEMENT'S DISCUSSION OF FUND
remains a leader in the managed care PERFORMANCE ARE THOSE OF A I M ADVISORS,
area with solid assets and sound INC. THESE VIEWS AND OPINIONS ARE
fundamentals. SUBJECT TO CHANGE AT ANY TIME BASED ON
FACTORS SUCH AS MARKET AND ECONOMIC
MERGE TECHNOLOGIES, a health care CONDITIONS. THESE VIEWS AND OPINIONS MAY
software and IT services company, also NOT BE RELIED UPON AS INVESTMENT ADVICE
detracted from performance for the OR RECOMMENDATIONS, OR AS AN OFFER FOR A
period. The company allegedly PARTICULAR SECURITY. THE INFORMATION IS
misrepresented prior financial NOT A COMPLETE ANALYSIS OF EVERY ASPECT
performance resulting in the replacement OF ANY MARKET, COUNTRY, INDUSTRY,
of the entire senior management team. We SECURITY OR THE FUND. STATEMENTS OF FACT
sold the position as a result of these ARE FROM SOURCES CONSIDERED RELIABLE,
events. BUT A I M ADVISORS, INC. MAKES NO
REPRESENTATION OR WARRANTY AS TO THEIR
During the fiscal year, we trimmed COMPLETENESS OR ACCURACY. ALTHOUGH
MEDCO HEALTH SOLUTIONS, the largest HISTORICAL PERFORMANCE IS NO GUARANTEE
pharmacy-benefit manager, as the stock OF FUTURE RESULTS, THESE INSIGHTS MAY
appreciated from the purchase price, and HELP YOU UNDERSTAND OUR INVESTMENT
we invested in new attractive MANAGEMENT PHILOSOPHY.
opportunities. We also sold our
See important fund and index
disclosures on the inside front cover.
FOR A PRESENTATION OF YOUR FUND'S
LONG-TERM PERFORMANCE, PLEASE SEE
PAGES 8 AND 9.
6
Appendix IV
AIM Global Health Care Fund
NOTE 16--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,
-----------------------------------------------------------------------------
2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.77 $ 26.38 $ 24.09 $ 22.41 $ 29.93
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15) (0.18)(a) (0.17)(a) (0.13) (0.29)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.59 3.57 2.46 1.81 (3.17)
=======================================================================================================================
Total from investment operations 2.44 3.39 2.29 1.68 (3.46)
=======================================================================================================================
Less distributions from net realized
gains (0.93) -- -- -- (4.06)
=======================================================================================================================
Net asset value, end of period $ 31.28 $ 29.77 $ 26.38 $ 24.09 $ 22.41
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 8.31% 12.85% 9.51% 7.50% (13.76)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $539,666 $554,679 $550,319 $536,746 $533,216
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.22%(c) 1.48% 1.89% 1.94% 1.86%
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.22%(c) 1.60% 1.91% 1.94% 1.86%
=======================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.46)%(c) (0.64)% (0.63)% (0.56)% (1.10)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 83% 92% 64% 99% 153%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $557,208,445.
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.99 $ 24.08 $ 22.09 $ 20.66 $ 28.03
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.36 3.24 2.26 1.66 (2.93)
=======================================================================================================================
Total from investment operations 2.00 2.91 1.99 1.43 (3.31)
=======================================================================================================================
Less distributions from net realized
gains (0.93) -- -- -- (4.06)
=======================================================================================================================
Net asset value, end of period $ 28.06 $ 26.99 $ 24.08 $ 22.09 $ 20.66
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 7.52% 12.08% 9.01% 6.92% (14.21)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $138,788 $153,766 $168,468 $179,646 $187,793
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36%
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36%
=======================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 83% 92% 64% 99% 153%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $148,741,953.
F-15
AIM Global Health Care Fund
NOTE 16--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.01 $ 24.09 $ 22.11 $ 20.67 $ 28.03
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a)
- ------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.36 3.25 2.25 1.67 (2.92)
==================================================================================================================
Total from investment operations 2.00 2.92 1.98 1.44 (3.30)
==================================================================================================================
Less distributions from net realized
gains (0.93) -- -- -- (4.06)
==================================================================================================================
Net asset value, end of period $ 28.08 $ 27.01 $ 24.09 $ 22.11 $ 20.67
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 7.51% 12.12% 8.95% 6.97% (14.18)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $42,463 $45,591 $42,863 $43,482 $46,759
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36%
- ------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36%
==================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)%
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate 83% 92% 64% 99% 153%
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $45,225,318.
F-16
AIM GLOBAL HEALTH CARE FUND
A PORTFOLIO OF AIM INVESTMENT FUNDS
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 959-4246
AIM ADVANTAGE HEALTH SCIENCES FUND
A PORTFOLIO OF AIM COUNSELOR SERIES TRUST
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 959-4246
STATEMENT OF ADDITIONAL INFORMATION
(March 15, 2007 Special Meeting of Shareholders of AIM Advantage Health
Sciences Fund)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement and Prospectus dated
January 31, 2007 for use in connection with the Special Meeting of Shareholders
of AIM Advantage Health Sciences Fund to be held on March 15, 2007. Copies of
the Combined Proxy Statement and Prospectus may be obtained at no charge by
writing A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173 or by calling 1 800-410-4246. 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 dated February 28, 2006, as
supplemented March 24, 2006, March 31, 2006, June 30, 2006, August 1, 2006,
September 20, 2006 and December 13, 2006 (the "Statement of Additional
Information") for AIM Investment Funds (the "Trust"), 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 January 31, 2007.
TABLE OF CONTENTS
THE TRUST................................................................. S-3
DESCRIPTION OF PERMITTED INVESTMENTS...................................... S-3
TRUSTEES AND OFFICERS OF THE TRUST........................................ S-3
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES....................... S-3
ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF
DISTRIBUTION........................................................... S-3
PORTFOLIO TRANSACTIONS.................................................... S-3
DESCRIPTION OF SHARES..................................................... S-3
DETERMINATION OF NET ASSET VALUE.......................................... S-3
TAXES..................................................................... S-4
PERFORMANCE DATA.......................................................... S-4
FINANCIAL INFORMATION..................................................... S-4
Appendix I - Statement of Additional Information of the Trust
Appendix II - Pro forma financial statements of the Fund
Appendix III - Audited financial statements of the Fund and the report thereon
by PricewaterhouseCoopers LLP
S-2
THE TRUST
This Statement of Additional Information relates to AIM Investment Funds
(the "Trust") and its investment portfolio, AIM Global Health Care Fund (the
"Fund"). The Trust is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
is a separate series of shares of beneficial interest of the Trust. For
additional information about the Trust, see heading "General Information About
the Trust" in the Trust's Statement of Additional Information attached hereto as
Appendix I.
DESCRIPTION OF PERMITTED INVESTMENTS
For a discussion of the fundamental and non-fundamental investment policies
of the Fund adopted by the Trust's Board of Trustees, see heading "Description
of the Funds and Their Investments and Risks" in the Trust's Statement of
Additional Information attached hereto as Appendix I.
TRUSTEES AND OFFICERS OF THE TRUST
For a disclosure of the names and a brief occupational biography of each of
the Trust's trustees and executive officers identifying those who are interested
persons of the Trust as well as stating their aggregate remuneration, see
heading "Management of the Trust" in the Trust'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 Fund, the principal holders
of shares of the Fund and the ownership by officers and trustees of the Fund,
see heading "Control Persons and Principal Holders of Securities" in the Trust'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 Trust's advisory and management-related services
agreements and plans of distribution, see headings "Investment Advisory and
Other Services" and "Distribution of Securities" in the Trust's Statement of
Additional Information attached hereto as Appendix I.
PORTFOLIO TRANSACTIONS
For a discussion of the Trust's brokerage policy, see heading "Brokerage
Allocation and Other Practices" in the Trust's Statement of Additional
Information attached hereto as Appendix I.
DESCRIPTION OF SHARES
For a discussion of the Trust's authorized securities and the
characteristics of the Trust's shares of beneficial interest, see heading
"General Information About the Trust" in the Trust's Statement of Additional
Information attached hereto as Appendix I.
DETERMINATION OF NET ASSET VALUE
For a discussion of the Trust's valuation and pricing procedures and a
description of its purchase and redemption procedures, see heading "Purchase,
Redemption and Pricing of Shares" in the Trust's Statement of Additional
Information attached hereto as Appendix I.
S-3
TAXES
For a discussion of any tax information relating to ownership of the
Trust's shares, see heading "Dividends, Distributions and Tax Matters" in the
Trust's Statement of Additional information attached hereto as Appendix I.
PERFORMANCE DATA
For a description and quotation of certain performance data used by the
Trust, see heading "Calculation of Performance Data" in the Trust's Statement of
Additional Information attached hereto as Appendix I.
FINANCIAL INFORMATION
The pro forma financial statements of the Fund are attached hereto as
Appendix II.
The October 31, 2006 audited financial statements of the Fund and the
report thereon by PricewaterhouseCoopers LLP, are attached hereto as Appendix
III.
S-4
Appendix I
RETAIL CLASSES OF
AIM DEVELOPING MARKETS FUND
AIM GLOBAL HEALTH CARE FUND
AIM TRIMARK ENDEAVOR FUND
AIM TRIMARK FUND
AIM TRIMARK SMALL COMPANIES FUND
(SERIES PORTFOLIOS OF AIM INVESTMENT FUNDS)
Supplement dated December 13, 2006
to the Statement of Additional Information dated February 28, 2006,
as supplemented March 24, 2006, March 31, 2006, June 30, 2006, August 1, 2006
and September 20, 2006
The following information replaces in its entirety the section entitled
"DESCRIPTION OF FUNDS AND THEIR INVESTMENTS AND RISKS - INVESTMENT STRATEGIES
AND RISKS - OTHER INVESTMENTS - OTHER INVESTMENT COMPANIES" on page 10 of the
Statement of Additional Information:
"OTHER INVESTMENT COMPANIES. Each Fund may purchase shares of
other investment companies. For each Fund, the 1940 Act imposes the
following restrictions on investments in other investment companies:
(i) a Fund may not purchase more than 3% of the total outstanding
voting stock of another investment company; (ii) a Fund may not invest
more than 5% of its total assets in securities issued by another
investment company; and (iii) a Fund may not invest more than 10% of
its total assets in securities issued by other investment companies.
These restrictions do not apply to investments by the Funds in
investment companies that are money market funds, including money
market funds that have AIM or an affiliate of AIM as an investment
advisor (the "Affiliated Money Market Funds").
With respect to a Fund's purchase of shares of another
investment company, including an Affiliated Money Market Fund, the Fund
will indirectly bear its proportionate share of the advisory fees and
other operating expenses of such investment company.
EXCHANGE-TRADED FUNDS. Each Fund may purchase shares of
exchange-traded funds ("ETFs"). Most ETFs are registered under the 1940
Act as investment companies. Therefore, a Fund's purchase of shares of
an ETF may be subject to the restrictions on investments in other
investment companies discussed above under "Other Investment
Companies."
ETFs hold portfolios of securities that are designed to
replicate, as closely as possible before expenses, the price and yield
of a specified market index. The performance results of ETFs will not
replicate exactly the performance of the pertinent index due to
transaction and other expenses, including fees to service providers,
borne by ETFs. ETF shares are sold and redeemed at net asset value only
in large blocks called creation units and redemption units,
respectively. ETF shares also may be purchased and sold in secondary
market trading on national securities exchanges, which allows investors
to purchase and sell ETF shares at their market price throughout the
day.
Investments in ETFs involve the same risks associated with a
direct investment in the types of securities included in the indicies
the ETFs are designed to replicate. In addition, shares of an ETF may
trade at a market price that is less than their net asset value and an
active trading market in such shares may not develop or continue.
Finally there can be no assurance that the portfolio of securities
purchased by an ETF to replicate a particular index will replicate such
index."
The following information replaces in its entirety the first paragraph under the
heading "DESCRIPTION OF FUNDS AND THEIR INVESTMENTS AND RISKS - FUND POLICIES -
NON FUNDAMENTAL RESTRICTIONS" on page 25 of the Statement of Additional
Information (such paragraph describes each Fund's non-fundamental investment
restriction regarding issuer diversification):
"(1) In complying with the fundamental restriction regarding
issuer diversification, the Fund will not, with respect to 75% of its
total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities and securities issued by 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. The Fund may purchase securities of other investment
companies as permitted by the 1940 Act Laws, Interpretations and
Exemptions."
Effective January 1, 2007, the following information is added after the second
paragraph under the heading "INVESTMENT ADVISORY AND OTHER SERVICES - OTHER
SERVICE PROVIDERS - TRANSFER AGENT" on pages 38 and 39 of the Statement of
Additional Information:
"SUB-TRANSFER AGENT. AIM Funds Management, Inc. ("AFMI"), 5140
Yonge Street, Suite 900, Toronto, Ontario M2N6X7, a wholly owned,
indirect subsidiary of AMVESCAP PLC, provides services to the Trust as
a sub-transfer agent, pursuant to an agreement between AFMI and AIS.
The Trust does not pay a fee to AFMI for these services. Rather AFMI is
compensated by AIS, as a sub-contractor."
2
AIM INVESTMENT FUNDS
RETAIL CLASSES OF
AIM DEVELOPING MARKETS FUND
AIM GLOBAL HEALTH CARE FUND
AIM TRIMARK ENDEAVOR FUND
AIM TRIMARK FUND
AIM TRIMARK SMALL COMPANIES FUND
Supplement dated September 20, 2006
to the Statement of Additional Information dated February 28, 2006,
as supplemented March 24, 2006, March 31, 2006, June 30, 2006 and August 1, 2006
The following replaces in its entirety the information relating to Philip A.
Taylor, under the heading "TRUSTEES AND OFFICERS -- INTERESTED PERSONS" in
Appendix C in the Statement of Additional Information:
"NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE AND/OR TRUSTEESHIP(S) HELD
TRUST OFFICER BY TRUSTEE
SINCE
INTERESTED PERSONS
Philip A. Taylor* -- 1954 2006 Director, Chief Executive Officer and President, A I M None"
Trustee, President and Management Group Inc., AIM Mutual Fund Dealer Inc.,
Principal Executive Officer AIM Funds Management Inc. and 1371 Preferred Inc.;
Director and President, A I M Advisors, Inc., INVESCO
Funds Group, Inc. and AIM GP Canada Inc.; Director,
A I M Capital Management, Inc. and A I M Distributors,
Inc.; Director and Chairman, AIM Investment Services,
Inc., Fund Management Company and INVESCO
Distributors, Inc.; Director, President and Chairman,
AVZ Callco Inc., AMVESCAP Inc. and AIM Canada
Holdings Inc.; Director and Chief Executive Officer,
AIM Trimark Global Fund Inc. and AIM Trimark Canada
Fund Inc.; Trustee, President and Principal Executive
Officer, The AIM Family of Funds--Registered Trademark--
(other than AIM Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free Investments Trust); and
Trustee and Executive Vice President, The AIM Family of
Funds--Registered Trademark-- (AIM Treasurer's Series
Trust, Short-Term Investments Trust and Tax-Free
Investments Trust only)
Formerly: President and Principal Executive Officer,
The AIM Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments
Trust and Tax-Free Investments Trust only);
Chairman, AIM Canada Holdings, Inc.; Executive Vice
President and Chief Operations Officer, AIM Funds
Management Inc.; President, AIM Trimark Global Fund
Inc. and AIM Trimark Canada Fund Inc.; and Director,
Trimark Trust
Additionally, effective September 20, 2006, Mark H. Williamson resigned as
Trustee and Executive Vice President. Philip A. Taylor has been appointed to
replace Mark H. Williamson on the Investments Committee and Valuation Committee.
- ----------
* Mr. Taylor was appointed as President and Principal Executive Officer
of the Trust on August 1, 2006 and was appointed as Trustee of the
Trust on September 20, 2006. Mr. Taylor 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.
AIM INVESTMENT FUNDS
RETAIL CLASSES OF
AIM DEVELOPING MARKETS FUND
AIM GLOBAL HEALTH CARE FUND
AIM TRIMARK ENDEAVOR FUND
AIM TRIMARK FUND
AIM TRIMARK SMALL COMPANIES FUND
Supplement dated August 1, 2006
to the Statement of Additional Information dated February 28, 2006,
as supplemented March 24, 2006, March 31, 2006 and June 30, 2006
The following (1) replaces in its entirety, the information relating to Robert
H. Graham, under the heading "TRUSTEES AND OFFICERS -- INTERESTED PERSONS" and
(2) is added with respect to Philip A. Taylor, under the heading "TRUSTEES AND
OFFICERS -- OTHER OFFICERS" in Appendix C in the Statement of Additional
Information:
"NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE AND/OR TRUSTEESHIP(S) HELD
TRUST OFFICER BY TRUSTEE
SINCE
- -------------------------- ------- --------------------------------------------- -------------------
INTERESTED PERSONS
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management None"
Trustee and Vice Chair Group Inc. (financial services holding
company); Director and Vice Chairman,
AMVESCAP PLC; Chairman, AMVESCAP PLC --
AIM Division (parent of AIM and a global
investment management firm); and Trustee
and Vice Chair of The AIM Family of
Funds--Registered Trademark--
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer), AIM
Investment Services, Inc. (registered
transfer agent), and Fund Management
Company (registered broker dealer);
Chief Executive Officer, AMVESCAP PLC --
Managed Products; and President and
Principal Executive Officer of The AIM
Family of Funds--Registered Trademark--
- ----------
(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.
1
p
"OTHER OFFICERS
Philip A. Taylor(2) -- 1954 2006 Director, Chief Executive Officer and None"
President and Principal President, A I M Management Group Inc.,
Executive Officer AIM Mutual Fund Dealer Inc., AIM Funds
Management Inc. and 1371 Preferred Inc.;
Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc. and AIM
GP Canada Inc.; Director, A I M Capital
Management, Inc. and A I M Distributors,
Inc.; Director and Chairman, AIM
Investment Services, Inc., Fund
Management Company and INVESCO
Distributors, Inc.; Director, President
and Chairman, AVZ Callco Inc., AMVESCAP
Inc. and AIM Canada Holdings Inc.;
Director and Chief Executive Officer,
AIM Trimark Global Fund Inc. and AIM
Trimark Canada Fund Inc.; and President
and Principal Executive Officer of The
AIM Family of Funds--Registered
Trademark--
Formerly: Chairman, AIM Canada Holdings,
Inc.; Executive Vice President and Chief
Operations Officer, AIM Funds Management
Inc.; President, AIM Trimark Global Fund
Inc. and AIM Trimark Canada Fund Inc.;
and Director, Trimark Trust
- ----------
(2) Mr. Taylor was elected as President and Principal Executive Officer of the
Trust on August 1, 2006.
2
AIM INVESTMENT FUNDS
RETAIL CLASS SHARES OF
AIM DEVELOPING MARKETS FUND
AIM GLOBAL HEALTH CARE FUND
AIM TRIMARK ENDEAVOR FUND
AIM TRIMARK FUND
AIM TRIMARK SMALL COMPANIES FUND
Supplement dated June 30, 2006 to the
Statement of Additional Information dated February 28, 2006
as supplemented March 24, 2006 and March 31, 2006
Effective July 1, 2006, the following information replaces the second paragraph
in its entirety appearing under the heading "INVESTMENT ADVISORY AND OTHER
SERVICES -- OTHER SERVICE PROVIDERS -- TRANSFER AGENT" on page 38 of the
Statement of Additional Information:
"The Transfer Agency and Service Agreement (the "TA
Agreement") between the Trust and AIS provides that AIS will perform
certain services related to the servicing of shareholders of the Funds.
Other such services may be delegated or sub-contracted to third party
intermediaries. For servicing accounts holding Class A, A3, B, C, P, R,
AIM Cash Reserve and Investor Class Shares, the TA Agreement provides
that the Trust, on behalf of the Funds, will pay AIS an annual fee per
open shareholder account plus certain out of pocket expenses. This fee
is paid monthly at the rate of 1/12 of the annual rate and is based
upon the number of open shareholder accounts during each month. In
addition, all fees payable by AIS or its affiliates to third party
intermediaries who service accounts pursuant to sub-transfer agency,
omnibus account services and sub-accounting agreements are charged back
to the Funds, subject to certain limitations approved by the Board of
the Trust. These payments are made in consideration of services that
would otherwise be provided by AIS if the accounts serviced by such
intermediaries were serviced by AIS directly. For more information
regarding such payments to intermediaries, see the discussion under
"Administrative and Processing Support Payments" below."
"APPENDIX L -- CERTAIN FINANCIAL ADVISORS THAT RECEIVE ONE OR MORE TYPES OF
PAYMENTS" appearing on page L-1 of the Statement of Additional Information is
revised to include AXA Advisors, LLC.
AIM DEVELOPING MARKETS FUND
AIM GLOBAL HEALTH CARE FUND
AIM TRIMARK ENDEAVOR FUND
AIM TRIMARK FUND
AIM TRIMARK SMALL COMPANIES FUND
(SERIES PORTFOLIOS OF AIM INVESTMENTS FUNDS)
Supplement dated March 31, 2006 to the Statement
of Additional Information dated February 28, 2006
as supplemented March 24, 2006
The following (1) replaces in its entirety, the information relating to Lisa O.
Brinkley and Kevin M. Carome and (2) is added with respect to John M. Zerr and
Todd L. Spillane, under the heading "APPENDIX C TRUSTEES AND OFFICERS- OTHER
OFFICERS" in the Statement of Additional Information.
TRUSTEE OTHER
"NAME, YEAR OF BIRTH AND/OR TRUSTEESHIP(S)
AND POSITION(S) HELD OFFICER HELD BY
WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS TRUSTEE
- ------------------------ ------- ------------------------------------------------- --------------
OTHER OFFICERS
Lisa O. Brinkley - 1959 2004 Global Compliance Director, AMVESCAP PLC; and N/A
Vice President Vice President of the AIM Family of Funds
Formerly: Senior Vice President, A I M Management
Group Inc. (financial services holding company);
Senior Vice President and Chief Compliance
Officer, A I M Advisors, Inc. and the AIM Family
of Funds; Vice President and Chief Compliance
Officer, A I M Capital Management, Inc. and A I M
Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund Management
Company; and Senior Vice President and Compliance
Director, Delaware Investments Family of Funds
Kevin M. Carome - 1956 2003 Senior Vice President and General Counsel, N/A
Vice President AMVESCAP PLC; and Vice President of the AIM
Family of Funds
Formerly: Director, General Counsel, and Vice
President Fund Management Company; Director,
Senior Vice President, Secretary and General
Counsel, A I M Management Group Inc. (financial
services holding company) and A I M Advisors,
Inc.; Director and Vice President, INVESCO
Distributors, Inc.; Senior Vice President, A I M
Distributors, Inc.; Vice President, A I M Capital
Management, Inc. and AIM Investment Services,
Inc.; Senior Vice President and Secretary of the
AIM Family of Funds; and Senior Vice President
and General Counsel, Liberty Financial Companies,
Inc. and Liberty Funds Group, LLC
Todd L. Spillane* - 1958 2006 Senior Vice President, A I M Management Group N/A
Chief Compliance Officer Inc.; Senior Vice President and Chief Compliance
Officer, A I M Advisors, Inc.; Chief Compliance
Officer of the AIM Family of Funds; Vice
President and Chief Compliance Officer, A I M
Capital Management, Inc.; and Vice President,
A I M Distributors, Inc., AIM Investment
Services, Inc. and Fund Management Company
Formerly: Global Head of Product Development,
AIG-Global Investment Group, Inc.; Chief
Compliance Officer and Deputy General Counsel,
AIG-SunAmerica Asset Management, and Chief
Compliance Officer, Chief Operating Officer and
Deputy General Counsel, American General
Investment Management
John M. Zerr** - 1962 2006 Director, Senior Vice President, Secretary and N/A
Senior Vice President, General Counsel, A I M Management Group Inc.
Chief Legal Officer (financial services holding company) and A I M
and Secretary Advisors, Inc.; Director and Vice President,
INVESCO Distributors, Inc.; Vice President, A I M
Capital Management, Inc., AIM Investment
Services, Inc., and Fund Management Company;
Senior Vice President, A I M Distributors, Inc.;
and Senior Vice President, Chief Legal Officer
and Secretary of the AIM Family of Funds
Formerly: Chief Operating Officer, Senior Vice
President, General Counsel, and Secretary,
Liberty Ridge Capital, Inc. (an investment
adviser); Vice President and Secretary, PBHG
Funds (an investment company); Vice President and
Secretary, PBHG Insurance Series Fund (an
investment company); General Counsel and
Secretary, Pilgrim Baxter Value Investors (an
investment adviser); Chief Operating Officer,
General Counsel and Secretary, Old Mutual
Investment Partners (a broker-dealer); General
Counsel and Secretary, Old Mutual Fund Services
(an administrator); General Counsel and
Secretary, Old Mutual Shareholder Services (a
shareholder servicing center); Executive Vice
President, General Counsel and Secretary, Old
Mutual Capital, Inc. (an investment adviser); and
Vice President and Secretary, Old Mutual Advisors
Funds (an investment company)
* Mr. Spillane was elected Chief Compliance Officer effective March 29, 2006.
** Mr. Zerr was elected Senior Vice President, Chief Legal Officer and
Secretary effective March 29, 2006.
Additionally, effective March 31, 2006, Mr. Edward K. Dunn retired as a Trustee
of the AIM Funds."
RETAIL CLASSES OF
AIM DEVELOPING MARKETS FUND
AIM GLOBAL HEALTH CARE FUND
AIM TRIMARK ENDEAVOR FUND
AIM TRIMARK FUND
AIM TRIMARK SMALL COMPANIES FUND
(SERIES PORTFOLIO OF AIM INVESTMENT FUNDS)
Supplement dated March 24, 2006
to the Statement of Additional Information dated February 28, 2006
Effective March 27, 2006, the following information replaces in its entirety the
information appearing under the heading "PORTFOLIO MANAGER FUND HOLDINGS AND
INFORMATION ON OTHER MANAGED ACCOUNTS - AIM TRIMARK SMALL COMPANIES FUND" on
page H-2 of the Statement of Additional Information:
- ----------------------------------------------------------------------------------------------------------------------
OTHER REGISTERED MUTUAL OTHER POOLED
FUNDS (ASSETS IN INVESTMENT VEHICLES OTHER ACCOUNTS
MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2)
DOLLAR RANGE OF ----------------------- ----------------------- -----------------------
INVESTMENTS IN NUMBER OF TOTAL NUMBER OF TOTAL NUMBER OF TOTAL
PORTFOLIO MANAGER EACH FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ----------------------------------------------------------------------------------------------------------------------
AIM TRIMARK SMALL COMPANIES FUND
- ----------------------------------------------------------------------------------------------------------------------
Robert Mikalachki None(3) None - 3 $317.3 None -
- ----------------------------------------------------------------------------------------------------------------------
Ted Chisholm(4) None(3) None - None - None -
- ----------------------------------------------------------------------------------------------------------------------
(1) This column reflects investments in a Fund's shares owned directly by a
portfolio manager or beneficially owned by a portfolio manager (as
determined in accordance with Rule 16a-1(a)(2) under the Securities
Exchange Act of 1934, as amended). A portfolio manager is presumed to be a
beneficial owner of securities that are held by his or her immediate
family members sharing the same household.
(2) These are accounts of individual investors for which AIM's affiliate, AIM
Private Asset Management, Inc. ("APAM") provides investment advice. APAM
offers separately managed accounts that are managed according to the
investment models developed by AIM's portfolio managers and used in
connection with the management of certain AIM funds. APAM accounts may be
invested in accordance with one or more of those investment models and
investments held in those accounts are traded in accordance with the
applicable model.
(3) Shares of the Funds are not sold in Canada, where the portfolio management
is domiciled. Accordingly, no portfolio manager may invest in the Funds.
(4) Ted Chisholm began serving as portfolio manager on March 27, 2006.
Ownership information and information on other accounts managed has been
provided as of February 28, 2006.
STATEMENT OF
ADDITIONAL INFORMATION
AIM INVESTMENT FUNDS
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION RELATES TO EACH PORTFOLIO (EACH A
"FUND," COLLECTIVELY THE "FUNDS") OF AIM INVESTMENT FUNDS LISTED BELOW. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUSES FOR THE FUNDS LISTED BELOW. PORTIONS OF
EACH FUND'S FINANCIAL STATEMENTS ARE INCORPORATED INTO THIS STATEMENT OF
ADDITIONAL INFORMATION BY REFERENCE TO SUCH FUND'S MOST RECENT ANNUAL REPORT TO
SHAREHOLDERS. YOU MAY OBTAIN, WITHOUT CHARGE, A COPY OF ANY PROSPECTUS AND/OR
ANNUAL REPORT FOR ANY FUND LISTED BELOW FROM AN AUTHORIZED DEALER OR BY WRITING
TO:
AIM INVESTMENT SERVICES, INC.
P.O. BOX 4739
HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 959-4246
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED FEBRUARY 28, 2006, RELATES TO
THE CLASS A, CLASS B, CLASS C, CLASS R AND INVESTOR CLASS SHARES, AS APPLICABLE,
OF THE FOLLOWING PROSPECTUSES:
FUND DATED
AIM DEVELOPING MARKETS FUND FEBRUARY 28, 2006
AIM GLOBAL HEALTH CARE FUND FEBRUARY 28, 2006
AIM TRIMARK ENDEAVOR FUND FEBRUARY 28, 2006
AIM TRIMARK FUND FEBRUARY 28, 2006
AIM TRIMARK SMALL COMPANIES FUND FEBRUARY 28, 2006
AIM INVESTMENT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION ABOUT THE TRUST................................................................................. 1
Fund History............................................................................................ 1
Shares of Beneficial Interest........................................................................... 1
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS............................................................ 3
Classification.......................................................................................... 3
Investment Strategies and Risks......................................................................... 3
Equity Investments.......................................................................... 6
Foreign Investments......................................................................... 6
Debt Investments............................................................................ 8
Other Investments........................................................................... 9
Investment Techniques....................................................................... 11
Derivatives................................................................................. 15
Additional Securities or Investment Techniques.............................................. 22
Fund Policies........................................................................................... 23
Concentration of Investments............................................................................ 26
Temporary Defensive Positions........................................................................... 26
Portfolio Turnover...................................................................................... 26
Policies and Procedures for Disclosure of Fund Holdings................................................. 26
MANAGEMENT OF THE TRUST............................................................................................. 29
Board of Trustees....................................................................................... 29
Management Information.................................................................................. 29
Trustee Ownership of Fund Shares............................................................ 32
Compensation............................................................................................ 32
Retirement Plan For Trustees................................................................ 32
Deferred Compensation Agreements............................................................ 33
Purchase of Class A Shares of the Funds at Net Asset Value.................................. 33
Codes of Ethics......................................................................................... 33
Proxy Voting Policies................................................................................... 34
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................................................................. 34
INVESTMENT ADVISORY AND OTHER SERVICES.............................................................................. 34
Investment Advisor...................................................................................... 34
Investment Sub-Advisor...................................................................... 37
Portfolio Managers.......................................................................... 38
Securities Lending Arrangements............................................................. 38
Service Agreements...................................................................................... 38
Other Service Providers................................................................................. 38
BROKERAGE ALLOCATION AND OTHER PRACTICES............................................................................ 39
Brokerage Transactions.................................................................................. 39
Commissions............................................................................................. 40
Broker Selection........................................................................................ 40
Directed Brokerage (Research Services).................................................................. 43
Regular Brokers or Dealers.............................................................................. 43
Allocation of Portfolio Transactions.................................................................... 43
Allocation of Initial Public Offering ("IPO") Transactions.............................................. 44
i
PURCHASE, REDEMPTION AND PRICING OF SHARES......................................................................... 44
Transactions through Financial Intermediaries.......................................................... 44
Purchase and Redemption of Shares...................................................................... 45
Offering Price......................................................................................... 64
Redemptions In Kind.................................................................................... 66
Backup Withholding..................................................................................... 66
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS........................................................................... 67
Dividends and Distributions............................................................................ 67
Tax Matters............................................................................................ 68
DISTRIBUTION OF SECURITIES......................................................................................... 75
Distribution Plans..................................................................................... 75
Distributor............................................................................................ 77
CALCULATION OF PERFORMANCE DATA.................................................................................... 79
FINANCIAL STATEMENTS............................................................................................... 84
PENDING LITIGATION................................................................................................. 84
APPENDICES:
RATINGS OF DEBT SECURITIES......................................................................................... A-1
PERSONS TO WHOM AIM PROVIDES NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS..................................... B-1
TRUSTEES AND OFFICERS.............................................................................................. C-1
TRUSTEE COMPENSATION TABLE......................................................................................... D-1
PROXY POLICIES AND PROCEDURES...................................................................................... E-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................................................................ F-1
MANAGEMENT FEES.................................................................................................... G-1
PORTFOLIO MANAGERS................................................................................................. H-1
ADMINISTRATIVE SERVICES FEES....................................................................................... I-1
BROKERAGE COMMISSIONS.............................................................................................. J-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF REGULAR BROKERS OR DEALERS................... K-1
CERTAIN FINANCIAL ADVISORS THAT RECEIVE ONE OR MORE TYPES OF PAYMENTS.............................................. L-1
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS............................................ M-1
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS...................................................... N-1
TOTAL SALES CHARGES................................................................................................ O-1
PENDING LITIGATION................................................................................................. P-1
ii
GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Investment Funds (the "Trust") is a Delaware statutory trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company. The Trust currently
consists of five separate portfolios: AIM Developing Markets Fund, AIM Global
Health Care Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark
Small Companies Fund (each a "Fund" and collectively, the "Funds"). Under the
Amended and Restated Agreement and Declaration of Trust, dated September 14,
2005, as amended (the "Trust Agreement"), the Board of Trustees of the Trust
(the "Board") is authorized to create new series of shares without the necessity
of a vote of shareholders of the Trust.
The Trust was originally organized on October 29, 1987 as a Maryland
corporation. The Trust reorganized as a Delaware business trust on May 7, 1998.
All historical financial and other information contained in this Statement of
Additional Information for periods prior to September 8, 1998 relating to these
Funds (or a class thereof), except for AIM Trimark Endeavor Fund, AIM Trimark
Fund and AIM Trimark Small Companies Fund, is that of AIM Investment Funds, Inc.
the Maryland corporation (or the corresponding class thereof). Each of AIM
Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund
commenced operations as a series of the Trust. On July 18, 2005, AIM Global
Health Care Fund acquired the assets of AIM Health Sciences Fund, a portfolio of
AIM Sector Funds.
SHARES OF BENEFICIAL INTEREST
Shares of beneficial interest of the Trust are redeemable at their net
asset value (subject, in certain circumstances, to a contingent deferred sales
charge or redemption fee) at the option of the shareholder or at the option of
the Trust in certain circumstances.
The Trust allocates moneys and other property it receives from the issue
or sale of shares of each of its series of shares, and all income, earnings and
profits from such issuance and sales, subject only to the rights of creditors,
to the appropriate Fund. These assets constitute the underlying assets of each
Fund, are segregated on the Trust's books of account, and are charged with the
expenses of such Fund and its respective classes. The Trust allocates any
general expenses of the Trust not readily identifiable as belonging to a
particular Fund by or under the direction of the Board, primarily on the basis
of relative net assets, or other relevant factors.
Each share of each Fund represents an equal proportionate interest in that
Fund with each other share and is entitled to such dividends and distributions
out of the income belonging to such Fund as are declared by the Board.
Each Fund offers the following separate classes of shares:
INSTITUTIONAL INVESTOR
FUND CLASS A CLASS B CLASS C CLASS R CLASS CLASS
- -------------------------------- ------- ------- ------- ------- ------------- --------
AIM Developing Markets Fund X X X X
AIM Global Health Care Fund X X X X
AIM Trimark Endeavor Fund X X X X X
AIM Trimark Fund X X X X X
AIM Trimark Small Companies Fund X X X X X
1
This Statement of Additional Information relates solely to the Class A,
Class B, Class C, Class R and Investor Class shares, if applicable, of the
Funds. The Institutional Class shares of the Funds, which are discussed in a
separate Statement of Additional Information, are intended for use by certain
eligible institutional investors.
Each class of shares represents an interest in the same portfolio of
investments. Differing sales charges and expenses will result in differing net
asset values and dividends and distributions. Upon any liquidation of the Trust,
shareholders of each class are entitled to share pro rata in the net assets
belonging to the applicable Fund allocable to such class available for
distribution after satisfaction of outstanding liabilities of the Fund allocable
to such class.
Each share of a Fund generally has the same voting, dividend, liquidation
and other rights; however, each class of shares of a Fund is subject to
different sales loads, conversion features, exchange privileges and
class-specific expenses. Only shareholders of a specific class may vote on
matters relating to that class' distribution plan.
Because Class B shares automatically convert to Class A shares on or about
month-end which is at least eight years after the date of purchase, the Funds'
distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act requires
that Class B shareholders must also approve any material increase in
distribution fees submitted to Class A shareholders of that Fund. A pro rata
portion of shares from reinvested dividends and distributions convert along with
the Class B shares.
Except as specifically noted above, shareholders of each Fund are entitled
to one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the shares of a Fund. However,
on matters affecting an individual Fund or class of shares, a separate vote of
shareholders of that Fund or class is required. Shareholders of a Fund or class
are not entitled to vote on any matter which does not affect that Fund or class
but that requires a separate vote of another Fund or class. An example of a
matter that would be voted on separately by shareholders of each Fund is the
approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an
example of a matter that would be voted on separately by shareholders of each
class of shares is approval of the distribution plans. When issued, shares of
each Fund are fully paid and nonassessable, have no preemptive, subscription
rights, and are freely transferable. Other than the automatic conversion of
Class B shares to Class A shares, there are no conversion rights. Shares do not
have cumulative voting rights, which means that in situations in which
shareholders elect trustees, holders of more than 50% of the shares voting for
the election of trustees can elect all of the trustees of the Trust, and the
holders of less than 50% of the shares voting for the election of trustees will
not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations. There is a remote possibility, however, that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. The Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the Trust. The Trust Agreement provides for indemnification out
of the property of a Fund for all losses and expenses of any shareholder of such
Fund held liable on account of being or having been a shareholder. Thus, the
risk of a shareholder incurring financial loss due to shareholder liability is
limited to circumstances in which a Fund is unable to meet its obligations and
the complaining party is not held to be bound by the disclaimer.
The trustees and officers of the Trust will not be liable for any act,
omission or obligation of the Trust or any trustee or officer; however, a
trustee or officer is not protected against any liability to the Trust or to the
shareholders to which a trustee or officer would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his or her office with the Trust
("Disabling Conduct"). The Trust's Bylaws generally provide for
2
indemnification by the Trust of the trustees, the officers and employees or
agents of the Trust, provided that such persons have not engaged in Disabling
Conduct. Indemnification does not extend to judgments or amounts paid in
settlement in an action by or in the right of the Trust. The Trust's Bylaws
provide for the advancement of payments to current and former trustees, officers
and employees or agents of the Trust, or anyone serving at their request, in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding, expenses for which such person would be entitled to
indemnification; provided that any advancement of payments would be reimbursed
unless it is ultimately determined that such person is entitled to
indemnification for such expenses.
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to demand or
require the Trust to issue share certificates and share certificates are not
issued.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Trust is an open-end management investment company. Each of the Funds
other than AIM Developing Markets Fund is "diversified" for purposes of the 1940
Act.
INVESTMENT STRATEGIES AND RISKS
The table on the following pages identifies various securities and
investment techniques used by AIM in managing The AIM Family of Funds registered
trademark. The table has been marked to indicate those securities and investment
techniques that AIM may use to manage a Fund. A Fund may not use all of these
techniques at any one time. A Fund's transactions in a particular security or
use of a particular technique is subject to limitations imposed by a Fund's
investment objective, policies and restrictions described in that Fund's
Prospectus and/or this Statement of Additional Information, as well as federal
securities laws. The Funds' investment objectives, policies, strategies and
practices are non-fundamental unless otherwise indicated. A more detailed
description of the securities and investment techniques, as well as the risks
associated with those securities and investment techniques that the Funds
utilize, follows the table. The descriptions of the securities and investment
techniques in this section supplement the discussion of principal investment
strategies contained in each Fund's Prospectus; where a particular type of
security or investment technique is not discussed in a Fund's Prospectus, that
security or investment technique is not a principal investment strategy.
3
AIM INVESTMENT FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
- -------------------
SECURITY/ AIM AIM GLOBAL AIM TRIMARK
INVESTMENT DEVELOPING HEALTH CARE AIM TRIMARK AIM TRIMARK SMALL
TECHNIQUE MARKETS FUND FUND ENDEAVOR FUND FUND COMPANIES FUND
- ----------------------------------- ------------ ---------- ------------- ----------- --------------
EQUITY INVESTMENTS
Common Stock X X X X X
Preferred Stock X X X X X
Convertible Securities X X X X X
Alternative Entity Securities X X X X X
FOREIGN INVESTMENTS
Foreign Securities X X X X X
Foreign Government Obligations X X X X X
Foreign Exchange Transactions X X X X X
DEBT INVESTMENTS
U.S. Government Obligations X X X X X
Rule 2a-7 Requirements
Mortgage-Backed and Asset-Backed
Securities
Collateralized Mortgage Obligations
Bank Instruments
Commercial Instruments
Participation Interests
Municipal Securities
Municipal Lease Obligations
Investment Grade Corporate Debt X X X X X
Obligations
Junk Bonds X X X X X
Liquid Assets X X X X X
OTHER INVESTMENTS
REITs X X X X X
Other Investment Companies X X X X X
Defaulted Securities
Municipal Forward Contracts
Variable or Floating Rate X
Instruments
Indexed Securities X
Zero-Coupon and Pay-in-Kind X
Securities
Synthetic Municipal Instruments
INVESTMENT TECHNIQUES
Delayed Delivery Transactions X X X X X
When-Issued Securities X X X X X
Short Sales X X X X X
4
FUND
- ------------------------
SECURITY/ AIM AIM GLOBAL AIM TRIMARK
INVESTMENT DEVELOPING HEALTH CARE AIM TRIMARK AIM TRIMARK SMALL
TECHNIQUE MARKETS FUND FUND ENDEAVOR FUND FUND COMPANIES FUND
- ----------------------------------- ------------ ----------- ------------- ----------- --------------
Margin Transactions
Swap Agreements X X X X X
Interfund Loans X X X X X
Borrowing X X X X X
Lending Portfolio Securities X X X X X
Repurchase Agreements X X X X X
Reverse Repurchase Agreements X X
Dollar Rolls X
Illiquid Securities X X X X X
Rule 144A Securities X X X X X
Unseasoned Issuers X
Portfolio Transactions
Sale of Money Market Securities
Standby Commitments
DERIVATIVES
Equity-Linked Derivatives X X X X X
Put Options X X X X X
Call Options X X X X X
Straddles X X X X X
Warrants X X X X X
Futures Contracts and Options on X X X X X
Futures Contracts
Forward Currency Contracts X X X X X
Cover X X X X X
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Investments in Entities with X X X X X
Relationships with the
Funds/Advisor
Loan Participations and Assignments X
Privatizations X X X X X
Indexed Commercial Paper X
Samurai and Yankee Bonds X
Premium Securities X
Structured Investments X
Stripped Income Securities X
5
Equity Investments
COMMON STOCK. Common stock is issued by companies principally to raise
cash for business purposes and represents a residual interest in the issuing
company. A Fund participates in the success or failure of any company in which
it holds stock. The prices of equity securities change in response to many
factors including the historical and prospective earnings of the issuer, the
value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
PREFERRED STOCK. Preferred stock, unlike common stock, often offers a
stated dividend rate payable from a corporation's earnings. If interest rates
rise, the fixed dividend on preferred stocks may be less attractive, causing the
price of preferred stocks to decline. Preferred stock may have mandatory sinking
fund provisions, as well as call/redemption provisions prior to maturity, a
negative feature when interest rates decline. Dividends on some preferred stock
may be "cumulative," requiring all or a portion of prior unpaid dividends to be
paid before dividends are paid on the issuer's common stock. Preferred stock
also generally has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the corporation, and may be
"participating," which means that it may be entitled to a dividend exceeding the
stated dividend in certain cases. In some cases an issuer may offer auction rate
preferred stock, which means that the interest to be paid is set by auction and
will often be reset at stated intervals. The rights of preferred stocks on the
distribution of a corporation's assets in the event of a liquidation are
generally subordinate to the rights associated with a corporation's debt
securities.
CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures,
notes, preferred stocks and other securities that may be converted into a
prescribed amount of common stock or other equity securities at a specified
price and time. The holder of convertible securities is entitled to receive
interest paid or accrued on debt, or dividends paid or accrued on preferred
stock, until the security matures or is converted.
The value of a convertible security depends on interest rates, the yield
of similar nonconvertible securities, the financial strength of the issuer and
the seniority of the security in the issuer's capital structure. Convertible
securities may be illiquid, and may be required to convert at a time and at a
price that is unfavorable to the Fund.
The values of the convertible securities in which the fund may invest also will
be affected by market interest rates, the risk that the issuer may default on
interest or principal payments and the value of the underlying common stock into
which these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest and dividends, their values may fall
if market interest rates rise and rise if market interest rates fall.
Additionally, an issuer may have the right to buy back certain of the
convertible securities at a time and at a price that is unfavorable to the fund.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited
partnerships, limited liability companies, business trusts or other
non-corporate entities may issue equity securities that are similar to common or
preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities
issued by issuers outside the United States, and include securities in the form
of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
or other securities representing underlying securities of foreign issuers.
Depositary Receipts are typically issued by a bank or trust company and evidence
ownership of underlying securities issued by foreign corporations.
Each Fund may invest up to 100% of its total assets in foreign securities,
except that AIM Trimark Endeavor Fund and AIM Trimark Small Companies Fund may
each invest up to 25% of its total assets in foreign securities.
6
Investments by a Fund in foreign securities, whether denominated in U.S.
dollars or foreign currencies, may entail all of the risks set forth below.
Investments by a Fund in ADRs, EDRs or similar securities also may entail some
or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be
affected by changes in currency exchange rates. The U.S. dollar value of a
foreign security decreases when the value of the U.S. dollar rises against the
foreign currency in which the security is denominated, and increases when the
value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in
which the Funds may invest may not be as developed as the United States' economy
and may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of the
Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities
and Exchange Commission ("SEC") and are generally not subject to the regulatory
controls imposed on United States issuers and, as a consequence, there is
generally less publicly available information about foreign securities than is
available about domestic securities. Foreign companies are not subject to
uniform accounting, auditing and financial reporting standards, corporate
governance practices and requirements comparable to those applicable to domestic
companies. Income from foreign securities owned by the Funds may be reduced by a
withholding tax at the source, which tax would reduce dividend income payable to
the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the
Funds invest will have substantially less trading volume than the major United
States markets. As a result, the securities of some foreign companies may be
less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
Risks of Developing Countries. AIM Developing Markets Fund may invest all
of its total assets in securities of companies located in developing countries.
AIM Global Health Care Fund may invest up to 20%, AIM Trimark Endeavor Fund and
AIM Trimark Fund may each invest up to 15% and AIM Trimark Small Companies Fund
may invest up to 5%, of their respective total assets in securities of companies
located in developing countries. Developing countries are those countries which
are not included in the MSCI World Index. The Funds consider various factors
when determining whether a company is in a developing country, including whether
(1) it is organized under the laws of a developing country; (2) it has a
principal office in a developing country; (3) it derives 50% or more of its
total revenues from business in a developing country; or (4) its securities are
traded principally on a stock exchange, or in an over-the-counter market, in a
developing country. Investments in developing countries present risks greater
than, and in addition to, those presented by investments in foreign issuers in
general. A number of developing countries restrict, to varying degrees, foreign
investment in stocks. Repatriation of investment income, capital, and the
proceeds of sales by foreign investors may require governmental registration
and/or approval in some developing countries. A number of the currencies of
developing countries have experienced significant declines against the U.S.
dollar in recent years, and devaluation may occur subsequent to investments in
these currencies by the Funds. Inflation and rapid fluctuations in inflation
rates have had and may continue to have negative effects on the economies and
securities markets of certain emerging market countries. Many of the developing
securities markets are relatively small or less diverse, have low trading
volumes, suffer periods of relative illiquidity, and are characterized by
significant price volatility. There is a risk in developing countries that a
future economic or political crisis could lead to price controls, forced mergers
of companies, expropriation or confiscatory taxation, seizure, nationalization,
or creation of government monopolies, any of which may have a detrimental effect
on the Fund's investments.
7
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign
governments are often, but not always, supported by the full faith and credit of
the foreign governments, or their subdivisions, agencies or instrumentalities
that issue them. These securities involve the risk discussed above with respect
to foreign securities. Additionally, the issuer of the debt or the governmental
authorities that control repayment of the debt may be unwilling or unable to pay
interests or repay principal when due. Political or economic changes or the
balance of trade may affect a country's willingness or ability to service its
debt obligations. Periods of economic uncertainty may result in the volatility
of market prices of sovereign debt obligations, especially debt obligations
issued by the government of developing countries. Foreign government obligations
of developing countries, and some structures of emerging market debt securities,
both of which are generally below investment grade, are sometimes referred to as
"Brady Bonds."
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include
direct purchases of futures contracts with respect to foreign currency, and
contractual agreements to purchase or sell a specified currency at a specified
future date (up to one year) at a price set at the time of the contract. Such
contractual commitments may be forward contracts entered into directly with
another party or exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies of
the different countries in which it will invest as a hedge against possible
variations in the foreign exchange rates between those currencies. A Fund may
commit the same percentage of its assets to foreign exchange hedges as it can
invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging")
or portfolio positions ("position hedging") to hedge foreign currency exposure
through foreign exchange transactions. Transaction hedging is the purchase or
sale of foreign currency with respect to specific receivables or payables of a
Fund accruing in connection with the purchase or sale of its portfolio
securities, the sale and redemption of shares of the Fund, or the payment of
dividends and distributions by the Fund. Position hedging is the purchase or
sale of foreign currency with respect to portfolio security positions (or
underlying portfolio security positions, such as in an ADR) denominated or
quoted in a foreign currency. Additionally, foreign exchange transactions may
involve some of the risks of investments in foreign securities.
Debt Investments
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities include bills, notes and bonds
issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S.
Treasury obligations representing future interest or principal payments on U.S.
Treasury notes or bonds. Stripped securities are sold at a discount to their
"face value," and may exhibit greater price volatility than interest-bearing
securities since investors receive no payment until maturity. Obligations of
certain agencies and instrumentalities of the U.S. Government, such as the
Government National Mortgage Association ("GNMA"), are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association ("FNMA"), are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the former Student
Loan Marketing Association ("SLMA"), are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others, though issued by an instrumentality chartered by the U.S. Government,
like the Federal Farm Credit Bureau ("FFCB"), are supported only by the credit
of the instrumentality. The U.S. Government may choose not to provide financial
support to U.S. Government-sponsored agencies or instrumentalities if it is not
legally obligated to do so, in which case, if the issuer were to default, the
Funds holding securities of such issuer might not be able to recover their
investment from the U.S. Government.
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S.
dollar-denominated debt obligations issued or guaranteed by U.S. corporations or
U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers
and debt obligations of foreign issuers denominated in
8
foreign currencies. Such debt obligations include, among others, bonds, notes,
debentures and variable rate demand notes. In choosing corporate debt securities
on behalf of a Fund, its investment adviser may consider (i) general economic
and financial conditions; (ii) the specific issuer's (a) business and
management, (b) cash flow, (c) earnings coverage of interest and dividends, (d)
ability to operate under adverse economic conditions, (e) fair market value of
assets, and (f) in the case of foreign issuers, unique political, economic or
social conditions applicable to such issuer's country; and, (iii) other
considerations deemed appropriate.
JUNK BONDS. Each of the Funds may invest in junk bonds. Junk bonds are
lower-rated or non-rated debt securities. Junk bonds are considered speculative
with respect to their capacity to pay interest and repay principal in accordance
with the terms of the obligation. While generally providing greater income and
opportunity for gain, non-investment grade debt securities are subject to
greater risks than higher-rated securities.
Companies that issue junk bonds are often highly leveraged, and may not
have more traditional methods of financing available to them. During an economic
downturn or recession, highly leveraged issuers of high yield securities may
experience financial stress, and may not have sufficient revenues to meet their
interest payment obligations. Economic downturns tend to disrupt the market for
junk bonds, lowering their values, and increasing their price volatility. The
risk of issuer default is higher with respect to junk bonds because such issues
are generally unsecured and are often subordinated to other creditors of the
issuer.
The credit rating of a junk bond does not necessarily address its market
value risk, and ratings may from time to time change to reflect developments
regarding the issuer's financial condition. The lower the rating of a junk bond,
the more speculative its characteristics.
The Funds may have difficulty selling certain junk bonds because they may
have a thin trading market. The lack of a liquid secondary market may have an
adverse effect on the market price and a Fund's ability to dispose of particular
issues and may also make it more difficult for the Fund to obtain accurate
market quotations in valuing these assets. In the event a Fund experiences an
unexpected level of net redemptions, the Fund could be forced to sell its junk
bonds at an unfavorable price. Prices of junk bonds have been found to be less
sensitive to fluctuations in interest rates, and more sensitive to adverse
economic changes and individual corporate developments than those of
higher-rated debt securities. AIM Global Health Care Fund, AIM Trimark Endeavor
Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund may each invest up
to 5% of total assets, and AIM Developing Markets Fund may invest up to 50% of
total assets in junk bonds.
Descriptions of debt securities ratings are found in Appendix A.
LIQUID ASSETS. Cash equivalents include money market instruments (such as
certificates of deposit, time deposits, bankers' acceptances from U.S. or
foreign banks, and repurchase agreements), shares of affiliated money market
funds or high-quality debt obligations (such as U.S. Government obligations,
commercial paper, master notes and other short-term corporate instruments and
municipal obligations).
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITs"). REITs are trusts that sell equity
or debt securities to investors and use the proceeds to invest in real estate or
interests therein. A REIT may focus on particular projects, such as apartment
complexes, or geographic regions, such as the southeastern United States, or
both.
To the extent consistent with their respective investment objectives and
policies, each Fund may invest up to 15% of its total assets in equity and/or
debt securities issued by REITs.
9
To the extent that a Fund has the ability to invest in REITs, the Fund
could conceivably own real estate directly as a result of a default on the
securities it owns. A Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic conditions, adverse changes in the climate
for real estate, environmental liability risks, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
limitations on rents, changes in neighborhood values, the appeal of properties
to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by
any changes in the value of the underlying property owned by the trusts, while
mortgage REITs may be affected by the quality of any credit extended. Equity and
mortgage REITs are dependent upon management skill, are not diversified, and are
therefore subject to the risk of financing single or a limited number of
projects. Such trusts are also subject to heavy cash flow dependency, defaults
by borrowers, self-liquidation, and the possibility of failing to maintain an
exemption from the 1940 Act. Changes in interest rates may also affect the value
of debt securities held by a Fund. By investing in REITs indirectly through a
Fund, a shareholder will bear not only his/her proportionate share of the
expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of
another investment company, including Affiliated Money Market Funds (defined
below), the Fund will indirectly bear its proportionate share of the advisory
fees and other operating expenses of such investment company. The Funds have
obtained an exemptive order from the SEC allowing them to invest in money market
funds that have AIM or an affiliate of AIM as an investment advisor (the
"Affiliated Money Market Funds"), provided that investments in Affiliated Money
Market Funds do not exceed 25% of the total assets of the investing Fund.
The following restrictions apply to investments in other investment
companies other than Affiliated Money Market Funds: (i) a Fund may not purchase
more than 3% of the total outstanding voting stock of another investment
company; (ii) a Fund may not invest more than 5% of its total assets in
securities issued by another investment company; and (iii) a Fund may not invest
more than 10% of its total assets in securities issued by other investment
companies.
VARIABLE OR FLOATING RATE INSTRUMENTS. AIM Developing Markets Fund may
invest in securities which have variable or floating interest rates which are
readjusted on set dates (such as the last day of the month or calendar quarter)
in the case of variable rates or whenever a specified interest rate change
occurs in the case of a floating rate instrument. Variable or floating interest
rates generally reduce changes in the market price of securities from their
original purchase price because, upon readjustment, such rates approximate
market rates. Accordingly, as interest rates decrease or increase, the potential
for capital appreciation or depreciation is less for variable or floating rate
securities than for fixed rate obligations. Many securities with variable or
floating interest rates purchased by a Fund are subject to payment of principal
and accrued interest (usually within seven days) on the Fund's demand. The terms
of such demand instruments require payment of principal and accrued interest by
the issuer, a guarantor, and/or a liquidity provider. All variable or floating
rate instruments will meet the applicable quality standards of a Fund. AIM will
monitor the pricing, quality and liquidity of the variable or floating rate
securities held by the Funds.
INDEXED SECURITIES. AIM Developing Markets Fund may invest in indexed
securities the value of which is linked to interest rates, commodities, indices
or other financial indicators. Most indexed securities are short to intermediate
term fixed income securities whose values at maturity (principal value) or
interest rates rise or fall according to changes in the value of one or more
specified underlying instruments. Indexed securities may be positively or
negatively indexed (i.e., their principal value or interest rates may increase
or decrease if the underlying instrument appreciates), and may have return
characteristics similar to direct investments in the underlying instrument or to
one or more options on the underlying instrument. Indexed securities may be more
volatile than the underlying instrument itself and could involve the loss of all
or a portion of the principal amount of the indexed security.
10
ZERO-COUPON AND PAY-IN-KIND SECURITIES. AIM Developing Markets Fund may,
but does not currently intend to, invest in zero-coupon or pay-in-kind
securities. These securities are debt securities that do not make regular cash
interest payments. Zero-coupon securities are sold at a deep discount to their
face value. Pay-in-kind securities pay interest through the issuance of
additional securities. Because zero-coupon and pay-in-kind securities do not pay
current cash income, the price of these securities can be volatile when interest
rates fluctuate. While these securities do not pay current cash income, federal
tax law requires the holders of zero-coupon and pay-in-kind securities to
include in income each year the portion of the original issue discount (or
deemed discount) and other non-cash income on such securities accrued during
that year. In order to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code") and to avoid certain
excise taxes, the Fund may be required to distribute a portion of such discount
and income, and may be required to dispose of other portfolio securities, which
could occur during periods of adverse market prices, in order to generate
sufficient cash to meet these distribution requirements.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also
referred to as forward commitments, involve commitments by a Fund to dealers or
issuers to acquire or sell securities at a specified future date beyond the
customary settlement for such securities. These commitments may fix the payment
price and interest rate to be received or paid on the investment. A Fund may
purchase securities on a delayed delivery basis to the extent it can anticipate
having available cash on settlement date. Delayed delivery agreements will not
be used as a speculative or leveraging technique.
Investment in securities on a delayed delivery basis may increase a Fund's
exposure to market fluctuation and may increase the possibility that the Fund
will incur short-term gains subject to federal taxation or short-term losses if
the Fund must engage in portfolio transactions in order to honor a delayed
delivery commitment. Until the settlement date, a Fund will segregate liquid
assets of a dollar value sufficient at all times to make payment for the delayed
delivery transactions. Such segregated liquid assets will be marked-to-market
daily, and the amount segregated will be increased if necessary to maintain
adequate coverage of the delayed delivery commitments. No additional delayed
delivery agreements or when-issued commitments (as described below) will be made
by a Fund if, as a result, more than 25% of the Fund's total assets would become
so committed.
The delayed delivery securities, which will not begin to accrue interest
or dividends until the settlement date, will be recorded as an asset of a Fund
and will be subject to the risk of market fluctuation. The purchase price of the
delayed delivery securities is a liability of a Fund until settlement. Absent
extraordinary circumstances, a Fund will not sell or otherwise transfer the
delayed delivery basis securities prior to settlement.
A Fund may enter into buy/sell back transactions (a form of delayed
delivery agreement). In a buy/sell back transaction, a Fund enters a trade to
sell securities at one price and simultaneously enters a trade to buy the same
securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis
means that the date for delivery of and payment for the securities is not fixed
at the date of purchase, but is set after the securities are issued. The payment
obligation and, if applicable, the interest rate that will be received on the
securities are fixed at the time the buyer enters into the commitment. A Fund
will only make commitments to purchase such securities with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in a
Fund's portfolio are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and, if applicable, changes in
the level of interest rates. Therefore, if a Fund is to remain substantially
fully invested at the same time that it has purchased securities on a
when-issued basis, there will be a possibility that the market value of the
Fund's assets will fluctuate to a greater degree. Furthermore, when the time
comes for the Fund to meet its obligations under when-issued commitments,
11
the Fund will do so by using then available cash flow, by sale of the segregated
liquid assets, by sale of other securities or, although it would not normally
expect to do so, by directing the sale of the when-issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation).
Investment in securities on a when-issued basis may increase a Fund's
exposure to market fluctuation and may increase the possibility that the Fund
will incur short-term gains subject to federal taxation or short-term losses if
the Fund must sell another security in order to honor a when-issued commitment.
If a Fund purchases a when-issued security, the Fund will segregate liquid
assets in an amount equal to the when-issued commitment. If the market value of
such segregated assets declines, additional liquid assets will be segregated on
a daily basis so that the market value of the segregated assets will equal the
amount of the Fund's when-issued commitments. No additional delayed delivery
agreements (as described above) or when-issued commitments will be made by a
Fund if, as a result, more than 25% of the Fund's total assets would become so
committed.
SHORT SALES. The Fund may engage in short sales. The Fund will only make
short sales "against the box," meaning that at all times when a short position
is open the Fund owns an equal amount of such securities or securities
convertible into, or exchangeable without payment of any further consideration
for, securities of the same issue as, and in an amount equal to, the securities
sold short. To secure its obligation to deliver the securities sold short
against the box, the Fund will segregate with its custodian an equal amount of
the securities sold short or securities convertible into or exchangeable for
such securities. The Fund will not sell a security short if, as a result of such
short sale, the aggregate market value of all securities sold short exceeds 10%
of the Fund's total assets.
The Fund will make a short sale, as a hedge, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for such
security, or when the Fund does not want to sell the security it owns, because
it wishes to defer recognition of gain or loss for federal income tax purposes.
In such case, any future losses in the Fund's long position should be reduced by
a gain in the short position. Conversely, any gain in the long position should
be reduced by a loss in the short position. The extent to which such gains or
losses are reduced will depend upon the amount of the security sold short
relative to the amount the Fund owns, either directly or indirectly, and, in the
case where the Fund owns convertible securities, changes in the conversion
premium. In determining the number of shares to be sold short against the Fund's
position in a convertible security, the anticipated fluctuation in the
conversion premium is considered.
Short sales against the box may afford the Fund an opportunity to earn
additional current income to the extent the Fund is able to enter into
arrangements with broker-dealers though which the short sales are executed to
receive income with respect to the proceeds of the short sales during the period
the Fund's short positions remain open. There is no assurance that the Fund will
be able to enter into such arrangements.
Short sales against the box may be subject to special tax treatment as
"constructive sales" and require the Fund to recognize any taxable gain unless
an exception to the constructive sale rule applies. See "Dividends,
Distributions and Tax Matters - Tax Matters - Determination of Taxable Income of
a Regulated Investment Company."
MARGIN TRANSACTIONS. None of the Funds will purchase any security on
margin, except that each Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of portfolio securities. The
payment by a Fund of initial or variation margin in connection with futures or
related options transactions will not be considered the purchase of a security
on margin.
SWAP AGREEMENTS. Each Fund may enter into interest rate, index and
currency exchange rate swap agreements for purposes of attempting to obtain a
particular desired return at a lower cost to the Fund than if it had invested
directly in an instrument that yielded that desired return. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the
12
returns (or differentials in rates of return) earned or realized on particular
predetermined investments or instruments. The gross returns to be exchanged or
"swapped" between the parties are calculated with respect to a "notional
amount," i.e., the return on or increase in value of a particular dollar amount
invested at a particular interest rate, in a particular foreign currency, or in
a "basket" of securities representing a particular index. Commonly used swap
agreements include: (i) interest rate caps, under which, in return for a
premium, one party agrees to make payments to the other to the extent that
interest rates exceed a specified rate, or "cap"; (ii) interest rate floors,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates fall below a specified level, or
"floor"; and (iii) interest rate collars, under which a party sells a cap and
purchases a floor or vice versa in an attempt to protect itself against interest
rate movements exceeding given minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictitious basis on
which to calculate the obligations that the parties to a swap agreement have
agreed to exchange. Swaps are generally governed by a single master agreement
for each counterparty, and the agreements allow for netting of counterparties'
obligations on specific transactions. A Fund's obligation or rights will be the
net amount owed to or by the counterparty. A Fund's current obligations under a
swap agreement will be accrued daily (on a net basis), and the Fund will
maintain liquid assets in an amount equal to amounts owed to a swap counterparty
less the value of any collateral posted. A Fund will not enter into a
transaction with any single counterparty if the net amount owed or to be
received under existing transactions under the swap agreements with that
counterparty would exceed 5% of the Fund's net assets determined on the date the
transaction is entered into. For a discussion of the tax considerations relating
to swap agreements, see "Dividends, Distributions and Tax Matters - Swap
Agreements."
INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its net
assets to other funds advised by AIM (the "AIM Funds") and each Fund may borrow
from other AIM Funds to the extent permitted under such Fund's investment
restrictions. During temporary or emergency periods, the percentage of a Fund's
net assets that may be loaned to other AIM Funds may be increased as permitted
by the SEC. If a Fund has borrowed from other AIM Funds and has aggregate
borrowings from all sources that exceed 10% of such Fund's total assets, such
Fund will secure all of its loans from other AIM Funds. The ability of a Fund to
lend its securities to other AIM Funds is subject to certain other terms and
conditions.
BORROWING. Each Fund may borrow money to a limited extent for temporary or
emergency purposes. If there are unusually heavy redemptions because of changes
in interest rates or for any other reason, a Fund may have to sell a portion of
its investment portfolio at a time when it may be disadvantageous to do so.
Selling fund securities under these circumstances may result in a lower net
asset value per share or decreased dividend income, or both. The Trust believes
that, in the event of abnormally heavy redemption requests, a Fund's borrowing
ability would help to mitigate any such effects and could make the forced sale
of their portfolio securities less likely.
LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio
securities (principally to broker-dealers) where such loans are callable at any
time and are continuously secured by segregated collateral equal to no less than
the market value, determined daily, of the loaned securities. Such collateral
will be cash, letters of credit, or debt securities issued or guaranteed by the
U.S. Government or any of its agencies. Each Fund may lend portfolio securities
to the extent of one-third of its total assets.
A Fund will not have the right to vote securities while they are being
lent, but it can call a loan in anticipation of an important vote. The Fund
would receive income in lieu of dividends on loaned securities and would, at the
same time, earn interest on the loan collateral or on the investment of any cash
collateral. Lending securities entails a risk of loss to the Fund if and to the
extent that the market value of the loaned securities increases and the
collateral is not increased accordingly, or in the event of a default by the
borrower. The Fund could also experience delays and costs in gaining access to
the collateral.
Any cash received as collateral for loaned securities will be invested,
in accordance with a Fund's investment guidelines, in short-term money market
instruments or Affiliated Money Market Funds. For
13
purposes of determining whether a Fund is complying with its investment
policies, strategies and restrictions, the Fund will consider the loaned
securities as assets of the Fund, but will not consider any collateral received
as a Fund asset.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a
Fund acquires ownership of a security from a broker-dealer or bank that agrees
to repurchase the security at a mutually agreed upon time and price (which is
higher than the purchase price), thereby determining the yield during a Fund's
holding period. A Fund may, however, enter into a "continuing contract" or
"open" repurchase agreement under which the seller is under a continuing
obligation to repurchase the underlying obligation from the Fund on demand and
the effective interest rate is negotiated on a daily basis. Each of the Funds
may engage in repurchase agreement transactions involving the types of
securities in which it is permitted to invest.
If the seller of a repurchase agreement fails to repurchase the security
in accordance with the terms of the agreement, a Fund might incur expenses in
enforcing its rights, and could experience losses, including a decline in the
value of the underlying security and loss of income. The securities underlying a
repurchase agreement will be marked-to-market every business day so that the
value of such securities is at least equal to the investment value of the
repurchase agreement, including any accrued interest thereon.
The Funds may invest their cash balances in joint accounts with other AIM
Funds for the purpose of investing in repurchase agreements with maturities not
to exceed 60 days and in certain other money market instruments with remaining
maturities not to exceed 90 days. Repurchase agreements are considered loans by
a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are
agreements that involve the sale of securities held by a Fund to financial
institutions such as banks and broker-dealers, with an agreement that the Fund
will repurchase the securities at an agreed upon price and date. A Fund may
employ reverse repurchase agreements (i) for temporary emergency purposes, such
as to meet unanticipated net redemptions so as to avoid liquidating other
portfolio securities during unfavorable market conditions; (ii) to cover
short-term cash requirements resulting from the timing of trade settlements; or
(iii) to take advantage of market situations where the interest income to be
earned from the investment of the proceeds of the transaction is greater than
the interest expense of the transaction. At the time it enters into a reverse
repurchase agreement, a Fund will segregate liquid assets having a dollar value
equal to the repurchase price, and will subsequently continually monitor the
account to ensure that such equivalent value is maintained at all times. Reverse
repurchase agreements involve the risk that the market value of securities to be
purchased by the Fund may decline below the price at which it is obligated to
repurchase the securities, or that the other party may default on its
obligation, so that the Fund is delayed or prevented from completing the
transaction. Reverse repurchase agreements are considered borrowings by a Fund
under the 1940 Act.
DOLLAR ROLLS. A dollar roll involves the sale by a Fund of a mortgage
security to a financial institution such as a broker-dealer or a bank, with an
agreement to repurchase a substantially similar (i.e., same type, coupon and
maturity) security at an agreed upon price and date. The mortgage securities
that are purchased will bear the same interest rate as those sold, but will
generally be collateralized by different pools of mortgages with different
prepayment histories. During the period between the sale and repurchase, a Fund
will not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale will be invested in short-term
instruments, and the income from these investments, together with any additional
fee income received on the sale, could generate income for the Fund exceeding
the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities under a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of
the securities may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the Fund's
14
obligation to repurchase the securities. At the time the Fund enters into a
dollar roll, it will segregate liquid assets having a dollar value equal to the
repurchase price, and will monitor the account to ensure that such equivalent
value is maintained. The Fund typically enters into dollar roll transactions to
enhance the Fund's return either on an income or total return basis or to manage
pre-payment risk. Dollar rolls are considered borrowings by a Fund under the
1940 Act.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
disposed of within seven days in the normal course of business at the price at
which they are valued. Illiquid securities may include securities that are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in
certain circumstances, be resold pursuant to Rule 144A under the 1933 Act, and
thus may or may not constitute illiquid securities.
Each Fund may invest up to 15% of its net assets in securities that are
illiquid. Limitations on the resale of restricted securities may have an adverse
effect on their marketability, which may prevent a Fund from disposing of them
promptly at reasonable prices. A Fund may have to bear the expense of
registering such securities for resale, and the risk of substantial delays in
effecting such registrations.
AIM Global Health Care Fund cannot invest more than 5% of total assets in
joint ventures, cooperatives, partnerships and state enterprises which are
illiquid.
RULE 144A SECURITIES. Rule 144A securities are securities which, while
privately placed, are eligible for purchase and resale pursuant to Rule 144A
under the 1933 Act. This Rule permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Board, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the Funds' restriction on investment in illiquid
securities. Determination of whether a Rule 144A security is liquid or not is a
question of fact. In making this determination AIM will consider the trading
markets for the specific security taking into account the unregistered nature of
a Rule 144A security. In addition, AIM could consider the (i) frequency of
trades and quotes; (ii) number of dealers and potential purchasers; (iii) dealer
undertakings to make a market; and (iv) nature of the security and of market
place trades (for example, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). AIM will also
monitor the liquidity of Rule 144A securities and, if as a result of changed
conditions, AIM determines that a Rule 144A security is no longer liquid, AIM
will review a Fund's holdings of illiquid securities to determine what, if any,
action is required to assure that such Fund complies with its restriction on
investment in illiquid securities. Investing in Rule 144A securities could
increase the amount of each Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
UNSEASONED ISSUERS. AIM Trimark Small Companies Fund may invest in equity
securities of unseasoned issuers. Investments in the equity securities of
companies having less than three years' continuous operations (including
operations of any predecessor) involve more risk than investments in the
securities of more established companies because unseasoned issuers have only a
brief operating history and may have more limited markets and financial
resources. As a result, securities of unseasoned issuers tend to be more
volatile than securities of more established companies.
Derivatives
The Funds may each invest in forward currency contracts, futures
contracts, options on securities, options on indices, options on currencies, and
options on futures contracts to attempt to hedge against the overall level of
investment and currency risk normally associated with each Fund's investments.
The Funds may also invest in equity-linked derivative products designed to
replicate the composition and performance of particular indices. These
instruments are often referred to as "derivatives," which may be defined as
financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as a security, currency or an index of
securities).
15
EQUITY-LINKED DERIVATIVES. Equity-Linked Derivatives are interests in a
securities portfolio designed to replicate the composition and performance of a
particular index. Equity-Linked Derivatives are exchange traded. The performance
results of Equity-Linked Derivatives will not replicate exactly the performance
of the pertinent index due to transaction and other expenses, including fees to
service providers, borne by the Equity-Linked Derivatives. Examples of such
products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial
Average Instruments ("DIAMONDS") and Optimised Portfolios As Listed Securities
("OPALS"). Investments in Equity-Linked Derivatives involve the same risks
associated with a direct investment in the types of securities included in the
indices such products are designed to track. There can be no assurance that the
trading price of the Equity-Linked Derivatives will equal the underlying value
of the basket of securities purchased to replicate a particular index or that
such basket will replicate the index. Investments in Equity-Linked Derivatives
may constitute investments in other investment companies and, therefore, a Fund
may be subject to the same investment restrictions with Equity-Linked
Derivatives as with other investment companies. See "Other Investment
Companies."
PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy
the underlying security, contract or foreign currency at the stated exercise
price at any time prior to the expiration of the option (or on a specified date
if the option is a European style option), regardless of the market price or
exchange rate of the security contract or foreign currency as the case may be at
the time of exercise. If the purchaser exercises the call option, the writer of
a call option is obligated to sell the underlying security, contract or foreign
currency. A put option gives the purchaser the right to sell the underlying
security, contract or foreign currency at the stated exercise price at any time
prior to the expiration date of the option (or on a specified date if the option
is a European style option), regardless of the market price or exchange rate of
the security, contract or foreign currency, as the case may be at the time of
exercise. If the purchaser exercises the put option, the writer of a put option
is obligated to buy the underlying security, contract or foreign currency. The
premium paid to the writer is consideration for undertaking the obligations
under the option contract. Until an option expires or is offset, the option is
said to be "open." When an option expires or is offset, the option is said to be
"closed."
A Fund will not write (sell) options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
the time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
Pursuant to federal securities rules and regulations, if a Fund writes
options it may be required to set aside assets to reduce the risks associated
with writing those options. This process is described in more detail below in
the section "Cover."
Writing Options. A Fund may write put and call options in an attempt to
realize, through the receipt of premiums, a greater current return than would be
realized on the underlying security, contract, or foreign currency alone. A Fund
may only write a call option on a security if it owns an equal amount of such
securities or securities convertible into, or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities subject to the call option. In return for the premium
received for writing a call option, the Fund foregoes the opportunity for profit
from a price increase in the underlying security, contract, or foreign currency
above the exercise price so long as the option remains open, but retains the
risk of loss should the price of the security, contract, or foreign currency
decline.
A Fund may write a put option without owning the underlying security if it
covers the option as described below in the section "Cover." A Fund may only
write a put option on a security as part of an investment strategy, and not for
speculative purposes. In return for the premium received for writing a put
option, the Fund assumes the risk that the price of the underlying security,
contract, or foreign currency will decline below the exercise price, in which
case the put would be exercised and the Fund would suffer a loss.
16
If an option that a Fund has written expires, it will realize a gain in
the amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security, contract or currency during the option
period. If a call option is exercised, a Fund will realize a gain or loss from
the sale of the underlying security, contract or currency, which will be
increased or offset by the premium received. A Fund would write a put option at
an exercise price that, reduced by the premium received on the option, reflects
the price it is willing to pay for the underlying security, contract or
currency. The obligation imposed upon the writer of an option is terminated upon
the expiration of the option, or such earlier time at which a Fund effects a
closing purchase transaction by purchasing an option (put or call as the case
may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. Closing transactions may be effected in order
to realize a profit on an outstanding call option, to prevent an underlying
security, contract or currency from being called or to permit the sale of the
underlying security, contract or currency. Furthermore, effecting a closing
transaction will permit a Fund to write another call option on the underlying
security, contract or currency with either a different exercise price or
expiration date, or both.
Purchasing Options. A Fund may purchase a call option for the purpose of
acquiring the underlying security, contract or currency for its portfolio. The
Fund is not required to own the underlying security in order to purchase a call
option, and may only cover this transaction with cash, liquid assets and/or
short-term debt securities. Utilized in this fashion, the purchase of call
options would enable a Fund to acquire the security, contract or currency at the
exercise price of the call option plus the premium paid. So long as it holds
such a call option, rather than the underlying security or currency itself, the
Fund is partially protected from any unexpected increase in the market price of
the underlying security, contract or currency. If the market price does not
exceed the exercise price, the Fund could purchase the security on the open
market and could allow the call option to expire, incurring a loss only to the
extent of the premium paid for the option. Each of the Funds may also purchase
call options on underlying securities, contracts or currencies against which it
has written other call options. For example, where a Fund has written a call
option on an underlying security, rather than entering a closing transaction of
the written option, it may purchase a call option with a different exercise
strike and/or expiration date that would eliminate some or all of the risk
associated with the written call. Used in combinations, these strategies are
commonly referred to as "call spreads."
A Fund may only purchase a put option on an underlying security, contract
or currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security, contract or currency. Such
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit
realized when the security, contract or currency is delivered upon the exercise
of the put option. Conversely, if the underlying security, contract or currency
does not decline in value, the option may expire worthless and the premium paid
for the protective put would be lost. A Fund may also purchase put options on
underlying securities, contracts or currencies against which it has written
other put options. For example, where a Fund has written a put option on an
underlying security, rather than entering a closing transaction of the written
option, it may purchase a put option with a different exercise price and/or
expiration date that would eliminate some or all of the risk associated with the
written put. Used in combinations, these strategies are commonly referred to as
"put spreads." Likewise, a Fund may write call options on underlying securities,
contracts or currencies against which it has purchased protective put options.
This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or
traded in over-the-counter ("OTC") markets. Listed options are third-party
contracts (i.e., performance of the obligations of the purchaser and seller is
guaranteed by the exchange or clearing corporation) and have standardized strike
prices and expiration dates. OTC options are two-party contracts with negotiated
strike prices and expiration dates. A Fund will not purchase an OTC option
unless it believes that daily valuations for such options are readily
obtainable. OTC options differ from exchange-traded options in that OTC options
are transacted with dealers directly and not through a clearing corporation
(which
17
guarantees performance). Consequently, there is a risk of non-performance by the
dealer. Since no exchange is involved, OTC options are valued on the basis of an
average of the last bid prices obtained from dealers, unless a quotation from
only one dealer is available, in which case only that dealer's price will be
used. In the case of OTC options, there can be no assurance that a liquid
secondary market will exist for any particular option at any specific time.
Because purchased OTC options in certain cases may be difficult to dispose of in
a timely manner, the Fund may be required to treat some or all of these options
(i.e., the market value) as illiquid securities. Although a Fund will enter into
OTC options only with dealers that are expected to be capable of entering into
closing transactions with it, there is no assurance that the Fund will in fact
be able to close out an OTC option position at a favorable price prior to
expiration. In the event of insolvency of the dealer, a Fund might be unable to
close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are
similar in many respects to options on securities, except that an index option
gives the holder the right to receive, upon exercise, cash instead of
securities, if the closing level of the securities index upon which the option
is based is greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. The amount of cash is equal to the
difference between the closing price of the index and the exercise price of the
call or put times a specified multiple (the "multiplier"), which determines the
total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes
index options it may be required to set aside assets to reduce the risks
associated with writing those options. This process is described in more detail
below in the section "Cover."
STRADDLES. A Fund, for hedging purposes, may write straddles (combinations
of put and call options on the same underlying security) to adjust the risk and
return characteristics of the Fund's overall position. A possible combined
position would involve writing a covered call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of the
written covered call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
WARRANTS. Warrants are, in effect, longer-term call options. They give the
holder the right to purchase a given number of shares of a particular company at
specified prices within certain periods of time. The purchaser of a warrant
expects that the market price of the security will exceed the purchase price of
the warrant plus the exercise price of the warrant, thus giving him a profit.
Since the market price may never exceed the exercise price before the expiration
date of the warrant, the purchaser of the warrant risks the loss of the entire
purchase price of the warrant. Warrants generally trade in the open market and
may be sold rather than exercised. Warrants are sometimes sold in unit form with
other securities of an issuer. Units of warrants and common stock may be
employed in financing young, unseasoned companies. The purchase price of a
warrant varies with the exercise price of the warrant, the current market value
of the underlying security, the life of the warrant and various other investment
factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is
a two party agreement to buy or sell a specified amount of a specified security
or currency (or delivery of a cash settlement price, in the case of an index
future) for a specified price at a designated date, time and place
(collectively, "Futures Contracts"). A stock index Futures Contract provides for
the delivery, at a designated date, time and place, of an amount of cash equal
to a specified dollar amount times the
18
difference between the stock index value at the close of trading on the contract
and the price agreed upon in the Futures Contract; no physical delivery of
stocks comprising the index is made. Brokerage fees are incurred when a Futures
Contract is bought or sold, and margin deposits must be maintained at all times
when a Futures Contract is outstanding.
A Fund will enter into Futures Contracts for hedging purposes only; that
is, Futures Contracts will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures Contracts will be
purchased to protect the Fund against an increase in the price of securities or
currencies it has committed to purchase or expects to purchase. A Fund's hedging
may include sales of Futures Contracts as an offset against the effect of
expected increases in interest rates, and decreases in currency exchange rates
and stock prices, and purchases of Futures Contracts as an offset against the
effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
The Funds currently may not invest in any security (including futures
contracts or options thereon) that is secured by physical commodities.
The Funds will only enter into Futures Contracts that are traded (either
domestically or internationally) on futures exchanges and are standardized as to
maturity date and underlying financial instrument. Futures exchanges and trading
thereon in the United States are regulated under the Commodity Exchange Act and
by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges
and trading thereon are not regulated by the CFTC and are not subject to the
same regulatory controls. For a further discussion of the risks associated with
investments in foreign securities, see "Foreign Investments" in this Statement
of Additional Information.
Closing out an open Futures Contract is effected by entering into an
offsetting Futures Contract for the same aggregate amount of the identical
financial instrument or currency and the same delivery date. There can be no
assurance, however, that a Fund will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular time.
If a Fund is not able to enter into an offsetting transaction, it will continue
to be required to maintain the margin deposits on the Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that
must be deposited by a Fund in order to initiate Futures Contracts trading and
maintain its open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered ("initial margin") is intended to ensure the Fund's
performance under the Futures Contract. The margin required for a particular
Futures Contract is set by the exchange on which the Futures Contract is traded
and may be significantly modified from time to time by the exchange during the
term of the Futures Contract.
Subsequent payments, called "variation margin," received from or paid to
the futures commission merchant through which a Fund entered into the Futures
Contract will be made on a daily basis as the price of the underlying security,
currency or index fluctuates making the Futures Contract more or less valuable,
a process known as marking-to-market the unrealized gains or losses.
If a Fund were unable to liquidate a Futures Contract or an option on a
Futures Contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to maintain the
position being hedged by the Futures Contract or option or to maintain cash or
securities in a segregated account.
Options on Futures Contracts. Options on Futures Contracts are similar to
options on securities or currencies except that options on Futures Contracts
give the purchaser the right, in return for the premium paid, to assume a
position in a Futures Contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the delivery of
the Futures Contract position by the writer of the option to the holder of the
option will be accompanied by delivery of the accumulated balance in the
19
writer's Futures Contract margin account. The Funds currently may not invest in
any security (including futures contracts or options thereon) that is secured by
physical commodities.
Limitations on Futures Contracts and Options on Futures Contracts and on
Certain Options on Currencies. To the extent that a Fund enters into Futures
Contracts, options on Futures Contracts and options on foreign currencies traded
on a CFTC-regulated exchange, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the total assets of the Fund, after taking
into account unrealized profits and unrealized losses on any contracts it has
entered into. This guideline may be modified by the Board, without a shareholder
vote. This limitation does not limit the percentage of the Fund's assets at risk
to 5%.
Pursuant to federal securities rules and regulations, a Fund's use of
Futures Contracts and options on Futures Contracts may require that Fund to set
aside assets to reduce the risks associated with using Futures Contracts and
options on Futures Contracts. This process is described in more detail below in
the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation,
usually arranged with a commercial bank or other currency dealer, to purchase or
sell a currency against another currency at a future date and price as agreed
upon by the parties. A Fund either may accept or make delivery of the currency
at the maturity of the forward currency contract. A Fund may also, if its contra
party agrees prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract. Forward currency contracts are
traded over-the-counter, and not on organized commodities or securities
exchanges. As a result, it may be more difficult to value such contracts, and it
may be difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward currency contracts with respect to a specific
purchase or sale of a security, or with respect to its portfolio positions
generally. When a Fund purchases a security denominated in a foreign currency
for settlement in the near future, it may immediately purchase in the forward
market the currency needed to pay for and settle the purchase. By entering into
a forward currency contract with respect to the specific purchase or sale of a
security denominated in a foreign currency, the Fund can secure an exchange rate
between the trade and settlement dates for that purchase or sale transaction.
This practice is sometimes referred to as "transaction hedging." Position
hedging is the purchase or sale of foreign currency with respect to portfolio
security positions denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of forward currency contracts does not eliminate fluctuations in the
prices of the underlying securities a Fund owns or intends to acquire, but it
does establish a rate of exchange in advance. In addition, while forward
currency contract sales limit the risk of loss due to a decline in the value of
the hedged currencies, they also limit any potential gain that might result
should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of
forward currency contracts may require that Fund to set aside assets to reduce
the risks associated with using forward currency contracts. This process is
described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts
and options (other than options purchased by a Fund) expose a Fund to an
obligation to another party. A Fund will not enter into any such transactions
unless, in addition to complying with all the restrictions noted in the
disclosure above, it owns either (1) an offsetting ("covered") position in
securities, currencies, or other options, forward currency contracts or futures
contracts or (2) cash, liquid assets and/or short-term debt securities with a
value sufficient at all times to cover its potential obligations not covered as
provided in (1) above.
20
Each Fund will comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash or liquid securities. To the
extent that a futures contract, forward currency contract or option is deemed to
be illiquid, the assets used to "cover" the Fund's obligation will also be
treated as illiquid for purposes of determining the Fund's maximum allowable
investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an
obligation to another party, but rather provide the Funds with a right to
exercise, the Funds intend to "cover" the cost of any such exercise. To the
extent that a purchased option is deemed illiquid, a Fund will treat the market
value of the option (i.e., the amount at risk to the Fund) as illiquid, but will
not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the
corresponding forward currency contract, futures contract or option is open,
unless they are replaced with other appropriate assets. If a large portion of a
Fund's assets is used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the
Funds of options, futures contracts and forward currency contracts involves
special considerations and risks, as described below. Risks pertaining to
particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to
correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies. While AIM is experienced in
the use of these instruments, there can be no assurance that any particular
hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between
the price movements of an instrument (such as an option contract) and the price
movements of the investments being hedged. For example, if a "protective put" is
used to hedge a potential decline in a security and the security does decline in
price, the put option's increased value may not completely offset the loss in
the underlying security. Such a lack of correlation might occur due to factors
unrelated to the value of the investments being hedged, such as changing
interest rates, market liquidity, and speculative or other pressures on the
markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements in
the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for
any particular option, futures contract or option thereon or forward currency
contract at any particular time.
(5) As described above, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties. If a Fund were
unable to close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair a Fund's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For
example, if a Fund determines that the cost of hedging will exceed the potential
benefit to the Fund, the Fund will not enter into such transaction.
21
Additional Securities or Investment Techniques
INVESTMENTS IN ENTITIES WITH RELATIONSHIPS WITH THE FUNDS/ADVISOR. The
Fund(s) may invest in securities issued, sponsored or guaranteed by the
following types of entities or their affiliates: (i) entities that sell shares
of the AIM Funds; (ii) entities that rate or rank the AIM Funds; (iii) exchanges
on which the AIM Funds buy or sell securities; and (iv) entities that provide
services to the AIM Funds (e.g., custodian banks). The Funds will decide whether
to invest in or sell securities issued by these entities based on the merits of
the specific investment opportunity.
PARTICIPATION INTERESTS. AIM Developing Markets Fund may purchase
participations in corporate loans. Participation interests generally will be
acquired from a commercial bank or other financial institution (a "Lender") or
from other holders of a participation interest (a "Participant"). The purchase
of a participation interest either from a Lender or a Participant will not
result in any direct contractual relationship with the borrowing company (the
"Borrower"). The Fund generally will have no right directly to enforce
compliance by the Borrower with the terms of the credit agreement. Instead, the
Fund will be required to rely on the Lender or the Participant that sold the
participation interest both for the enforcement of the Fund's rights against the
Borrower and for the receipt and processing of payments due to the Fund under
the loans. Under the terms of a participation interest, the Fund may be regarded
as a creditor of the Participant and thus the Fund is subject to the credit risk
of both the Borrower and a Lender or a Participant. Participation interests are
generally subject to restrictions on resale. The Fund considers participation
interests to be illiquid and therefore subject to the Fund's percentage
limitation for investments in illiquid securities.
PRIVATIZATIONS. Each of the Funds may invest in privatizations. The
governments of some foreign countries have been engaged in selling part or all
of their stakes in government-owned or controlled enterprises
("privatizations"). AIM believes that privatizations may offer opportunities for
significant capital appreciation and intends to invest assets of the Funds in
privatizations in appropriate circumstances. In certain foreign countries, the
ability of foreign entities such as the Funds to participate may be limited by
local law, or the terms on which a Fund may be permitted to participate may be
less advantageous than those for local investors. There can be no assurance that
foreign governments will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
INDEXED COMMERCIAL PAPER. AIM Developing Markets Fund may invest without
limitation in commercial paper which is indexed to certain specific foreign
currency exchange rates. The terms of such commercial paper provide that its
principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect changes in the exchange rate between two currencies while
the obligation is outstanding. The Fund will purchase such commercial paper with
the currency in which it is denominated and, at maturity, will receive interest
and principal payments thereon in that currency, but the amount of principal
payable by the issuer at maturity will change in proportion to the change (if
any) in the exchange rate between the two specified currencies between the date
the instrument is issued and the date the instrument matures. While such
commercial paper entails the risk of loss of principal, the potential for
realizing gains as a result of changes in foreign currency exchange rates
enables the funds to hedge against a decline in the U.S. dollar value of
investments denominated in foreign currencies while seeking to provide an
attractive money market rate of return. The Fund will not purchase such
commercial paper for speculation.
SAMURAI AND YANKEE BONDS. Subject to its fundamental investment
restrictions, AIM Developing Markets Fund may invest in yen-denominated bonds
sold in Japan by non-Japanese issuers ("Samurai bonds"), and may invest in
dollar-denominated bonds sold in the United States by non-U.S. issuers ("Yankee
bonds"). As compared with bonds issued in their countries of domicile, such bond
issues normally carry a higher interest rate but are less actively traded. It is
the policy of the Fund to invest in Samurai or Yankee bond issues only after
taking into account considerations of quality and liquidity, as well as yield.
22
PREMIUM SECURITIES. AIM Developing Markets Fund may invest in income
securities bearing coupon rates higher than prevailing market rates. Such
"premium" securities are typically purchased at prices greater than the
principal amounts payable on maturity. The Fund will not amortize the premium
paid for such securities in calculating its net investment income. As a result,
in such cases the purchase of such securities provides the Fund a higher level
of investment income distributable to shareholders on a current basis than if
the Fund purchased securities bearing current market rates of interest. If
securities purchased by the Fund at a premium are called or sold prior to
maturity, the Fund will realize a loss to the extent the call or sale price is
less than the purchase price. Additionally, the Fund will realize a loss if it
holds such securities to maturity.
STRUCTURED INVESTMENTS. AIM Developing Markets Fund may invest a portion
of its assets in interests in entities organized and operated solely for the
purpose of restructuring the investment characteristics of Sovereign Debt. This
type of restructuring involves the deposit with or purchase by an entity, such
as a corporation or trust, of specified instruments (such as commercial bank
loans or Brady Bonds) and the issuance by that entity of one or more classes of
securities ("Structured Investments") backed by, or representing interests in,
the underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Investments is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Investments of the type
in which the Fund anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments.
AIM Developing Markets Fund is permitted to invest in a class of
Structured Investments that is either subordinated or not subordinated to the
right of payment of another class. Subordinated Structured Investments typically
have higher yields and present greater risks than unsubordinated Structured
Investments.
Certain issuers of Structured Investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, AIM Developing Markets
Fund's investment in these Structured Investments may be limited by the
restrictions contained in the 1940 Act described below under "Investment
Strategies and Risks - Other Investment Companies." Structured Investments are
typically sold in private placement transactions, and there currently is no
active trading market for Structured Investments.
STRIPPED INCOME SECURITIES. AIM Developing Markets Fund may invest a
portion of its assets in stripped income securities, which are obligations
representing an interest in all or a portion of the income or principal
components of an underlying or related security, a pool of securities or other
assets. In the most extreme case, one class will receive all of the interest
(the "interest only class" or the "IO class"), while the other class will
receive all of the principal (the "principal-only class" or the "PO class"). The
market values of stripped income securities tend to be more volatile in response
to changes in interest rates than are conventional income securities.
FUND POLICIES
FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following investment
restrictions, which may be changed only by a vote of such Fund's outstanding
shares, except that AIM Developing Markets Fund is not subject to restriction
(1) and AIM Global Health Care Fund is not subject to restriction (4).
Fundamental restrictions may be changed only by a vote of the lesser of (i) 67%
or more of the Fund's shares present at a meeting if the holders of more than
50% of the outstanding shares are present in person or represented by proxy, or
(ii) more than 50% of the Fund's outstanding shares. Any investment restriction
that involves a maximum or minimum percentage of securities or assets (other
than with respect to borrowing) shall not be considered to be violated unless an
excess over or a deficiency under the percentage occurs immediately after, and
is caused by, an acquisition or disposition of securities or utilization of
assets by the Fund.
23
(1) The Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the Fund
would fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as such statute, rules and
regulations are amended from time to time or are interpreted from time to time
by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or
except to the extent that the Fund may be permitted to do so by exemptive order
or similar relief (collectively, with the 1940 Act Laws and Interpretations, the
"1940 Act Laws, Interpretations and Exemptions"). In complying with this
restriction, however, the Fund may purchase securities of other investment
companies to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions.
(2) The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) The Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions involving
the acquisition, disposition or resale of its portfolio securities, regardless
of whether the Fund may be considered to be an underwriter under the 1933 Act.
(4) The Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act Laws,
Interpretations and Exemptions) of its investments in the securities of issuers
primarily engaged in the same industry. This restriction does not limit the
Fund's investments in (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or (ii) tax-exempt obligations
issued by governments or political subdivisions of governments. In complying
with this restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that invest,
deal, or otherwise engage in transactions in real estate or interests therein,
or investing in securities that are secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities.
(7) The Fund may not make personal loans or loans of its assets to persons
who control or are under common control with the Fund, except to the extent
permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction
does not prevent the Fund from, among other things, purchasing debt obligations,
entering into repurchase agreements, loaning its assets to broker-dealers or
institutional investors, or investing in loans, including assignments and
participation interests.
(8) The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and restrictions as the Fund.
(9) AIM Global Health Care Fund will concentrate (as such term may be
defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) its
investments in the securities of domestic and foreign issuers in the health care
industry.
The investment restrictions set forth above provide each of the Funds with
the ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though each of the Funds has this flexibility, the Board of
Trustees has adopted non-fundamental restrictions for each of the Funds relating
to certain of these restrictions which AIM and the sub-advisor of AIM Trimark
Endeavor Fund, AIM Trimark Fund and AIM
24
Trimark Small Companies Fund must follow in managing the Funds. Any changes to
these non-fundamental restrictions, which are set forth below, require the
approval of the Board.
NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment
restrictions apply to each of the Funds, except that AIM Developing Markets Fund
is not subject to restriction (1) and AIM Global Health Care is not subject to
restriction (3). They may be changed for any Fund without approval of that
Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total assets,
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities),
if, as a result, (i) more than 5% of the Fund's total assets would be invested
in the securities of that issuer, or (ii) the Fund would hold more than 10% of
the outstanding voting securities of that issuer. The Fund may (i) purchase
securities of other investment companies as permitted by Section 12(d)(1) of the
1940 Act and (ii) invest its assets in securities of other money market funds
and lend money to other AIM Funds, subject to the terms and conditions of any
exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the Fund may borrow money in an amount not
exceeding 33-1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). The Fund may borrow from banks,
broker-dealers or an AIM Fund. The Fund may not borrow for leveraging, but may
borrow for temporary or emergency purposes, in anticipation of or in response to
adverse market conditions, or for cash management purposes. The Fund may not
purchase additional securities when any borrowings from banks exceed 5% of the
Fund's total assets or when any borrowings from an AIM Fund are outstanding.
(3) In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the same
industry.
(4) In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33-1/3% of its total assets and may lend money to
an AIM Fund, on such terms and conditions as the SEC may require in an exemptive
order.
(5) Notwithstanding the fundamental restriction with regard to investing
all assets in an open-end fund, the Fund may not invest all of its assets in the
securities of a single open-end management investment company with the same
fundamental investment objectives, policies and restrictions as the Fund.
(6) Notwithstanding the fundamental restriction with regard to engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities, the Fund currently may not
invest in any security (including futures contracts or options thereon) that is
secured by physical commodities.
(7) The Fund may not acquire any securities of registered open-end
investment companies or registered unit investment trusts in reliance on
Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
ADDITIONAL NON-FUNDAMENTAL POLICIES. As non-fundamental policies:
(1) AIM Developing Markets Fund normally invests at least 80% of its
assets in securities of companies that are in developing markets countries. For
purposes of the foregoing sentence, "assets" means net assets, plus the amount
of any borrowings for investment purposes. The Fund will provide written notice
to its shareholders prior to any change to this policy, as required by the 1940
Act Laws, Interpretations and Exemptions.
(2) AIM Global Health Care Fund normally invests at least 80% of its
assets in securities of health care industry companies. For purposes of the
foregoing sentence, "assets" means net assets, plus
25
the amount of any borrowings for investment purposes. The Fund will provide
written notice to its shareholders prior to any change to this policy, as
required by the 1940 Act Laws, Interpretations and Exemptions.
(3) AIM Trimark Small Companies Fund normally invests at least 80% of its
assets in marketable equity securities of small capitalization companies. For
purposes of the foregoing sentence, "assets" means net assets, plus the amount
of any borrowings for investment purposes. The Fund will provide written notice
to its shareholders prior to any change to this policy, as required by the 1940
Act Laws, Interpretations and Exemptions.
CONCENTRATION OF INVESTMENTS
For purposes of AIM Global Health Care Fund's fundamental investment
restriction regarding industry concentration, a company will be considered a
health care company if (1) at least 50% of its gross income or its net sales are
derived from activities in the health care industry; (2) at least 50% of its
assets are devoted to producing revenues from the health care industry; or (3)
based on other available information, AIM determines that its primary business
is within the health care industry.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market or other conditions,
or atypical circumstances such as unusually large cash inflows or redemptions,
the Funds may temporarily hold all or a portion of their assets in cash, cash
equivalents or high-quality debt instruments. Each of the Funds may also invest
up to 25% of its total assets in Affiliated Money Market Funds for these
purposes.
PORTFOLIO TURNOVER
AIM Global Health Care Fund's portfolio turnover rate increased from 64%
in 2004 to 92% in 2005 due to repositioning of the portfolio in the type of
security the portfolio managers believe would contribute to long term growth.
POLICIES AND PROCEDURES FOR DISCLOSURE OF FUND HOLDINGS
The Board has adopted policies and procedures with respect to the
disclosure of the Funds' portfolio holdings (the "Holdings Disclosure Policy").
AIM and the Board may amend the Holdings Disclosure Policy at any time without
prior notice. Details of the Holdings Disclosure Policy and a description of the
basis on which employees of AIM and its affiliates may release information about
portfolio securities in certain contexts are provided below.
26
PUBLIC RELEASE OF PORTFOLIO HOLDINGS. The Funds disclose the following
1
portfolio holdings information on http://www.aiminvestments.com :
INFORMATION APPROXIMATE DATE OF WEBSITE INFORMATION REMAINS POSTED ON
POSTING WEBSITE
- -------------------------------- ------------------------------- --------------------------------
Top ten holdings as of month-end 15 days after month-end Until replaced with the
following month's top ten
holdings
Select holdings included in the 29 days after calendar Until replaced with the
Fund's Quarterly Performance quarter-end following quarter's Quarterly
Update Performance Update
Complete portfolio holdings as 30 days after calendar For one year
of calendar quarter-end quarter-end
Complete portfolio holdings as 60-70 days after fiscal quarter- For one year
of fiscal quarter-end end
These holdings are listed along with the percentage of the Fund's net
assets they represent. Generally, employees of AIM and its affiliates may not
disclose such portfolio holdings until one day after they have been posted on
http://www.aiminvestments.com. You may also obtain the publicly available
portfolio holdings information described above by contacting us at
1-800-959-4246.
SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS PURSUANT TO NON-DISCLOSURE
AGREEMENT. Employees of AIM and its affiliates may disclose non-public full
portfolio holdings on a selective basis only if the Internal Compliance Controls
Committee (the "ICCC") of A I M Management Group Inc. ("AIM Management")
approves the parties to whom disclosure of non-public full portfolio holdings
will be made. The ICCC must determine that the proposed selective disclosure
will be made for legitimate business purposes of the applicable Fund and address
any perceived conflicts of interest between shareholders of such Fund and AIM or
its affiliates as part of granting its approval.
The Board exercises continuing oversight of the disclosure of Fund
portfolio holdings by (1) overseeing the implementation and enforcement of the
Holdings Disclosure Policy and the AIM Funds Code of Ethics by the Chief
Compliance Officer (or her designee) of AIM and the AIM Funds and (2)
considering reports and recommendations by the Chief Compliance Officer
concerning any material compliance matters (as defined in Rule 38a-1 under the
1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940, as
amended) that may arise in connection with the Holdings Disclosure Policy.
Pursuant to the Holdings Disclosure Policy, the Board reviews the types of
situations in which AIM provides such selective disclosure and approves
situations involving perceived conflicts of interest between shareholders of the
applicable Fund and AIM or its affiliates brought to the Board's attention by
AIM.
AIM discloses non-public full portfolio holdings information to the
following persons in connection with the day-to-day operations and management of
the AIM Funds:
- - Attorneys and accountants;
- - Securities lending agents;
- - Lenders to the AIM Funds;
- - Rating and rankings agencies;
- - Persons assisting in the voting of proxies;
- - AIM Funds' custodians;
- - The AIM Funds' transfer agent(s) (in the event of a redemption in kind);
- ----------
1
To locate a Fund's portfolio holdings information on
http://www.aiminvestments.com, click on the Products and Performance tab, then
click on the Mutual Funds link, then click on the Fund Overview link and select
the Fund from the drop-down menu. Links to the Fund's portfolio holdings are
located in the upper right side of this website page.
27
- Pricing services, market makers, or other persons who provide
systems or software support in connection with AIM Funds' operations
(to determine the price of securities held by an AIM Fund);
- Financial printers;
- Brokers identified by the AIM Funds' portfolio management team who
provide execution and research services to the team; and
- Analysts hired to perform research and analysis to the AIM Funds'
portfolio management team.
In many cases, AIM will disclose current portfolio holdings on a daily
basis to these persons. In these situations, AIM has entered into non-disclosure
agreements which provide that the recipient of the portfolio holdings will
maintain the confidentiality of such portfolio holdings and will not trade on
such information ("Non-disclosure Agreements"). Please refer to Appendix B for a
list of examples of persons to whom AIM provides non-public portfolio holdings
on an ongoing basis.
AIM will also disclose non-public portfolio holdings information if such
disclosure is required by applicable laws, rules or regulations, or by
regulatory authorities having jurisdiction over AIM and its affiliates or the
Funds.
The Holdings Disclosure Policy provides that AIM will not request, receive
or accept any compensation (including compensation in the form of the
maintenance of assets in any Fund or other mutual fund or account managed by AIM
or one of its affiliates) for the selective disclosure of portfolio holdings
information.
DISCLOSURE OF CERTAIN PORTFOLIO HOLDINGS AND RELATED INFORMATION WITHOUT
NON-DISCLOSURE AGREEMENT. AIM and its affiliates that provide services to the
Funds, and the Funds' subadvisors, if applicable, and each of their employees
may receive or have access to portfolio holdings as part of the day to day
operations of the Funds.
From time to time, employees of AIM and its affiliates may express their
views orally or in writing on one or more of the Funds' portfolio securities or
may state that a Fund has recently purchased or sold, or continues to own, one
or more securities. The securities subject to these views and statements may be
ones that were purchased or sold since a Fund's most recent quarter-end and
therefore may not be reflected on the list of the Fund's most recent quarter-end
portfolio holdings disclosed on the website. Such views and statements may be
made to various persons, including members of the press, brokers and other
financial intermediaries that sell shares of the Funds, shareholders in the
applicable Fund, persons considering investing in the applicable Fund or
representatives of such shareholders or potential shareholders, such as
fiduciaries of a 401(k) plan or a trust and their advisers, and other entities
for which AIM or its affiliates provides or may provide investment advisory
services. The nature and content of the views and statements provided to each of
these persons may differ.
From time to time, employees of AIM and its affiliates also may provide
oral or written information ("portfolio commentary") about a Fund, including,
but not limited to, how the Fund's investments are divided among various
sectors, industries, countries, investment styles and capitalization sizes, and
among stocks, bonds, currencies and cash, security types, bond maturities, bond
coupons and bond credit quality ratings. This portfolio commentary may also
include information on how these various weightings and factors contributed to
Fund performance. AIM may also provide oral or written information ("statistical
information") about various financial characteristics of a Fund or its
underlying portfolio securities including, but not limited to, alpha, beta,
R-squared, coefficient of determination, duration, maturity, information ratio,
sharpe ratio, earnings growth, payout ratio, price/book value, projected
earnings growth, return on equity, standard deviation, tracking error, weighted
average quality, market capitalization, percent debt to equity, price to cash
flow, dividend yield or growth, default rate, portfolio turnover, and risk and
style characteristics. This portfolio commentary and statistical information
about a Fund may be based on the Fund's portfolio as of the most recent
quarter-end or the end of some other interim period, such as month-end. The
portfolio commentary and statistical information may be provided
28
to various persons, including those described in the preceding paragraph. The
nature and content of the information provided to each of these persons may
differ.
DISCLOSURE OF PORTFOLIO HOLDINGS BY TRADERS. Additionally, employees of
AIM and its affiliates may disclose one or more of the portfolio securities of a
Fund when purchasing and selling securities through broker-dealers, requesting
bids on securities, obtaining price quotations on securities, or in connection
with litigation involving the Funds' portfolio securities. AIM does not enter
into formal Non-disclosure Agreements in connection with these situations;
however, the Funds would not continue to conduct business with a person who AIM
believed was misusing the disclosed information.
DISCLOSURE OF PORTFOLIO HOLDINGS OF OTHER AIM-MANAGED PRODUCTS. AIM and
its affiliates manage products sponsored by companies other than AIM, including
investment companies, offshore funds, and separate accounts. In many cases,
these other products are managed in a similar fashion to certain AIM Funds (as
defined herein) and thus have similar portfolio holdings. The sponsors of these
other products managed by AIM and its affiliates may disclose the portfolio
holdings of their products at different times than AIM discloses portfolio
holdings for the AIM Funds.
AIM provides portfolio holdings information for portfolios of AIM Variable
Insurance Funds (the "Insurance Funds") to insurance companies whose variable
annuity and variable life insurance accounts invest in the Insurance Funds
("Insurance Companies"). AIM may disclose portfolio holdings information for the
Insurance Funds to Insurance Companies with which AIM has entered into
Non-disclosure Agreements up to five days prior to the scheduled dates for AIM's
disclosure of similar portfolio holdings information for other AIM Funds on
http://www.aiminvestments.com. AIM provides portfolio holdings information for
the Insurance Funds to such Insurance Companies to allow them to disclose this
information on their websites at approximately the same time that AIM discloses
portfolio holdings information for the other AIM Funds on its website. AIM
manages the Insurance Funds in a similar fashion to certain other AIM Funds and
thus the Insurance Funds and such other AIM Funds have similar portfolio
holdings. AIM does not disclose the portfolio holdings information for the
Insurance Funds on its website, and not all Insurance Companies disclose this
information on their websites.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The overall management of the business and affairs of the Funds and the
Trust is vested in the Board. The Board approves all significant agreements
between the Trust, on behalf of one or more of the Funds, and persons or
companies furnishing services to the Funds. The day-to-day operations of each
Fund are delegated to the officers of the Trust and to AIM, subject always to
the objective(s), restrictions and policies of the applicable Fund and to the
general supervision of the Board. Certain trustees and officers of the Trust are
affiliated with AIM and AIM Management, the parent corporation of AIM. All of
the Trust's executive officers hold similar offices with some or all of the
other AIM Funds.
MANAGEMENT INFORMATION
The trustees and officers of the Trust, their principal occupations during
at least the last five years and certain other information concerning them are
set forth in Appendix C.
The standing committees of the Board are the Audit Committee, the
Compliance Committee, the Governance Committee, the Investments Committee, the
Valuation Committee and the Special Market Timing Litigation Committee.
The members of the Audit Committee are James T. Bunch, Edward K. Dunn, Jr.
(Chair), Lewis F. Pennock, Raymond Stickel, Jr., Dr. Larry Soll, Dr. Prema
Mathai-Davis and Ruth H. Quigley, (Vice Chair). The Audit Committee's primary
purposes are to: (i) assist the Board in oversight of the independent registered
public accountant's qualifications, independence and performance; (ii) appoint
independent
29
registered public accountants for the Funds; (iii) to the extent required by
Section 10A(h) and (i) of the Exchange Act, to pre-approve all permissible
non-audit services that are provided to Funds by their independent registered
public accountants; (iv) pre-approve, in accordance with Rule 2-01(c)(7)(ii) of
Regulation S-X, certain non-audit services provided by the Funds' independent
registered public accountants to the Funds' investment adviser and certain other
affiliated entities; (v) to oversee the financial reporting process for the
Funds; (vi) the extent required by Regulation 14A under the Exchange Act, to
prepare an audit committee report for inclusion in any proxy statement issued by
a Fund; (vii) assist the Board's oversight of the performance of the Funds'
internal audit function to the extent an internal audit function exists; (viii)
assist the Board's oversight of the integrity of the Funds' financial
statements; and (ix) assist the Board's oversight of the Funds' compliance with
legal and regulatory requirements. During the fiscal year ended October 31,
2005, the Audit Committee held eight meetings.
The members of the Compliance Committee are Frank S. Bayley, Bruce L.
Crockett (Chair), Albert R. Dowden (Vice Chair) and Mr. Dunn. The Compliance
Committee is responsible for: (i) recommending to the Board and the independent
trustees the appointment, compensation and removal of the Funds' Chief
Compliance Officer; (ii) recommending to the independent trustees the
appointment, compensation and removal of the Funds' Senior Officer appointed
pursuant to the terms of the Assurances of Discontinuance entered into by the
New York Attorney General, AIM and INVESCO Funds Group, Inc. ("IFG"); (iii)
recommending to the independent trustees the appointment and removal of AIM's
independent Compliance Consultant (the "Compliance Consultant") and reviewing
the report prepared by the Compliance Consultant upon its compliance review of
AIM (the "Report") and any objections made by AIM with respect to the Report;
(iv) reviewing any report prepared by a third party who is not an interested
person of AIM, upon the conclusion by such third party of a compliance review of
AIM; (v) reviewing all reports on compliance matters from the Funds' Chief
Compliance Officer, (vi) reviewing all recommendations made by the Senior
Officer regarding AIM's compliance procedures, (vii) reviewing all reports from
the Senior Officer of any violations of state and federal securities laws, the
Colorado Consumer Protection Act, or breaches of AIM's fiduciary duties to Fund
shareholders and of AIM's Code of Ethics; (viii) overseeing all of the
compliance policies and procedures of the Funds and their service providers
adopted pursuant to Rule 38a-1 of the 1940 Act; (ix) from time to time,
reviewing certain matters related to redemption fee waivers and recommending to
the Board whether or not to approve such matters; (x) receiving and reviewing
quarterly reports on the activities of AIM's Internal Compliance Controls
Committee; (xi) reviewing all reports made by AIM's Chief Compliance Officer;
(xii) reviewing and recommending to the independent trustees whether to approve
procedures to investigate matters brought to the attention of AIM's ombudsman;
(xiii) risk management oversight with respect to the Funds and, in connection
therewith, receiving and overseeing risk management reports from AMVESCAP PLC
that are applicable to the Funds or their service providers; and (xiv)
overseeing potential conflicts of interest that are reported to the Compliance
Committee by the AIM, the Chief Compliance Officer, the Senior Officer and/or
the Compliance Consultant. During the fiscal year ended October 31, 2005, the
Compliance Committee held seven meetings.
The members of the Governance Committee are Messrs. Bayley, Crockett,
Dowden (Chair), Bob R. Baker, and Jack M. Fields (Vice Chair). The Governance
Committee is responsible for: (i) nominating persons who will qualify as
independent trustees for (a) election as trustees in connection with meetings of
shareholders of the Funds that are called to vote on the election of trustees,
(b) appointment by the Board as trustees in connection with filling vacancies
that arise in between meetings of shareholders; (ii) reviewing the size of the
Board, and recommending to the Board whether the size of the Board shall be
increased or decreased; (iii) nominating the Chair of the Board; (iv) monitoring
the composition of the Board and each committee of the Board, and monitoring the
qualifications of all trustees; (v) recommending persons to serve as members of
each committee of the Board (other than the Compliance Committee), as well as
persons who shall serve as the chair and vice chair of each such committee; (vi)
reviewing and recommending the amount of compensation payable to the independent
trustees; (vii) overseeing the selection of independent legal counsel to the
independent trustees; (viii) reviewing and approving the compensation paid to
independent legal counsel and other advisers, if any, to the Audit Committee of
the Board; (ix) reviewing and approving the compensation paid to counsel and
other advisers, if any, to the Audit Committee of the Board; and (x) reviewing
as they deem appropriate administrative and/or logistical matters pertaining to
the operations of the Board.
30
The Governance Committee will consider nominees recommended by a
shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Governance Committee or the Board, as applicable, shall make the
final determination of persons to be nominated. During the fiscal year ended
October 31, 2005, the Governance Committee held eight meetings.
Notice procedures set forth in the Trust's bylaws require that any
shareholder of a Fund desiring to nominate a trustee for election at a
shareholder meeting must submit to the Trust's Secretary the nomination in
writing not later than the close of business on the later of the 90th day prior
to such shareholder meeting or the tenth day following the day on which public
announcement is made of the shareholder meeting and not earlier than the close
of business on the 120th day prior to the shareholder meeting.
The members of the Investments Committee are Messrs. Baker (Vice Chair),
Bayley (Chair), Bunch, Crockett, Dowden, Dunn, Fields, Carl Frischling, Robert
H. Graham, Pennock, Soll, Stickel, Mark H. Williamson, Dr. Mathai-Davis (Vice
Chair) and Miss Quigley (Vice Chair). The Investments Committee's primary
purposes are to: (i) assist the Board in its oversight of the investment
management services provided by AIM as well as any sub-advisers; and (ii) review
all proposed and existing advisory, sub-advisory and distribution arrangements
for the Funds, and to recommend what action the full Boards and the independent
trustees take regarding the approval of all such proposed arrangements and the
continuance of all such existing arrangements.
The Investments Committee has established three Sub-Committees. The
Sub-Committees are responsible for: (i) reviewing the performance, fees and
expenses of the Funds that have been assigned to a particular Sub-Committee (for
each Sub-Committee, the "Designated Funds"), unless the Investments Committee
takes such action directly; (ii) reviewing with the applicable portfolio
managers from time to time the investment objective(s), policies, strategies and
limitations of the Designated Funds; (iii) evaluating the investment advisory,
sub-advisory and distribution arrangements in effect or proposed for the
Designated Funds, unless the Investments Committee takes such action directly;
(iv) being familiar with the registration statements and periodic shareholder
reports applicable to their Designated Funds; and (v) such other
investment-related matters as the Investments Committee may delegate to the
Sub-Committee from time to time. During the fiscal year ended October 31, 2005,
the Investments Committee held eight meetings.
The members of the Valuation Committee are Messrs. Bunch, Pennock (Vice
Chair), Soll, and Williamson and Miss Quigley (Chair). The Valuation Committee
is responsible for: (i) developing a sufficient knowledge of the valuation
process and of AIM's Procedures for Valuing Securities (Pricing Procedures) (the
"Pricing Procedures") in order to carry out their responsibilities; (ii)
periodically reviewing information provided by AIM or other advisors regarding
industry developments in connection with valuation and pricing, and making
recommendations to the Board with respect to the Pricing Procedures based upon
such review; (iii) reviewing the reports described in the Pricing Procedures and
other information from AIM regarding fair value determinations made pursuant to
the Pricing Procedures by AIM's internal valuation committee, and reporting to
and making recommendations to the Board in connection with such reports; (iv)
receiving the reports of AIM's internal valuation committee requesting approval
of any changes to pricing vendors or pricing methodologies as required by the
Pricing Procedures, receiving the annual report of AIM evaluating the pricing
vendors, and approving changes to pricing vendors and pricing methodologies as
provided in the Pricing Procedures and recommending the pricing vendors for
approval by the Board annually; (v) upon request of AIM, assisting AIM's
internal valuation committee and/or the Board in resolving particular fair
valuation issues; (vi) receiving any reports of concerns by AIM's internal
valuation committee regarding actual or potential conflicts of interest by
investment personnel or others that could color their input or recommendations
regarding pricing issues, and receiving information from AIM disclosing
differences between valuation and pricing procedures used for the Funds and
private funds, if any, advised by AIM for which AIM Fund Administration has
exclusive accounting responsibility, and the reasons for such differences; and
(vii) in
31
each of the foregoing areas, making regular reports to the Board. During the
fiscal year ended October 31, 2005, the Valuation Committee held two meetings.
The members of the Special Market Timing Litigation Committee are Messrs.
Bunch (Chair), Crockett, Dowden (Vice Chair) and Dunn. The Special Market Timing
Litigation Committee is responsible: (i) for receiving reports from time to time
from management, counsel for management, counsel for the AIM Funds and special
counsel for the independent trustees, as applicable, related to (a) the civil
lawsuits, including purported class action and shareholder derivative suits,
that have been filed against the AIM Funds concerning alleged excessive short
term trading in shares of the AIM Funds ("market timing") and (b) the civil
enforcement actions and investigations related to market timing activity in the
AIM Funds that were settled with certain regulators, including without
limitation the SEC, the New York Attorney General and the Colorado Attorney
General, and for recommending to the independent trustees what actions, if any,
should be taken by the AIM Funds in light of all such reports; (ii) for
overseeing the investigation(s) on behalf of the independent trustees by special
counsel for the independent trustees and the independent trustees' financial
expert of market timing activity in the AIM Funds, and for recommending to the
independent trustees what actions, if any, should be taken by the AIM Funds in
light of the results of such investigation(s); (iii) for (a) reviewing the
methodology developed by AIM's Independent Distribution Consultant (the
"Distribution Consultant") for the monies ordered to be paid under the
settlement order with the SEC, and making recommendations to the independent
trustees as to the acceptability of such methodology and (b) recommending to the
independent trustees whether to consent to any firm with which the Distribution
Consultant is affiliated entering into any employment, consultant,
attorney-client, auditing or other professional relationship with AIM, or any of
its present or former affiliates, directors, officers, employees or agents
acting in their capacity as such for the period of the Distribution Consultant's
engagement and for a period of two years after the engagement; and (iv) for
taking reasonable steps to ensure that any AIM Fund which the Special Market
Timing Litigation Committee determines was harmed by improper market timing
activity receives what the Special Market Timing Litigation Committee deems to
be full restitution. During the fiscal year ended October 31, 2005, the Special
Market Timing Litigation Committee held three meetings.
Trustee Ownership of Fund Shares
The dollar range of equity securities beneficially owned by each trustee
(i) in the Funds and (ii) on an aggregate basis, in all registered investment
companies overseen by the trustee within the AIM Funds complex is set forth in
Appendix C.
COMPENSATION
Each trustee who is not affiliated with AIM is compensated for his or her
services according to a fee schedule which recognizes the fact that such trustee
also serves as a director or trustee of other AIM Funds. Each such trustee
receives a fee, allocated among the AIM Funds for which he or she serves as a
director or trustee, which consists of an annual retainer component and a
meeting fee component. The Chair of the Board and Chairs and Vice Chairs of
certain committees receive additional compensation for their services.
Information regarding compensation paid or accrued for each trustee of the
Trust who was not affiliated with AIM during the year ended December 31, 2005 is
found in Appendix D.
Retirement Plan For Trustees
The trustees have adopted a retirement plan for the trustees of the Trust
who are not affiliated with AIM.
The trustees have also adopted a retirement policy that 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.
32
Annual retirement benefits are available to each non-AIM-affiliated
trustee of the Trust and/or the other AIM Funds (each, a "Covered Fund") who has
at least five years of credited service as a trustee (including service to a
predecessor fund) for a Covered Fund. Effective January 1, 2006, for retirements
after December 31, 2005, the retirement benefits will equal 75% of the trustee's
annual retainer paid to or accrued by any Covered Fund for 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 amount of benefits does not include additional
compensation paid for Board meeting fees or compensation paid to the Chair of
the Board and the Chairs and Vice Chairs of certain committees, whether such
amounts are paid directly to the trustee or deferred. The annual retirement
benefits are payable in quarterly installments for a number of years equal to
the lesser of (i) sixteen years or (ii) the number of such trustee's credited
years of service. If a trustee dies prior to receiving the full amount of
retirement benefits, the remaining payments will be made to the deceased
trustee's designated beneficiary for the same length of time that the trustee
would have received the payments based on his or her service. A trustee must
have attained the age of 65 (60 in the event of death or disability) to receive
any retirement benefit. A trustee may make an irrevocable election to receive
retirement benefits prior to age 72, subject to a reduction for early payment.
Deferred Compensation Agreements
Messrs. Crockett, Dunn, Fields, Frischling and Sklar and Drs. Mathai-Davis
and Soll (for purposes of this paragraph only, the "Deferring Trustees") have
each executed a Deferred Compensation Agreement (collectively, the "Compensation
Agreements"). Pursuant to the Compensation Agreements, the Deferring Trustees
have the option to elect to defer receipt of up to 100% of their compensation
payable by the Trust, and such amounts are placed into a deferral account and
deemed to be invested in one or more AIM Funds selected by the Deferring
Trustee. 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. If a Deferring Trustee dies prior to
the distribution of amounts in his or her deferral account, the balance of the
deferral account will be distributed to his or her designated beneficiary. The
Compensation Agreements are not funded and, with respect to the payments of
amounts held in the deferral accounts, the Deferring Trustees have the status of
unsecured creditors of the Trust and of each other AIM Fund from which they are
deferring compensation.
Purchase of Class A Shares of the Funds at Net Asset Value
The trustees and other affiliated persons of the Trust may purchase Class
A shares of the AIM Funds without paying an initial sales charge. AIM
Distributors permits such purchases because there is a reduced sales effort
involved in sales to such purchasers, thereby resulting in relatively low
expenses of distribution. For a complete description of the persons who will not
pay an initial sales charge on purchases of Class A shares of the AIM Funds, see
"Purchase, Redemption and Pricing of Shares - Purchase and Redemption of Shares
- - Purchases of Class A Shares, Class A3 Shares, of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money
Market Fund - Purchases of Class A Shares at Net Asset Value."
CODES OF ETHICS
AIM, the Trust, AIM Distributors and AIM Funds Management Inc. have
adopted Codes of Ethics governing personal trading activities of all employees
of AIM and its subsidiaries, and AIM Funds Management Inc. The Codes of Ethics
are intended to address conflicts of interest with the Trust that may arise from
personal trading, including personal trading in most of the funds within The AIM
Family of Funds registered trademark. Personal trading, including personal
trading involving securities that may be purchased or held by a fund within The
AIM Family of Funds registered trademark, is permitted under the Codes subject
to certain restrictions; however employees are required to pre-clear security
transactions with the Compliance Officer or a designee and to report
transactions on a regular basis.
33
PROXY VOTING POLICIES
The Board has delegated responsibility for decisions regarding proxy
voting for securities held by each Fund other than AIM Trimark Endeavor Fund,
AIM Trimark Fund and AIM Trimark Small Companies Fund to AIM, the Fund's
investment advisor, and with respect to AIM Trimark Endeavor Fund, AIM Trimark
Fund and AIM Trimark Small Companies Fund, to AIM Funds Management, Inc., the
Sub-Advisor. The investment advisor and Sub-Advisor will vote such proxies in
accordance with their proxy policies and procedures, which have been reviewed
and approved by the Board, and which are found in Appendix E.
Any material changes to the proxy policies and procedures will be
submitted to the Board for approval. The Board will be supplied with a summary
quarterly report of each Fund's proxy voting record.
Information regarding how the Funds voted proxies related to their
portfolio securities during the 12 months ended June 30, 2005 is available at
our Web site, http://www.aiminvestments.com. This information is also available
at the SEC Web site, http://www.sec.gov.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Information about the ownership of each class of each Fund's shares by
beneficial or record owners of such Fund and by trustees and officers as a group
is found in Appendix F. A shareholder who owns beneficially 25% or more of the
outstanding shares of a Fund is presumed to "control" that Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
AIM, the Funds' investment advisor, was organized in 1976, and along with
its subsidiaries, manages or advises over 200 investment portfolios encompassing
a broad range of investment objectives. AIM is a direct, wholly owned subsidiary
of AIM Management, a holding company that has been engaged in the financial
services business since 1976. AIM Management is an indirect, wholly owned
subsidiary of AMVESCAP. AMVESCAP and its subsidiaries are an independent global
investment management group. Certain of the directors and officers of AIM are
also executive officers of the Trust and their affiliations are shown under
"Management Information" herein.
As investment advisor, AIM supervises all aspects of the Funds' operations
and provides investment advisory services to the Funds. AIM obtains and
evaluates economic, statistical and financial information to formulate and
implement investment programs for the Funds. The Advisory Agreement provides
that, in fulfilling its responsibilities, AIM may engage the services of other
investment managers with respect to one or more of the Funds. The investment
advisory services of AIM and the investment sub-advisory services of the
Sub-Advisor to the Funds are not exclusive and AIM and the Sub-Advisor(s) are
free to render investment advisory services to others, including other
investment companies.
AIM is also responsible for furnishing to the Funds, at AIM's expense, the
services of persons believed to be competent to perform all supervisory and
administrative services required by the Funds, in the judgment of the trustees,
to conduct their respective businesses effectively, as well as the offices,
equipment and other facilities necessary for their operations. Such functions
include the maintenance of each Fund's accounts and records, and the preparation
of all requisite corporate documents such as tax returns and reports to the SEC
and shareholders.
The Advisory Agreement provides that each Fund will pay or cause to be
paid all expenses of such Fund not assumed by AIM, including, without
limitation: brokerage commissions, taxes, legal, auditing or governmental fees,
custodian, transfer and shareholder service agent costs, expenses of
34
issue, sale, redemption, and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to trustees and shareholder
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Trust on behalf of
each Fund in connection with membership in investment company organizations, and
the cost of printing copies of prospectuses and statements of additional
information distributed to the Funds' shareholders.
AIM, at its own expense, furnishes to the Trust office space and
facilities. AIM furnishes to the Trust all personnel for managing the affairs of
the Trust and each of its series of shares.
Pursuant to the Advisory Agreement with the Trust, AIM receives a monthly
fee from each Fund calculated at the annual rates indicated in the second column
below, based on the average daily net assets of each Fund during the year:
Effective January 1, 2005 the advisor has contractually agreed to waive
advisory fees to the extent necessary so that the advisory fees payable by each
Fund do not exceed the maximum advisory fee rate set forth in the third column
below. The maximum advisory fee rates are effective through the Committed Until
Date set forth in the fourth column.
MAXIMUM
ADVISORY FEE
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATE RATES COMMITTED
FUND NAME PER ADVISORY AGREEMENT AFTER JANUARY 1, 2005 UNTIL DATE
- --------------------------------- --------------------------- ------- ------------------ ---------------
AIM Developing Markets Fund 0.975% of first $500M 0.935% of first $250M June 30, 2006
0.95% of next $500M 0.91% of next $250M
0.925% of next $500M 0.885% of next $500M
0.90% on amount thereafter 0.86% of next $1.5B
0.835% of next $2.5B
0.81% of next $2.5B
0.785% of next $2.5B
0.76% of amount over $10B
AIM Global Health Care Fund 0.75% of first $350M N/A N/A
0.65% of next $350M
0.55% of next $1.3B
0.45% of next $2B
0.40% of next $2B
0.375% of next $2B
0.35% of next $8B
AIM Trimark Endeavor Fund 0.80% of first $1B 0.745% of first $250M June 30, 2006
0.75% on amount thereafter 0.73% of next $250M
0.715% of next $500M
0.70% of next $1.5B
0.685% of next $2.5B
0.67% of next $2.5B
0.655% of next $2.5B
0.64% of amount over $10B
35
MAXIMUM
ADVISORY FEE
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATE RATES COMMITTED
FUND NAME PER ADVISORY AGREEMENT AFTER JANUARY 1, 2005 UNTIL DATE
- --------------------------------- --------------------------- ------- ------------------ ---------------
AIM Trimark Fund 0.85% of first $1B 0.80% of first $250M June 30, 2006
0.80% on amount thereafter 0.78% of next $250M
0.76% of next $500M
0.74% of next $1.5B
0.72% of next $2.5B
0.70% of next $2.5B
0.68% of next $2.5B
0.66% of amount over $10B
AIM Trimark Small Companies Fund 0.85% of first $1B 0.745% of first $250M June 30, 2006
0.80% on amount thereafter 0.73% of next $250M
0.715% of next $500M
0.70% of next $1.5B
0.685% of next $2.5B
0.67% of next $2.5B
0.655% of next $2.5B
0.64% of amount over $10B
AIM may from time to time waive or reduce its fee. Voluntary fee waivers
or reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus
may not be terminated or amended to the Funds' detriment during the period
stated in the agreement between AIM and the Fund.
AIM has voluntarily agreed to waive a portion of advisory fees payable by
each Fund. The amount of the waiver will equal 25% of the advisory fee AIM
receives from the Affiliated Money Market Funds as a result of each Fund's
investment of uninvested cash in an Affiliated Money Market Fund. Termination of
this agreement requires approval by the Board. See "Description of the Funds and
Their Investments and Risks - Investment Strategies and Risks - Other
Investments - Other Investment Companies."
AIM has contractually agreed through October 31, 2006, to limit total
annual fund operating expenses (excluding (i) interest; (ii) taxes; (iii)
dividend expense on short sales; (iv) extraordinary items; (v) expenses related
to a merger or reorganization, as approved by each Fund's Board; and (vi)
expenses that each Fund has incurred but did not actually pay because of an
expense offset arrangement for the following Funds' shares to the extent
necessary to limit the total operating expenses as follows:
FUND EXPENSE LIMITATION
- ----------------------------------- ------------------
AIM Developing Markets Fund
Class A Shares 1.75%
Class B Shares 2.50%
Class C Shares 2.50%
Institutional Class Shares 1.50%
36
AIM Trimark Endeavor Fund
Class A Shares 1.90%
Class B Shares 2.65%
Class C Shares 2.65%
Class R Shares 2.15%
Institutional Class Shares 1.65%
AIM Trimark Fund
Class A Shares 2.15%
Class B Shares 2.90%
Class C Shares 2.90%
Class R Shares 2.40%
Institutional Class Shares 1.90%
AIM Trimark Small Companies Fund
Class A Shares 1.50%
Class B Shares 2.25%
Class C Shares 2.25%
Class R. Shares 1.75%
Institutional Class Shares 1.25%
Such contractual fee waivers or reductions are set forth in the Fee Table to
each Fund's Prospectus and may not be terminated or amended to the Funds'
detriment during the period stated in the agreement between AIM and the Fund.
Investment Sub-Advisor
AIM has entered into a Sub-Advisory Agreement with the Sub-Advisor to
provide investment sub-advisory services to AIM Trimark Endeavor Fund, AIM
Trimark Fund and AIM Trimark Small Companies Fund.
The Sub-Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended (the "Advisers Act").
The Sub-Advisor is located at 5140 Yonge Street, Suite 900, Toronto,
Ontario M2N 6X7 and has provided investment management and/or administrative
services to pension funds, insurance funds, unit trusts, offshore funds and a
variety of institutional accounts since 1981.
AIM and the Sub-Advisor are indirect wholly owned subsidiaries of AMVESCAP
PLC (formerly, AMVESCO PLC and INVESCO PLC).
For the services to be rendered by the Sub-Advisor under the Sub-Advisory
Agreement, AIM will pay to the Sub-Advisor a fee which will be computed daily
and paid as of the last day of each month on the basis of each Fund's daily net
asset value, using for each daily calculation the most recently determined net
asset value of each Fund. (See "Computation of Net Asset Value.") On an annual
basis, the sub-advisory fee is equal to 40% of AIM's compensation in respect of
the sub-advised assets per year, for each of AIM Trimark Endeavor Fund, AIM
Trimark Fund and AIM Trimark Small Companies Fund.
The management fees payable by each Fund, the amounts waived by AIM and
the net fees paid by each Fund for the last three fiscal years ended October 31
are found in Appendix G.
37
Portfolio Managers
Appendix H contains the following information regarding the portfolio
managers identified in each Fund's prospectus:
- The dollar range of the manager's investments in each Fund.
- A description of the manager's compensation structure.
- Information regarding other accounts managed by the manager and
potential conflicts of interest that might arise from the management
of multiple accounts.
Securities Lending Arrangements
If a Fund engages in securities lending, AIM will provide the Fund
investment advisory services and related administrative services. The Advisory
Agreement describes the administrative services to be rendered by AIM if a Fund
engages in securities lending activities, as well as the compensation AIM may
receive for such administrative services. Services to be provided include: (a)
overseeing participation in the securities lending program to ensure compliance
with all applicable regulatory and investment guidelines; (b) assisting the
securities lending agent or principal (the "agent") in determining which
specific securities are available for loan; (c) monitoring the agent to ensure
that securities loans are effected in accordance with AIM's instructions and
with procedures adopted by the Board; (d) preparing appropriate periodic reports
for, and seeking appropriate approvals from, the Board with respect to
securities lending activities; (e) responding to agent inquiries; and (f)
performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation for
the related administrative services AIM will provide, a lending Fund will pay
AIM a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities. AIM currently intends to waive such fee,
and has agreed to seek Board approval prior to its receipt of all or a portion
of such fee.
SERVICE AGREEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Trust have entered into a
Master Administrative Services Agreement ("Administrative Services Agreement")
pursuant to which AIM may perform or arrange for the provision of certain
accounting and other administrative services to each Fund which are not required
to be performed by AIM under the Advisory Agreement. The Administrative Services
Agreement provides that it will remain in effect and continue from year to year
only if such continuance is specifically approved at least annually by the
Board, including the independent trustees, by votes cast in person at a meeting
called for such purpose. Under the Administrative Services Agreement, AIM is
entitled to receive from the Funds reimbursement of its costs or such reasonable
compensation as may be approved by the Board. Currently, AIM is reimbursed for
the services of the Trust's principal financial officer and her staff, and any
expenses related to fund accounting services.
Administrative services fees paid to AIM by each Fund for the last three
fiscal years ended October 31 are found in Appendix I.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment Services, Inc. ("AIS") (formerly, A I M
Fund Services, Inc.), 11 Greenway Plaza, Suite 100, Houston, Texas 77046, a
wholly owned subsidiary of AIM, is the Trust's transfer agent.
The Transfer Agency and Service Agreement (the "TA Agreement") between the
Trust and AIS provides that AIS will perform certain services related to the
servicing of shareholders of the Funds.
38
Other such services may be delegated or sub-contracted to third party
intermediaries. For servicing accounts holding Class A, A3, B, C, P, R, AIM Cash
Reserve and Investor Class Shares, the TA Agreement provides that the Trust, on
behalf of the Funds, will pay AIS a fee at an annual rate of $21.60 per open
shareholder account plus certain out of pocket expenses. This fee is paid
monthly at the rate of 1/12 of the annual rate and is based upon the number of
open shareholder accounts during each month. In addition, all fees payable by
AIS or its affiliates to third party intermediaries who service accounts
pursuant to sub-transfer agency, omnibus account services and sub-accounting
agreements are charged back to the Funds, subject to certain limitations
approved by the Board of the Trust. These payments are made in consideration of
services that would otherwise be provided by AIS if the accounts serviced by
such intermediaries were serviced by AIS directly. For more information
regarding such payments to intermediaries, see the discussion under
"Administrative and Processing Support Payments" below.
CUSTODIAN. State Street Bank and Trust Company (the "Custodian"), 225
Franklin Street, Boston, Massachusetts 02110, is custodian of all securities and
cash of the Funds. Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002,
serves as sub-custodian for purchases of shares of the Funds. The Bank of New
York, 2 Hanson Place, Brooklyn, New York 11217-1431, also serves as
sub-custodian to facilitate cash management.
The Custodian is authorized to establish separate accounts in foreign
countries and to cause foreign securities owned by the Funds to be held outside
the United States in branches of U.S. banks and, to the extent permitted by
applicable regulations, in certain foreign banks and securities depositories.
AIM is responsible for selecting eligible foreign securities depositories and
for assessing the risks associated with investing in foreign countries,
including the risk of using eligible foreign securities depositories in a
country. The Custodian is responsible for monitoring eligible foreign securities
depositories.
Under its contract with the Trust, the Custodian maintains the portfolio
securities of the Funds, administers the purchases and sales of portfolio
securities, collects interest and dividends and other distributions made on the
securities held in the portfolios of the Funds and performs other ministerial
duties. These services do not include any supervisory function over management
or provide any protection against any possible depreciation of assets.
AUDITORS. The Funds' independent registered public accounting firm is
responsible for auditing the financial statements of the Funds. The Audit
Committee of the Board has appointed PricewaterhouseCoopers LLP, 1201 Louisiana,
Suite 2900, Houston, Texas 77002, as the independent registered public
accounting firm to audit the financial statements of the Funds. Such appointment
was ratified and approved by the Board.
COUNSEL TO THE TRUST. Legal matters for the Trust have been passed upon by
Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia,
Pennsylvania 19103-7599.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Sub-Advisor has adopted compliance procedures that cover, among other
items, brokerage allocation and other trading practices. Unless specifically
noted, the Sub-Advisor's procedures do not materially differ from AIM's
procedures as set forth below.
BROKERAGE TRANSACTIONS
AIM or the Sub-Advisor makes decisions to buy and sell securities for each
Fund, selects broker-dealers (each, a "Broker"), effects the Funds' investment
portfolio transactions, allocates brokerage fees in such transactions and, where
applicable, negotiates commissions and spreads on transactions. AIM's primary
consideration in effecting a security transaction is to obtain best execution,
which AIM defines as prompt and efficient execution of the transaction at the
best obtainable price with payment of commissions, mark-ups or mark-downs which
are reasonable in relation to the value of the brokerage
39
services provided by the Broker. While AIM seeks reasonably competitive
commission rates, the Funds may not pay the lowest commission or spread
available. See "Broker Selection" below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. Portfolio transactions placed in such markets may be
effected on a principal basis at net prices without commissions, but which
include compensation to the Broker in the form of a mark-up or mark-down, or on
an agency basis, which involves the payment of negotiated brokerage commissions
to the Broker, including electronic communication networks. Purchases of
underwritten issues include a commission or concession paid by the issuer (not
the Funds) to the underwriter. Purchases of money market instruments may be made
directly from issuers without the payment of commissions.
Traditionally, commission rates have not been negotiated on stock markets
outside the United States. Although in recent years many overseas stock markets
have adopted a system of negotiated rates, a number of markets maintain an
established schedule of minimum commission rates.
Brokerage commissions paid by each of the Funds during the last three
fiscal years ended October 31 are found in Appendix J.
COMMISSIONS
During the last three fiscal years ended October 31, none of the Funds
paid brokerage commissions to Brokers affiliated with the Funds, AIM, AIM
Distributors, or any affiliates of such entities.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of an AIM Fund, provided the conditions of an exemptive order
received by the AIM Funds from the SEC are met. In addition, a Fund may purchase
or sell a security from or to certain other Funds or accounts (and may invest in
Affiliated Money Market Funds) provided the Funds follow procedures adopted by
the Boards of the various AIM Funds, including the Trust. These inter-fund
transactions do not generate brokerage commissions but may result in custodial
fees or taxes or other related expenses.
BROKER SELECTION
AIM's primary consideration in selecting Brokers to execute portfolio
transactions for a Fund is to obtain best execution. In selecting a Broker to
execute a portfolio transaction in equity securities for a Fund, AIM considers
the full range and quality of a Broker's services, including the value of
research and/or brokerage services provided, execution capability, commission
rate, willingness to commit capital, anonymity and responsiveness. AIM's primary
consideration when selecting a Broker to execute a portfolio transaction in
fixed income securities for a Fund is the Broker's ability to deliver or sell
the relevant fixed income securities; however, AIM will also consider the
various factors listed above. In each case, the determinative factor is not the
lowest commission or spread available but whether the transaction represents the
best qualitative execution for the Fund. AIM will not select Brokers based upon
their promotion or sale of Fund shares.
In choosing Brokers to execute portfolio transactions for the Funds, AIM
may select Brokers that provide brokerage and/or research services ("Soft Dollar
Products") to the Funds and/or the other accounts over which AIM and its
affiliates have investment discretion. Section 28(e) of the Securities Exchange
Act of 1934, as amended, provides that AIM, under certain circumstances,
lawfully may cause an account to pay a higher commission than the lowest
available. Under Section 28(e)(1), AIM must make a good faith determination that
the commissions paid are "reasonable in relation to the value of the brokerage
and research services provided ... viewed in terms of either that particular
transaction or [AIM's] overall responsibilities with respect to the accounts as
to which [it] exercised investment discretion." The services provided by the
Broker also must lawfully and appropriately assist AIM in the performance of its
investment decision-making responsibilities. Accordingly, a Fund may pay a
Broker higher commissions than those available from another Broker in
recognition of such Broker's provision of Soft Dollar Products to AIM.
40
AIM faces a potential conflict of interest when it uses client trades to
obtain Soft Dollar Products. This conflict exists because AIM is able to use the
Soft Dollar Products to manage client accounts without paying cash for the Soft
Dollar Products, which reduces AIM's expenses to the extent that AIM would have
purchased such products had they not been provided by Brokers. Section 28(e)
permits AIM to use Soft Dollar Products for the benefit of any account it
manages. Certain AIM-managed accounts may generate soft dollars used to purchase
Soft Dollar Products that ultimately benefit other AIM-managed accounts,
effectively cross subsidizing the other AIM-managed accounts that benefit
directly from the product. AIM may not use all of the Soft Dollar Products
provided by Brokers through which a Fund effects securities transactions in
connection with managing such Fund.
AIM and certain of its affiliates presently engage in the following
instances of cross-subsidization:
1. Fixed income funds normally do not generate soft dollar commissions
to pay for Soft Dollar Products. Therefore, soft dollar commissions
used to pay for Soft Dollar Products which are used to manage the
fixed income AIM Funds are generated entirely by equity AIM Funds
and other equity client accounts managed by AIM or A I M Capital
Management, Inc. ("AIM Capital"), a subsidiary of AIM. In other
words, the fixed income AIM Funds are cross-subsidized by the equity
AIM Funds in that the fixed income AIM Funds receive the benefit of
Soft Dollar Products services for which they do not pay.
2. The investment models used to manage many of the AIM Funds are also
used to manage other accounts of AIM and/or AIM Capital. The Soft
Dollar Products obtained through the use of soft dollar commissions
generated by the transactions of the AIM Funds and/or other accounts
managed by AIM and/or AIM Capital are used to maintain the
investment models relied upon by both of these advisory affiliates.
This type of cross-subsidization occurs in both directions. For
example, soft dollar commissions generated by transactions of the
AIM Funds and/or other accounts managed by AIM are used for Soft
Dollar Products which may benefit those AIM Funds and/or accounts as
well as accounts managed by AIM Capital. Additionally, soft dollar
commissions generated by transactions of accounts managed by AIM
Capital are used for Soft Dollar Products which may benefit those
accounts as well as accounts managed by AIM. In certain
circumstances, AIM Capital accounts may indicate that their
transactions should not be used to generate soft dollar commissions
but may still receive the benefits of Soft Dollar Products received
by AIM or AIM Capital.
3. Some of the common investment models used to manage various Funds
and other accounts of AIM and/or AIM Capital are also used to manage
accounts of AIM Private Asset Management, Inc. ("APAM"), another AIM
subsidiary. The Soft Dollar Products obtained through the use of
soft dollar commissions generated by the transactions of the Funds
and/or other accounts managed by AIM and/or AIM Capital are used to
maintain the investment models relied upon by AIM, AIM Capital and
APAM. This cross-subsidization occurs in only one direction. Most of
APAM's accounts do not generate soft dollar commissions which can be
used to purchase Soft Dollar Products. The soft dollar commissions
generated by transactions of the Funds and/or other accounts managed
by AIM and/or AIM Capital are used for Soft Dollar Products which
may benefit the accounts managed by AIM, AIM Capital and APAM;
however, APAM does not provide any soft dollar research benefit to
the Funds and/or other accounts managed by AIM or AIM Capital.
AIM and AIM Capital attempt to reduce or eliminate the potential conflicts
of interest concerning the use of Soft Dollar Products by directing client
trades for Soft Dollar Products only if AIM and AIM Capital conclude that the
Broker supplying the product is capable of providing best execution.
41
Certain Soft Dollar Products may be available directly from a vendor on a
hard dollar basis; other Soft Dollar Products are available only through Brokers
in exchange for soft dollars. AIM uses soft dollars to purchase two types of
Soft Dollar Products:
- proprietary research created by the Broker executing the trade, and
- other products created by third parties that are supplied to AIM
through the Broker executing the trade.
Proprietary research consists primarily of traditional research reports,
recommendations and similar materials produced by the in-house research staffs
of broker-dealer firms. This research includes evaluations and recommendations
of specific companies or industry groups, as well as analyses of general
economic and market conditions and trends, market data, contacts and other
related information and assistance. AIM periodically rates the quality of
proprietary research produced by various Brokers. Based on the evaluation of the
quality of information that AIM receives from each Broker, AIM develops an
estimate of each Broker's share of AIM clients' commission dollars. AIM attempts
to direct trades to the firms to meet these estimates.
AIM also used soft dollars to acquire products from third parties that are
supplied to AIM through Brokers executing the trades or other Brokers who "step
in" to a transaction and receive a portion of the brokerage commission for the
trade. AIM may from time to time instruct the executing Broker to allocate or
"step out" a portion of a transaction to another Broker. The Broker to which AIM
has "stepped out" would then settle and complete the designated portion of the
transaction, and the executing Broker would settle and complete the remaining
portion of the transaction that has not been "stepped out." Each Broker may
receive a commission or brokerage fee with respect to that portion of the
transaction that it settles and completes.
Soft Dollar Products received from Brokers supplement AIM's own research
(and the research of certain of its affiliates), and may include the following
types of products and services:
- Database Services - comprehensive databases containing current
and/or historical information on companies and industries and
indices. Examples include historical securities prices, earnings
estimates and financial data. These services may include software
tools that allow the user to search the database or to prepare
value-added analyses related to the investment process (such as
forecasts and models used in the portfolio management process).
- Quotation/Trading/News Systems - products that provide real time
market data information, such as pricing of individual securities
and information on current trading, as well as a variety of news
services.
- Economic Data/Forecasting Tools - various macro economic forecasting
tools, such as economic data or currency and political forecasts for
various countries or regions.
- Quantitative/Technical Analysis - software tools that assist in
quantitative and technical analysis of investment data.
- Fundamental/Industry Analysis - industry specific fundamental
investment research.
- Fixed Income Security Analysis - data and analytical tools that
pertain specifically to fixed income securities. These tools assist
in creating financial models, such as cash flow projections and
interest rate sensitivity analyses, which are relevant to fixed
income securities.
42
- Other Specialized Tools - other specialized products, such as
consulting analyses, access to industry experts, and distinct
investment expertise such as forensic accounting or custom built
investment-analysis software.
If AIM determines that any service or product has a mixed use (i.e., it
also serves functions that do not assist the investment decision-making or
trading process), AIM will allocate the costs of such service or product
accordingly in its reasonable discretion. AIM will allocate brokerage
commissions to Brokers only for the portion of the service or product that AIM
determines assists it in the investment decision-making or trading process and
will pay for the remaining value of the product or service in cash.
Outside research assistance is useful to AIM since the Brokers used by AIM
tend to provide more in-depth analysis of a broader universe of securities and
other matters than AIM's staff follows. In addition, such services provide AIM
with a diverse perspective on financial markets. Some Brokers may indicate that
the provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Funds. However, the Funds are not under any obligation to deal
with any Broker in the execution of transactions in portfolio securities. In
some cases, Soft Dollar Products are available only from the Broker providing
them. In other cases, Soft Dollar Products may be obtainable from alternative
sources in return for cash payments. AIM believes that because Broker research
supplements rather than replaces AIM's research, the receipt of such research
tends to improve the quality of AIM's investment advice. The advisory fee paid
by the Funds is not reduced because AIM receives such services. To the extent
the Funds' portfolio transactions are used to obtain Soft Dollar Products, the
brokerage commissions obtained by the Funds might exceed those that might
otherwise have been paid.
AIM may determine target levels of brokerage business with various Brokers
on behalf of its clients (including the Funds) over a certain time period. The
target levels will be based upon the following factors, among others: (1) the
execution services provided by the Broker; and (2) the research services
provided by the Broker. Portfolio transactions may be effected through Brokers
that recommend the Funds to their clients, or that act as agent in the purchase
of a Fund's shares for their clients, provided that AIM believes such Brokers
provide best execution and such transactions are executed in compliance with
AIM's policy against using directed brokerage to compensate Brokers for
promoting or selling AIM Fund shares. AIM will not enter into a binding
commitment with Brokers to place trades with such Brokers involving brokerage
commissions in precise amounts.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during
the last fiscal year ended October 31, 2005 are found in Appendix K.
REGULAR BROKERS OR DEALERS
Information concerning the Funds' acquisition of securities of their
regular brokers or dealers during the last fiscal year ended October 31, 2005 is
found in Appendix K.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous other AIM Funds and other accounts.
Some of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more other accounts. However, the
position of each account in the same security and the length of time that each
account may hold its investment in the same security may vary. The timing and
amount of purchase by each account will also be determined by its cash position.
If the purchase or sale of securities is consistent with the investment policies
of the Fund(s) and one or more of these accounts, and is considered at or about
the same time, AIM will allocate transactions in such securities among the
Fund(s) and these accounts on a pro rata basis based on order size or in such
other manner believed by AIM to be fair and equitable. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most
43
favorable execution. Simultaneous transactions could, however, adversely affect
a Fund's ability to obtain or dispose of the full amount of a security which it
seeks to purchase or sell.
ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS
Certain of the AIM Funds or other accounts managed by AIM may become
interested in participating in IPOs. Purchases of IPOs by one AIM Fund or
account may also be considered for purchase by one or more other AIM Funds or
accounts. It shall be AIM's practice to specifically combine or otherwise bunch
indications of interest for IPOs for all AIM Funds and accounts participating in
purchase transactions for that IPO, and, when the full amount of all IPO orders
for such AIM Funds and accounts cannot be filled completely, to allocate such
transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that seeks
to participate in a particular IPO by reviewing a number of factors, including
market capitalization/liquidity suitability and sector/style suitability of the
investment with the AIM Fund's or account's investment objective, policies,
strategies and current holdings. The allocation of securities issued in IPOs
will be made to eligible AIM Funds and accounts on a pro rata basis based on
order size.
On occasion, when the Sub-Advisor is purchasing certain thinly-traded
securities or shares in an IPO for AIM Trimark Endeavor Fund, AIM Trimark Fund
and AIM Trimark Small Companies Fund, the situation may arise that the
Sub-Advisor is unable to obtain sufficient securities to fill the orders of the
Fund or all other relevant clients. In that situation, the Sub-Advisor is
required to use pro-rata allocation methods that ensure the fair and equitable
treatment of all clients.
The requirement of pro-rata allocation is subject to limited exceptions -
such as when the Fund is subject to special investment objectives or size
constraints on investment positions.
PURCHASE, REDEMPTION AND PRICING OF SHARES
TRANSACTIONS THROUGH FINANCIAL INTERMEDIARIES
If you are investing indirectly in a Fund through a financial intermediary
such as a broker-dealer, a bank (including a bank trust department), an
insurance company separate account, an investment advisor, an administrator or
trustee of a retirement plan or a qualified tuition plan of a sponsor of a
fee-based program that maintains a master account (an omnibus account) with the
Fund for trading on behalf of its customers, different guidelines, conditions
and restrictions may apply than if you held your shares of the Fund directly.
These differences may include, but are not limited to: (i) different eligibility
standards to purchase and sell shares, different eligibility standards to invest
in funds with limited offering status and different eligibility standards to
exchange shares by telephone; (ii) different minimum and maximum initial and
subsequent purchase amounts; (iii) system inability to provide Letter of Intent
privileges; and (iv) different annual amounts (less than 12%) subject to
withdrawal under a Systematic Redemption Plan without being subject to a
contingent deferred sales charge. The financial intermediary through whom you
are investing may also choose to adopt different exchange and/or transfer limit
guidelines and restrictions, including different trading restrictions designed
to discourage excessive or short-term trading. The financial intermediary
through whom you are investing may also choose to impose a redemption fee that
has different characteristics, which may be more or less restrictive, than the
redemption fee currently imposed on certain Funds.
If the financial intermediary is managing your account, you may also be
charged a transaction or other fee by such financial intermediary, including
service fees for handling redemption transactions. Consult with your financial
intermediary (or, in the case of a retirement plan, your plan sponsor) to
determine what fees, guidelines, conditions and restrictions, including any of
the above, may be applicable to you.
44
PURCHASE AND REDEMPTION OF SHARES
Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money
Market Fund
INITIAL SALES CHARGES. Each AIM Fund (other than AIM Tax-Exempt Cash Fund)
is grouped into one of three categories to determine the applicable initial
sales charge for its Class A Shares. Additionally, Class A shares of AIM Short
Term Bond Fund are subject to an initial sales charge of 2.50%. The sales charge
is used to compensate AIM Distributors and participating dealers for their
expenses incurred in connection with the distribution of the Funds' shares. You
may also be charged a transaction or other fee by the financial institution
managing your account.
Class A Shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve
Shares of AIM Money Market Fund are sold without an initial sales charge.
45
CATEGORY I FUNDS
AIM Advantage Health Sciences Fund
AIM Aggressive Growth Fund
AIM Asia Pacific Growth Fund
AIM Basic Balanced Fund
AIM Basic Value Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund AIM Conservative Allocation Fund
AIM Constellation Fund
AIM Developing Markets Fund
AIM Diversified Dividend Fund
AIM Dynamics Fund AIM Energy Fund
AIM European Growth Fund
AIM European Small Company Fund
AIM Financial Services Fund
AIM Global Aggressive Growth Fund
AIM Global Equity Fund
AIM Global Growth Fund
AIM Global Health Care Fund
AIM Global Real Estate Fund
AIM Global Value Fund
AIM Gold & Precious Metals Fund
AIM Growth Allocation Fund
AIM Income Allocation Fund
AIM International Allocation Fund
AIM International Core Equity Fund
AIM International Growth Fund
AIM International Small Company Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund
AIM Leisure Fund
AIM Mid Cap Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Mid Cap Growth Fund
AIM Moderate Allocation Fund
AIM Moderate Growth Allocation Fund
AIM Moderately Conservative Allocation Fund
AIM Multi-Sector Fund
AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
AIM Premier Equity Fund
AIM Real Estate Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund
AIM Small Company Growth Fund
AIM Summit Fund AIM Technology Fund
AIM Trimark Endeavor Fund
AIM Trimark Fund
AIM Trimark Small Companies Fund
AIM Utilities Fund
AIM Weingarten Fund
Dealer
Investor's Sales Charge Concession
----------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction 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
46
CATEGORY II FUNDS
AIM High Income Municipal Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Total Return Bond Fund
Dealer
Investor's Sales Charge Concession
----------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
- --------------------------------- ------------- ------------ --------------
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
CATEGORY III FUNDS
AIM Limited Maturity Treasury Fund
AIM Tax-Free Intermediate Fund
Dealer
Investor's Sales Charge Concession
----------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
- --------------------------------- ------------- ------------ --------------
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
47
AIM SHORT TERM BOND FUND
Dealer
Investor's Sales Charge Concession
----------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
- --------------------------------- ------------- ------------ --------------
Less than $ 100,000 2.50% 2.56% 2.00%
$100,000 but less than $ 250,000 2.00 2.04 1.50
$250,000 but less than $ 500,000 1.50 1.52 1.25
$500,000 but less than $1,000,000 1.25 1.27 1.00
As of the close of business on October 30, 2002, Class A Shares of AIM
Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to
new investors. Current investors must maintain a share balance in order to
continue to make incremental purchases.
LARGE PURCHASES OF CLASS A SHARES. Investors who purchase $1,000,000 or
more of Class A Shares of a Category I, II or III Fund and Class A shares of AIM
Short Term Bond Fund do not pay an initial sales charge. In addition, investors
who currently own Class A shares of Category I, II, or III Funds and Class A
shares of AIM Short Term Bond Fund and make additional purchases that result in
account balances of $1,000,000 or more do not pay an initial sales charge on the
additional purchases. The additional purchases, as well as initial purchases of
$1,000,000 or more, are referred to as Large Purchases. However, if an investor
makes a Large Purchase of Class A shares of a Category I or II Fund and Class A
shares of AIM Short Term Bond Fund each share issued will generally be subject
to a 1.00% contingent deferred sales charge ("CDSC") if the investor redeems
those shares within 18 months after purchase. Large Purchases of Class A Shares
by investors who were Class K shareholders of record on October 21, 2005 are not
subject to a CDSC.
AIM Distributors may pay a dealer concession and/or advance a service fee
on Large Purchases, as set forth below. Exchanges between the AIM Funds may
affect total compensation paid.
PURCHASES OF CLASS A SHARES BY NON-RETIREMENT PLANS. AIM Distributors may
make the following payments to dealers of record for Large Purchases of Class A
shares of Category I or II Funds or AIM Short Term Bond Fund by investors other
than: (i) retirement plans that are maintained pursuant to Sections 401 and 457
of the Internal Revenue Code of 1986, as amended (the Code), and (ii) retirement
plans that are maintained pursuant to Section 403 of the Code if the employer or
plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3)
of the Code:
PERCENT OF PURCHASE
1% of the first $2 million
plus 0.80% of the next $1 million
plus 0.50% of the next $17 million
plus 0.25% of amounts in excess of $20 million
48
If (i) the amount of any single purchase order plus (ii) the public
offering price of all other shares owned by the same customer submitting the
purchase order on the day on which the purchase order is received equals or
exceeds $1,000,000, the purchase will be considered a "jumbo accumulation
purchase." With regard to any individual jumbo accumulation purchase, AIM
Distributors may make payment to the dealer of record based on the cumulative
total of jumbo accumulation purchases made by the same customer over the life of
his or her account(s).
If an investor made a Large Purchase of Class A shares of a Category III
Fund on and after November 15, 2001 and through October 30, 2002 and exchanges
those shares for Class A shares of a Category I or II Fund, AIM Distributors
will pay an additional dealer concession of 0.75% upon exchange.
If an investor makes a Large Purchase of Class A3 shares of a Category III
Fund on and after October 31, 2002 and exchanges those shares for Class A shares
of a Category I or II Fund or AIM Short Term Bond Fund, AIM Distributors will
pay 1.00% of such purchase as dealer compensation upon the exchange. The Class A
Shares of the Category I or II Fund or AIM Short Term Bond Fund received in
exchange generally will be subject to a 1.00% CDSC if the investor redeems such
shares within 18 months from the date of exchange.
PURCHASES OF CLASS A SHARES BY CERTAIN RETIREMENT PLANS AT NAV. Effective
November 1, 2002, for purchases of Class A shares of Category I and II Funds and
AIM Short Term Bond Fund, AIM Distributors may make the following payments to
investment dealers or other financial service firms for sales of such shares at
net asset value ("NAV") to certain retirement plans provided the applicable
dealer of record is able to establish that the retirement plan's purchase of
Class A shares is a new investment (as defined below):
PERCENT OF PURCHASE
0.50% of the first $20 million
plus 0.25% of amounts in excess of $20 million
This payment schedule will be applicable to purchases of Class A shares at
NAV by the following types of retirement plans: (i) all plans maintained
pursuant to Sections 401 and 457 of the Code, and (ii) plans maintained pursuant
to Section 403 of the Code if the employer or plan sponsor is a tax-exempt
organization operated pursuant to Section 501(c)(3) of the Code.
A "new investment" means a purchase paid for with money that does not
represent (i) the proceeds of one or more redemptions of AIM Fund shares, (ii)
an exchange of AIM Fund shares, (iii) the repayment of one or more retirement
plan loans that were funded through the redemption of AIM Fund shares, or (iv)
money returned from another fund family. If AIM Distributors pays a dealer
concession in connection with a plan's purchase of Class A shares at NAV, such
shares may be subject to a CDSC of 1.00% of net assets for 12 months, commencing
on the date the plan first invests in Class A shares of an AIM Fund. If the
applicable dealer of record is unable to establish that a plan's purchase of
Class A shares at NAV is a new investment, AIM Distributors will not pay a
dealer concession in connection with such purchase and such shares will not be
subject to a CDSC.
With regard to any individual jumbo accumulation purchase, AIM
Distributors may make payment to the dealer of record based on the cumulative
total of jumbo accumulation purchases made by the same plan over the life of the
plan's account(s).
PURCHASERS QUALIFYING FOR REDUCTIONS IN INITIAL SALES CHARGES. As shown in
the tables above, purchases of certain amounts of AIM Fund shares may reduce the
initial sales charges. These reductions are available to purchasers that meet
the qualifications listed below. We will refer to purchasers that meet these
qualifications as "Qualified Purchasers."
DEFINITIONS
49
As used herein, the terms below shall be defined as follows:
- "Individual" refers to a person, as well as his or her Spouse or Domestic
Partner and his or her Children;
- "Spouse" is the person to whom one is legally married under state law;
- "Domestic Partner" is an adult with whom one shares a primary residence
for at least six-months, is in a relationship as a couple where one or
each of them provides personal or financial welfare of the other without a
fee, is not related by blood and is not married;
- "Child" or "Children" include a biological, adopted or foster son or
daughter, a Step-child, a legal ward or a Child of a person standing in
loco parentis;
- "Parent" is a person's biological or adoptive mother or father;
- "Step-child" is the child of one's Spouse by a previous marriage or
relationship;
- "Step-parent" is the Spouse of a Child's Parent; and
- "Immediate Family" includes an Individual (including, as defined above, a
person, his or her Spouse or Domestic Partner and his or her Children) as
well as his or her Parents, Step-parents and the Parents of Spouse or
Domestic Partner.
INDIVIDUALS
- an Individual (including his or her spouse or domestic partner, and
children);
- a retirement plan established exclusively for the benefit of an
Individual, specifically including but not limited to, a Traditional IRA,
Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Keogh plan, or a tax sheltered
403(b)(7) custodial account; and
- a qualified tuition plan account, maintained pursuant to Section 529 of
the Code, or a Coverdell Education Savings Account, maintained pursuant to
Section 530 of the Code (in either case, the account must be established
by an Individual or have an Individual named as the beneficiary thereof).
EMPLOYER-SPONSORED RETIREMENT PLANS
- a retirement plan maintained pursuant to Section 401, 403 (only if the
employer or plan sponsor is a tax-exempt organization operated pursuant to
Section 501(c)(3) of the Code), 408 (includes SEP, SARSEP, and SIMPLE IRA
plans) or 457 of the Code, if:
a. the employer or plan sponsor submits all contributions for all
participating employees in a single contribution transmittal (the AIM
Funds will not accept separate contributions submitted with respect to
individual participants);
b. each transmittal is accompanied by a single check or wire transfer; and
c. if the AIM Funds are expected to carry separate accounts in the names
of each of the plan participants, (i) the employer or plan sponsor
notifies AIM Distributors in writing that the separate accounts of all
plan participants should be linked, and (ii) all new participant
accounts are established by submitting an appropriate Account
Application on behalf of each new participant with the contribution
transmittal.
50
HOW TO QUALIFY FOR REDUCTIONS IN INITIAL SALES CHARGES. The following
sections discuss different ways that a Qualified Purchaser can qualify for a
reduction in the initial sales charges for purchases of Class A shares of the
AIM Funds.
LETTERS OF INTENT
A Qualified Purchaser may pay reduced initial sales charges by (i)
indicating on the Account Application that he, she or it intends to provide a
Letter of Intent ("LOI") and (ii) subsequently fulfilling the conditions of that
LOI. Employer-sponsored retirement plans, with the exception of Solo 401(k)
plans and SEP plans, are not eligible for a LOI.
The LOI confirms the total investment in shares of the AIM Funds that the
Qualified Purchaser intends to make within the next 13 months. By marking the
LOI section on the account application and by signing the account application,
the Qualified Purchaser indicates that he, she or it understands and agrees to
the terms of the LOI and is bound by the provisions described below:
Calculating the Initial Sales Charge
- Each purchase of fund shares normally subject to an initial sales charge
made during the 13-month period will be made at the public offering price
applicable to a single transaction of the total dollar amount indicated by
the LOI (to determine what the applicable public offering price is, look
at the sales charge table in the section on "Initial Sales Charges"
above).
- It is the purchaser's responsibility at the time of purchase to specify
the account numbers that should be considered in determining the
appropriate sales charge.
- The offering price may be further reduced as described below under "Rights
of Accumulation" if the Transfer Agent is advised of all other accounts at
the time of the investment.
- Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI.
Calculating the Number of Shares to be Purchased
- Purchases made within 90 days before signing an LOI will be applied toward
completion of the LOI. The LOI effective date will be the date of the
first purchase within the 90-day period.
- Purchases made more than 90 days before signing an LOI will be applied
toward the completion of the LOI based on the value of the shares
purchased that is calculated at the public offering price on the effective
date of the LOI.
- If a purchaser wishes to revise the LOI investment amount upward, he, she
or it may submit a written and signed request at any time prior to the
completion of the original LOI. This revision will not change the original
expiration date.
- The Transfer Agent will process necessary adjustments upon the expiration
or completion date of the LOI.
Fulfilling the Intended Investment
- By signing an LOI, a purchaser is not making a binding commitment to
purchase additional shares, but if purchases made within the 13-month
period do not total the amount specified, the purchaser will have to pay
the increased amount of sales charge.
51
- To assure compliance with the provisions of the 1940 Act, the Transfer
Agent will escrow in the form of shares an appropriate dollar amount
(computed to the nearest full share) out of the initial purchase (or
subsequent purchases if necessary). All dividends and any capital gain
distributions on the escrowed shares will be credited to the purchaser.
All shares purchased, including those escrowed, will be registered in the
purchaser's name. If the total investment specified under this LOI is
completed within the 13-month period, the escrowed shares will be promptly
released.
- If the intended investment is not completed, the purchaser will pay the
Transfer Agent the difference between the sales charge on the specified
amount and the sales charge on the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration
date, he or she irrevocably constitutes and appoints the Transfer Agent as
his attorney to surrender for redemption any or all shares, to make up
such difference within 60 days of the expiration date.
- Shareholders of AIM Basic Balanced Fund, AIM Developing Markets Fund, AIM
Global Aggressive Growth Fund, AIM Global Equity Fund, AIM Global Growth
Fund, AIM Global Health Care Fund and AIM Real Estate Fund who have a
Letter of Intent in place as of November 1, 2005, will be able to complete
the Letter of Intent under the current pricing schedule, and future
Letters of Intent or subsequent purchases will be subject to the Category
I pricing.
Canceling the LOI
- If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he or she must give written notice to AIM
Distributors or its designee.
- If at any time before completing the LOI Program the purchaser requests
the Transfer Agent to liquidate or transfer beneficial ownership of his
total shares, the LOI will be automatically canceled. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent
will redeem an appropriate number of escrowed shares equal to the
difference between the sales charge actually paid and the sales charge
that would have been paid if the total purchases had been made at a single
time.
Other Persons Eligible for the LOI Privilege
The LOI privilege is also available to holders of the Connecticut General
Guaranteed Account, established for tax qualified group annuities, for contracts
purchased on or before June 30, 1992.
LOIs and Contingent Deferred Sales Charges
All LOIs to purchase $1,000,000 or more of Class A shares of Category I
and II Funds and AIM Short Term Bond Fund are subject to an 18-month, 1.00%
CDSC.
RIGHTS OF ACCUMULATION
A Qualified Purchaser may also qualify for reduced initial sales charges
based upon his, her or its existing investment in shares of any of the AIM Funds
at the time of the proposed purchase. To determine whether or not a reduced
initial sales charge applies to a proposed purchase, AIM Distributors takes into
account not only the money which is invested upon such proposed purchase, but
also the value of all shares of the AIM Funds owned by such purchaser,
calculated at their then current public offering price.
If a purchaser qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money being invested, even if only a
portion of that amount exceeds the breakpoint for the reduced sales charge. For
example, if a purchaser already owns qualifying shares of any AIM Fund with a
value of $20,000 and wishes to invest an additional $20,000 in a fund with a
maximum initial sales charge of 5.50%, the reduced initial sales charge of 5.25%
will apply to the full $20,000 purchase and not just to the $15,000 in excess of
the $25,000 breakpoint.
52
To qualify for obtaining the discount applicable to a particular purchase,
the purchaser or his dealer must furnish the Transfer Agent with a list of the
account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
Rights of Accumulation are also available to holders of the Connecticut
General Guaranteed Account, established for tax-qualified group annuities, for
contracts purchased on or before June 30, 1992.
If an investor's new purchase of Class A shares of a Category I or II Fund
or AIM Short Term Bond Fund is at net asset value, the newly purchased shares
will be subject to a CDSC if the investor redeems them prior to the end of the
18 month holding period (12 months for Category III Fund shares). For new
purchases of Class A shares of Category III Funds at net asset value made on and
after November 15, 2001 and through October 30, 2002, the newly purchased shares
will be subject to a CDSC if the investor redeems them prior to the end of the
12 month holding period.
OTHER REQUIREMENTS FOR REDUCTIONS IN INITIAL SALES CHARGES. As discussed
above, investors or dealers seeking to qualify orders for a reduced initial
sales charge must identify such orders and, if necessary, support their
qualification for the reduced charge. AIM Distributors reserves the right to
determine whether any purchaser is entitled to the reduced sales charge based on
the definition of a Qualified Purchaser listed above. No person or entity may
distribute shares of the AIM Funds without payment of the applicable sales
charge other than to Qualified Purchasers.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 Shares
of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM
Cash Reserve Shares of AIM Money Market Fund, and Class B and Class C shares of
AIM Floating Rate Fund and Investor Class shares of any fund will not be taken
into account in determining whether a purchase qualifies for a reduction in
initial sales charges.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE. AIM Distributors permits
certain categories of persons to purchase Class A shares of AIM Funds without
paying an initial sales charge. These are typically categories of persons whose
transactions involve little expense, such as persons who have a relationship
with the funds or with AIM and certain programs for purchase. It is the
purchaser's responsibility to notify AIM Distributors or its designee of any
qualifying relationship at the time of purchase.
AIM Distributors believes that it is appropriate and in the Funds' best
interests that such persons, and certain other persons whose purchases result in
relatively low expenses of distribution, be permitted to purchase shares through
AIM Distributors without payment of a sales charge.
Accordingly, the following purchasers will not pay initial sales charges
on purchases of Class A shares because there is a reduced sales effort involved
in sales to these purchasers:
- AIM Management and its affiliates, or their clients;
- Any current or retired officer, director or employee (and members of
their Immediate Family) of AIM Management, its affiliates or The AIM
Family of Funds, registered trademark and any foundation, trust or
employee benefit plan established exclusively for the benefit of, or
by, such persons;
- Any current or retired officer, director, or employee (and members
of their Immediate Family), of DST Systems, Inc. or Personix, a
division of Fiserv Solutions, Inc.;
- Sales representatives and employees (and members of their Immediate
Family) of selling group members of financial institutions that have
arrangements with such selling group members;
53
- Purchases through approved fee-based programs;
- Employer-sponsored retirement plans that are Qualified Purchasers,
as defined above, provided that:
a. a plan's assets are at least $1 million;
b. there are at least 100 employees eligible to participate in
the plan;
c. all plan transactions are executed through a single omnibus
account per AIM Fund and the financial institution or service
organization has entered into the appropriate agreement with
the distributor; further provided that retirement plans
maintained pursuant to Section 403(b) of the Code are not
eligible to purchase shares at NAV based on the aggregate
investment made by the plan or the number of eligible
employees unless the employer or plan sponsor is a tax-exempt
organization operated pursuant to Section 501(c)(3) of the
Code;
- Shareholders of record of Advisor Class shares of AIM International
Growth Fund or AIM Worldwide Growth Fund on February 12, 1999 who
have continuously owned shares of the AIM Funds;
- Shareholders of record or discretionary advised clients of any
investment advisor holding shares of AIM Weingarten Fund or AIM
Constellation Fund on September 8, 1986, or of AIM Charter Fund on
November 17, 1986, who have continuously owned shares and who
purchase additional shares of the same Fund;
- Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or AIM
Constellation Fund; provided, however, prior to the termination date
of the trusts, a unitholder may invest proceeds from the redemption
or repurchase of his units only when the investment in shares of AIM
Weingarten Fund and AIM Constellation Fund is effected within 30
days of the redemption or repurchase;
- A shareholder of a fund that merges or consolidates with an AIM Fund
or that sells its assets to an AIM Fund in exchange for shares of an
AIM Fund;
- Shareholders of the GT Global funds as of April 30, 1987 who since
that date continually have owned shares of one or more of these
funds;
- Certain former AMA Investment Advisers' shareholders who became
shareholders of the AIM Global Health Care Fund in October 1989, and
who have continuously held shares in the GT Global funds since that
time;
- Shareholders of record of Advisor Class shares of an AIM Fund on
February 11, 2000 who have continuously owned shares of that AIM
Fund, and who purchase additional shares of that AIM Fund;
- Shareholders of Investor Class shares of an AIM Fund;
- Qualified Tuition Programs created and maintained in accordance with
Section 529 of the Code;
- Insurance company separate accounts;
- Additional purchases of Class A shares by shareholders of record of
Class K shares on October 21, 2005 whose Class K shares were
converted to Class A shares;
54
- Retirement plan established exclusively for the benefit of an
individual (specifically including, but not limited to, a
Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Keogh
plan, or a tax-sheltered 403(b)(7) custodial account) if:
a. such plan is funded by a rollover of assets from an
Employer-Sponsored Retirement Plan;
b. the account being funded by such rollover is to be maintained
by the same trustee, custodian or administrator that
maintained the plan from which the rollover distribution
funding such rollover originated, or an affiliate thereof; and
c. the dealer of record with respect to the account being funded
by such rollover is the same as the dealer of record with
respect to the plan from which the rollover distribution
funding such rollover originated, or an affiliate thereof.
- Transfers to IRAs that are attributable to AIM Fund investments held
in 403(b)(7)s, SIMPLEs, SEPs, SARSEPs, Traditional or Roth IRAs; and
- Rollovers from AIM-held 403(b)(7)s, 401(K)s, SEPs, SIMPLEs, SARSEPs,
Money Purchase Plans, and Profit Sharing Plans if the assets are
transferred to an AIM IRA.
In addition, an investor may acquire shares of any of the AIM Funds at net
asset value in connection with:
- the reinvestment of dividends and distributions from a Fund;
- exchanges of shares of certain Funds as more fully described in the
Prospectus;
- the purchase of shares in connection with the repayment of a
retirement plan loan administered by AIS; or
- a merger, consolidation or acquisition of assets of a Fund; or
- the purchase of Class A Shares with proceeds from the redemption of
Class B or Class C shares where the redemption and purchase are
effectuated on the same business day.
PAYMENTS TO DEALERS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the 1933 Act.
The financial advisor through which you purchase your shares may receive
all or a portion of the sales charges and Rule 12b-1 distribution fees discussed
above. In addition to those payments, AIM Distributors or one or more of its
corporate affiliates (collectively, the "ADI Affiliates") may make additional
cash payments to financial advisors in connection with the promotion and sale of
shares of AIM Funds. ADI Affiliates makes these payments from its own resources,
from AIM Distributors' retention of underwriting concessions and from payments
to AIM Distributors under Rule 12b-1 plans. These additional cash payments are
described below. The categories described below are not mutually exclusive. The
same financial advisor may receive payments under more than one or all
categories. Most financial advisors that sell shares of AIM Funds receive one or
more types of these cash payments. Financial advisors negotiate the cash
payments to be paid on an individual basis. Where services are provided, the
costs of providing the services and the overall package of services provided may
vary from one financial advisor to another. ADI Affiliates do not make an
independent assessment of the cost of providing such services.
55
In this context, "financial advisors" include any broker, dealer, bank
(including bank trust departments), transfer agent, registered investment
advisor, financial planner, retirement plan administrator and any other
financial intermediary having a selling, administration or similar agreement
with ADI Affiliates. A list of certain financial advisors that received one or
more types of payments below during the 2005 calendar year is attached hereto as
Appendix L. This list is not necessarily current and will change over time.
Certain arrangements are still being negotiated, and there is a possibility that
payments will be made retroactively to financial intermediaries not listed
below. Accordingly, please contact your financial advisor to determine whether
they currently may be receiving such payments and to obtain further information
regarding any such payments.
REVENUE SHARING PAYMENTS. ADI Affiliates make revenue sharing payments as
incentives to certain financial advisors to promote and sell shares of AIM
Funds. The benefits ADI Affiliates receive when they make these payments
include, among other things, placing AIM Funds on the financial advisor's funds
sales system, placing AIM Funds on the financial advisor's preferred or
recommended fund list, and access (in some cases on a preferential basis over
other competitors) to individual members of the financial advisor's sales force
or to the financial advisor's management. Revenue sharing payments are sometimes
referred to as "shelf space" payments because the payments compensate the
financial advisor for including AIM Funds in its fund sales system (on its
"sales shelf"). ADI Affiliates compensate financial advisors differently
depending typically on the level and/or type of considerations provided by the
financial advisor. In addition, payments typically apply only to retail sales,
and may not apply to other types of sales or assets (such as sales to retirement
plans, qualified tuition programs, or fee based advisor programs - some of which
may generate certain other payments described below.)
The revenue sharing payments ADI Affiliates make may be calculated on
sales of shares of AIM Funds ("Sales-Based Payments"), in which case the total
amount of such payments shall not exceed 0.25% of the public offering price of
all shares sold by the financial advisor during the particular period. Such
payments also may be calculated on the average daily net assets of the
applicable AIM Funds attributable to that particular financial advisor
("Asset-Based Payments"), in which case the total amount of such cash payments
shall not exceed 0.25% per annum of those assets during a defined period.
Sales-Based Payments primarily create incentives to make new sales of shares of
AIM Funds and Asset-Based Payments primarily create incentives to retain
previously sold shares of AIM Funds in investor accounts. ADI Affiliates may pay
a financial advisor either or both Sales-Based Payments and Asset-Based
Payments.
ADMINISTRATIVE AND PROCESSING SUPPORT PAYMENTS. ADI Affiliates also may
make payments to certain financial advisors that sell AIM Fund shares for
certain administrative services, including record keeping and sub-accounting
shareholder accounts. Payments for these services typically do not exceed 0.25%
of average annual assets or $19 per annum per shareholder account. ADI
Affiliates also may make payments to certain financial advisors that sell AIM
Fund shares in connection with client account maintenance support, statement
preparation and transaction processing. The types of payments that ADI
Affiliates may make under this category include, among others, payment of ticket
charges per purchase or exchange order placed by a financial advisor, payment of
networking fees of up to $12 per shareholder account maintained on certain
mutual fund trading systems, or one-time payments for ancillary services such as
setting up funds on a financial advisor's mutual fund trading systems. All fees
payable by ADI Affiliates pursuant to a sub-transfer agency, omnibus account
service or sub-accounting agreement are charged back to the AIM Funds, subject
to certain limitations approved by the Board of the Trust.
OTHER CASH PAYMENTS. From time to time, ADI Affiliates, at their expense,
may provide additional compensation to financial advisors which sell or arrange
for the sale of shares of the Fund. Such compensation provided by ADI Affiliates
may include financial assistance to financial advisors that enable ADI
Affiliates to participate in and/or present at conferences or seminars, sales or
training programs for invited registered representatives and other employees,
client entertainment, client and investor events, and other financial
advisor-sponsored events, and travel expenses, including lodging incurred by
registered representatives and other employees in connection with client
prospecting, retention and due diligence trips. Other compensation may be
offered to the extent not prohibited by state laws or any self-regulatory
agency, such as the NASD, Inc. ("NASD"). ADI Affiliates make payments
56
for entertainment events they deem appropriate, subject to ADI Affiliates
guidelines and applicable law. These payments may vary depending upon the nature
of the event or the relationship.
ADI Affiliates are motivated to make the payments described above since
they promote the sale of AIM Fund shares and the retention of those investments
by clients of financial advisors. To the extent financial advisors sell more
shares of AIM Funds or retain shares of AIM Funds in their clients' accounts,
ADI Affiliates benefit from the incremental management and other fees paid to
ADI Affiliates by the AIM Funds with respect to those assets.
In certain cases these payments could be significant to the financial
advisor. Your financial advisor may charge you additional fees or commissions
other than those disclosed in the prospectus. You can ask your financial advisor
about any payments it receives from ADI Affiliates or the AIM Funds, as well as
about fees and/or commissions it charges.
Purchases of Class B Shares
Class B shares are sold at net asset value, and are not subject to an
initial sales charge. Instead, investors may pay a CDSC if they redeem their
shares within six years after purchase. See the Prospectus for additional
information regarding contingent deferred sales charges. AIM Distributors may
pay sales commissions to dealers and institutions who sell Class B shares of the
AIM Funds at the time of such sales. Payments will equal 4.00% of the purchase
price and will consist of a sales commission equal to 3.75% plus an advance of
the first year service fee of 0.25%.
Purchases of Class C Shares
Class C shares are sold at net asset value, and are not subject to an
initial sales charge. Instead, investors may pay a CDSC if they redeem their
shares within the first year after purchase (no CDSC applies to Class C shares
of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that
are subject to a CDSC into AIM Short Term Bond Fund). See the Prospectus for
additional information regarding this CDSC. AIM Distributors may pay sales
commissions to dealers and institutions who sell Class C shares of the AIM Funds
(except for Class C shares of AIM Short Term Bond Fund) at the time of such
sales. Payments will equal 1.00% of the purchase price and will consist of a
sales commission of 0.75% plus an advance of the first year service fee of
0.25%. These commissions are not paid on sales to investors exempt from the
CDSC, including shareholders of record of AIM Advisor Funds, Inc. on April 30,
1995, who purchase additional shares in any of the Funds on or after May 1,
1995, and in circumstances where AIM Distributors grants an exemption on
particular transactions.
AIM Distributors may pay dealers and institutions who sell Class C shares
of AIM Short Term Bond Fund an annual fee of 0.50% of average daily net assets.
These payments will consist of an asset-based fee of 0.25% and a service fee of
0.25% and will commence immediately.
Class K Shares
Class K shares converted to Class A shares at the close of business on
October 21, 2005. If AIM Distributors paid a concession at the time of sale to
the dealer of record, the Class K shares were subject to a 0.70% CDSC at the
time of redemption if all retirement plan assets were redeemed within one year
from the date of the retirement plan's initial purchase. This CDSC will continue
to apply if all retirement plan assets are redeemed within 12 months from the
date of the retirement plan's initial purchase.
Payments with Regard to Class K Shares
For Class A shares acquired by a former Class K shareholder (i) as a
result of a fund merger; or (ii) as a result of the conversion of Class K shares
into Class A shares on October 21, 2005, AIM Distributors will pay financial
intermediaries 0.45% on such Class A shares as follows: (i) 0.25% from the Class
A shares' Rule 12b-1 plan fees; and (ii) 0.20% from AIM Distributors' own
resources provided that, on an annualized basis for 2005 as of October 21, 2005,
the 0.20% exceeds $2,000 per year.
57
Purchases and Redemption of Class P Shares
Class P shares of AIM Summit Fund are only sold to members of the general
public through AIM Summit Investors Plans I and AIM Summit Investors Plans II
(the "Summit Plans"). The Summit Plans are periodic payment plans, registered as
a unit investment trust under the 1940 Act. The terms of offering shares of the
AIM Summit Fund and the procedures for requesting redemptions through the Summit
Plans are set forth in the Summit Plans respective prospectuses. Shares of AIM
Summit Fund are sold to the Summit Plans at net asset value. The Summit Plans
are currently closed to new investors.
The AIM Summit Fund's prospectus for Class P shares provides for a limited
group of individuals (certain individuals employed by or otherwise affiliated
with the AIM Distributors) to purchase Class P shares of AIM Summit Fund
directly at net asset value. Investors in the Summit Plans also acquire direct
ownership of Class P shares of the AIM Summit Fund upon the termination or
completion of their periodic payment plans.
Shareholder inquiries concerning the status of an account in Class P
shares of AIM Summit Fund should be directed to AIS by calling (800) 959-4246.
For information regarding inquiries concerning accounts in the Summit Plans, see
the applicable prospectus.
Purchases of Class R Shares
Class R shares are sold at net asset value, and are not subject to an
initial sales charge. If AIM Distributors pays a concession to the dealer of
record, however, the Class R shares are subject to a 0.75% CDSC at the time of
redemption if all retirement plan assets are redeemed within one year from the
date of the retirement plan's initial purchase. For purchases of Class R shares
of Category I or II Funds or AIM Short Term Bond Fund, AIM Distributors may make
the following payments to dealers of record provided that the applicable dealer
of record is able to establish that the purchase of Class R shares is a new
investment or a rollover from a retirement plan in which an AIM Fund was offered
as an investment option:
PERCENT OF CUMULATIVE PURCHASES
0.75% of the first $5 million
plus 0.50% of amounts in excess of $5 million
With regard to any individual purchase of Class R shares, AIM Distributors
may make payment to the dealer of record based on the cumulative total of
purchases made by the same plan over the life of the plan's account(s).
Purchases of Investor Class Shares
Investor Class shares are sold at net asset value, and are not subject to
an initial sales charge or to a CDSC. AIM Distributors may pay dealers and
institutions an annual fee of 0.25% of average daily net assets and such
payments will commence immediately.
Purchases of Institutional Class Shares
Institutional Class shares are sold at net asset value, and are not
subject to an initial sales charge or to a CDSC.
Exchanges
TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to be
acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such
58
purchases may be delayed for up to five business days if it is determined that a
fund would be materially disadvantaged by an immediate transfer of the proceeds
of the exchange. If a shareholder is exchanging into a fund paying daily
dividends, and the release of the exchange proceeds is delayed for the foregoing
five-day period, such shareholder will not begin to accrue dividends until the
sixth business day after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with
certain dealers and investment advisory firms to accept telephone instructions
to exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AIS at (800) 959-4246. If a
shareholder is unable to reach AIS by telephone, he may also request exchanges
by fax, telegraph or use overnight courier services to expedite exchanges by
mail, which will be effective on the business day received by AIS as long as
such request is received in good order prior to the close of the customary
trading session of the New York Stock Exchange ("NYSE"). AIS and AIM
Distributors may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
Redemptions
GENERAL. Shares of the AIM Funds may be redeemed directly through AIM
Distributors or through any dealer who has entered into an agreement with AIM
Distributors. In addition to the Funds' obligation to redeem shares, AIM
Distributors may also repurchase shares as an accommodation to shareholders. To
effect a repurchase, those dealers who have executed Selected Dealer Agreements
with AIM Distributors must phone orders to the order desk of the Funds at (800)
959-4246 and guarantee delivery of all required documents in good order. A
repurchase is effected at the net asset value per share of the applicable Fund
next determined after the repurchase order is received in good order. Such an
arrangement is subject to timely receipt by AIS, the Funds' transfer agent, of
all required documents in good order. If such documents are not received within
a reasonable time after the order is placed, the order is subject to
cancellation. While there is no charge imposed by a Fund or by AIM Distributors
(other than any applicable contingent deferred sales charge and any applicable
redemption fee) when shares are redeemed or repurchased, dealers may charge a
fair service fee for handling the transaction.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed when (a) trading on the NYSE is restricted, as
determined by applicable rules and regulations of the SEC, (b) the NYSE is
closed for other than customary weekend and holiday closings, (c) the SEC has by
order permitted such suspension, or (d) an emergency as determined by the SEC
exists making disposition of portfolio securities or the valuation of the net
assets of a Fund not reasonably practicable.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints AIS as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by AIS in the designated account(s),
present or future, with full power of substitution in the premises. AIS and AIM
Distributors are thereby authorized and directed to accept and act upon any
telephone redemptions of shares held in any of the account(s) listed, from any
person who requests the redemption. An investor acknowledges by signing the form
that he understands and agrees that AIS and AIM Distributors may not be liable
for any loss, expense or cost arising out of any telephone redemption requests
effected in accordance with the authorization set forth in these instructions if
they reasonably believe such request to be genuine, but may in certain cases be
liable for losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social
59
Security Number and current address, and mailings of confirmations promptly
after the transactions. AIS reserves the right to cease to act as
attorney-in-fact subject to this appointment, and AIM Distributors reserves the
right to modify or terminate the telephone redemption privilege at any time
without notice. An investor may elect not to have this privilege by marking the
appropriate box on the application. Then any redemptions must be effected in
writing by the investor.
SYSTEMATIC REDEMPTION PLAN. A Systematic Redemption Plan permits a
shareholder of an AIM Fund to withdraw on a regular basis at least $50 per
withdrawal. Under a Systematic Redemption Plan, all shares are to be held by
AIS. To provide funds for payments made under the Systematic Redemption Plan,
AIS redeems sufficient full and fractional shares at their net asset value in
effect at the time of each such redemption.
Payments under a Systematic Redemption Plan constitute taxable events.
Since such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of Class A
shares, it is disadvantageous to effect such purchases while a Systematic
Redemption Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Redemption Plan.
Contingent Deferred Sales Charges Imposed upon Redemption of Shares
A CDSC may be imposed upon the redemption of Large Purchases of Class A
shares of Category I and II Funds and AIM Short Term Bond Fund or upon the
redemption of Class B shares or Class C shares (no CDSC applies to Class C
shares of AIM Short Term Bond Fund unless you exchange shares of another AIM
Fund that are subject to a CDSC into AIM Short Term Bond Fund) and, in certain
circumstances, upon the redemption of Class R shares. See the Prospectus for
additional information regarding CDSCs.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR LARGE PURCHASES OF CLASS A
SHARES. An investor who has made a Large Purchase of Class A shares of a
Category I, II, or III Fund or AIM Short Term Bond Fund will not be subject to a
CDSC upon the redemption of those shares in the following situations:
- Redemptions of shares of Category I or II Funds or AIM Short Term
Bond Fund held more than 18 months;
- Redemptions of shares of Category III Funds purchased on or after
November 15, 2001 and through October 30, 2002 and held for more
than 12 months;
- Redemptions of shares held by retirement plans in cases where (i)
the plan has remained invested in Class A shares of an AIM Fund for
at least 12 months, or (ii) the redemption is not a complete
redemption of shares held by the plan;
- Redemptions from private foundations or endowment funds;
- Redemptions of shares by the investor where the investor's dealer
waives the amounts otherwise payable to it by the distributor and
notifies the distributor prior to the time of investment;
- Redemptions of shares of Category I, II or III Funds, or AIM Cash
Reserve Shares of AIM Money Market Fund or AIM Short Term Bond Fund
acquired by exchange from Class A shares of a Category I or II Fund
or AIM Short Term Bond Fund, unless the shares acquired by exchange
(on or after November 15, 2001 and through October 30, 2002 with
respect to Category III Funds) are redeemed within 18 months of the
original purchase of the exchange of Category I or II Fund or AIM
Short Term Bond Fund shares;
60
- Redemptions of shares of Category III Funds, shares of AIM
Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market
Fund acquired by exchange from Class A shares of a Category III Fund
purchased prior to November 15, 2001;
- Redemptions of shares of Category I or II Funds or AIM Short Term
Bond Fund acquired by exchange on and after November 15, 2001 from
AIM Cash Reserve Shares of AIM Money Market Fund if the AIM Cash
Reserve Shares were acquired by exchange from a Category I or II
Fund or AIM Short Term Bond Fund, unless the Category I or II Fund
or AIM Short Term Bond Fund shares acquired by exchange are redeemed
within 18 months of the original purchase of the exchanged Category
I or II Funds or AIM Short Term Bond Fund shares;
- Redemptions of Category I or II Funds or AIM Short Term Bond Fund by
retirement plan participants resulting from a total redemption of
the plan assets that occurs more than one year from the date of the
plan's initial purchase; and
- Redemptions of shares of Category I or II Funds or AIM Short Term
Bond Fund held by an Investor Class shareholder.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS B AND C SHARES.
Investors who purchased former GT Global funds Class B shares before June 1,
1998 are subject to the following waivers from the CDSC otherwise due upon
redemption:
- Total or partial redemptions resulting from a distribution following
retirement in the case of a tax-qualified employer-sponsored
retirement;
- Minimum required distributions made in connection with an IRA, Keogh
Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70-1/2;
- Redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former
GT Global funds, which are permitted to be made without penalty
pursuant to the Code, other than tax-free rollovers or transfers of
assets, and the proceeds of which are reinvested in the former GT
Global funds;
- Redemptions made in connection with participant-directed exchanges
between options in an employer-sponsored benefit plan;
- Redemptions made for the purpose of providing cash to fund a loan to
a participant in a tax-qualified retirement plan;
- Redemptions made in connection with a distribution from any
retirement plan or account that is permitted in accordance with the
provisions of Section 72(t)(2) of the Code, and the regulations
promulgated thereunder;
- Redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of
the Code to a participant or beneficiary under Section
401(k)(2)(B)(IV) of the Code upon hardship of the covered employee
(determined pursuant to Treasury Regulation Section
1.401(k)-1(d)(2)); and
- Redemptions made by or for the benefit of certain states, counties
or cities, or any instrumentalities, departments or authorities
thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
61
CDSCs will not apply to the following redemptions of Class B or Class C
shares, as applicable:
- Additional purchases of Class C shares of AIM International Core
Equity Fund (formerly INVESCO International Core Equity Fund and
formerly INVESCO International Blue Chip Value Fund) and AIM Real
Estate Fund by shareholders of record on April 30, 1995, of AIM
International Value Fund, predecessor to AIM International Core
Equity Fund, and AIM Real Estate Fund, except that shareholders
whose broker-dealers maintain a single omnibus account with AIS on
behalf of those shareholders, perform sub-accounting functions with
respect to those shareholders, and are unable to segregate
shareholders of record prior to April 30, 1995, from shareholders
whose accounts were opened after that date will be subject to a CDSC
on all purchases made after March 1, 1996;
- Redemptions following the death or post-purchase disability of (1)
any registered shareholders on an account or (2) a settlor of a
living trust, of shares held in the account at the time of death or
initial determination of post-purchase disability;
- Certain distributions from individual retirement accounts, Section
403(b) retirement plans, Section 457 deferred compensation plans and
Section 401 qualified plans, where redemptions result from (i)
required minimum distributions to plan participants or beneficiaries
who are age 70 1/2 or older, and only with respect to that portion
of such distributions that does not exceed 12% annually of the
participant's or beneficiary's account value in a particular AIM
Fund; (ii) in kind transfers of assets where the participant or
beneficiary notifies the distributor of the transfer no later than
the time the transfer occurs; (iii) tax-free rollovers or transfers
of assets to another plan of the type described above invested in
Class B or Class C shares of one or more of the AIM Funds; (iv)
tax-free returns of excess contributions or returns of excess
deferral amounts; and (v) distributions on the death or disability
(as defined in the Code) of the participant or beneficiary;
- Amounts from a Systematic Redemption Plan of up to an annual amount
of 12% of the account value on a per fund basis, at the time the
withdrawal plan is established, provided the investor reinvests his
dividends;
- Liquidation by the Fund when the account value falls below the
minimum required account size of $500; and
- Investment account(s) of AIM and its affiliates.
CDSCs will not apply to the following redemptions of Class C shares:
- A total or partial redemption of shares where the investor's dealer
of record notified the distributor prior to the time of investment
that the dealer would waive the upfront payment otherwise payable to
him;
- A total or partial redemption which is necessary to fund a
distribution requested by a participant in a retirement plan
maintained pursuant to Section 401, 403, or 457 of the Code;
- Redemptions of Class C shares of a Fund other than AIM Short Term
Bond Fund if you received such Class C shares by exchanging Class C
shares of AIM Short Term Bond Fund; and
- Redemptions of Class C shares of AIM Short Term Bond Fund unless you
received such Class C shares by exchanging Class C shares of another
Fund and the original purchase was subject to a CDSC.
62
Contingent Deferred Sales Charge Exceptions for Class R Shares and Former Class
K Shareholders that Acquired Class A Shares
CDSCs will not apply to redemptions of Class A shares acquired as a result
of conversion of Class K shares into Class A shares where the retirement plan's
dealer of record notified the distributor prior to the time of purchase that the
dealer waived the upfront payment otherwise payable to him.
CDSCs will not apply to the following redemptions of Class R shares:
- A total or partial redemption of Class R shares where the retirement
plan's dealer of record notifies the distributor prior to the time
of investment that the dealer waives the upfront payment otherwise
payable to him; and
- Redemptions of shares held by retirement plans in cases where (i)
the plan has remained invested in Class R shares of a Fund for at
least 12 months, or (ii) the redemption is not a complete redemption
of all Class R shares held by the plan.
General Information Regarding Purchases, Exchanges and Redemptions
GOOD ORDER. Purchase, exchange and redemption orders must be received in
good order in accordance with AIS policy and procedures and U.S. regulations.
AIS reserves the right to refuse transactions. Transactions not in good order
will not be processed and once brought into good order, will receive current
price. To be in good order, an investor must supply AIS with all required
information and documentation, including signature guarantees when required. In
addition, if a purchase of shares is made by check, the check must be received
in good order. This means that the check must be properly completed and signed,
and legible to AIS in its sole discretion. If a check used to purchase shares
does not clear, or if any investment order must be canceled due to nonpayment,
the investor will be responsible for any resulting loss.
AUTHORIZED AGENTS. AIS and AIM Distributors may authorize agents to accept
purchase and redemption orders that are in good form on behalf of the AIM Funds.
In certain cases, these authorized agents are authorized to designate other
intermediaries to accept purchase and redemption orders on a Fund's behalf. A
Fund will be deemed to have received the purchase or redemption order when the
Fund's authorized agent or its designee accepts the order. The order will be
priced at the net asset value next determined after the order is accepted by a
Fund's authorized agent or its designee.
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer or other
financial intermediary to ensure that all orders are transmitted on a timely
basis to AIS. Any loss resulting from the failure of the dealer or financial
intermediary to submit an order within the prescribed time frame will be borne
by that dealer or financial intermediary.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; (4) written redemptions or
exchanges of shares held in certificate form previously reported to AIM as lost,
whether or not the redemption amount is under $250,000 or the proceeds are to be
sent to the address of record, and (5) requests to redeem accounts where the
proceeds are over $250,000 or the proceeds are to be sent to an address or a
bank other than the address or bank of record. AIM Funds may waive or modify any
signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the
63
SEC, and further provided that such guarantor institution is listed in one of
the reference guides contained in AIS' current Signature Guarantee Standards and
Procedures, such as certain domestic banks, credit unions, securities dealers,
or securities exchanges. Notary Public signatures are not an acceptable
replacement for a signature guarantee. AIS will also accept signatures with
either: (1) a signature guaranteed with a medallion stamp of the STAMP Program,
or (2) a signature guaranteed with a medallion stamp of the NYSE Medallion
Signature Program, provided that in either event, the amount of the total
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AIS.
TRANSACTIONS BY TELEPHONE. By signing an account application form, an
investor appoints AIS as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by AIS in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. AIS and AIM Distributors are thereby authorized
and directed to accept and act upon any telephone redemptions of shares held in
any of the account(s) listed, from any person who requests the redemption
proceeds to be applied to purchase shares in any one or more of the AIM Funds,
provided that such fund is available for sale and provided that the registration
and mailing address of the shares to be purchased are identical to the
registration of the shares being redeemed. An investor acknowledges by signing
the form that he understands and agrees that AIS and AIM Distributors may not be
liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. AIS reserves the
right to modify or terminate the telephone exchange privilege at any time
without notice. An investor may elect not to have this privilege by marking the
appropriate box on the application. Then any exchanges must be effected in
writing by the investor.
INTERNET TRANSACTIONS. An investor may effect transactions in his account
through the internet by establishing a Personal Identification Number (PIN). By
establishing a PIN, the investor acknowledges and agrees that neither AIS nor
AIM Distributors will be liable for any loss, expense or cost arising out of any
internet transaction effected by them in accordance with any instructions
submitted by a user who transmits the PIN as authentication of his or her
identity. Procedures for verification of internet transactions include requests
for confirmation of the shareholder's personal identification number and mailing
of confirmations promptly after the transactions. The investor also acknowledges
that the ability to effect internet transactions may be terminated at any time
by the AIM Funds.
ABANDONED PROPERTY. It is the responsibility of the investor to ensure
that he maintains a correct address for his account(s). An incorrect address may
cause an investor's account statements and other mailings to be returned to AIS.
Upon receiving returned mail, AIS will attempt to locate the investor or
rightful owner of the account. If unsuccessful, AIS will retain a shareholder
locator service with a national information database to conduct periodic
searches for the investor. If the search firm is unable to locate the investor,
the search firm will determine whether the investor's account has legally been
abandoned. AIS is legally obligated to escheat (or transfer) abandoned property
to the appropriate state's unclaimed property administrator in accordance with
statutory requirements. The investor's last known address of record determines
which state has jurisdiction.
OFFERING PRICE
The following formula may be used to determine the public offering price
per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price ) = Offering
Price.
64
For example, at the close of business on October 31, 2005, AIM Global
Health Care Fund - Class A shares had a net asset value per share of $29.77. The
offering price, assuming an initial sales charge of 5.50%, therefore was $31.50.
Institutional Class shares of the Funds are offered at net asset value.
Calculation of Net Asset Value
Each Fund determines its net asset value per share once daily as of the
close of the customary trading session of the NYSE (generally 4:00 p.m. Eastern
time) on each business day of the Fund. In the event the NYSE closes early
(i.e., before 4:00 p.m. Eastern time) on a particular day, each Fund determines
its net asset value per share as of the close of the NYSE on such day. For
purposes of determining net asset value per share, futures and option contracts
generally will be valued 15 minutes after the close of the customary trading
session of the NYSE. Futures contracts are valued at the final settlement price
set by an exchange on which they are principally traded. Listed options are
valued at the mean between the last bid and ask prices from the exchange on
which they are principally traded. Options not listed on an exchange are valued
by an independent source at the mean between the last bid and ask prices. The
Funds determine net asset value per share by dividing the value of a Fund's
securities, cash and other assets (including interest accrued but not collected)
attributable to a particular class, less all its liabilities (including accrued
expenses and dividends payable) attributable to that class, by the total number
of shares outstanding of that class. Determination of a Fund's net asset value
per share is made in accordance with generally accepted accounting principles.
The net asset value for shareholder transactions may be different than the net
asset value reported in the Fund's financial statement due to adjustments
required by generally accepted accounting principles made to the net assets of
the Fund at period end.
Each equity security (excluding convertible bonds) held by a Fund is
valued at its last sales price on the exchange where the security is principally
traded or, lacking any sales on a particular day, the security is valued at the
closing bid price on that day. Each equity security traded in the
over-the-counter market (but not including securities reported on the NASDAQ
National Market System) is valued on the basis of prices furnished by
independent pricing services vendors or market makers. Each security reported on
the NASDAQ National Market System is valued at the NASDAQ Official Closing Price
("NOCP") or absent a NOCP, at the closing bid price on that day. Debt securities
(including convertible bonds) are fair valued using an evaluated quote provided
by an independent pricing vendor. Evaluated quotes provided by the pricing
vendor may be determined without exclusive reliance on quoted prices, and may
reflect appropriate factors such as institution-size trading in similar groups
of securities, developments related to special securities, dividend rate, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data.
Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and are
valued at the last bid price in the case of equity securities and in the case of
debt obligations, the mean between the last bid and ask prices. Securities for
which market quotations are not readily available, including situations where
market quotations are unreliable, are valued at fair value as determined in good
faith by or under the supervision of the Trust's officers in accordance with
procedures approved by the Board. Short-term investments are valued at amortized
cost when the security has 60 days or less to maturity.
Generally, trading in corporate bonds, U.S. Government securities and
money market instruments is substantially completed each day at various times
prior to the close of the customary trading session of the NYSE. The values of
such securities used in computing the net asset value of the a Fund's shares are
determined at such times. Occasionally, events affecting the values of such
securities may occur between the times at which such values are determined and
the close of the customary trading session of the NYSE. If AIM believes a
development/event has actually caused a closing price to no longer reflect
current market value, the closing price may be adjusted to reflect the fair
value of the affected security as of the close of the NYSE as determined in good
faith using procedures approved by the Board.
65
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Trading in certain foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value of
each Fund's shares are determined as of the close of the respective markets.
Events affecting the values of such foreign securities may occur between the
times at which the particular foreign market closes and the close of the
customary trading session of the NYSE. If an issuer specific event has occurred
that AIM determines, in its judgment, is likely to have affected the closing
price of a foreign security, it will price the security at fair value. Issuer
specific events may include a merger or insolvency, events which affect a
geographical area or an industry segment, such as political events or natural
disasters, or market events, such as a significant movement in the U.S. market.
AIM also relies on a screening process from a pricing vendor to indicate the
degree of certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current market value
as of the close of the NYSE. For foreign securities where AIM believes, at the
approved degree of certainty, that the price is not reflective of current market
value, AIM will use the indication of fair value from the pricing vendor to
determine the fair value of the security. The pricing vendor, pricing
methodology or degree of certainty may change from time to time. Multiple
factors may be considered by the pricing vendor in determining adjustments to
reflect fair value and may include information relating to sector indices, ADRs,
domestic and foreign index futures, and exchange-traded funds.
Fund securities primarily traded in foreign markets may be traded in such
markets on days that are not business days of the Fund. Because the net asset
value per share of each Fund is determined only on business days of the Fund,
the value of the portfolio securities of a Fund that invests in foreign
securities may change on days when an investor cannot exchange or redeem shares
of the Fund.
REDEMPTIONS IN KIND
Although the Funds generally intend to pay redemption proceeds solely in
cash, the Funds reserve the right to determine, in their sole discretion,
whether to satisfy redemption requests by making payment in securities or other
property (known as a redemption in kind). For instance, a Fund may make a
redemption in kind if a cash redemption would disrupt its operations or
performance. Securities that will be delivered as payment in redemptions in kind
will be valued using the same methodologies that the Fund typically utilizes in
valuing such securities. Shareholders receiving such securities are likely to
incur transaction and brokerage costs on their subsequent sales of such
securities, and the securities may increase or decrease in value until the
shareholder sells them. The Trust, on behalf of the Funds, has made an election
under Rule 18f-1 under the 1940 Act (a "Rule 18f-1 Election"), and therefore,
the Trust, on behalf of a Fund is obligated to redeem for cash all shares
presented to such Fund for redemption by any one shareholder in an amount up to
the lesser of $250,000 or 1% of that Fund's net assets in any 90-day period. The
Rule 18f-1 Election is irrevocable while Rule 18f-1 under the 1940 Act is in
effect unless the SEC by order permits withdrawal of such Rule 18f-1 Election.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying
the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, generally must withhold 28% of redemption
payments and reportable dividends (whether paid or accrued) in the case of any
shareholder who fails to provide the Fund with a taxpayer identification number
("TIN") and a certification that he is not subject to backup withholding.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
2. the IRS notifies the Fund that the investor furnished an incorrect
TIN;
66
3. the investor or the Fund is notified by the IRS that the investor is
subject to backup withholding because the investor failed to report
all of the interest and dividends on such investor's tax return (for
reportable interest and dividends only);
4. the investor fails to certify to the Fund that the investor is not
subject to backup withholding under (3) above (for reportable
interest and dividend accounts opened after 1983 only); or
5. the investor does not certify his TIN. This applies only to
non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1), (2) or (5) above
applies.
Certain payees and payments are exempt from backup withholding and
information reporting. AIM or AIS will not provide Form 1099 to those payees.
Investors should contact the IRS if they have any questions concerning
withholding.
IRS PENALTIES - Investors who do not supply the AIM Funds with a correct
TIN will be subject to a $50 penalty imposed by the IRS unless such failure is
due to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities
are not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
generally remains in effect for a period starting on the date the Form is signed
and ending on the last day of the third succeeding calendar year. Such
shareholders may, however, be subject to federal income tax withholding at a 30%
rate on ordinary income dividends and other distributions. Under applicable
treaty law, residents of treaty countries may qualify for a reduced rate of
withholding or a withholding exemption.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
It is the present policy of each Fund to declare and pay annually net
investment income dividends and capital gain distributions. It is each Fund's
intention to distribute substantially all of its net investment income and
realized net capital gains. In determining the amount of capital gains, if any,
available for distribution, capital gains will generally be offset against
available net capital loss, if any, carried forward from previous fiscal
periods. All dividends and distributions will be automatically reinvested in
additional shares of the same class of each Fund unless the shareholder has
requested in writing to receive such dividends and distributions in cash or that
they be invested in shares of another AIM Fund, subject to the terms and
conditions set forth in the Prospectus under the caption "Special Plans -
Automatic Dividend Investment." Such dividends and distributions will be
reinvested at the net asset value per share determined on the ex-dividend date.
If a shareholder's account does not have any shares in it on a dividend or
capital gain distribution payment date, the dividend or distribution will be
paid in cash whether or not the shareholder has elected to have such dividends
or distributions reinvested.
Dividends on Class B, Class C and Class R shares are expected to be lower
than those for Class A shares because of higher distribution fees paid by Class
B, Class C and Class R shares. Other class-specific expenses may also affect
dividends on shares of those classes. Expenses attributable to a particular
class ("Class Expenses") include distribution plan expenses, which must be
allocated to the
67
class for which they are incurred. Other expenses may be allocated as Class
Expenses, consistent with applicable legal principles under the 1940 Act and the
Code.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund has elected to
be taxed under Subchapter M of the Code as a regulated investment company and
intends to maintain its qualification as such in each of its taxable years. As a
regulated investment company, each Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes an amount equal to (i) at least 90%
of its investment company taxable income (i.e., net investment income, net
foreign currency ordinary gain or loss and the excess of net short-term capital
gain over net long-term capital loss) and (ii) at least 90% of the excess of its
tax-exempt interest income under Code Section 103(a) over its deductions
disallowed under Code Sections 265 and 171(a)(2) for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described below. Distributions by a Fund made during the taxable
year or, under specified circumstances, within twelve months after the close of
the taxable year, will be considered distributions of income and gain of the
taxable year and can therefore satisfy the Distribution Requirement.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.
Each Fund may use "equalization accounting" in determining the portion of
its net investment income and capital gain net income that has been distributed.
A Fund that elects to use equalization accounting will allocate a portion of its
realized investment income and capital gain to redemptions of Fund shares and
will reduce the amount of such income and gain that it distributes in cash.
However, each Fund intends to make cash distributions for each taxable year in
an aggregate amount that is sufficient to satisfy the Distribution Requirement
without taking into account its use of equalization accounting. The IRS has not
published any guidance concerning the methods to be used in allocating
investment income and capital gains to redemptions of shares. In the event that
the IRS determines that a Fund is using an improper method of allocation and has
under-distributed its net investment income and capital gain net income for any
taxable year, such Fund may be liable for additional federal income tax.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock, securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities), other income
(including, but not limited to, gains from options, futures or forward
contracts) derived from its business of investing in such stock, securities or
currencies and net income derived from certain publicly traded partnerships (the
"Income Requirement"). Under certain circumstances, a Fund may be required to
sell portfolio holdings to meet this requirement.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company (the "Asset Diversification Test"). Under this test, at the
close of each quarter of each Fund's taxable year, at least 50% of the value of
the Fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers, as to which the Fund has not invested
68
more than 5% of the value of the Fund's total assets in securities of such
issuer and as to which the Fund does not hold more than 10% of the outstanding
voting securities of such issuer, and no more than 25% of the value of its total
assets may be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment companies),
or of two or more issuers which the Fund controls and which are engaged in the
same or similar trades or businesses or collectively, in securities of certain
publicly traded partnerships.
For purposes of the Asset Diversification Test, the IRS has ruled that the
issuer of a purchased listed call option on stock is the issuer of the stock
underlying the option. The IRS has also informally ruled that, in general, the
issuers of purchased or written call and put options on securities, of long and
short positions on futures contracts on securities and of options on such future
contracts are the issuers of the securities underlying such financial
instruments where the instruments are traded on an exchange.
Where the writer of a listed call option owns the underlying securities,
the IRS has ruled that the Asset Diversification Test will be applied solely to
such securities and not to the value of the option itself. With respect to
options on securities indexes, futures contracts on securities indexes and
options on such futures contracts, the IRS has informally ruled that the issuers
of such options and futures contracts are the separate entities whose securities
are listed on the index, in proportion to the weighing of securities in the
computation of the index. It is unclear under present law who should be treated
as the issuer of forward foreign currency exchange contracts, of options on
foreign currencies, or of foreign currency futures and related options. It has
been suggested that the issuer in each case may be the foreign central bank or
the foreign government backing the particular currency. Due to this uncertainty
and because the Funds may not rely on informal rulings of the IRS, the Funds may
find it necessary to seek a ruling from the IRS as to the application of the
Asset Diversification Test to certain of the foregoing types of financial
instruments or to limit its holdings of some or all such instruments in order to
stay within the limits of such test.
Under an IRS revenue procedure, a Fund may treat its position as lender
under a repurchase agreement as a U.S. Government security for purposes of the
Asset Diversification where the repurchase agreement is fully collateralized
(under applicable SEC standards) with securities that constitute U.S. Government
securities.
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of such Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the dividends
received deduction (to the extent discussed below) in the case of corporate
shareholders and will be included in the qualified dividend income of
non-corporate shareholders. See "Fund Distributions" below.
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY. In
general, gain or loss recognized by a Fund on the disposition of an asset will
be a capital gain or loss. However, gain recognized on the disposition of a debt
obligation purchased by a Fund at a market discount (generally, at a price less
than its principal amount) will be treated as ordinary income to the extent of
the portion of the market discount which accrued during the period of time the
Fund held the debt obligation unless the Fund made an election to accrue market
discount into income. If a Fund purchases a debt obligation that was originally
issued at a discount, the Fund is generally required to include in gross income
each year the portion of the original issue discount which accrues during such
year. In addition, under the rules of Code Section 988, gain or loss recognized
on the disposition of a debt obligation denominated in a foreign currency or an
option with respect thereto (but only to the extent attributable to changes in
foreign currency exchange rates), and gain or loss recognized on the disposition
of a foreign currency forward contract or of foreign currency itself, will
generally be treated as ordinary income or loss. In certain cases, a fund may
make an election to treat such gain or loss as capital.
Certain hedging transactions that may be engaged in by certain of the
Funds (such as short sales "against the box") may be subject to special tax
treatment as "constructive sales" under Section 1259 of
69
the Code if a Fund holds certain "appreciated financial positions" (defined
generally as any interest (including a futures or forward contract, short sale
or option) with respect to stock, certain debt instruments, or partnership
interests if there would be a gain were such interest sold, assigned, or
otherwise terminated at its fair market value). Upon entering into a
constructive sales transaction with respect to an appreciated financial
position, a Fund will generally be deemed to have constructively sold such
appreciated financial position and will recognize gain as if such position were
sold, assigned, or otherwise terminated at its fair market value on the date of
such constructive sale (and will take into account any gain for the taxable year
which includes such date).
Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds may enter into will be subject to
special tax treatment as "Section 1256 contracts." Section 1256 contracts that a
Fund holds are treated as if they are sold for their fair market value on the
last business day of the taxable year, regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date. Any
gain or loss recognized as a consequence of the year-end deemed disposition of
Section 1256 contracts is combined with any other gain or loss that was
previously recognized upon the termination of Section 1256 contracts during that
taxable year. The net amount of such gain or loss for the entire taxable year
(including gain or loss arising as a consequence of the year-end deemed sale of
such contracts) is deemed to be 60% long-term and 40% short-term gain or loss.
If such a future or option is held as an offsetting position and can be
considered a straddle under Section 1092 of the Code, such a straddle will
constitute a mixed straddle. A mixed straddle will be subject to both Section
1256 and Section 1092 unless certain elections are made by the Fund.
Other hedging transactions in which the Funds may engage may result in
"straddles" or "conversion transactions" for U.S. federal income tax purposes.
The straddle and conversion transaction rules may affect the character of gains
(or in the case of the straddle rules, losses) realized by the Funds. In
addition, losses realized by the Funds on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken into account
in calculating the taxable income for the taxable year in which the losses are
realized. Because only a few regulations implementing the straddle rules and the
conversion transaction rules have been promulgated, the tax consequences to the
Funds of hedging transactions are not entirely clear. The hedging transactions
may increase the amount of short-term capital gain realized by the Funds (and,
if they are conversion transactions, the amount of ordinary income) which is
taxed as ordinary income when distributed to shareholders.
Because application of any of the foregoing rules governing Section 1256
contracts, constructive sales, straddle and conversion transactions may affect
the character of gains or losses, defer losses and/or accelerate the recognition
of gains or losses from the affected investment or straddle positions, the
taxable income of a Fund may exceed or be less than its book income.
Accordingly, the amount which must be distributed to shareholders and which will
be taxed to shareholders as ordinary income, qualified dividend income, or
long-term capital gain may also differ from the book income of the Fund and may
be increased or decreased as compared to a fund that did not engage in such
transactions.
PFIC INVESTMENTS. The Funds are permitted to invest in foreign equity
securities and thus may invest in stocks of foreign companies that are
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign company is classified as a PFIC if at least one-half of its
assets constitute investment-type assets or 75% or more of its gross income is
investment-type income.
The application of the PFIC rules may affect, among other things, the
character of gain, the amount of gain or loss and the timing of the recognition
and character of income with respect to PFIC stock, as well as subject the Funds
themselves to tax on certain income from PFIC stock. For these reasons the
amount that must be distributed to shareholders, and which will be taxed to
shareholders as ordinary income or long-term capital gain, may be increased or
decreased substantially as compared to a fund that did not invest in PFIC stock.
SWAP AGREEMENTS. Each Fund may enter into swap agreements. The rules
governing the tax aspects of certain types of swap agreements are in a
developing stage and are not entirely clear in
70
certain respects. Accordingly, while a Fund intends to account for such
transactions in a manner deemed to be appropriate, the IRS might not accept such
treatment. If it did not, the status of a Fund as a regulated investment company
might be affected. Each Fund intends to monitor developments in this area.
Certain requirements that must be met under the Code in order for a Fund to
qualify as a regulated investment company may limit the extent to which a Fund
will be able to engage in certain types of swap agreements.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES. A 4% non-deductible excise
tax is imposed on a regulated investment company that fails to distribute in
each calendar year an amount equal to 98% of ordinary taxable income for the
calendar year and 98% of capital gain net income (excess of capital gains over
capital losses) for the one-year period ended on October 31 of such calendar
year (or, at the election of a regulated investment company having a taxable
year ending November 30 or December 31, for its taxable year (a "taxable year
election")). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year and (2) exclude Section
988 foreign currency gains and losses incurred after October 31 (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
Each Fund generally intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
in the event that the IRS determines that a Fund is using an improper method of
allocation for purposes of equalization accounting (as discussed above), such
Fund may be liable for excise tax. Moreover, investors should note that a Fund
may in certain circumstances be required to liquidate portfolio investments to
make sufficient distributions to avoid excise tax liability. In addition, under
certain circumstances, a Fund may elect to pay a minimal amount of excise tax.
FUND DISTRIBUTIONS. Each Fund anticipates distributing substantially all
of its investment company taxable income for each taxable year. Such
distributions will be taxable to shareholders as ordinary income and treated as
dividends for federal income tax purposes, but they will qualify for the 70%
dividends received deduction for corporations and as qualified dividend income
for individuals and other non-corporate taxpayers to the extent that
shareholders have held their fund shares for a minimum required period and the
distributions satisfy other requirements that are discussed below.
A Fund may either retain or distribute to shareholders its net capital
gain (net long-term capital gain over net short-term capital loss) for each
taxable year. Each Fund currently intends to distribute any such amounts. If net
capital gain is distributed and designated as a capital gain dividend, it will
be taxable to shareholders as long-term capital gain (currently taxable at a
maximum rate of 15% for non-corporate shareholders) regardless of the length of
time the shareholder has held his shares or whether such gain was recognized by
the Fund prior to the date on which the shareholder acquired his shares.
Conversely, if a Fund elects to retain its net capital gain, the Fund will be
taxed thereon (except to the extent of any available capital loss carry
forwards) at the 35% corporate tax rate. If a Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
treated as if each received a distribution of its pro rata share of such gain,
with the result that each shareholder will be required to report its pro rata
share of such gain on its tax return as long-term capital gain, will receive a
refundable tax credit for its pro rata share of tax paid by the Fund on the
gain, and will increase the tax basis for its shares by an amount equal to the
deemed distribution less the tax credit.
Ordinary income dividends paid by a Fund with respect to a taxable year
will qualify for the 70% dividends received deduction generally available to
corporations (other than corporations, such as "S" corporations, which are not
eligible for the deduction because of their special characteristics and other
71
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.
Ordinary income dividends paid by a Fund to individuals and other
non-corporate taxpayers will be treated as qualified dividend income that is
subject to tax at a maximum rate of 15% to the extent of the amount of
qualifying dividends received by the Fund from domestic corporations and from
foreign corporations that are either incorporated in a possession of the United
States, or are eligible for benefits under certain income tax treaties with the
United States that include an exchange of information program. In addition,
qualifying dividends include dividends paid with respect to stock of a foreign
corporation that is readily tradable on an established securities market in the
United States. Dividends received by the Fund from PFICs are not qualifying
dividends. If the qualifying dividend income received by a Fund is equal to 95%
(or a greater percentage) of the Fund's gross income (exclusive of net capital
gain) in any taxable year, all of the ordinary income dividends paid by the Fund
will be qualifying dividend income.
Dividends paid by a Fund will not be eligible for the dividends received
deduction when received by a corporation that has not held its shares of the
Fund for at least 46 days during the 91-day period beginning 45 days before the
date on which the shares become ex-dividend and will not be treated as qualified
dividend income when received by an individual or other noncorporate shareholder
who has not held its shares of the Fund for at least 61 days during the 121-day
period beginning 60 days before the date on which the shares become ex-dividend.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum rate of 28% for
non-corporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
However, the AMT on capital gain dividends and qualified dividend income paid by
a Fund to a non-corporate shareholder may not exceed a maximum rate of 15%. The
corporate dividends received deduction is not itself an item of tax preference
that must be added back to taxable income or is otherwise disallowed in
determining a corporation's AMTI. However, corporate shareholders will generally
be required to take the full amount of any dividend received from the Fund into
account (without a dividends received deduction) in determining their adjusted
current earnings, which are used in computing an additional corporate preference
item (i.e., 75% of the excess of a corporate taxpayer's adjusted current
earnings over its AMTI (determined without regard to this item and the AMTI net
operating loss deduction)) that is includable in AMTI. However, certain small
corporations are wholly exempt from the AMT.
Distributions by a Fund that are not made from earnings and profits will
be treated as a return of capital to the extent of (and in reduction of) the
shareholder's tax basis in his shares; any excess will be treated as gain from
the sale of his shares.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the ex-dividend date.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the IRS.
72
If the net asset value of shares is reduced below a shareholder's cost as
a result of a distribution by a Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of a Fund just
prior to a distribution. The price of shares purchased at this time may reflect
the amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which generally will be taxable to
them.
SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss on
the sale or redemption of shares of a Fund in an amount equal to the difference
between the proceeds of the sale or redemption and the shareholder's adjusted
tax basis in the shares. All or a portion of any loss so recognized may be
deferred under the wash sale rules if the shareholder purchases other shares of
the Fund within 30 days before or after the sale or redemption. In general, any
gain or loss arising from (or treated as arising from) the sale or redemption of
shares of a Fund will be considered capital gain or loss and will be long-term
capital gain or loss if the shares were held for longer than one year.
Currently, any long-term capital gain recognized by a non-corporate shareholder
will be subject to tax at a maximum rate of 15%. However, any capital loss
arising from the sale or redemption of shares held for six months or less will
be treated as a long-term capital loss to the extent of the amount of capital
gain dividends received on such shares. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of a
non-corporate taxpayer, $3,000 of ordinary income.
If a shareholder (a) incurs a sales load in acquiring shares of a Fund,
(b) disposes of such shares less than 91 days after they are acquired, and (c)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of, but shall be treated as incurred on the
acquisition of the shares subsequently acquired. The wash sale rules may also
limit the amount of loss that may be taken into account on disposition after
such adjustment.
BACKUP WITHHOLDING. The Funds may be required to withhold 28% of taxable
distributions and/or redemption payments. For more information refer to
"Purchase, Redemption and Pricing of Shares - Backup Withholding."
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United
States, is a nonresident alien individual, foreign trust or estate, foreign
corporation, or foreign partnership ("foreign shareholder"), depends on whether
the income from a Fund is "effectively connected" with a U.S. trade or business
carried on by such shareholder. If the income from a Fund is not effectively
connected with a U.S. trade or business carried on by a foreign shareholder,
distributions (other than distributions of long-term and short-term capital gain
and of certain types of interest income) will be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) upon the gross amount of the
distribution to the extent discussed below. Such a foreign shareholder would
generally be exempt from U.S. federal income tax on gain realized on the
redemption of shares of a Fund, capital gain dividends and amounts retained by a
Fund that are designated as undistributed net capital gain.
As a consequence of the enactment of the American Jobs Creation Act of
2004, such a foreign shareholder will also generally be exempt from U.S. federal
income tax on distributions that a Fund designates as "short-term capital gain
dividends" or as "interest-related dividends" for Fund taxable years beginning
after December 31, 2004 and before January 1, 2008. The aggregate amount that
may be designated as short-term capital gain dividends for a Fund's taxable year
is generally equal to the excess (if any) of the Fund's net short-term capital
gain over its net long-term capital loss. The aggregate amount designated as
interest-related dividends for any Fund taxable year is generally limited to the
excess of the amount of "qualified interest income" of the Fund over allocable
expenses. Qualified interest income is generally equal to the sum of a Fund's
U.S.-source income that constitutes (1) bank deposit interest; (2) short-term
original issue discount that is exempt from withholding tax; (3) interest on a
debt obligation which is in registered form, unless it is earned on a debt
obligation issued by a corporation or partnership
73
in which the Fund holds a 10-percent ownership interest or its payment is
contingent on certain events; and (4) interest-related dividends received from
another regulated investment company.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, short-term capital gain dividends, interest-related
dividends and any gains realized upon the sale or redemption of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be required
to withhold U.S. federal income tax at a rate of 28% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.
Foreign shareholders may be subject to U.S. withholding tax at a rate of
30% on the income resulting from the foreign tax election (as defined below),
but may not be able to claim a credit or deduction with respect to the
withholding tax for the foreign tax treated as having been paid by them.
Foreign persons who file a United States tax return to obtain a U.S. tax
refund and who are not eligible to obtain a social security number must apply to
the IRS for an individual taxpayer identification number, using IRS Form W-7.
For a copy of the IRS Form W-7 and accompanying instructions, please contact
your tax adviser or the IRS.
Transfers by gift of shares of a Fund by a foreign shareholder who is a
nonresident alien individual will not be subject to U.S. federal gift tax. An
individual who, at the time of death, is a foreign shareholder will nevertheless
be subject to U.S. federal estate tax with respect to shares at the graduated
rates applicable to U.S. citizens and residents, unless a treaty exception
applies. In the absence of a treaty, there is a $13,000 statutory estate tax
credit. Estates of non-resident alien shareholders dying after December 31, 2004
and before January 1, 2008 will be able to exempt from federal estate tax the
proportion of the value of a Fund's shares attributable to "qualifying assets"
held by the Fund at the end of the quarter immediately preceding the decedent's
death (or such other time as the IRS may designate in regulations). Qualifying
assets include bank deposits and other debt obligations that pay interest or
accrue original issue discount that is exempt from withholding tax, debt
obligations of a domestic corporation that are treated as giving rise to foreign
source income, and other investments that are not treated for tax purposes as
being within the United States. Shareholders will be advised annually of the
portion of a Fund's assets that constituted qualifying assets at the end of each
quarter of its taxable year.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign tax.
FOREIGN INCOME TAX. Investment income received by each Fund from sources
within foreign countries may be subject to foreign income tax withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle the Funds to a reduced rate of, or exemption from, tax
on such income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of a Fund's assets to be invested in various
countries is not known.
If more than 50% of the value of a Fund's total assets at the close of
each taxable year consists of the stock or securities of foreign corporations,
the Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign income tax paid by the Fund (the "Foreign Tax Election"). Pursuant to
the Foreign Tax Election, shareholders will be required (i) to include in gross
income, even though not actually received, their respective pro-rata shares of
the foreign income tax paid by the Fund that are attributable to any
distributions they receive; and (ii) either to deduct their pro-rata share of
foreign tax in computing their taxable income, or to use it (subject to various
Code limitations) as a foreign tax credit
74
against Federal income tax (but not both). No deduction for foreign tax may be
claimed by a non-corporate shareholder who does not itemize deductions or who is
subject to alternative minimum tax.
Unless certain requirements are met, a credit for foreign tax is subject
to the limitation that it may not exceed the shareholder's U.S. tax (determined
without regard to the availability of the credit) attributable to the
shareholder's foreign source taxable income. In determining the source and
character of distributions received from a Fund for this purpose, shareholders
will be required to allocate Fund distributions according to the source of the
income realized by the Fund. Each Fund's gain from the sale of stock and
securities and certain currency fluctuation gain and loss will generally be
treated as derived from U.S. sources. In addition, the limitation on the foreign
tax credit is applied separately to foreign source "passive" income, such as
dividend income, and the portion of foreign source income consisting of
qualified dividend income is reduced by approximately 57% to account for the tax
rate differential. Individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign tax included on Form 1099 and
whose foreign source income is all "qualified passive income" may elect each
year to be exempt from the foreign tax credit limitation and will be able to
claim a foreign tax credit without filing Form 1116 with its corresponding
requirement to report income and tax by country. Moreover, no foreign tax credit
will be allowable to any shareholder who has not held his shares of the Fund for
at least 16 days during the 30-day period beginning 15 days before the day such
shares become ex-dividend with respect to any Fund distribution to which foreign
income taxes are attributed (taking into account certain holding period
reduction requirements of the Code). Because of these limitations, shareholders
may be unable to claim a credit for the full amount of their proportionate
shares of the foreign income tax paid by a Fund.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing
general discussion of U.S. federal income tax consequences is based on the Code
and the regulations issued thereunder as in effect on February 15, 2006. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income, qualified dividend
income and capital gain dividends may differ from the rules for U.S. federal
income taxation described above. Distributions may also be subject to additional
state, local and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ
significantly from those summarized above. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in the Funds.
DISTRIBUTION OF SECURITIES
DISTRIBUTION PLANS
The Trust has adopted distribution plans pursuant to Rule 12b-1 under the
1940 Act with respect to each Fund's Class A shares, Class B shares, Class C
shares, Class R and Investor Class shares, if applicable, (collectively the
"Plans"). Each Fund, pursuant to the Plans, pays AIM Distributors compensation
at the annual rate, shown immediately below, of the Fund's average daily net
assets of the applicable class.
INVESTOR
FUND CLASS A CLASS B CLASS C CLASS R CLASS
- ---- ------- ------- ------- ------- --------
AIM Developing Markets Fund 0.25% 1.00% 1.00% N/A N/A
AIM Global Health Care Fund 0.25 1.00 1.00 N/A 0.25%
AIM Trimark Endeavor Fund 0.25 1.00 1.00 0.50% N/A
AIM Trimark Fund 0.25 1.00 1.00 0.50 N/A
AIM Trimark Small Companies Fund 0.25 1.00 1.00 0.50 N/A
75
All of the Plans compensate AIM Distributors for the purpose of financing
any activity which is primarily intended to result in the sale of shares of the
Funds. Such activities include, but are not limited to, the following: printing
of prospectuses and statements of additional information and reports for other
than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and conducting
sales seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering each Plan.
Amounts payable by a Fund under the Class A, Class B, Class C, Class R and
Investor Class Plans need not be directly related to the expenses actually
incurred by AIM Distributors on behalf of each Fund. These Plans do not obligate
the Funds to reimburse AIM Distributors for the actual allocated share of
expenses AIM Distributors may incur in fulfilling its obligations under these
Plans. Thus, even if AIM Distributors' actual expenses exceeds the fee payable
to AIM Distributors at any given time, under these Plans the Funds will not be
obligated to pay more than that fee. If AIM Distributors' actual allocated share
of expenses is less than the fee it receives, under these Plans AIM Distributors
will retain the full amount of the fee.
AIM Distributors may from time to time waive or reduce any portion of its
12b-1 fee for Class A shares, Class C shares, Class R shares or Investor Class
shares. Voluntary fee waivers or reductions may be rescinded at any time without
further notice to investors. During periods of voluntary fee waivers or
reductions, AIM Distributors will retain its ability to be reimbursed for such
fee prior to the end of each fiscal year. Contractual fee waivers or reductions
set forth in the Fee Table in a Prospectus may not be terminated or amended to
the Funds' detriment during the period stated in the agreement between AIM
Distributors and the Fund.
The Funds may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B, Class C, Class R and Investor Class shares attributable
to the customers of selected dealers and financial institutions to such dealers
and financial institutions, including AIM Distributors, acting as principal, who
furnish continuing personal shareholder services to their customers who purchase
and own the applicable class of shares of the Fund. Under the terms of a
shareholder service agreement, such personal shareholder services include
responding to customer inquiries and providing customers with information about
their investments. Any amounts not paid as a service fee under each Plan would
constitute an asset-based sales charge.
AIM Distributors may pay dealers and institutions who sell Class R shares
an annual fee of 0.50% of average daily net assets. These payments will consist
of an asset-based fee of 0.25% and a service fee of 0.25% and will commence
either on the thirteenth month after the first purchase, on accounts on which a
dealer concession was paid, or immediately, on accounts on which a dealer
concession was not paid. If AIM Distributors pays a dealer concession, it will
retain all payments received by it relating to Class R shares for the first year
after they are purchased. AIM Distributors will make quarterly payments to
dealers and institutions based on the average net asset value of Class R shares
which are attributable to shareholders for whom the dealers and institutions are
designated as dealers of record.
Under a Shareholder Service Agreement, a Fund agrees to pay periodically
fees to selected dealers and other institutions who render the foregoing
services to their customers. The fees payable under a Shareholder Service
Agreement will be calculated at the end of each payment period for each business
day of the Funds during such period at the annual rate specified in each
agreement based on the average daily net asset value of the Funds' shares
purchased or acquired through exchange. Fees shall be paid only to those
selected dealers or other institutions who are dealers or institutions of record
at the close of business on the last business day of the applicable payment
period for the account in which such Fund's shares are held.
Selected dealers and other institutions entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another. Under the Plans, certain financial
institutions which have entered into service agreements and which sell shares of
the Funds on an agency basis, may receive payments from the Funds pursuant to
the respective Plans.
76
AIM Distributors does not act as principal, but rather as agent for the Funds,
in making dealer incentive and shareholder servicing payments to dealers and
other financial institutions under the Plans. These payments are an obligation
of the Funds and not of AIM Distributors.
Payments pursuant to the Plans are subject to any applicable limitations
imposed by rules of the NASD.
See Appendix M for a list of the amounts paid by each class of shares of
each Fund to AIM Distributors pursuant to the Plans for the year, or period,
ended October 31, 2005 and Appendix N for an estimate by category of the
allocation of actual fees paid by each class of shares of each Fund pursuant to
its respective distribution plan for the year or period ended October 31, 2005.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board, including a majority of the
trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in the operation of
the Plans or in any agreements related to the Plans (the "Rule 12b-1 Trustees").
In approving the Plans in accordance with the requirements of Rule 12b-1, the
trustees considered various factors and determined that there is a reasonable
likelihood that the Plans would benefit each class of the Funds and its
respective shareholders.
The anticipated benefits that may result from the Plans with respect to
each Fund and/or the classes of each Fund and its shareholders include but are
not limited to the following: (1) rapid account access; (2) relatively
predictable flow of cash; and (3) a well-developed, dependable network of
shareholder service agents to help curb sharp fluctuations in rates of
redemptions and sales, thereby reducing the chance that an unanticipated
increase in net redemptions could adversely affect the performance of each Fund.
Unless terminated earlier in accordance with their terms, the Plans
continue from year to year as long as such continuance is specifically approved,
in person, at least annually by the Board, including a majority of the Rule
12b-1 Trustees. A Plan may be terminated as to any Fund or class by the vote of
a majority of the Rule 12b-1 Trustees or, with respect to a particular class, by
the vote of a majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
the Plans may be amended by the trustees, including a majority of the Rule 12b-1
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Independent Trustees is committed to the discretion of the
Independent Trustees.
The Class B Plan obligates Class B shares to continue to make payments to
AIM Distributors following termination of the Class B shares Distribution
Agreement with respect to Class B shares sold by or attributable to the
distribution efforts of AIM Distributors or its predecessors, unless there has
been a complete termination of the Class B Plan (as defined in such Plan) and
the Class B Plan expressly authorizes AIM Distributors to assign, transfer or
pledge its rights to payments pursuant to the Class B Plan.
DISTRIBUTOR
The Trust has entered into master distribution agreements, as amended,
relating to the Funds (the "Distribution Agreements") with AIM Distributors, a
registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which
AIM Distributors acts as the distributor of shares of the Funds. The address of
AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees
and officers of the Trust are affiliated with AIM Distributors. See "Management
of the Trust."
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds on a continuous basis directly and
through other broker dealers with whom AIM Distributors
77
has entered into selected dealer agreements. AIM Distributors has not undertaken
to sell any specified number of shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own resources
to dealers and institutions who sell Class B, Class C and Class R shares of the
Funds at the time of such sales.
Payments with respect to Class B shares will equal 4.00% of the purchase
price of the Class B shares sold by the dealer or institution, and will consist
of a sales commission equal to 3.75% of the purchase price of the Class B shares
sold plus an advance of the first year service fee of 0.25% with respect to such
shares. The portion of the payments to AIM Distributors under the Class B Plan
which constitutes an asset-based sales charge (0.75%) is intended in part to
permit AIM Distributors to recoup a portion of such sales commissions plus
financing costs. In the future, if multiple distributors serve a Fund, each such
distributor (or its assignee or transferee) would receive a share of the
payments under the Class B Plan based on the portion of the Fund's Class B
shares sold by or attributable to the distribution efforts of that distributor.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A, Class C and Class R Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of the sales commissions to dealers plus
financing costs, if any. After the first full year, AIM Distributors will make
quarterly payments to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record. These payments
will consist of an asset-based sales charge of 0.75% and a service fee of 0.25%.
AIM Distributors may pay dealers and institutions who sell Class R shares
an annual fee of 0.50% of average daily net assets. These payments will consist
of an asset-based fee of 0.25% and a service fee of 0.25% and will commence
either on the thirteenth month after the first purchase, on accounts on which a
dealer concession was paid, or immediately, on accounts on which a dealer
concession was not paid. If AIM Distributors pays a dealer concession, it will
retain all payments received by it relating to Class R shares for the first year
after they are purchased. AIM Distributors will make quarterly payments to
dealers and institutions based on the average net asset value of Class R shares
which are attributable to shareholders for whom the dealers and institutions are
designated as dealers of record.
The Trust (on behalf of any class of any Fund) or AIM Distributors may
terminate the Distribution Agreements on 60 days' written notice without
penalty. The Distribution Agreements will terminate automatically in the event
of their assignment. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset-based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of AIM Distributors or its predecessors; provided,
however that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments to AIM Distributors. Termination of the Class
B Plan or the Distribution Agreement for Class B shares would not affect the
obligation of Class B shareholders to pay contingent deferred sales charges.
Total sales charges (front end and contingent deferred sales charges) paid
in connection with the sale of shares of each class of each Fund, if applicable,
for the last three fiscal years ended October 31 are found in Appendix O.
78
CALCULATION OF PERFORMANCE DATA
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential investments,
investors should note that the methods of computing performance of other
potential investments are not necessarily comparable to the methods employed by
a Fund.
Average Annual Total Return Quotation
The standard formula for calculating average annual total return is as
follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the
one, five, or ten year periods);
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five and
ten year periods at the end of the one, five, or
ten year periods (or fractional portion of such
period).
Total returns quoted in advertising reflect all aspects of a Fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Fund's net asset value per share over the
period. Cumulative total return reflects the performance of a Fund over a stated
period of time. Average annual total returns are calculated by determining the
growth or decline in value of a hypothetical investment in a Fund over a stated
period of time, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or decline in
value had been constant over the period.
Each Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for: (1) Class A shares reflects the deduction of a Fund's maximum front-end
sales charge, at the time of purchase; (2) Class B and Class C shares reflects
the deduction of the maximum applicable CDSC on a redemption of shares held for
the period; (3) Class R shares does not reflect a deduction of any sales charge
since that class is generally sold and redeemed at net asset value; and (4)
Investor Class shares does not reflect a deduction of any sales charge since
that class is sold and redeemed at net asset value.
A Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. Because average annual returns tend to even out
variations in the Fund's return, investors should recognize that such returns
are not the same as actual year-by-year results. To illustrate the components of
overall performance, a Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
Alternative Total Return Quotations
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
79
n
P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000;
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000 payment
at the end of the stated period.
Cumulative total return across a stated period may be calculated as
follows:
P(1+V)=ERV
Where P = a hypothetical initial payment of $1,000;
V = cumulative total return assuming payment of all of,a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period; and
ERV = ending redeemable value of a hypothetical $1,000 payment
at the end of the stated period.
Calculation of Certain Performance Data
AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small
Companies Fund may use a restated or blended performance calculation to derive
certain performance data shown for their Class R shares in this Statement of
Additional Information and in each Fund's advertisements and other sales
material. If a Fund's Class R shares were not offered to the public during the
performance period covered, the performance data shown will be the restated
historical performance of such Fund's Class A shares at net asset value,
adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares.
If such Fund's Class R shares were offered to the public only during a portion
of the performance period covered, the performance data shown will be the
blended returns of the historical performance of such Fund's Class R shares
since their inception and the restated historical performance of such Fund's
Class A shares (for periods prior to the inception of such Fund's Class R
shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees
applicable to the Class R shares. If such Fund's Class R shares were offered to
the public during the entire performance period covered, the performance data
shown will be the historical performance of the Fund's Class R shares.
AIM Global Health Care Fund may also use a restated or a blended
performance calculation to derive certain performance data shown for the Fund's
Investor Class shares in this Statement of Additional Information and in the
Fund's advertisements and other sales material. If the Fund's Investor Class
shares were not offered to the public during the performance period covered, the
performance data shown will be the restated historical performance of the Fund's
Class A shares at net asset value and reflecting the Rule 12b-1 fees applicable
to the Class A shares. If the Fund's Investor Class shares were offered to the
public only during a portion of the performance period covered, the performance
data shown will be the blended returns of the historical performance of the
Fund's Investor Class shares since their inception and the restated historical
performance of the Fund's Class A shares (for periods prior to inception of the
Investor Class shares) at net asset value and reflecting the Rule 12b-1 fees
applicable to the Class A shares. If the Fund's Investor Class shares were
offered to the public during the entire performance period covered, the
performance data shown will be the historical performance of each the Fund's
Investor Class shares.
A restated or blended performance calculation may be used to derive (i)
each Funds' standardized average annual total returns over a stated period and
(ii) each Funds' non-standardized cumulative total returns over a stated period.
Average Annual Total Return (After Taxes on Distributions) Quotation
80
A Fund's average annual total return (after taxes on distributions) shows
its overall change in value, including changes in share price and assuming all
the Fund's dividends and capital gain distributions are reinvested. It reflects
the deduction of federal income taxes on distributions, but not on redemption
proceeds. Average annual total returns (after taxes on distributions) are
calculated by determining the after-tax growth or decline in value of a
hypothetical investment in a Fund over a stated period of time, and then
calculating the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over the
period. Because average annual total returns (after taxes on distributions) tend
to even out variations in the Fund's return, investors should recognize that
such returns are not the same as actual year-by-year results. To illustrate the
components of overall performance, a Fund may separate its average annual total
returns (after taxes on distributions) into income results and capital gains or
losses.
The standard formula for calculating average annual total return (after
taxes on distributions) is:
n
P(1+T) = ATV
D
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on distributions);
N = number of years; and
ATV = ending value of a hypothetical $1,000 payment made at the
D
beginning of the one, five, or ten year periods (or since
inception, if applicable) at the end of the one, five, or
ten year periods (or since inception, if applicable), after
taxes on fund distributions but not after taxes on
redemption.
Standardized average annual total return (after taxes on distributions)
for (1) Class A shares reflects the deduction of a Fund's maximum front-end
sales charge at the time of purchase; and (2) Class B and Class C shares
reflects the deduction of the maximum applicable CDSC on a redemption of shares
held for the period; and (3) Investor Class shares does not reflect a deduction
of any sales charge since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes
due on such distributions, are reinvested at the price calculated as stated in
the prospectus on the reinvestment dates during the period. Taxes on a Fund's
distributions are calculated by applying to each component of the distribution
(e.g., ordinary income and long-term capital gain) the highest corresponding
individual marginal federal income tax rates in effect on the reinvestment date.
The taxable amount and tax character of each distribution is as specified by the
Fund on the dividend declaration date, but reflects any subsequent
recharacterizations of distributions. The effect of applicable tax credits, such
as the foreign tax credit, are also taken into account. The calculations only
reflect federal taxes, and thus do not reflect state and local taxes or the
impact of the federal alternative minimum tax.
Average Annual Total Return (After Taxes on Distributions and Sale of Fund
Shares) Quotation
A Fund's average annual total return (after taxes on distributions and
sale of Fund shares) shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. It reflects the deduction of federal income taxes on both
distributions and proceeds. Average annual total returns (after taxes on
distributions and redemption) are calculated by determining the after-tax growth
or decline in value of a hypothetical investment in a Fund over a stated period
of time, and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant over the period. Because average annual total returns (after taxes on
distributions and redemption) tend to even out variations in the Fund's return,
investors should recognize that such returns are not the same as actual
year-by-year results. To illustrate the components of overall performance, a
Fund may separate its average annual total returns (after taxes on distributions
and redemption) into income results and capital gains or losses.
81
The standard formula for calculating average annual total return (after
taxes on distributions and redemption) is:
n
P(1+T) = ATV
DR
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on distributions
and redemption);
N = number of years; and
ATV = ending value of a hypothetical $1,000 payment made at the
DR
beginning of the one, five, or ten year periods (or since
inception, if applicable) at the end of the one, five, or
ten year periods (or since inception, if applicable),
after taxes on fund distributions and redemption.
Standardized average annual total return (after taxes on distributions and
redemption) for: (1) Class A shares reflects the deduction of a Fund's maximum
front-end sales charge at the time of purchase; (2) Class B and Class C shares
reflects the deduction of the maximum applicable CDSC on a redemption of shares
held for the period; and (3) Investor Class shares does not reflect a deduction
of any sales charge since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes
due on such distributions, are reinvested at the price calculated as stated in
the prospectus on the reinvestment dates during the period. Taxes due on a
Fund's distributions are calculated by applying to each component of the
distribution (e.g., ordinary income and long-term capital gain) the highest
corresponding individual marginal federal income tax rates in effect on the
reinvestment date. The taxable amount and tax character of each distribution is
as specified by the Fund on the dividend declaration date, but reflects any
subsequent recharacterizations of distributions. The effect of applicable tax
credits, such as the foreign tax credit, are also taken into account. The
calculations only reflect federal taxes, and thus do not reflect state and local
taxes or the impact of the federal alternative minimum tax.
The ending values for each period assume a complete liquidation of all
shares. The ending values for each period are determined by subtracting capital
gains taxes resulting from the sale of Fund shares and adding the tax benefit
from capital losses resulting from the sale of Fund shares. The capital gain or
loss upon sale of Fund shares is calculated by subtracting the tax basis from
the proceeds. Capital gains taxes (or the benefit resulting from tax losses) are
calculated using the highest federal individual capital gains tax rate for gains
of the appropriate character (e.g., ordinary income or long-term) in effect on
the date of the sale of Fund shares and in accordance with federal tax law
applicable on that date. The calculations assume that a shareholder may deduct
all capital losses in full.
The basis of shares acquired through the $1,000 initial investment are
tracked separately from subsequent purchases through reinvested distributions.
The basis for a reinvested distribution is the distribution net of taxes paid on
the distribution. Tax basis is adjusted for any distributions representing
returns of capital and for any other tax basis adjustments that would apply to
an individual taxpayer.
The amount and character (i.e., short-term or long-term) of capital gain
or loss upon sale of Fund shares is determined separately for shares acquired
through the $1,000 initial investment and each subsequent purchase through
reinvested distributions. The tax character is determined by the length of the
measurement period in the case of the initial $1,000 investment and the length
of the period between reinvestment and the end of the measurement period in the
case of reinvested distributions.
Performance Information
All advertisements of the Funds will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of a Fund's shares. If
any advertised performance data does not reflect the maximum sales charge (if
any), such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would
82
reduce the performance quoted. Further information regarding each Fund's
performance is contained in that Fund's annual report to shareholders, which is
available upon request and without charge.
From time to time, AIM or its affiliates may waive all or a portion of
their fees and/or assume certain expenses of any Fund. Fee waivers or reductions
or commitments to reduce expenses will have the effect of increasing that Fund's
yield and total return.
The performance of each Fund will vary from time to time and past results
are not necessarily indicative of future results.
Total return and yield figures for the Funds are neither fixed nor
guaranteed. The Funds may provide performance information in reports, sales
literature and advertisements. The Funds may also, from time to time, quote
information about the Funds published or aired by publications or other media
entities which contain articles or segments relating to investment results or
other data about one or more of the Funds. The following is a list of such
publications or media entities:
Advertising Age Financial World New York Times
Barron's Forbes Pension World
Best's Review Fortune Pensions & Investments
Bloomberg Hartford Courant Inc. Personal Investor
Broker World Institutional Investor Philadelphia Inquirer
Business Week Insurance Forum The Bond Buyer
Changing Times Insurance Week USA Today
Christian Science Monitor Investor's Business Daily U.S. News & World Report
Consumer Reports Journal of the American Wall Street Journal
Economist Society of CLU & ChFC Washington Post
FACS of the Week Kiplinger Letter CNN
Financial Planning Money CNBC
Financial Product News Mutual Fund Forecaster PBS
Financial Services Week Nation's Business
Each Fund may also compare its performance to performance data of similar
mutual funds as published by the following services:
Bank Rate Monitor Morningstar, Inc.
Bloomberg Standard & Poor's
Factset Data Systems Strategic Insight
Thompson Financial
Each Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the following:
Lipper Emerging Markets Fund Index MSCI Europe, Australasia, and Far East Index
Lipper Global Fund Index MSCI Europe Index
Lipper Global Multi-Cap Growth Fund Index MSCI World Health Care Index
Lipper Health/Biotech Fund Index MSCI World Index
Lipper Mid-Cap Core Fund Index Russell 2000 Index
Lipper Multi-Cap Growth Fund Index Russell Midcap registered trademark Index
Lipper Small-Cap Core Fund Index Standard & Poor's 500 Stock Index
MSCI All Country World Free Index Standard & Poor's Composite Index of 500 Stocks
MSCI Emerging Markets Free Index
83
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
90 day Treasury Bills
Advertising for the Funds may from time to time include discussions of
general economic conditions and interest rates. Advertising for such Funds may
also include references to the use of those Funds as part of an individual's
overall retirement investment program. From time to time, sales literature
and/or advertisements for any of the Funds may disclose: (i) the largest
holdings in the Funds' portfolios; (ii) certain selling group members; (iii)
certain institutional shareholders; (iv) measurements of risk, including
standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector
analyses of holdings in the Funds' portfolios.
From time to time, the Funds' sales literature and/or advertisements may
discuss generic topics pertaining to the mutual fund industry. This includes,
but is not limited to, literature addressing general information about mutual
funds, discussions regarding investment styles, such as the growth, value or
GARP (growth at a reasonable price) styles of investing, variable annuities,
dollar-cost averaging, stocks, bonds, money markets, certificates of deposit,
retirement, retirement plans, asset allocation, tax-free investing, college
planning and inflation.
FINANCIAL STATEMENTS
Each Fund's Financial Statements for the period ended October 31, 2005,
including the Financial Highlights and the report of the independent registered
public accounting firm pertaining thereto, are incorporated by reference into
this Statement of Additional Information ("SAI") from such Fund's Annual Report
to shareholders.
The portions of such Annual Reports that are not specifically listed above
are not incorporated by reference into this SAI and are not a part of this
Registration Statement.
PENDING LITIGATION
Regulatory Action Alleging Market Timing
On April 12, 2005, the Attorney General of the State of West Virginia
("WVAG") filed a civil lawsuit against AIM, INVESCO Funds Group, Inc. ("IFG")
(the former investment advisor to certain AIM Funds) and ADI, as well as
numerous unrelated mutual fund complexes and financial institutions. None of the
AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint,
filed in the Circuit Court of Marshall County, West Virginia [Civil Action No.
05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair
competition and/or unfair or deceptive trade practices by failing to disclose in
the prospectuses for the AIM Funds, including those formerly advised by IFG,
that they had entered into certain arrangements permitting market timing of such
Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code
Section 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection
Act). The WVAG complaint is seeking injunctive relief; civil monetary penalties;
a writ of quo warranto against the defendants; pre-judgment and post-judgment
interest; costs and expenses, including counsel fees; and other relief.
If AIM is unsuccessful in its defense of the WVAG lawsuit, it could be
barred from serving as an investment adviser for any investment company
registered under the Investment Company Act of 1940, as amended (a "registered
investment company"). Such results could affect the ability of AIM or any other
investment advisor directly or indirectly owned by AMVESCAP PLC ("AMVESCAP")
from serving as an investment advisor to any registered investment company,
including your Fund. Your Fund has been informed by AIM that, if these results
occur, AIM will seek exemptive relief from the SEC to permit it to
84
continue to serve as your Fund's investment advisor. There is no assurance that
such exemptive relief will be granted.
On October 19, 2005, the WVAG lawsuit was transferred for pretrial
purposes to the MDL Court (as defined below). On July 7, 2005, the Supreme Court
of West Virginia ruled in an unrelated lawsuit that is similar to this action
that the WVAG does not have authority to bring an action based upon conduct that
is ancillary to the purchase or sale of securities. AIM intends to seek
dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
On August 30, 2005, the West Virginia Office of the State Auditor -
Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and
Notice of Right to Hearing to AIM and ADI (Order No. 05-1318). The WVASC makes
findings of fact that essentially mirror the WVAG's allegations mentioned above
and conclusions of law to the effect that AIM and ADI violated the West Virginia
securities laws. The WVASC orders AIM and ADI to cease any further violations
and seeks to impose monetary sanctions, including restitution to affected
investors, disgorgement of fees, reimbursement of investigatory, administrative
and legal costs and an "administrative assessment," to be determined by the
Commissioner. Initial research indicates that these damages could be limited or
capped by statute. AIM and ADI have the right to challenge this action, which
they intend to do.
Private Civil Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, the
parent company of IFG and AIM, certain related entities, certain of their
current and former officers and/or certain unrelated third parties) based on
allegations of improper market timing and related activity in the AIM Funds.
These lawsuits allege a variety of theories of recovery, including but not
limited to: (i) violation of various provisions of the Federal and state
securities laws; (ii) violation of various provisions of ERISA; (iii) breach of
fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in
both Federal and state courts and seek such remedies as compensatory damages;
restitution; injunctive relief; disgorgement of management fees; imposition of a
constructive trust; removal of certain directors and/or employees; various
corrective measures under ERISA; rescission of certain Funds' advisory
agreements; interest; and attorneys' and experts' fees. A list identifying such
lawsuits that have been served on IFG, AIM, the AIM Funds or related entities,
or for which service of process has been waived, as of February 16, 2006 is set
forth in Appendix P-1.
All lawsuits based on allegations of market timing, late trading, and
related issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits
consolidated their claims for pre-trial purposes into three amended complaints
against various AIM- and IFG-related parties. A list identifying the amended
complaints in the MDL Court is included in Appendix P-1. Plaintiffs in two of
the underlying lawsuits transferred to the MDL Court continue to seek remand of
their action to state court. These lawsuits are identified in Appendix P-1.
Private Civil Actions Alleging Improper Use of Fair Value Pricing
Multiple civil class action lawsuits have been filed against various
parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)
alleging that certain AIM Funds inadequately employed fair value pricing. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs. A
list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds
or related entities, or for which service of process has been waived, as of
February 16, 2006 is set forth in Appendix P-2.
85
Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the
defendants charged excessive advisory and/or distribution fees and failed to
pass on to shareholders the perceived savings generated by economies of scale.
Certain of these lawsuits also allege that the defendants adopted unlawful
distribution plans. These lawsuits allege a variety of theories of recovery,
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;
and attorneys' and experts' fees. A list identifying such lawsuits that have
been served on IFG, AIM, the AIM Funds or related entities, or for which service
of process has been waived, as of February 16, 2006 is set forth in Appendix
P-3.
Private Civil Actions Alleging Improper Mutual Fund Sales Practices and
Directed-Brokerage Arrangements
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS")
and/or certain of the trustees of the AIM Funds) alleging that the defendants
improperly used the assets of the AIM Funds to pay brokers to aggressively
promote the sale of the AIM Funds over other mutual funds and that the
defendants concealed such payments from investors by disguising them as
brokerage commissions. These lawsuits allege a variety of theories of recovery,
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a
breach of fiduciary duty. These lawsuits have been filed in Federal courts and
seek such remedies as compensatory and punitive damages; rescission of certain
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees. A list identifying such lawsuits that have been
served on IFG, AIM, the AIM Funds or related entities, or for which service of
process has been waived, as of February 16, 2006 is set forth in Appendix P-4.
86
APPENDIX A
RATINGS OF DEBT SECURITIES
The following is a description of the factors underlying the debt ratings
of Moody's, S&P and Fitch:
MOODY'S LONG-TERM DEBT RATINGS
Moody's corporate ratings are as follows:
Aaa: Bonds and preferred stock which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt-edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds and preferred stock which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. These are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risk in Aa rated bonds appear
somewhat larger than those securities rated Aaa.
A: Bonds and preferred stock which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa: Bonds and preferred stock which are rated Baa are considered as
medium-grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba: Bonds and preferred stock which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds and preferred stock which are rated B generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small.
Caa: Bonds and preferred stock which are rated Caa are of poor standing.
Such issues may be in default or there may be present elements of danger with
respect to principal or interest.
Ca: Bonds and preferred stock which are rated Ca represent obligations
which are speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C: Bonds and preferred stock which are rated C are the lowest rated class
of bonds, and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating
A-1
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates a ranking in the lower end of that generic rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor
senior financial obligations and contracts. Such obligations generally have an
original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment
grade , to indicate the relative repayment ability of rated issuers.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior
ability for repayment of senior short-term obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong
ability to repay senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Note: In addition, in certain countries the prime rating may be modified
by the issuer's or guarantor's senior unsecured long-term debt rating.
Moody's municipal ratings are as follows:
MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS
Municipal Ratings are opinions of the investment quality of issuers and
issues in the US municipal and tax-exempt markets. As such, these ratings
incorporate Moody's assessment of the default probability and loss severity of
these issuers and issues.
Municipal Ratings are based upon the analysis of four primary factors
relating to municipal finance: economy, debt, finances, and
administration/management strategies. Each of the factors is evaluated
individually and for its effect on the other factors in the context of the
municipality's ability to repay its debt.
Aaa: Issuers or issues rated Aaa demonstrate the strongest
creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Aa: Issuers or issues rated Aa demonstrate very strong creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
A-2
A: Issuers or issues rated A present above-average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
Baa: Issuers or issues rated Baa represent average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
Ba: Issuers or issues rated Ba demonstrate below-average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
B: Issuers or issues rated B demonstrate weak creditworthiness relative to
other US municipal or tax-exempt issuers or issues.
Caa: Issuers or issues rated Caa demonstrate very weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
Ca: Issuers or issues rated Ca demonstrate extremely weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
C: Issuers or issues rated C demonstrate the weakest creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa to Caa. The modifier 1 indicates that the
issue ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic category.
MOODY'S MIG/VMIG US SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for
short-term obligations that are considered investment grade. These ratings are
designated as Moody's Investment Grade (MIG) and are divided into three levels -
MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality
are designated SG, or speculative grade.
In the case of variable rate demand obligations (VRDOs), a two-component
rating is assigned. The first element represents Moody's evaluation of the
degree of risk associated with scheduled principal and interest payments. The
second element represents Moody's evaluation of the degree of risk associated
with the demand feature, using the MIG rating scale.
The short-term rating assigned to the demand feature of VRDOs is
designated as VMIG. When either the long- or short-term aspect of a VRDO is not
rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG ratings expire at note maturity. By contrast, VMIG rating expirations
will be a function of each issue's specific structural or credit features.
Gradations of investment quality are indicated by rating symbols, with
each symbol representing a group in which the quality characteristics are
broadly the same.
MIG 1/VMIG 1: This designation denotes superior credit quality. Excellent
protection is afforded by established cash flows, highly reliable liquidity
support or demonstrated broad-based access to the market for refinancing.
A-3
MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of
protection are ample although not as large as in the preceding group.
MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and
cash flow protection may be narrow and market access for refinancing is likely
to be less well established.
SG: This designation denotes speculative-grade credit quality. Debt instruments
in this category may lack sufficient margins of protection.
STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS
Issue credit ratings are based in varying degrees, on the following
considerations: likelihood of payment - capacity and willingness of the obligor
to meet its financial commitment on an obligation in accordance with the terms
of the obligation; nature of and provisions of the obligation; and protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above.
S&P describes its ratings for corporate and municipal bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in a small degree.
A: Debt rated A has a strong capacity to meet its financial commitments although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions.
NR: Not Rated.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or
demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example,
A-4
AAA/A-1+). With short-term demand debt, the note rating symbols are used with
the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.
These categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated 'B' are regarded as having only speculative capacity for timely
payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless Standard & Poor's believes
such payments will be made during such grace period.
S&P SHORT-TERM MUNICIPAL RATINGS
An S&P note rating reflect the liquidity factors and market-access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note); and source of payment
(the more dependant the issue is on the market for its refinancing, the more
likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH LONG-TERM CREDIT RATINGS
Fitch Ratings provides an opinion on the ability of an entity or of a
securities issue to meet financial commitments, such as interest, preferred
dividends, or repayment of principal, on a timely basis. These credit ratings
apply to a variety of entities and issues, including but not limited to
sovereigns,
A-5
governments, structured financings, and corporations; debt, preferred/preference
stock, bank loans, and counterparties; as well as the financial strength of
insurance companies and financial guarantors.
Credit ratings are used by investors as indications of the likelihood of
getting their money back in accordance with the terms on which they invested.
Thus, the use of credit ratings defines their function: "investment grade"
ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' -
'F3') indicate a relatively low probability of default, while those in the
"speculative" or "non-investment grade" categories (international Long-term 'BB'
- - 'D'; Short-term 'B' - 'D') either signal a higher probability of default or
that a default has already occurred. Ratings imply no specific prediction of
default probability. However, for example, it is relevant to note that over the
long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than
0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and
for 'B' rated bonds, 3.0%.
Fitch ratings do not reflect any credit enhancement that may be provided
by insurance policies or financial guaranties unless otherwise indicated.
Entities or issues carrying the same rating are of similar but not
necessarily identical credit quality since the rating categories do not fully
reflect small differences in the degrees of credit risk.
Fitch credit and research are not recommendations to buy, sell or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
of taxability of payments of any security.
The ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch Ratings believes
to be reliable. Fitch Ratings does not audit or verify the truth or accuracy of
such information. Ratings may be changed or withdrawn as a result of changes in,
or the unavailability of, information or for other reasons.
Our program ratings relate only to standard issues made under the program
concerned; it should not be assumed that these ratings apply to every issue made
under the program. In particular, in the case of non-standard issues, i.e.,
those that are linked to the credit of a third party or linked to the
performance of an index, ratings of these issues may deviate from the applicable
program rating.
Credit ratings do not directly address any risk other than credit risk. In
particular, these ratings do not deal with the risk of loss due to changes in
market interest rates and other market considerations.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong capacity for timely payment of financial
commitments, which is unlikely to be affected by foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor has a very strong capacity for timely payment of financial commitments
which is not significantly vulnerable to foreseeable events.
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of good credit quality. The
obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances are more
likely to impair this capacity.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
A-6
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of
information available to be inadequate for ratings purposes.
RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is
a reasonable possibility of a rating change and the likely direction of such
change. These are designated as "Positive," indicating a potential upgrade,
"Negative," for potential downgrade, or "Evolving," if ratings may be raised,
lowered or maintained. RatingWatch is typically resolved over a relatively short
period.
FITCH SPECULATIVE GRADE BOND RATINGS
BB: Bonds are considered speculative. There is a possibility of credit risk
developing, particularly as the result of adverse economic changes over time.
However, business and financial alternatives may be available to allow financial
commitments to be met.
B: Bonds are considered highly speculative. Significant
credit risk is present but a limited margin of safety remains. While bonds in
this class are currently meeting financial commitments, the capacity for
continued payment is contingent upon a sustained, favorable business and
economic environment.
CCC: Default is a real possibility. Capacity for meeting financial commitments
is solely reliant upon sustained, favorable business or economic developments.
CC: Default of some kind appears probable.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and are valued on the basis of their prospects
for achieving partial or full recovery value in liquidation or reorganization of
the obligor. "DDD" represents the highest potential for recovery on these bonds,
and "D" represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in categories below CCC.
FITCH SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings. A Short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as in
the case of the higher ratings.
A-7
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
A-8
APPENDIX B
PERSONS TO WHOM AIM PROVIDES
NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS
(AS OF FEBRUARY 21, 2006)
SERVICE PROVIDER DISCLOSURE CATEGORY
- ---------------- -------------------------------
ABN AMRO Financial Services, Inc. Broker (for certain AIM funds)
AIM Investment Services, Inc. Transfer Agent
Anglemyer & Co. Analyst (for certain AIM funds)
Ballard Spahr Andrews & Ingersoll, LLP Legal Counsel
BB&T Capital Markets Broker (for certain AIM funds)
Belle Haven Investments L.P. Broker (for certain AIM funds)
Bloomberg System Provider (for certain AIM funds)
BOSC, Inc. Broker (for certain AIM funds)
BOWNE & Co. Financial Printer
Brown Brothers Harriman & Co. Securities Lender (for certain AIM funds)
Cabrera Capital Markets Broker (for certain AIM funds)
Cenveo Financial Printer
Classic Printers Inc. Financial Printer
Coastal Securities, LP Broker (for certain AIM funds)
Color Dynamics Financial Printer
Duncan-Williams, Inc. Broker (for certain AIM funds)
Earth Color Houston Financial Printer
EMCO Press Financial Printer
Empirical Research Partners Analyst (for certain AIM funds)
Fidelity Investments Broker (for certain AIM funds)
First Albany Capital Broker (for certain AIM funds)
First Tryon Securities Broker (for certain AIM funds)
Foley & Lardner LLP Legal Counsel (for certain AIM funds)
GainsKeeper Software Provider (for certain AIM funds)
GCom2 Solutions Software Provider (for certain AIM funds)
George K. Baum & Company Broker (for certain AIM funds)
Global Trend Alert Analyst (for certain AIM funds)
Grover Printing Financial Printer
Gulfstream Graphics Corp. Financial Printer
Hattier, Sanford & Reynoir Broker (for certain AIM funds)
Howe Barnes Investments, Inc. Broker (for certain AIM funds)
Hutchinson, Shockey, Erley & Co. Broker (for certain AIM funds)
iMoneyNet Rating & Ranking Agency (for certain AIM funds)
Institutional Shareholder Services, Inc. Proxy Voting Service (for certain AIM funds)
J.P.Morgan Securities Inc. Analyst (for certain AIM funds)
JPMorgan Securities Inc.\Citigroup Global Markets Lender (for certain AIM funds)
Inc.\JPMorgan Chase Bank
John Hancock Investment Management Services, LLC Sub-advisor (for certain sub-advised accounts)
Kevin Dann & Partners Analyst (for certain AIM funds)
Kirkpatrick, Pettis, Smith, Pollian, Inc. Broker (for certain AIM funds)
Kramer, Levin Naftalis & Frankel LLP Legal Counsel
Legg Mason Wood Walker Broker (for certain AIM funds)
Lipper Rating & Ranking Agency (for certain AIM funds)
Loan Pricing Corporation Pricing Service (for certain AIM funds)
Loop Capital Markets Broker (for certain AIM funds)
M.R. Beal & Company Broker (for certain AIM funds)
McDonald Investments Inc. Broker (for certain AIM funds)
B-1
SERVICE PROVIDER DISCLOSURE CATEGORY
- ---------------- -------------------------------
Mesirow Financial, Inc. Broker (for certain AIM funds)
Moody's Investors Service Rating & Ranking Agency (for certain AIM funds)
Morgan Keegan & Company, Inc. Broker (for certain AIM funds)
Morrison Foerster LLP Legal Counsel
Muzea Insider Consulting Services, LLC Analyst (for certain AIM funds)
Noah Financial, LLC Analyst (for certain AIM funds)
Piper Jaffray Analyst and Broker (for certain AIM funds)
PricewaterhouseCoopers LLP Independent Registered Public Accounting Firm (for certain AIM
funds)
Printing Arts of Houston Financial Printer
Ramirez & Co., Inc. Broker (for certain AIM funds)
Raymond James & Associates, Inc. Broker (for certain AIM funds)
RBC Capital Markets Analyst (for certain AIM funds)
RBC Dain Rauscher Incorporated Broker (for certain AIM funds)
Reuters America Inc. Pricing Service (for certain AIM funds)
Robert W. Baird & Co. Incorporated Broker (for certain AIM funds)
RR Donnelley Financial Printer
Salomon Smith Barney Broker (for certain AIM funds)
SBK Brooks Investment Corp. Broker (for certain AIM funds)
Seattle Northwest Securities Corporation Broker (for certain AIM funds)
Siebert Brandford Shank & Co., L.L.C. Broker (for certain AIM funds)
Signature Financial Printer
Simon Printing Company Financial Printer
Southwest Precision Printers, Inc. Financial Printer
Standard and Poor's/Standard and Poor's Securities Pricing Service (for certain AIM funds)
Evaluations, Inc.
State Street Bank and Trust Company Custodian (for certain AIM funds); Lender (for certain AIM Funds);
Securities Lender (for certain AIM funds)
Sterne, Agee & Leach, Inc. Broker (for certain AIM funds)
Stifel, Nicholaus & Company, Incorporated Broker (for certain AIM funds)
The Bank of New York Custodian (for certain AIM funds)
The MacGregor Group, Inc. Software Provider
Thomson Information Services Incorporated Software Provider
UBS Financial Services, Inc. Broker (for certain AIM funds)
VCI Group Inc. Financial Printer
Wachovia National Bank, N.A. Broker (for certain AIM funds)
Western Lithograph Financial Printer
Wiley Bros. Aintree Capital L.L.C. Broker (for certain AIM funds)
XSP, LLC\Solutions Plus, Inc. Software Provider
B-2
APPENDIX C
TRUSTEES AND OFFICERS
As of January 31, 2006
The address of each trustee and officer is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173. Each trustee oversees 109 portfolios in the AIM Funds
complex. The trustees serve for the life of the Trust, subject to their earlier
death, incapacitation, resignation, retirement or removal as more specifically
provided in the Trust's organizational documents. Column two below includes
length of time served with any predecessor entities, if any.
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE
- -------------------------- ------- ------------------------------------------- ------------------
INTERESTED PERSONS 1998 Director and Chairman, A I M Management Group None
1
Robert H. Graham -- 1946
Trustee, Vice Chair, President Inc. (financial services holding company);
and Principal Executive Officer Director and Vice Chairman, AMVESCAP PLC and
Chairman, AMVESCAP PLC - AIM Division (parent of
AIM and a global investment management firm)
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.; Director,
Chairman and President, A I M Advisors, Inc.
(registered investment advisor); Director and
Chairman, A I M Capital Management, Inc.
(registered investment advisor), A I M
Distributors, Inc. (registered broker dealer),
AIM Investment Services, Inc. (registered
transfer agent), and Fund Management Company
(registered broker dealer); and Chief Executive
Officer, AMVESCAP PLC - Managed Products
2
Mark H. Williamson -- 1951 2003 Director, President and Chief Executive Officer, None
Trustee and Executive Vice A I M Management Group Inc. (financial services
President holding company); Director and President, A I M
Advisors, Inc. (registered investment advisor);
Director, A I M Capital Management, Inc.
(registered investment advisor) and A I M
Distributors, Inc. (registered broker dealer);
Director and Chairman, AIM Investment Services,
Inc. (registered transfer agent), Fund
Management Company (registered broker dealer)
and INVESCO Distributors, Inc. (registered
broker dealer); and Chief Executive Officer,
AMVESCAP PLC - AIM Division (parent of AIM and a
global investment management firm)
Formerly: Director, Chairman, President and
Chief Executive Officer, INVESCO Funds Group,
Inc.; President and Chief Executive Officer,
INVESCO Distributors, Inc.; Chief Executive
Officer, AMVESCAP PLC - Managed Products; and
Chairman, A I M Advisors, Inc.
- ----------------
1
Mr. Graham is considered an interested person of the Trust because he is a
director of AMVESCAP PLC, parent of the advisor to the Trust.
2
Mr. Williamson is considered an interested person of the Trust because he
is an officer and a director of the advisor to, and a director of the
principal underwriter of the Trust.
C-1
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE
- -------------------------- ------- ------------------------------------------- ------------------
INDEPENDENT TRUSTEES
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited
Trustee and Chair (technology consulting company) (insurance
company); and
Captaris, Inc.
(unified messaging
provider)
Bob R. Baker - 1936 2003 Retired None
Trustee
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc.
Trustee Formerly: Partner, law firm of Baker & McKenzie (registered
investment company
(2 portfolios))
James T. Bunch - 1942 2003 Founder, Green, Manning & Bunch Ltd. None
Trustee (investment banking firm); and Director, Policy
Studies, Inc. and Van Gilder Insurance
Corporation
Albert R. Dowden -- 1941 2001 Director of a number of public and private None
Trustee business corporations, including the Boss Group,
Ltd. (private investment and
management); Cortland Trust, Inc.
(Chairman) (registered investment
company (3 portfolios)); Annuity
and Life Re (Holdings), Ltd.
(insurance company); CompuDyne
Corporation (provider of products
and services to the public security
market) and Homeowners of America
Holding Corporation
Formerly: Director, President and Chief
Executive Officer, Volvo Group
North America, Inc.; Senior Vice
President, AB Volvo; and director
of various affiliated Volvo
companies
Edward K. Dunn, Jr. -- 1935 2001 Retired None
Trustee
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Century Administaff ; and
Trustee Group, Inc. (government affairs company) and; Discovery Global
Owner, Dos Angelos Ranch, L.P. Education Fund
(non-profit)
Formerly: Chief Executive Officer, Texana
Timber LP (sustainable forestry company)
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Naftalis and Cortland Trust,
Trustee Frankel LLP Inc. (registered
investment company
(3 portfolios))
C-2
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE
- -------------------------- ------- ------------------------------------------- ------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the None
Trustee USA
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
Ruth H. Quigley -- 1935 1987 Retired None
Trustee
Larry Soll - 1942 2003 Retired None
Trustee
Raymond Stickel, Jr. - 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche
OTHER OFFICERS
Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management Group N/A
Senior Vice President and Inc. (financial services holding company);
Chief Compliance Officer Senior Vice President and Chief Compliance
Officer, A I M Advisors, Inc.; Vice President
and Chief Compliance Officer, A I M Capital
Management, Inc.; and Vice President, A I M
Distributors, Inc., AIM Investment Services,
Inc. and Fund Management Company and Global
Compliance Director, AMVESCAP
Formerly: Senior Vice President and Compliance
Director, Delaware Investments Family of Funds;
and Chief Compliance Officer, A I M
Distributors, Inc.
Russell C. Burk - 1958 2005 Formerly: Director of Compliance and Assistant N/A
Senior Vice President and General Counsel, ICON Advisers, Inc.; Financial
Senior Officer Consultant, Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual Funds, Inc.
C-3
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE
- -------------------------- ------- ------------------------------------------- ------------------
Kevin M. Carome - 1956 Senior 2003 Director, Senior Vice President, Secretary and N/A
Vice President, Chief Legal General Counsel, A I M Management Group Inc.
Officer and Secretary (financial services holding company) and A I M
Advisors, Inc.; Director and Vice President,
INVESCO Distributors, Inc.; Vice President, A I
M Capital Management, Inc., AIM Investment
Services, Inc., and Fund Management Company; and
Senior Vice President, A I M Distributors, Inc.
and Senior Vice President and General Counsel,
AMVESCAP
Formerly: Senior Vice President and General
Counsel, Liberty Financial Companies, Inc.; and
Senior Vice President and General Counsel,
Liberty Funds Group, LLC; and Vice President, A
I M Distributors, Inc.; and Director and General
Counsel, Fund Management Company
Sidney M. Dilgren - 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Advisors, Inc.
Treasurer and Principal Formerly: Senior Vice President, AIM Investment
Financial Officer Services, Inc.; and Vice President, A I M
Distributors, Inc.
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief Investment N/A
Vice President Officer, A I M Advisors Inc.; Director,
Chairman, Chief Executive Officer, President and
Chief Investment Officer, A I M Capital
Management, Inc; and Executive Vice President, A
I M Management Group Inc.
Formerly: Senior Vice President, AIM Private
Asset Management, Inc.; and Chief Equity
Officer, and Senior Investment Officer, A I M
Capital Management, Inc.
Karen Dunn Kelley - 1960 2004 Director of Cash Management, Managing Director N/A
Vice President and Chief Cash Management Officer, A I M Capital
Management, Inc.; Director and President, Fund
Management Company; and Vice President, A I M
Advisors, Inc.
C-4
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2005
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY SECURITIES TRUSTEE IN THE AIM FAMILY
NAME OF TRUSTEE PER FUND OF FUNDS REGISTERED TRADEMARK
- ----------------- ------------------------------------------------------ -----------------------------
Robert H. Graham AIM Developing Markets Fund Over $100,000 Over $100,000
Mark H. Williamson AIM Global Health Care Fund $10,001 - $50,000 Over $100,000
Bob R. Baker -0- Over $100,000
Frank S. Bayley AIM Developing Markets Fund $1 - $10,000 Over $100,000
AIM Trimark Small Companies Fund $10,001 - $50,000
3
James T. Bunch -0- Over $100,000
3
Bruce L. Crockett AIM Developing Markets Fund $10,001 - $50,000 Over $100,000
Albert R. Dowden -0- Over $100,000
3
Edward K. Dunn, Jr. AIM Trimark Endeavor Fund $10,001 - $50,000 Over $100,000
3
Jack M. Fields -0- Over $100,000
3
Carl Frischling AIM Developing Markets Fund Over $100,000 Over $100,000
AIM Trimark Small Companies Fund $50,001 - $100,000
3
Prema Mathai-Davis -0- Over $100,000
Lewis F. Pennock -0- Over $100,000
3
Ruth H. Quigley AIM Developing Markets Fund $10,001 - $50,000 $50,001 - $100,000
3
Larry Soll AIM Developing Markets Fund $10,001 - $50,000 Over $100,000
AIM Global Health Care Fund $50,001 - $100,000
4
Raymond Stickel, Jr. AIM Trimark Small Companies Fund $10,001 - $50,000 Over $100,000
- ----------------------
3
Include 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.
4
Mr. Stickel was elected as a trustee of the Trust effective October
1,2005.
C-5
APPENDIX D
TRUSTEE COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for
each trustee of the Trust who was not affiliated with AIM during the year ended
December 31, 2005:
RETIREMENT
AGGREGATE BENEFITS ESTIMATED ANNUAL TOTAL
COMPENSATION FROM ACCRUED BENEFITS UPON COMPENSATION
THE BY ALL RETIREMENT FROM ALL FROM ALL AIM
(1) (2) (3) (4)
TRUSTEE TRUST AIM FUNDS AIM FUNDS FUNDS
- --------- -------------------- -------------- -------------------- ------------
Bob R. Baker $ 6,962 $ 200,136 $ 162,613 $ 213,750
Frank S. Bayley 7,451 132,526 120,000 229,000
James T. Bunch 6,472 162,930 120,000 198,500
Bruce L. Crockett 11,455 83,764 120,000 359,000
Albert R. Dowden 7,451 112,024 120,000 229,000
Edward K. Dunn, Jr. 7,451 141,485 120,000 229,000
Jack M. Fields 6,031 59,915 120,000 185,000
(5)
Carl Frischling 6,366 59,042 120,000 195,250
(6)
Gerald J. Lewis 6,472 162,930 114,375 198,500
Prema Mathai-Davis 6,962 69,131 120,000 213,750
Lewis F. Pennock 6,472 86,670 120,000 198,500
Ruth H. Quigley 6,962 154,658 120,000 213,750
(6)
Louis S. Sklar 1,184 51,638 101,250 -
Larry Soll 6,472 201,483 138,990 198,500
(7)
Raymond Stickel, Jr. 654 - 120,000 54,000
(1) Amounts shown are based on the fiscal year ended October 31, 2005. The
total amount of compensation deferred by all trustees of the Trust during
the fiscal year ended October 31, 2005, including earnings, was $15,770.
(2) During the fiscal year ended October 31, 2005, the total amount of
expenses allocated to the Trust in respect of such retirement benefits was
$31,359.
(3) These amounts represent the estimated annual benefits payable by the AIM
Funds upon the trustee's retirement and assumes each trustee serves until
his or her normal retirement date.
(4) All trustees currently serve as trustees of 19 registered investment
companies advised by AIM.
(5) During the fiscal year ended October 31, 2005, the Trust paid $17,534 in
legal fees to Kramer Levin Naftalis & Frankel LLP for services rendered by
such firm as counsel to the independent trustees of the Trust. Mr.
Frischling is a partner of such firm.
(6) Mr. Sklar and Mr. Lewis retired effective December 31, 2004 and December
31, 2005, respectively.
(7) Mr. Stickel was elected as trustee of the Trust effective October 1, 2005.
D-1
APPENDIX E
PROXY POLICIES AND PROCEDURES
(AS AMENDED OCTOBER 1, 2005)
A. PROXY POLICIES
Each of A I M Advisors, Inc., A I M Capital Management, Inc. and AIM
Private Asset Management, Inc. (each an "AIM Advisor" and collectively
"AIM") has the fiduciary obligation to, at all times, make the economic
best interest of advisory clients the sole consideration when voting
proxies of companies held in client accounts. As a general rule, each AIM
Advisor shall vote against any actions that would reduce the rights or
options of shareholders, reduce shareholder influence over the board of
directors and management, reduce the alignment of interests between
management and shareholders, or reduce the value of shareholders'
investments. At the same time, AIM believes in supporting the management
of companies in which it invests, and will accord proper weight to the
positions of a company's board of directors, and the AIM portfolio
managers who chose to invest in the companies. Therefore, on most issues,
our votes have been cast in accordance with the recommendations of the
company's board of directors, and we do not currently expect that trend to
change. Although AIM's proxy voting policies are stated below, AIM's proxy
committee considers all relevant facts and circumstances, and retains the
right to vote proxies as deemed appropriate.
I. BOARDS OF DIRECTORS
A board that has at least a majority of independent directors is
integral to good corporate governance. The key board committees
(e.g., Audit, Compensation and Nominating) should be composed of
only independent trustees.
There are some actions by directors that should result in votes
being withheld. These instances include directors who:
- Are not independent directors and (a) sit on the board's
audit, compensation or nominating committee, or (b) sit on a
board where the majority of the board is not independent;
- Attend less than 75 percent of the board and committee
meetings without a valid excuse;
- It is not clear that the director will be able to fulfill his
function;
- Implement or renew a dead-hand or modified dead-hand poison
pill;
- Enacted egregious corporate governance or other policies or
failed to replace management as appropriate;
- Have failed to act on takeover offers where the majority of
the shareholders have tendered their shares; or
- Ignore a shareholder proposal that is approved by a majority
of the shares outstanding.
Votes in a contested election of directors must be evaluated on a
case-by-case basis, considering the following factors:
- Long-term financial performance of the target company relative
to its industry;
- Management's track record;
- Portfolio manager's assessment;
- Qualifications of director nominees (both slates);
- Evaluation of what each side is offering shareholders as well
as the likelihood that the proposed objectives and goals can
be met; and
- Background to the proxy contest.
II. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
A company should limit its relationship with its auditors to the
audit engagement, and certain closely related activities that do
not, in the aggregate, raise an appearance of impaired independence.
We will support the reappointment of the company's auditors unless:
- It is not clear that the auditors will be able to fulfill
their function;
E-1
- There is reason to believe the independent auditors have
rendered an opinion that is neither accurate nor indicative of
the company's financial position; or
- The auditors have a significant professional or personal
relationship with the issuer that compromises the auditors'
independence.
III. COMPENSATION PROGRAMS
Appropriately designed equity-based compensation plans, approved by
shareholders, can be an effective way to align the interests of
long-term shareholders and the interests of management, employees
and directors. Plans should not substantially dilute shareholders'
ownership interests in the company, provide participants with
excessive awards or have objectionable structural features. We will
consider all incentives, awards and compensation, and compare them
to a company-specific adjusted allowable dilution cap and a weighted
average estimate of shareholder wealth transfer and voting power
dilution.
- We will generally vote against equity-based plans where the
total dilution (including all equity-based plans) is
excessive.
- We will support the use of employee stock purchase plans to
increase company stock ownership by employees, provided that
shares purchased under the plan are acquired for no less than
85% of their market value.
- We will vote against plans that have any of the following
structural features: ability to re-price underwater options
without shareholder approval, ability to issue options with an
exercise price below the stock's current market price, ability
to issue reload options, or automatic share replenishment
("evergreen") feature.
- We will vote for proposals to reprice options if there is a
value-for-value (rather than a share-for-share) exchange.
- We will generally support the board's discretion to determine
and grant appropriate cash compensation and severance
packages.
IV. CORPORATE MATTERS
We will review management proposals relating to changes to capital
structure, reincorporation, restructuring and mergers and
acquisitions on a case by case basis, considering the impact of the
changes on corporate governance and shareholder rights, anticipated
financial and operating benefits, portfolio manager views, level of
dilution, and a company's industry and performance in terms of
shareholder returns.
- We will vote for merger and acquisition proposals that the
proxy committee and relevant portfolio managers believe, based
on their review of the materials, will result in financial and
operating benefits, have a fair offer price, have favorable
prospects for the combined companies, and will not have a
negative impact on corporate governance or shareholder rights.
- We will vote against proposals to increase the number of
authorized shares of any class of stock that has superior
voting rights to another class of stock.
- We will vote for proposals to increase common share
authorization for a stock split, provided that the increase in
authorized shares would not result in excessive dilution given
a company's industry and performance in terms of shareholder
returns.
- We will vote for proposals to institute open-market share
repurchase plans in which all shareholders participate on an
equal basis.
V. SHAREHOLDER PROPOSALS
Shareholder proposals can be extremely complex, and the impact on
share value can rarely be anticipated with any high degree of
confidence. The proxy committee reviews shareholder proposals on a
case-by-case basis, giving careful consideration to such factors as:
the proposal's impact on the company's short-term and long-term
share value, its effect on the company's reputation, the economic
effect of the proposal, industry and regional norms
E-2
applicable to the company, the company's overall corporate
governance provisions, and the reasonableness of the request.
- We will generally abstain from shareholder social and
environmental proposals.
- We will generally support the board's discretion regarding
shareholder proposals that involve ordinary business
practices.
- We will generally vote for shareholder proposals that are
designed to protect shareholder rights if the company's
corporate governance standards indicate that such additional
protections are warranted.
- We will generally vote for proposals to lower barriers to
shareholder action.
- We will generally vote for proposals to subject shareholder
rights plans to a shareholder vote. In evaluating these plans,
we give favorable consideration to the presence of "TIDE"
provisions (short-term sunset provisions, qualified
bid/permitted offer provisions, and/or mandatory review by a
committee of independent directors at least every three
years).
VI. OTHER
- We will vote against any proposal where the proxy materials
lack sufficient information upon which to base an informed
decision.
- We will vote against any proposals to authorize the proxy to
conduct any other business that is not described in the proxy
statement.
- We will vote any matters not specifically covered by these
proxy policies and procedures in the economic best interest of
advisory clients.
AIM's proxy policies, and the procedures noted below, may be
amended from time to time.
B. PROXY COMMITTEE PROCEDURES
The proxy committee currently consists of representatives from the Legal
and Compliance Department, the Investments Department and the Finance
Department.
The committee members review detailed reports analyzing the proxy issues
and have access to proxy statements and annual reports. Committee members
may also speak to management of a company regarding proxy issues and
should share relevant considerations with the proxy committee. The
committee then discusses the issues and determines the vote. The committee
shall give appropriate and significant weight to portfolio managers' views
regarding a proposal's impact on shareholders. A proxy committee meeting
requires a quorum of three committee members, voting in person or by
e-mail.
AIM's proxy committee shall consider its fiduciary responsibility to all
clients when addressing proxy issues and vote accordingly. The proxy
committee may enlist the services of reputable outside professionals
and/or proxy evaluation services, such as Institutional Shareholder
Services or any of its subsidiaries ("ISS"), to assist with the analysis
of voting issues and/or to carry out the actual voting process. To the
extent the services of ISS or another provider are used, the proxy
committee shall periodically review the policies of that provider. The
proxy committee shall prepare a report for the Funds' Board of Trustees on
a periodic basis regarding issues where AIM's votes do not follow the
recommendation of ISS or another provider because AIM's proxy policies
differ from those of such provider.
In addition to the foregoing, the following shall be strictly
adhered to unless contrary action receives the prior approval of the
Funds' Board of Trustees:
1. Other than by voting proxies and participating in Creditors'
committees, AIM shall not engage in conduct that involves an attempt
to change or influence the control of a company.
2. AIM will not publicly announce its voting intentions and the reasons
therefore.
3. AIM shall not participate in a proxy solicitation or otherwise seek
proxy-voting authority from any other public company shareholder.
4. All communications regarding proxy issues between the proxy
committee and companies or their agents, or with fellow shareholders
shall be for the sole purpose of expressing and
E-3
discussing AIM's concerns for its advisory clients' interests and
not for an attempt to influence or control management.
C. BUSINESS/DISASTER RECOVERY
If the proxy committee is unable to meet due to a temporary business
interruption, such as a power outage, a sub-committee of the proxy
committee, even if such subcommittee does not constitute a quorum of the
proxy committee, may vote proxies in accordance with the policies stated
herein. If the sub-committee of the proxy committee is not able to vote
proxies, the sub-committee shall authorize ISS to vote proxies by default
in accordance with ISS' proxy policies and procedures, which may vary
slightly from AIM's.
D. RESTRICTIONS AFFECTING VOTING
If a country's laws allow a company in that country to block the sale of
the company's shares by a shareholder in advance of a shareholder meeting,
AIM will not vote in shareholder meetings held in that country, unless the
company represents that it will not block the sale of its shares in
connection with the meeting. Administrative or other procedures, such as
securities lending, may also cause AIM to refrain from voting. Although
AIM considers proxy voting to be an important shareholder right, the proxy
committee will not impede a portfolio manager's ability to trade in a
stock in order to vote at a shareholder meeting.
E. CONFLICTS OF INTEREST
The proxy committee reviews each proxy to assess the extent to which there
may be a material conflict between AIM's interests and those of advisory
clients. A potential conflict of interest situation may include where AIM
or an affiliate manages assets for, administers an employee benefit plan
for, provides other financial products or services to, or otherwise has a
material business relationship with, a company whose management is
soliciting proxies, and failure to vote proxies in favor of management of
the company may harm AIM's relationship with the company. In order to
avoid even the appearance of impropriety, the proxy committee will not
take AIM's relationship with the company into account, and will vote the
company's proxies in the best interest of the advisory clients, in
accordance with these proxy policies and procedures. If AIM's proxy
policies and voting record do not guide the proxy committee's vote in a
situation where a conflict of interest exists, the proxy committee will
vote the proxy in the best interest of the advisory clients, and will
provide information regarding the issue to the Funds' Board of Trustees in
the next quarterly report.
If a committee member has any conflict of interest with respect to a
company or an issue presented, that committee member should inform the
proxy committee of such conflict and abstain from voting on that company
or issue.
F. FUND OF FUNDS
When an AIM Fund (an "Investing Fund") that invests in another AIM Fund(s)
(an "Underlying Fund") has the right to vote on the proxy of the
Underlying Fund, the Investing Fund will echo the votes of the other
shareholders of the Underlying AIM Fund.
G. CONFLICT IN THESE POLICIES
If following any of the policies listed herein would lead to a vote that
the proxy committee deems to be not in the best interest of AIM's advisory
clients, the proxy committee will vote the proxy in the manner that they
deem to be the best interest of AIM's advisory clients and will inform the
Funds' Board of Trustees of such vote and the circumstances surrounding it
promptly thereafter.
E-4
AIM TRIMARK INVESTMENTS
PROXY VOTING GUIDELINES
(SEPTEMBER 15, 2005)
PURPOSE AND BACKGROUND
In its trusteeship and management of mutual funds, AIM Trimark acts as
fiduciary to the unitholders and must act in their best interests.
APPLICATION
AIM Trimark will make every effort to exercise all voting rights with
respect to securities held in the mutual funds that it manages in Canada or to
which it provides sub-advisory services, including a Fund registered under and
governed by the US Investment Company act of 1940, as amended (the "US Funds")
(collectively, the "Funds"). Proxies for the funds distributed by AIM Trimark
Investments and managed by an affiliate or a third party (a "Sub-Advisor") will
be voted in accordance with the Sub-Advisor's policy, unless the sub-advisory
agreement provides otherwise.
The portfolio managers have responsibility for exercising all proxy votes
and in doing so, for acting in the best interest of the Fund. Portfolio managers
must vote proxies in accordance with the Guidelines, as amended from time to
time, a copy of which is attached to this policy.
When a proxy is voted against management's recommendation, the portfolio
manager will provide to the CIO the reasons in writing for any vote in
opposition to management's recommendation.
AIM Trimark may delegate to a third party the responsibility to vote
proxies on behalf of all or certain Funds, in accordance with the Guidelines.
RECORDS MANAGEMENT
The Investment Department will endeavour to ensure that all proxies and
notices are received from all issuers on a timely basis, and will maintain for
all Funds
- A record of all proxies received;
- a record of votes cast;
- a copy of the reasons for voting against management; and for the US
Funds
- the documents mentioned above; and
- a copy of any document created by AIM Trimark that was material to
making a decision how to vote proxies on behalf of a US Fund and
that memorializes the basis of that decision.
AIM Trimark has a dedicated Central Proxy Administrator who manages all
proxy voting materials. Proxy voting circulars for all companies are received
electronically through an external service provider. Circulars for North
American companies and ADRs are generally also received in paper format.
Once a circular is received, the Administrator verifies that all shares
and Funds affected are correctly listed. The Administrator then gives a copy of
the proxy summary to each affected portfolio manager and maintains a tracking
list to ensure that all proxies are voted within the prescribed deadlines.
Once voting information has been received from the portfolio managers,
voting instructions are sent electronically to the service provider who then
forwards the instructions to the appropriate proxy
E-5
voting agent or transfer agent. The external service provider retains on behalf
of AIM Trimark a record of the votes cast and agrees to provide AIM Trimark with
a copy of proxy records promptly upon request. The service provider must make
all documents available to AIM Trimark for a period of six years.
In the event that AIM Trimark ceases to use an external service provider,
all documents would be maintained and preserved in an easily accessible place
(i) for a period of two years where AIM Trimark carries on business in Canada
and (ii) for a period of three years thereafter at the same location or at any
other location.
REPORTING
The CIO will report on proxy voting to the Fund Boards on an annual basis
with respect to all funds managed in Canada or distributed by AIM Trimark
Investments and managed by a Sub-Advisor. The CIO will report on proxy voting to
the Board of Directors of the US Funds as required from time to time.
Compliance will review the proxy voting records held by AIM Trimark on an
annual basis.
E-6
AIM TRIMARK INVESTMENTS
PROXY VOTING GUIDELINES
(SEPTEMBER 15, 2005)
PURPOSE
The purpose of this document is to describe AIM Trimark's general
guidelines for voting proxies received from companies held in AIM Trimark's
Canada-managed funds. Proxy voting for the funds managed on behalf of AIM
Trimark on a sub-advised basis (i.e. by other AMVESCAP business units or on a
third party basis) are subject to the proxy voting policies & procedures of
those other entities. As part of its regular due diligence, AIM Trimark will
review the proxy voting policies & procedures of any new sub-advisors to ensure
that they are appropriate in the circumstances.
INTRODUCTION
AIM Trimark has the fiduciary obligation to ensure that the long-term
economic best interest of unitholders is the key consideration when voting
proxies of portfolio companies.
As a general rule, AIM Trimark shall vote against any actions that would
- reduce the rights or options of shareholders,
- reduce shareholder influence over the board of directors and
management,
- reduce the alignment of interests between management and
shareholders, or
- reduce the value of shareholders' investments.
At the same time, since AIM Trimark's portfolio managers follow an
investment discipline that includes investing in companies that are believed to
have strong management teams, the portfolio managers will generally support the
management of companies in which they invest, and will accord proper weight to
the positions of a company's board of directors. Therefore, in most
circumstances, votes will be cast in accordance with the recommendations of the
company's board of directors.
While AIM Trimark's proxy voting guidelines are stated below, the
portfolio managers will take into consideration all relevant facts and
circumstances (including country specific considerations), and retain the right
to vote proxies as deemed appropriate.
These guidelines may be amended from time to time.
CONFLICTS OF INTEREST
When voting proxies, AIM Trimark's portfolio managers assess whether there
are material conflicts of interest between AIM Trimark's interests and those of
unitholders. A potential conflict of interest situation may include where AIM
Trimark or an affiliate manages assets for, provides other financial services
to, or otherwise has a material business relationship with, a company whose
management is soliciting proxies, and failure to vote in favour of management of
the company may harm AIM Trimark's relationship with the company. In all
situations, the portfolio managers will not take AIM Trimark's relationship with
the company into account, and will vote the proxies in the best interest of the
unitholders. To the extent that a portfolio manager has any conflict of interest
with respect to a company or an issue presented, that portfolio manager should
abstain from voting on that company or issue. Portfolio managers are required to
report to the Chief Investment Officer any such conflicts of interest and/or
attempts by outside parties to improperly influence the voting process.
E-7
I BOARDS OF DIRECTORS
We believe that a board that has at least a majority of independent
directors is integral to good corporate governance. Unless there are
restrictions specific to a company's home jurisdiction, key board committees,
including audit and compensation committees, should be completely independent.
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Votes in an uncontested election of directors are evaluated on a
CASE-BY-CASE basis, considering factors that may include:
- Long-term company performance relative to a market index,
- Composition of the board and key board committees,
- Nominee's attendance at board meetings,
- Nominee's investments in the company,
- Whether the chairman is also serving as CEO, and
- Whether a retired CEO sits on the board.
VOTING ON DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Votes in a contested election of directors are evaluated on a CASE-BY-CASE
basis, considering factors that may include:
- Long-term financial performance of the target company relative to
its industry,
- Management's track record,
- Background to the proxy contest,
- Qualifications of director nominees (both slates),
- Evaluation of what each side is offering shareholders as well as the
likelihood that the proposed objectives and goals can be met, and
- Stock ownership positions.
REIMBURSEMENT OF PROXY SOLICITATION EXPENSES
Decisions to provide reimbursement for dissidents waging a proxy contest
are made on a CASE-BY-CASE basis.
SEPARATING CHAIRMAN AND CEO
Shareholder proposals to separate the chairman and CEO positions should be
evaluated on a CASE-BY-CASE basis.
While we generally support these proposals, some companies have governance
structures in place that can satisfactorily counterbalance a combined position.
Voting decisions will take into account factors such as:
E-8
- Designated lead director, appointed from the ranks of the
independent board members with clearly delineated duties;
- Majority of independent directors;
- All-independent key committees;
- Committee chairpersons nominated by the independent directors;
- CEO performance is reviewed annually by a committee of outside
directors; and
- Established governance guidelines.
MAJORITY OF INDEPENDENT DIRECTORS
While we generally support shareholder proposals asking that a majority of
directors be independent, each proposal should be evaluated on a CASE-BY-CASE
basis.
We generally vote for shareholder proposals that request that the board's
audit, compensation, and/or nominating committees be composed exclusively of
independent directors.
STOCK OWNERSHIP REQUIREMENTS
We believe that individual directors should be appropriately compensated
and motivated to act in the best interests of shareholders. Share ownership by
directors better aligns their interests with those of other shareholders.
Therefore, we believe that meaningful share ownership by directors is in the
best interest of the company.
We generally vote FOR proposals that require a certain percentage of a
director's compensation to be in the form of common stock.
SIZE OF BOARDS OF DIRECTORS
We believe that the number of directors is important to ensuring the
board's effectiveness in maximizing long-term shareholder value. The board must
be large enough to allow it to adequately discharge its responsibilities,
without being so large that it becomes cumbersome.
While we prefer a board of no fewer than five and no more than 16 members,
each situation will be considered on a CASE-BY-CASE basis taking into
consideration the specific company circumstances.
CLASSIFIED OR STAGGERED BOARDS
In a classified or staggered board, directors are typically elected in two
or more "classes", serving terms greater than one year.
We prefer the annual election of all directors and will generally NOT
SUPPORT proposals that provide for staggered terms for board members. We
recognize that there may be jurisdictions where staggered terms for board
members is common practice and, in such situations, we will review the proposals
on a CASE-BY-CASE basis.
DIRECTOR INDEMNIFICATION AND LIABILITY PROTECTION
We recognize that many individuals may be reluctant to serve as corporate
directors if they were to be personally liable for all lawsuits and legal costs.
As a result, limitations on directors' liability can
E-9
benefit the corporation and its shareholders by helping to attract and retain
qualified directors while providing recourse to shareholders on areas of
misconduct by directors.
We generally vote FOR proposals that limit directors' liability and
provide indemnification as long as the arrangements are limited to the director
acting honestly and in good faith with a view to the best interests of the
corporation and, in criminal matters, are limited to the director having
reasonable grounds for believing the conduct was lawful.
II AUDITORS
A strong audit process is a requirement for good corporate governance. A
significant aspect of the audit process is a strong relationship with a
knowledgeable and independent set of auditors.
RATIFICATION OF AUDITORS
We believe a company should limit its relationship with its auditors to
the audit engagement, and certain closely related activities that do not, in the
aggregate, raise an appearance of impaired independence.
We generally vote FOR the reappointment of the company's auditors unless:
- It is not clear that the auditors will be able to fulfill their
function;
- There is reason to believe the auditors have rendered an opinion
that is neither accurate nor indicative of the company's financial
position; or
- The auditors have a significant professional or personal
relationship with the issuer that compromises their independence.
DISCLOSURE OF AUDIT VS. NON-AUDIT FEES
Understanding the fees earned by the auditors is important for assessing
auditor independence. Our support for the re-appointment of the auditors will
take into consideration whether the management information circular contains
adequate disclosure about the amount and nature of audit vs. non-audit fees.
There may be certain jurisdictions that do not currently require
disclosure of audit vs. non-audit fees. In these circumstances, we will
generally SUPPORT proposals that call for this disclosure.
III COMPENSATION PROGRAMS
Appropriately designed equity-based compensation plans, approved by
shareholders, can be an effective way to align the interests of long-term
shareholders and the interests of management, employees and directors. Plans
should not substantially dilute shareholders' ownership interests in the
company, provide participants with excessive awards or have objectionable
structural features. We will consider each compensation plan in its entirety
(including all incentives, awards and other compensation) to determine if the
plan provides the right incentives to managers and directors and is reasonable
on the whole.
The following are specific guidelines dealing with some of the more common
features of compensation programs (features not specifically itemized below will
be considered on a CASE-BY-CASE basis taking into consideration the general
principles described above):
E-10
CASH COMPENSATION AND SEVERANCE PACKAGES
We will generally SUPPORT the board's discretion to determine and grant
appropriate cash compensation and severance packages.
EQUITY-BASED PLANS - DILUTION
We will generally vote AGAINST equity-based plans where the total dilution
(including all equity-based plans) is excessive.
EMPLOYEE STOCK PURCHASE PLANS
We will generally vote FOR the use of employee stock purchase plans to
increase company stock ownership by employees, provided that shares purchased
under the plan are acquired for no less than 85% of their market value. It is
recognized that country specific circumstances may exist (e.g. tax issues) that
require proposals to be reviewed on a CASE-BY-CASE basis.
LOANS TO EMPLOYEES
We will vote AGAINST the corporation making loans to employees to allow
employees to pay for stock or stock options.
STOCK OPTION PLANS - BOARD DISCRETION
We will vote AGAINST stock option plans that give the board broad
discretion in setting the terms and conditions of the programs. Such programs
should be submitted with detail and be reasonable in the circumstances regarding
their cost, scope, frequency and schedule for exercising the options.
STOCK OPTION PLANS - INAPPROPRIATE FEATURES
We will generally vote AGAINST plans that have any of the following
structural features:
- ability to re-price "underwater" options without shareholder
approval,
- ability to issue options with an exercise price below the stock's
current market price,
- ability to issue "reload" options, or
- automatic share replenishment ("evergreen") features.
STOCK OPTION PLANS - DIRECTOR ELIGIBILITY
We will generally SUPPORT stock option plans for directors as long as the
terms and conditions of director options are clearly defined and are reasonable.
STOCK OPTION PLANS - REPRICING
We will vote FOR proposals to re-price options if there is a
value-for-value (rather than a share-for-share) exchange.
STOCK OPTION PLANS - VESTING
We will vote AGAINST stock option plans that are 100% vested when granted.
E-11
STOCK OPTION PLANS - AUTHORIZED ALLOCATIONS
We will generally vote AGAINST stock option plans that authorize
allocation of 25% or more of the available options to any one individual.
STOCK OPTION PLANS - CHANGE IN CONTROL PROVISIONS
We will vote AGAINST stock option plans with change in control provisions
that allow option holders to receive more for their options than shareholders
would receive for their shares.
STOCK OPTION PLANS - EXPENSING
We will consider proposals that deal with the expensing of the costs
associated with stock option plans on a CASE-BY-CASE basis.
IV CORPORATE MATTERS
We will review management proposals relating to changes in capital
structure, reincorporation, restructuring and mergers & acquisitions on a
CASE-BY-CASE basis, taking into consideration the impact of the changes on
corporate governance and shareholder rights, anticipated financial and operating
benefits, portfolio manager views, level of dilution, and a company's industry
and performance in terms of shareholder returns.
COMMON STOCK AUTHORIZATION
We will review proposals to increase the number of shares of common stock
authorized for issue on a CASE-BY-CASE basis.
DUAL CLASS SHARE STRUCTURES
Dual class share structures involve the creation of a second class of
common stock with either superior or inferior voting rights to those of the
existing class of stock. Such share structures violate the principle of "one
share, one vote", leading to the possibility that the company may take actions
or fail to take actions without the support of a true majority of shareholders.
We will generally vote AGAINST proposals to create or extend dual class
share structures where certain stockholders have superior or inferior voting
rights to another class of stock.
STOCK SPLITS
We will vote FOR proposals to increase common share authorization for a
stock split, provided that the increase in authorized shares would not result in
excessive dilution given a company's industry and performance in terms of
shareholder returns.
REVERSE STOCK SPLITS
We will vote FOR management proposals to implement a reverse stock split,
provided that the reverse split does not result in an increase of authorized but
unissued shares of more than 100% after giving effect to the shares needed for
the reverse split.
SHARE REPURCHASE PROGRAMS
We will vote AGAINST proposals to institute open-market share repurchase
plans if all shareholders do not participate on an equal basis.
E-12
REINCORPORATION
Reincorporation involves re-establishing the company in a different legal
jurisdiction.
We will generally vote FOR proposals to reincorporate the company provided
that the board and management have demonstrated sound financial or business
reasons for the move. Proposals to reincorporate will NOT BE SUPPORTED if solely
as part of an anti-takeover defense or as a way to limit directors' liability.
MERGERS & ACQUISITIONS
We will vote FOR merger & acquisition proposals that the relevant
portfolio managers believe, based on their review of the material:
- will result in financial and operating benefits,
- have a fair offer price,
- have favourable prospects for the combined companies, and
- will not have a negative impact on corporate governance or
shareholder rights.
V SHAREHOLDER PROPOSALS
We recognize that to effectively manage a corporation, directors and
management must consider not only the interests of shareholders, but the
interests of employees, customers, suppliers, creditors and the general
community as well. Shareholder proposals can be extremely complex, and the
impact on the interests of all stakeholders can rarely be anticipated with a
high degree of confidence.
Shareholder proposals will be reviewed on a CASE-BY-CASE basis with
consideration of factors such as:
- the proposal's impact on the company's short-term and long-term
share value,
- its effect on the company's reputation,
- the economic effect of the proposal,
- industry and regional norms applicable to the company,
- the company's overall corporate governance provisions, and
- the reasonableness of the request.
We will generally NOT SUPPORT proposals that place arbitrary or artificial
constraints on the board, management or the company.
ORDINARY BUSINESS PRACTICES
We will generally SUPPORT the board's discretion regarding shareholder
proposals that involve ordinary business practices.
E-13
PROTECTION OF SHAREHOLDER RIGHTS
We will generally vote FOR shareholder proposals that are designed to
protect shareholder rights if the company's corporate governance standards
indicate that such additional protections are warranted.
BARRIERS TO SHAREHOLDER ACTION
We will generally vote FOR proposals to lower barriers to shareholder
action.
SHAREHOLDER RIGHTS PLANS
We will generally vote FOR proposals to subject shareholder rights plans
to a shareholder vote.
VI OTHER
We will vote AGAINST any proposal where the proxy materials lack
sufficient information upon which to base an informed decision.
We will vote AGAINST any proposals to authorize the company to conduct any
other business that is not described in the proxy statement.
E-14
APPENDIX F
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the record
and beneficial holders of 5% or more of the outstanding shares of each class of
the Trust's equity securities and the percentage of the outstanding shares held
by such holders are set forth below. Unless otherwise indicated below, the Trust
has no knowledge as to whether all or any portion of the shares owned of record
are also owned beneficially.
A shareholder who owns beneficially 25% or more of the outstanding
securities of a Fund is presumed to "control" that Fund as defined in the 1940
Act. Such control may affect the voting rights of other shareholders.
All information listed below is as of February 2, 2006.
AIM DEVELOPING MARKETS FUND
CLASS A CLASS B CLASS C INSTITUTIONAL
SHARES SHARES SHARES CLASS SHARES
------------ ------------ ------------ ---------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD
- ------------------------------------------------- ------------ ------------ ------------ ---------------
Citigroup Global Markets House Account 10.56% -- 15.40% --
Attn: Cindy Tempesta, 7th Floor
333 West 34th Street
NY, NY 10001-2402
AIM International Allocation Fund Omnibus Account
C/O AIM Advisors
11 E Greenway Plz Ste 100 -- -- -- 98.89%
Houston, TX 77046-1113
Merrill Lynch Pierce Fenner & Smith 6.50% -- 11.98% --
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Morgan Stanley DW
Attn: Mutual Fund Operations
3 Harborside Pl, Floor 6 -- -- 6.95% --
Jersey City, NJ 07311-3907
F-1
AIM GLOBAL HEALTH CARE FUND
INVESTOR
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS SHARES
-------------- -------------- -------------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD
- -------------------------------- -------------- -------------- -------------- ------------
Charles Schwab & Co Inc
Special Custody Acct for the
Exclusive Benefit of Customers
ATTN: Mutual Funds
101 Montgomery St -- -- -- 19.08%
San Francisco, CA 94104-4122
Citigroup Global Markets House
Account
Attn: Cindy Tempesta, 7th Floor
333 West 34th Street 7.25% 6.29% -- N/A
New York, NY 10001-2402
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration 7.17% -- 10.81% N/A
4800 Deer Lake Dr. East, 2nd
Floor
Jacksonville, FL 32246-6484
Nat'l Financial Services Corp
The Exclusive Benefit of Cust
One World Financial Center
200 Liberty St 5th Floor
ATTN: Kate - Recon -- -- -- 5.33%
New York, NY 10281
AIM TRIMARK ENDEAVOR FUND
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
- ----------------------------------- ---------- ---------- ---------- ---------- -------------
American Enterprise Investment
Svcs
1120 AMP Financial Center
Minneapolis, MN 55474-0001 -- -- -- 5.01% --
Charles Schwab & Co Inc
Reinvestment Account
101 Montgomery St 8.61% -- -- -- --
San Francisco, CA 94104-4122
F-2
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
- ----------------------------------- ---------- ---------- ---------- ---------- -------------
AIM Conservative Asset Allocation
Fund Omnibus Account
c/o AIM Advisors -- -- -- -- 99.49%
11 E. Greenway Plz, Suite 100
Houston, TX 77046-1113
Merrill Lynch Pierce Fenner & Smith
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East 15.53% -- 22.08% -- --
2nd Floor
Jacksonville, FL 32246-6484
MG Trust Company Cust FBO
F & F Roofing Co 401k Savings Pl
700 17th St Ste 300 -- -- -- 42.98% --
Denver, CO 80202-3531
MG Trust Co. Cust
continental Agency of Florida, Inc.
700 17th St Ste 300
Denver, CO 80202-3531 -- -- -- 7.58% --
AIM TRIMARK FUND
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
- ------------------------------------- ---------- ---------- ---------- ---------- -------------
(1)
A I M Advisors, Inc.
Attn: Corporate Controller
11 Greenway Plaza, Suite 1919
Houston, TX 77046-1103 -- -- -- 17.26% 100.00%
Charles Schwab & Co. Inc.
Special Custody
FBO Customers (RPS)
Attn: Mutual Funds 19.21% -- -- -- --
101 Montgomery St.
San Francisco, CA 94104-4122
Chisholm Trail Financial Services
Larry F. Cain
4100 S. Medford Dr., Suite B -- -- -- 5.07% --
Lufkin, TX 75901-5617
Coinage of America
Gregory A. Howe
2219 E. Thousand Oaks Blvd. #251 -- -- -- 11.67% --
Thousand Oaks, CA 91362-2930
(1)
Owned of record and beneficially.
F-3
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
- ------------------------------------- ---------- ---------- ---------- ---------- -------------
Leslie F Branyon
Leslie F Branyon 2484
Bentridge Ct
Orange Park, FL 32065-5701 -- -- -- 17.95% --
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 5.21% 7.23% 21.75% -- --
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
MG Trust Co Cust
Liberty Homes 401k
700 17th St Ste 300 -- -- -- 11.61% --
Denver, CO 80202-3531
Yuri Bast Interior Design Inc
Yuri C Bast
6 Andaluz -- -- -- 15.35% --
Aliso Viejo, CA 92656-6061
Yuri Bast Interior Design Inc
Edward O. Bast
6 Andaluz
Aliso Viejo, CA 92656-6061 -- -- -- 14.46% --
AIM TRIMARK SMALL COMPANIES FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
- ----------------------------------- ---------- ---------- ---------- ---------- -------------
Charles Schwab & Co Inc
Special Custody FBO Customers
(RPS)
ATTN: Mutual Funds
101 Montgomery St 16.51% -- -- -- --
San Francisco, CA 94104-4122
Merrill Lynch Pierce Fenner & Smith
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East 19.52% -- 29.45% -- --
2nd Floor
Jacksonville, FL 32246-6484
AIM Moderate Asset Allocation
Fund Omnibus Account
c/o AIM Advisors -- -- -- -- 100.00%
11 E. Greenway Plz, Suite 100
Houston, TX 77046-1113
F-4
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
- ----------------------------------- ---------- ---------- ---------- ---------- -------------
Reliance Trust Co FBO
Kraft Construction Co Inc 401(k)
PSP -- -- -- 70.66% --
PO Box 48529
Atlanta, GA 30362-1529
Reliance Trust Company Custodian
FBO R&H Motor Cars Ltd
401K Profit Sharing Plan
P.O. Box 48529 -- -- -- 9.05% --
Atlanta, GA 30362-1529
MANAGEMENT OWNERSHIP
As of February 2, 2006, the trustees and officers as a group owned less
than 1% of the outstanding shares of each class of each Fund.
F-5
APPENDIX G
MANAGEMENT FEES
For the last three fiscal years ended October 31, the management fees
payable by each Fund, the amounts waived by AIM and the net fees paid by
each Fund were as follows:
FUND NAME 2005 2004
--------- ---------------------------------------- -------------------------------------------
NET NET
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAYABLE FEE PAYABLE FEE WAIVERS FEE PAYABLE
----------- ----------- ----------- ----------- ----------- ------------
AIM Developing
Markets Fund $ 2,656,492 $ 388,181 $ 2,268,311 $ 2,305,531 $ 480,137 $ 1,825,394
AIM Global Health
Care Fund 7,999,419 919,507 7,079,912 7,724,785 14,503 7,710,282
AIM Trimark
1
Endeavor Fund 589,927 36,105 553,822 104,953 104,953 N/A
1
AIM Trimark Fund 226,802 83,997 142,805 87,385 87,385 N/A
AIM Trimark Small
1
Companies Fund 1,057,747 121,616 936,131 93,787 93,787 N/A
2003
--------------------------------------------
NET
MANAGEMENT MANAGEMENT MANAGEMENT
FUND NAME FEE PAYABLE FEE WAIVERS FEE PAYABLE
--------- ----------- ----------- -----------
AIM Developing
Markets Fund $ 1,755,280 $ 598,343 $ 1,156,937
AIM Global Health
Care Fund 7,101,823 7,033 7,094,790
AIM Trimark
1
Endeavor Fund N/A N/A N/A
1
AIM Trimark Fund N/A N/A N/A
AIM Trimark Small
1
Companies Fund N/A N/A N/A
- ----------------
1 Commenced operations on November 4, 2003
G-1
APPENDIX H
PORTFOLIO MANAGERS
PORTFOLIO MANAGER FUND HOLDINGS AND INFORMATION ON OTHER MANAGED ACCOUNTS
AIM's portfolio managers develop investment models which are used in
connection with the management of certain AIM funds as well as other mutual
funds for which AIM or an affiliate acts as sub-advisor, other pooled investment
vehicles that are not registered mutual funds, and other accounts managed for
organizations and individuals. The following chart reflects the portfolio
managers' investments in the Funds that they manage. The chart also reflects
information regarding accounts other than the Fund for which each portfolio
manager has day-to-day management responsibilities. Accounts are grouped into
three categories: (i) mutual funds, (ii) other pooled investment vehicles, and
(iii) other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance ("performance-based fees"), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. Dollars using the exchange
rates as of the applicable date.
The following table reflects information as of October 31, 2005:
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS (ASSETS INVESTMENT VEHICLES OTHER ACCOUNTS
2
IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)
DOLLAR RANGE --------------------- --------------------- ---------------------
PORTFOLIO OF INVESTMENTS NUMBER OF TOTAL NUMBER OF TOTAL NUMBER OF TOTAL
1
MANAGER IN EACH FUND ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ----------------- -------------- --------- --------- --------- --------- --------- ------
AIM DEVELOPING MARKETS FUND
Shuxin Cao $ 10,001- 8 $ 4,266.9 1 $ 24.5 594 $227.3
$ 50,000
Borge Endresen $ 10,001- 4 $ 2,676.7 3 $ 113.4 None --
$ 50,000
AIM GLOBAL HEALTH CARE FUND
3
Derek M. Taner None 5 $ 529.6 4 $ 337.2 None --
AIM TRIMARK ENDEAVOR FUND
3
Jeff Hyrich None None -- 2 $ 901.0 None --
3
Geoff MacDonald None None -- 5 $ 9,057.2 None --
- ------------
1
This column reflects investments in a Fund's shares owned directly by a
portfolio manager or beneficially owned by a portfolio manager (as
determined in accordance with Rule 16a-1(a)(2) under the Securities
Exchange Act of 1934, as amended). A portfolio manager is presumed to be a
beneficial owner of securities that are held by his or her immediate
family members sharing the same household.
2
These are accounts of individual investors for which AIM's affiliate, AIM
Private Asset Management, Inc. ("APAM") provides investment advice. APAM
offers separately managed accounts that are managed according to the
investment models developed by AIM's portfolio managers and used in
connection with the management of certain AIM funds. APAM accounts may be
invested in accordance with one or more of those investment models and
investments held in those accounts are traded in accordance with the
applicable models.
3
Shares of the Funds are not sold in Canada, where the portfolio management
is domiciled. Accordingly, no portfolio manager may invest in the Funds.
H-1
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS (ASSETS INVESTMENT VEHICLES OTHER ACCOUNTS
2
DOLLAR RANGE IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)
PORTFOLIO OF INVESTMENTS --------------------- --------------------- -----------------------
1 NUMBER OF TOTAL NUMBER OF TOTAL NUMBER OF TOTAL
MANAGER IN EACH FUND ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ----------------- -------------- --------- --------- --------- --------- --------- ------
AIM TRIMARK FUND
3
Tye Bousada None 1 $ 20.2 8 $ 3,888.5 None --
3
Dana Love None 1 $ 20.2 10 $ 4,391.1 None --
AIM TRIMARK SMALL COMPANIES FUND
3
Robert Mikalachki None None -- 3 $ 317.3 None --
POTENTIAL CONFLICTS OF INTEREST
A I M ADVISORS, INC.
Actual or apparent conflicts of interest may arise when a portfolio
manager has day-to-day management responsibilities with respect to more than one
Fund or other account. More specifically, portfolio managers who manage multiple
Funds and /or other accounts may be presented with one or more of the following
potential conflicts:
- - The management of multiple Funds and/or other accounts may result in a
portfolio manager devoting unequal time and attention to the management of
each Fund and/or other account. AIM seeks to manage such competing
interests for the time and attention of portfolio managers by having
portfolio managers focus on a particular investment discipline. Most other
accounts managed by a portfolio manager are managed using the same
investment models that are used in connection with the management of the
Funds.
- - If a portfolio manager identifies a limited investment opportunity which
may be suitable for more than one Fund or other account, a Fund may not be
able to take full advantage of that opportunity due to an allocation of
filled purchase or sale orders across all eligible Funds and other
accounts. To deal with these situations, AIM and the Funds have adopted
procedures for allocating portfolio transactions across multiple accounts.
- - With respect to securities transactions for the Funds, AIM determines
which broker to use to execute each order, consistent with its duty to
seek best execution of the transaction. However, with respect to certain
other accounts (such as mutual funds for which AIM or an affiliate acts as
sub-advisor, other pooled investment vehicles that are not registered
mutual funds, and other accounts managed for organizations and
individuals), AIM may be limited by the client with respect to the
selection of brokers or may be instructed to direct trades through a
particular broker. In these cases, trades for a Fund in a particular
security may be placed separately from, rather than aggregated with, such
other accounts. Having separate transactions with respect to a security
may temporarily affect the market price of the security or the execution
of the transaction, or both, to the possible detriment of the Fund or
other account(s) involved.
- - Finally, the appearance of a conflict of interest may arise where AIM has
an incentive, such as a performance-based management fee, which relates to
the management of one Fund or account but not all Funds and accounts with
respect to which a portfolio manager has day-to-day management
responsibilities.
- ----------------
3
Shares of the Funds are not sold in Canada, where the portfolio management
is domiciled. Accordingly, no portfolio manager may invest in the Funds.
H-2
AIM and the Funds have adopted certain compliance procedures which are designed
to address these types of conflicts. However, there is no guarantee that such
procedures will detect each and every situation in which a conflict arises.
AIM FUNDS MANAGEMENT, INC.
Actual or apparent conflicts of interest may arise when a portfolio
manager has day-to-day management responsibilities with respect to more than one
Fund or other account. More specifically, portfolio managers who manage multiple
Funds and/or other accounts are presented with the following potential
conflicts:
- - The management of multiple Funds and/or other accounts may result in a
portfolio manager devoting unequal time and attention to the management of
each Fund and/or other account. The Sub-advisor seeks to manage such
competing interests for the time and attention of portfolio managers by
having portfolio managers focus on a particular investment discipline.
Most other accounts managed by a portfolio manager are managed using the
same investment models that are used in connection with the management of
the Funds.
- - If a portfolio manager identifies a limited investment opportunity which
may be suitable for more than one Fund or other account, a Fund may not be
able to take full advantage of that opportunity due to an allocation of
filled purchase or sale orders across all eligible Funds and other
accounts. To deal with these situations, the Sub-advisor and the Funds
have adopted procedures for allocating portfolio transactions across
multiple accounts.
The Sub-advisor and the Funds have adopted certain compliance
procedures which are designed to address these types of conflicts. However,
there is no guarantee that such procedures will detect each and every situation
in which a conflict arises.
DESCRIPTION OF COMPENSATION STRUCTURE
A I M ADVISORS, INC.
AIM seeks to maintain a compensation program that is competitively
positioned to attract and retain high-caliber investment professionals.
Portfolio managers receive a base salary, an incentive bonus opportunity, an
equity compensation opportunity, and a benefits package. Portfolio manager
compensation is reviewed and may be modified each year as appropriate to reflect
changes in the market, as well as to adjust the factors used to determine
bonuses to promote good sustained fund performance. AIM evaluates competitive
market compensation by reviewing compensation survey results conducted by an
independent third party of investment industry compensation. Each portfolio
manager's compensation consists of the following five elements:
- - BASE SALARY. Each portfolio manager is paid a base salary. In setting the
base salary, AIM's intention is to be competitive in light of the
particular portfolio manager's experience and responsibilities.
- - ANNUAL BONUS. Each portfolio manager is eligible to receive an annual cash
bonus which has quantitative and non-quantitative components. Generally,
70% of the bonus is quantitatively determined, based typically on a
four-year rolling average of pre-tax performance of all registered
investment company accounts for which a portfolio manager has day-to-day
management responsibilities versus the performance of a pre-determined
peer group. In instances where a portfolio manager has responsibility for
management of more than one fund, an asset weighted four-year rolling
average is used.
High fund performance (against applicable peer group) would deliver
compensation generally associated with top pay in the industry (determined
by reference to the third-party provided
H-3
compensation survey information) and poor fund performance (versus
applicable peer group) could result in no bonus. The amount of fund assets
under management typically have an impact on the bonus potential (for
example, managing more assets increases the bonus potential); however,
this factor typically carries less weight than relative performance. The
remaining 30% portion of the bonus is discretionary as determined by AIM
and takes into account other subjective factors.
- - EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to
purchase common shares and/or granted restricted shares of AMVESCAP stock
from pools determined from time to time by the Remuneration Committee of
the AMVESCAP Board of Directors. Awards of equity-based compensation
typically vest over time, so as to create incentives to retain key talent.
- - PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are provided
life insurance coverage in the form of a group variable universal life
insurance policy, under which they may make additional contributions to
purchase additional insurance coverage or for investment purposes.
- - PARTICIPATION IN DEFERRED COMPENSATION PLAN. Portfolio managers are
eligible to participate in a non-qualified deferred compensation plan,
which affords participating employees the tax benefits of deferring the
receipt of a portion of their cash compensation.
Portfolio managers also participate in benefit plans and programs available
generally to all employees.
AIM FUNDS MANAGEMENT INC.
AIM Funds Management Inc.'s compensation practices for its Investment team
are aimed at retaining and motivating employees in order to maximize investment
performance. Accordingly, the compensation packages offered to the portfolio
managers are competitive with opportunities in the best managed firms in the
investment management industry. Portfolio managers receive a competitive base
salary, an incentive bonus opportunity, equity compensation and a benefits
package. Total cash compensation, as described below, is set for each portfolio
manager relative to his or her performance. Portfolio manager compensation is
reviewed and modified each year as appropriate. Each portfolio manager's
compensation consists of the following elements:
- - BASE SALARY. Each portfolio manager is paid a base salary. In setting the
base salary, AIM Funds Management Inc.'s intention is to be competitive in
light of the particular portfolio manager's experience and
responsibilities.
- - ANNUAL BONUS. Each portfolio manager is eligible to receive an annual cash
bonus which has quantitative and qualitative components. Generally, 75% of
the bonus is quantitatively determined, based primarily on the 3 and
5-year investment results of the funds for which the portfolio manager has
day-to-day responsibility. In instances where a portfolio manager has
responsibility for more than one fund, consideration is given to both the
overall assets under management as well as the individual fund
performances.
The remaining 25% portion of the bonus is discretionary as determined by
AIM Funds Management Inc. and takes into account other subjective factors.
- - EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to
purchase common shares and/or may be granted restricted shares of AMVESCAP
stock from pools determined by the Remuneration Committee of the AMVESCAP
Board of Directors. Awards of equity-based compensation typically vest
over time, so as to create incentives to retain key talent.
- - PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are provided
life insurance coverage in the form of a group term life insurance policy.
They also have the opportunity of purchasing optional life insurance for
their spouse and dependents.
Portfolio managers also participate in benefit plans and programs available
generally to all employees.
H-4
APPENDIX I
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for
the last three fiscal years ended October 31:
FUND NAME 2005 2004 2003
- --------------------------------- -------- -------- --------
AIM Developing Markets Fund $ 82,858 $ 74,387 $ 50,000
AIM Global Health Care Fund 252,124 203,995 185,138
1
AIM Trimark Endeavor Fund 50,000 50,000 N/A
1
AIM Trimark Fund 50,000 50,000 N/A
1
AIM Trimark Small Companies Fund 50,000 50,000 N/A
1 Commenced operations on November 4, 2003.
I-1
APPENDIX J
BROKERAGE COMMISSIONS
1
Brokerage commissions paid by each of the Funds listed below during the last
three fiscal years ended October 31 were as follows:
FUND 2005 2004 2003
- --------------------------------- ---------- ---------- ------------
AIM Developing Markets Fund $ 628,725 $ 784,157 $ 858,656
AIM Global Health Care Fund 2,253,159 1,407,846 2,353,702
3
AIM Trimark Endeavor Fund 46,146 26,199 N/A
3
AIM Trimark Fund 28,259 17,546 N/A
2,3
AIM Trimark Small Companies Fund 203,574 33,485 N/A
1 Disclosure regarding brokerage commissions is limited to commissions paid
on agency trades and designated as such on the trade confirm.
2 The variation in brokerage commission paid by the fund for the fiscal year
ended October 31, 2005, as compared to the prior fiscal year was due to
increased size of the Fund.
3 Commenced operations on November 4, 2003.
J-1
APPENDIX K
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended October 31, 2005, each Fund allocated
the following amount of transactions to broker-dealers that provided AIM with
certain research, statistics and other information:
RELATED
1 1
FUND TRANSACTIONS BROKERAGE COMMISSIONS
- -------------------------------- --------------- ----------------------
AIM Developing Markets Fund $ 200,781,023 $ 895,451
AIM Global Health Care Fund 1,207,554,955 3,372,064
AIM Trimark Endeavor Fund 14,643,858 25,512
AIM Trimark Fund 12,324,862 17,060
AIM Trimark Small Companies Fund 44,922,992 95,464
1 Amount is inclusive of commissions paid to, and brokerage transactions
placed with, certain brokers that provide execution, research and other
services.
During the last fiscal year ended October 31, 2005, the Funds did not hold
securities issued by "regular" brokers or dealers of the Funds.
K-1
APPENDIX L
CERTAIN FINANCIAL ADVISORS THAT RECEIVE ONE OR MORE TYPES OF PAYMENTS
ST
1 Global Capital Corporation
A G Edwards & Sons, Inc.
ADP Broker Dealer, Inc.
Advantage Capital Corporation
Advest, Inc
Allstate Life Insurance Company
American General Securities, Inc.
American Skandia Life Assurance Corporation
American United Life Insurance Company
Ameriprise Financial Services, Inc.
Amsouth Investment Services, Inc.
Associated Investment Services
Associated Securities Corporation
B N Y Investment Center Inc.
Banc One Securities Corporation
Bank of Oklahoma N.A.
Cadaret Grant & Company, Inc.
Cambridge Investment Research, Inc.
Capital Analysts, Inc.
Charles Schwab & Company, Inc.
Chase Investment Services Corporation
CitiCorp Investment Services
Citigroup Global Markets, Inc.
Citistreet Equities LLC
City National Bank
Comerica Bank
Comerica Securities, Inc.
Commonwealth Financial Network
Compass Brokerage, Inc.
Contemporary Financial Solutions, Inc.
CUNA Brokerage Services, Inc.
CUSO Financial Services, Inc.
Equity Services, Inc.
Fidelity Brokerage Services, LLC
Fidelity Institutional Operations Company, Inc.
Financial Network Investment Corporation
Fintegra Financial Solutions
Frost Brokerage Services, Inc.
FSC Securities Corporation
Great West Life & Annuity Company
Guardian Insurance & Annuity Company, Inc.
H & R Block Financial Advisors, Inc.
H Beck, Inc.
H. D. Vest Investment Securities, Inc.
Hibernia Investments LLC
Hilliard Lyons, Inc.
Hornor Townsend & Kent, Inc.
HSBC Brokerage, Inc.
Infinex Investments, Inc.
ING Financial Partners, Inc.
ING USA Annuity and Life Insurance Company
Intersecurities, Inc.
INVEST Financial Corporation, Inc.
Investment Centers of America, Inc.
Investments By Planners, Inc.
Investors Capital Corporation
Jefferson Pilot Securities Corporation
Lasalle Street Securities LLC
Leg Mason Wood Walker, Inc.
Lincoln Financial Advisors Corporation
Lincoln Investment Planning, Inc.
Linsco/Private Ledger Corporation
M & I Brokerage Services, Inc.
M & T Securities, Inc.
M M L Investors Services, Inc.
Manulife Wood Logan, Inc.
McDonald Investments, Inc.
Mellon Bank, N.A.
Merrill Lynch & Company, Inc.
Merrill Lynch Life Insurance Company
Metlife Securities, Inc.
Money Concepts Capital Corporation
Morgan Keegan & Company, Inc.
Morgan Stanley DW Inc.
Morningstar, Inc.
Multi-Financial Securities Corporation
Mutual Service Corporation
N F P Securities, Inc.
NatCity Investments, Inc.
National Planning Corporation
Nationwide Financial Services, Inc.
Nationwide Investment Services Corporation
Nationwide Life and Annuity Company of America
Nationwide Life and Annuity Insurance Company of America
Nationwide Life Insurance Company
New England Securities Corporation
Next Financial Group, Inc.
Northwestern Mutual Investment Services
NYLIFE Distributors, LLC
Oppenheimer & Company, Inc.
Pershing LLC
PFS Investments, Inc.
Piper Jaffray & Company
Popular Securities, Inc.
Prime Capital Services, Inc.
Primevest Financial Services, Inc.
Proequities, Inc.
R B C Centura Securities, Inc.
R B C Dain Rauscher, Inc.
Raymond James & Associates, Inc.
Raymond James Financial Services, Inc.
Royal Alliance Associates, Inc.
S I I Investments, Inc.
Securities America, Inc.
Securities Service Network, Inc.
Security Benefit life Insurance Company
Sentra Securities Corporation
Sigma Financial Corporation
Signator Investors, Inc.
Spelman & Company, Inc.
State Farm VP Management Corp
Stifel Nicolaus & Company, Inc.
Sungard Investment Products, Inc.
SunTrust Bank, Central Florida, N.A.
TD Waterhouse Investor Services, Inc.
Terra Securities Corporation
TFS Securities, Inc.
Tower Square Securities, Inc.
Transamerica Financial Advisors, Inc.
Transamerica Life Insurance & Annuity Company
U.S. Bancorp Investments, Inc.
UBS Financial Services, Inc.
United Planner Financial Service
USAllianz Securities, Inc.
UVEST Financial Services, Inc.
V S R Financial Services, Inc.
VALIC Financial Advisors, Inc.
Wachovia Securities, LLC
Walnut Street Securities, Inc.
Waterstone Financial Group, Inc.
Webster Investments Service Inc.
Wells Fargo Bank, N.A.
Wells Fargo Investments, LLC
Woodbury Financial Services, Inc.
X C U Capital Corporation, Inc.
L-1
APPENDIX M
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS
A list of amounts paid by each class of shares to AIM Distributors
pursuant to the Plans for the fiscal year or period ended October 31, 2005
follows:
CLASS CLASS CLASS CLASS INVESTOR
A B C R CLASS
1
FUND SHARES SHARES SHARES SHARES SHARES
- -------------------------------- ---------- ---------- ---------- ---------- -----------
AIM Developing Markets Fund $ 767,321 $ 308,695 $ 97,264 N/A N/A
AIM Global Health Care Fund 1,881,602 1,596,410 439,803 N/A $ 603,258
AIM Trimark Endeavor Fund 147,287 115,390 118,450 $ 464 N/A
AIM Trimark Fund 47,837 58,011 53,995 140 N/A
AIM Trimark Small Companies Fund 249,302 135,891 141,100 3,082 N/A
- -------------
1
Commenced operations on July 15, 2005.
M-1
APPENDIX N
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS
An estimate by category of the allocation of actual fees paid by Class A
shares of the Funds during the year ended October 31, 2005, follows:
TRAVEL
PRINTING EXPENSES
& UNDERWRITERS DEALERS RELATED TO
ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING
----------- --------- ------------ ------------ --------- ---------- ----------
AIM Developing Markets Fund $ 24,902 $ 2,592 0 $ 629,195 $ 103,431 $ 3,273 $ 3,928
AIM Global Health Care Fund 25,645 2,344 0 1,748,036 98,373 3,602 3,602
AIM Trimark Endeavor Fund 4,147 380 0 127,365 14,187 604 604
AIM Trimark Fund 1,325 96 0 40,737 5,147 355 177
AIM Trimark Small Companies Fund 5,051 486 0 221,688 20,321 810 945
An estimate by category of the allocation of actual fees paid by Class B
shares of the Funds during the year ended October 31, 2005, follows:
TRAVEL
PRINTING EXPENSES
& UNDERWRITERS DEALERS RELATED TO
ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING
----------- --------- ------------ ------------ --------- ---------- ----------
AIM Developing Markets Fund $ 653 $ 0 $ 231,522 $ 71,731 $ 4,354 $ 435 $ 0
AIM Global Health Care Fund 3,849 349 1,197,308 379,080 14,856 484 484
AIM Trimark Endeavor Fund 803 0 86,542 22,830 5,215 0 0
AIM Trimark Fund 0 0 43,509 11,681 2,821 0 0
AIM Trimark small Companies Fund 725 0 101,918 27,812 5,074 362 0
N-1
An estimate by category of the allocation of actual fees paid by Class C
shares of the Funds during the year ended October 31, 2005, follows:
TRAVEL
PRINTING EXPENSES
& UNDERWRITERS DEALERS RELATED TO
ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING
----------- -------- ------------ ------------ --------- -------- ----------
AIM Developing Markets Fund $ 1,268 $ 60 $ 27,901 $ 62,056 $ 5,979 $ 0 $ 0
AIM Global Health Care Fund 1,984 216 40,190 388,815 7,998 400 200
AIM Trimark Endeavor Fund 1,562 58 38,875 69,532 7,451 648 324
AIM Trimark Fund 1,085 0 24,423 23,602 4,885 0 0
AIM Trimark Small Companies Fund 3,043 254 65,009 59,133 12,719 471 471
An estimate by category of the allocation of actual fees paid by Class R
shares of the Funds during the period ended October 31, 2005, follows:
TRAVEL
PRINTING EXPENSES
& UNDERWRITERS DEALERS RELATED TO
ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING
----------- -------- ------------ ------------ --------- -------- ----------
AIM Trimark Endeavor Fund $ 0 $ 0 $ 170 $ 125 $ 169 $ 0 $ 0
AIM Trimark Fund 0 0 65 23 52 0 0
AIM Trimark Small Companies Fund 0 0 1,471 1,179 433 0 0
An estimate by category of the allocation of actual fees paid by Investor
Class shares of the Funds during the fiscal year ended October 31, 2005,
follows:
TRAVEL
PRINTING EXPENSES
& UNDERWRITERS DEALERS RELATED TO
ADVERTISING MAILING COMPENSATION COMPENSATION PERSONNEL SEMINARS MARKETING
----------- -------- ------------ ------------ --------- -------- ----------
AIM Global Health Care Fund $ 0 $ 0 $ 0 $ 603,258 $ 0 $ 0 $ 0
N-2
APPENDIX O
TOTAL SALES CHARGES
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the last three fiscal years ending October 31:
2005 2004 2003
---- ---- ----
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
---------- --------- --------- ----------- ----------- -----------
AIM Developing Markets Fund $ 304,163 $ 56,027 $ 136,410 $ 27,772 $ 68,195 $ 12,641
AIM Global Health Care Fund 466,000 86,137 678,933 126,743 709,375 128,248
1
AIM Trimark Endeavor Fund 368,411 58,928 165,034 26,908 N/A N/A
1
AIM Trimark Fund 110,765 19,200 154,275 23,974 N/A N/A
1
AIM Trimark Small Companies Fund 616,318 105,490 141,011 23,572 N/A N/A
The following chart reflects the contingent deferred sales charges paid by
Class A, Class B, Class C and Class R, if any, shareholders and retained by AIM
Distributors for the last three fiscal years ended October 31:
2005 2004 2003
---------- ----------- ----------
AIM Developing Markets Fund $ 58,761 $ 126,736 $ 20,360
AIM Global Health Care Fund 71,017 26,438 10,199
1,2
AIM Trimark Endeavor Fund 12,598 5,652 N/A
1,2
AIM Trimark Fund 9,229 1,520 N/A
1,2
AIM Trimark Small Companies Fund 24,482 806 N/A
1
Commenced operations on November 4, 2003.
2
Information which includes Class R Shares in the table is for the period
April 30, 2004 (the date Class R Shares commenced sales) to October 31,
2004.
O-1
APPENDIX P-1
PENDING LITIGATION ALLEGING MARKET TIMING
The following civil lawsuits, including purported class action and
shareholder derivative suits, involve, depending on the lawsuit, one or more AIM
Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of
their current and former officers and/or certain unrelated third parties and are
based on allegations of improper market timing and related activity in the AIM
Funds. These lawsuits either have been served or have had service of process
waived as of February 16, 2006 (with the exception of the Sayegh lawsuit
discussed below).
RICHARD LEPERA, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, V.
INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., INVESCO BOND FUNDS,
INC., INVESCO SECTOR FUNDS, INC. AND DOE DEFENDANTS 1-100, in the District
Court, City and County of Denver, Colorado, (Civil Action No. 03-CV-7600),
filed on October 2, 2003. This claim alleges: common law breach of
fiduciary duty; common law breach of contract; and common law tortious
interference with contract. The plaintiff in this case is seeking:
compensatory and punitive damages; injunctive relief; disgorgement of
revenues and profits; and costs and expenses, including counsel fees and
expert fees.
MIKE SAYEGH, ON BEHALF OF THE GENERAL PUBLIC, V. JANUS CAPITAL
CORPORATION, JANUS CAPITAL MANAGEMENT LLC, JANUS INVESTMENT FUND, EDWARD
J. STERN, CANARY CAPITAL PARTNERS LLC, CANARY INVESTMENT MANAGEMENT LLC,
CANARY CAPITAL PARTNERS LTD., KAPLAN & CO. SECURITIES INC., BANK ONE
CORPORATION, BANC ONE INVESTMENT ADVISORS, THE ONE GROUP MUTUAL FUNDS,
BANK OF AMERICA CORPORATION, BANC OF AMERICA CAPITAL MANAGEMENT LLC, BANC
OF AMERICA ADVISORS LLC, NATIONS FUND INC., ROBERT H. GORDON, THEODORE H.
SIHPOL III, CHARLES D. BRYCELAND, SECURITY TRUST COMPANY, STRONG CAPITAL
MANAGEMENT INC., JB OXFORD & COMPANY, ALLIANCE CAPITAL MANAGEMENT HOLDING
L.P., ALLIANCE CAPITAL MANAGEMENT L.P., ALLIANCE CAPITAL MANAGEMENT
CORPORATION, AXA FINANCIAL INC., ALLIANCEBERNSTEIN REGISTRANTS, GERALD
MALONE, CHARLES SCHAFFRAN, MARSH & MCLENNAN COMPANIES, INC., PUTNAM
INVESTMENTS TRUST, PUTNAM INVESTMENT MANAGEMENT LLC, PUTNAM INVESTMENT
FUNDS, AND DOES 1-500, in the Superior Court of the State of California,
County of Los Angeles (Case No. BC304655), filed on October 22, 2003 and
amended on December 17, 2003 to substitute INVESCO Funds Group, Inc. and
Raymond R. Cunningham for unnamed Doe defendants. This claim alleges
unfair business practices and violations of Sections 17200 and 17203 of
the California Business and Professions Code. The plaintiff in this case
is seeking: injunctive relief; restitution, including pre-judgment
interest; an accounting to determine the amount to be returned by the
defendants and the amount to be refunded to the public; the creation of an
administrative process whereby injured customers of the defendants receive
their losses; and counsel fees.
RAJ SANYAL, DERIVATIVELY ON BEHALF OF NATIONS INTERNATIONAL EQUITY FUND,
V. WILLIAM P. CARMICHAEL, WILLIAM H. GRIGG, THOMAS F. KELLER, CARL E.
MUNDY, JR., CORNELIUS J. PINGS, A. MAX WALKER, CHARLES B. WALKER, EDMUND
L. BENSON, III, ROBERT H. GORDON, JAMES B. SOMMERS, THOMAS S. WORD, JR.,
EDWARD D. BEDARD, GERALD MURPHY, ROBERT B. CARROLL, INVESCO GLOBAL ASSET
MANAGEMENT, PUTNAM INVESTMENT MANAGEMENT, BANK OF AMERICA CORPORATION,
MARSICO CAPITAL MANAGEMENT, LLC, BANC OF AMERICA ADVISORS, LLC, BANC OF
AMERICA CAPITAL MANAGEMENT, LLC, AND NATIONS FUNDS TRUST, in the Superior
Court Division,
P-1
State of North Carolina (Civil Action No. 03-CVS-19622), filed on November
14, 2003. This claim alleges common law breach of fiduciary duty; abuse of
control; gross mismanagement; waste of fund assets; and unjust enrichment.
The plaintiff in this case is seeking: injunctive relief, including
imposition of a constructive trust; damages; restitution and disgorgement;
and costs and expenses, including counsel fees and expert fees.
L. SCOTT KARLIN, DERIVATIVELY ON BEHALF OF INVESCO FUNDS GROUP, INC. V.
AMVESCAP, PLC, INVESCO, INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., in the
United States District Court, District of Colorado (Civil Action No.
03-MK-2406), filed on November 28, 2003. This claim alleges violations of
Section 36(b) of the Investment Company Act of 1940 ("Investment Company
Act"), and common law breach of fiduciary duty. The plaintiff in this case
is seeking damages and costs and expenses, including counsel fees and
expert fees.
RICHARD RAVER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC, AIM
MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP
PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND,
INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES
FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND,
INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX
FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO
TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO
BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH
YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP
VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT FUND,
INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S.
GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 03-F-2441), filed on December 2,
2003. This claim alleges violations of: Sections 11 and 15 of the
Securities Act of 1933 (the "Securities Act"); Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 (the "Exchange Act"); Rule 10b-5 under
the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the Investment
Company Act. The claim also alleges common law breach of fiduciary duty.
The plaintiffs in this case are seeking: damages; pre-judgment and
post-judgment interest; counsel fees and expert fees; and other relief.
JERRY FATTAH, CUSTODIAN FOR BASIM FATTAH, INDIVIDUALLY AND ON BEHALF OF
ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND,
INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND
(FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE
FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO
S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY
FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET
FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY
MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM
INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE
P-2
FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND,
INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND,
INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN GROWTH FUND
(COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM
COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS
REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP INC., TIMOTHY MILLER,
RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD STERN, AMERICAN SKANDIA INC.,
BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in
the United States District Court, District of Colorado (Civil Action No.
03-F-2456), filed on December 4, 2003. This claim alleges violations of:
Sections 11 and 15 of Securities Act; Sections 10(b) and 20(a) of the
Exchange Act; Rule 10b-5 under the Exchange Act; and Section 206 of the
Investment Advisers Act of 1940, as amended (the "Advisers Act"). The
plaintiffs in this case are seeking: compensatory damages; rescission;
return of fees paid; accounting for wrongfully gotten gains, profits and
compensation; restitution and disgorgement; and other costs and expenses,
including counsel fees and expert fees.
EDWARD LOWINGER AND SHARON LOWINGER, INDIVIDUALLY AND ON BEHALF OF ALL
OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND,
INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND
(FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE
FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO
S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY
FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET
FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY
MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM
INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO
BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO
HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND,
INVESCO VALUE FUND, INVESCO; INVESCO LATIN AMERICAN GROWTH FUND
(COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM
COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS
REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER,
RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC.,
BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in
the United States District Court, Southern District of New York (Civil
Action No. 03-CV-9634), filed on December 4, 2003. This claim alleges
violations of: Sections 11 and 15 of the Securities Act; Sections 10(b)
and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and
Section 206 of the Advisers Act. The plaintiffs in this case are seeking:
compensatory damages; rescission; return of fees
P-3
paid; accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
JOEL GOODMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
V. INVESCO FUNDS GROUP, INC. AND RAYMOND R. CUNNINGHAM, in the District
Court, City and County of Denver, Colorado (Case Number 03CV9268), filed
on December 5, 2003. This claim alleges common law breach of fiduciary
duty and aiding and abetting breach of fiduciary duty. The plaintiffs in
this case are seeking: injunctive relief; accounting for all damages and
for all profits and any special benefits obtained; disgorgement;
restitution and damages; costs and disbursements, including counsel fees
and expert fees; and equitable relief.
STEVEN B. EHRLICH, CUSTODIAN FOR ALEXA P. EHRLICH, UGTMA/FLORIDA, AND
DENNY P. JACOBSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY
FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL
SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH
SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS
INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP
GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND,
INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL
RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO
TAX-FREE MONEY FUND, AIM INVESCO TREASURERS MONEY MARKET RESERVE FUND, AIM
INVESCO TREASURERS TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT
MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO
EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO
GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT
INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND,
INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN
AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM
STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND
FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET
FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE
"INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC.,
TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN,
AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS,
LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND
JOHN DOES 1-100, in the United States District Court, District of Colorado
(Civil Action No. 03-N-2559), filed on December 17, 2003. This claim
alleges violations of: Sections 11 and 15 of the Securities Act; Sections
10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act;
and Section 206 of the Advisers Act. The plaintiffs in this case are
seeking: compensatory damages; rescission; return of fees paid; accounting
for wrongfully gotten gains, profits and compensation; restitution and
disgorgement; and other costs and expenses, including counsel fees and
expert fees.
JOSEPH R. RUSSO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY
FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL
SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH
SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS
INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP
GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND,
INVESCO SMALL COMPANY
P-4
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND,
AIM INVESCO TREASURERS MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS
TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO
ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO
GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND,
INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO
TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S.
GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN
GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS,
AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC.,
AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC.,
AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS
REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER,
RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC.,
BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in
the United States District Court, Southern District of New York (Civil
Action No. 03-CV-10045), filed on December 18, 2003. This claim alleges
violations of: Sections 11 and 15 of the Securities Act; Sections 10(b)
and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and
Section 206 of the Advisers Act. The plaintiffs in this case are seeking:
compensatory damages; rescission; return of fees paid; accounting for
wrongfully gotten gains, profits and compensation; restitution and
disgorgement; and other costs and expenses, including counsel fees and
expert fees.
MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. AMVESCAP PLC, AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP
NATIONAL TRUST COMPANY, ROBERT F. MCCULLOUGH, GORDON NEBEKER, JEFFREY G.
CALLAHAN, INVESCO FUNDS GROUP, INC., RAYMOND R. CUNNINGHAM, AND DOES
1-100, in the United States District Court, District of Colorado (Civil
Action No. 03-M-2604), filed on December 24, 2003. This claim alleges
violations of Sections 404, 405 and 406B of the Employee Retirement Income
Security Act ("ERISA"). The plaintiffs in this case are seeking:
declarations that the defendants breached their ERISA fiduciary duties and
that they are not entitled to the protection of Section 404(c)(1)(B) of
ERISA; an order compelling the defendants to make good all losses to a
particular retirement plan described in this case (the "Retirement Plan")
resulting from the defendants' breaches of their fiduciary duties,
including losses to the Retirement Plan resulting from imprudent
investment of the Retirement Plan's assets, and to restore to the
Retirement Plan all profits the defendants made through use of the
Retirement Plan's assets, and to restore to the Retirement Plan all
profits which the participants would have made if the defendants had
fulfilled their fiduciary obligations; damages on behalf of the Retirement
Plan; imposition of a constructive trust, injunctive relief, damages
suffered by the Retirement Plan, to be allocated proportionately to the
participants in the Retirement Plan; restitution and other costs and
expenses, including counsel fees and expert fees.
PAT B. GORSUCH AND GEORGE L. GORSUCH V. INVESCO FUNDS GROUP, INC. AND AIM
ADVISER, INC., in the United States District Court, District of Colorado
(Civil Action No. 03-MK-2612), filed on December 24, 2003. This claim
alleges violations of Sections 15(a), 20(a) and 36(b) of the Investment
Company Act. The plaintiffs in this case are seeking: rescission and/or
voiding of the investment advisory agreements; return of fees paid;
damages; and other costs and expenses, including counsel fees and expert
fees.
P-5
LORI WEINRIB, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
V. INVESCO FUNDS GROUP, INC., AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST,
AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND
FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC.,
AMVESCAP PLC, TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J.
STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL
PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS,
LTD., AND JOHN DOES 1-100, in the United States District Court, Southern
District of New York (Civil Action No. 04-CV-00492), filed on January 21,
2004. This claim alleges violations of: Sections 11 and 15 of the 1933
Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the
Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in this
case are seeking: compensatory damages; rescission; return of fees paid;
accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
ROBERT S. BALLAGH, JR., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM
MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP
PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND,
INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES
FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND,
INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX
FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO
TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO
BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH
YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP
VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT FUND,
INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S.
GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 04-MK-0152), filed on January 28,
2004. This claim alleges violations of: Sections 11 and 15 of the
Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5
under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the
Investment Company Act. The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are seeking: damages;
pre-judgment and post-judgment interest; counsel fees and expert fees; and
other relief.
JONATHAN GALLO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM
MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP
PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND,
INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES
FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND,
INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX
FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO
TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO
BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH
YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP
VALUE FUND, INVESCO REAL ESTATE
P-6
OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND, INVESCO
TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO
VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT MANAGEMENT, LLC, CANARY
CAPITAL PARTNERS, LTD., CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in
the United States District Court, District of Colorado (Civil Action No.
04-MK-0151), filed on January 28, 2004. This claim alleges violations of:
Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the
Exchange Act; Rule 10b-5 under the Exchange Act; and Sections 34(b), 36(a)
and 36(b) of the Investment Company Act. The claim also alleges common law
breach of fiduciary duty. The plaintiffs in this case are seeking:
damages; pre-judgment and post-judgment interest; counsel fees and expert
fees; and other relief.
EILEEN CLANCY, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY
FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL
SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH
SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS
INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP
GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND,
INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL
RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO
TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND,
AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT
MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO
EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO
GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT
INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND,
INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO,
INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO
FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS
INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM
MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN
AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP,
INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM AND THOMAS KOLBE, in the United
States District Court, Southern District of New York (Civil Action No.
04-CV-0713), filed on January 30, 2004. This claim alleges violations of
Sections 11 and 15 of the Securities Act. The plaintiffs in this case are
seeking: compensatory damages, rescission; return of fees paid; and other
costs and expenses, including counsel fees and expert fees.
SCOTT WALDMAN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, V.
INVESCO FUNDS GROUP, INC., INVESCO DYNAMICS FUND, INVESCO EUROPEAN FUND,
INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, AIM STOCK
FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS
INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS
INC., AIM INTERNATIONAL FUNDS INC., AMVESCAP PLC, AND RAYMOND CUNNINGHAM,
in the United States District Court, Southern District of New York (Civil
Action No. 04-CV-00915), filed on February 3, 2004. This claim alleges
violations of Sections 11 and 15 of the Securities Act and common law
breach of fiduciary duty. The plaintiffs in this case are seeking
compensatory damages; injunctive relief; and costs and expenses, including
counsel fees and expert fees.
P-7
CARL E. VONDER HAAR AND MARILYN P. MARTIN, ON BEHALF OF THEMSELVES AND ALL
OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK
FUNDS, INC. AND DOE DEFENDANTS 1-100, in the United States District Court,
District of Colorado (Civil Action No. 04-CV-812), filed on February 5,
2004. This claim alleges: common law breach of fiduciary duty; breach of
contract; and tortious interference with contract. The plaintiffs in this
case are seeking: injunctive relief; damages; disgorgement; and costs and
expenses, including counsel fees and expert fees.
HENRY KRAMER, DERIVATIVELY ON BEHALF OF INVESCO ENERGY FUND, INVESCO STOCK
FUNDS, INC., AND INVESCO MUTUAL FUNDS V. AMVESCAP, PLC, INVESCO FUNDS
GROUP, INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT,
LLC, AND CANARY CAPITAL PARTNERS, LTD., DEFENDANTS, AND INVESCO ENERGY
FUND, INVESCO STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS, NOMINAL
DEFENDANTS, in the United States District Court, District of Colorado
(Civil Action No. 04-MK-0397), filed on March 4, 2004. This claim alleges
violations of Section 36(b) of the Investment Company Act and common law
breach of fiduciary duty. The plaintiff in this case is seeking damages
and costs and expenses, including counsel fees and expert fees.
CYNTHIA L. ESSENMACHER, DERIVATIVELY ON BEHALF OF THE INVESCO DYNAMICS
FUND AND THE REMAINING "INVESCO FUNDS" V. INVESCO FUNDS GROUPS, INC.,
AMVESCAP PLC, AIM MANAGEMENT GROUP, INC., RAYMOND CUNNINGHAM, TIMOTHY
MILLER, THOMAS KOLBE AND MICHAEL LEGOSKI, DEFENDANTS, AND INVESCO DYNAMICS
FUND AND THE "INVESCO FUNDS", NOMINAL DEFENDANTS, in the United States
District Court, District of Delaware (Civil Action No. 04-CV-188), filed
on March 29, 2004. This claim alleges: violations of Section 36(b) of the
Investment Company Act; violations of Section 206 of the Advisers Act;
common law breach of fiduciary duty; and civil conspiracy. The plaintiff
in this case is seeking: damages; injunctive relief; and costs and
expenses, including counsel fees and expert fees.
ANNE G. PERENTESIS (WIDOW) V. AIM INVESTMENTS, ET AL (INVESCO FUNDS GROUP,
INC.), in the District Court of Maryland for Baltimore County (Case No.
080400228152005), filed on July 21, 2005. This claim alleges financial
losses, mental anguish and emotional distress as a result of unlawful
market timing and related activity by the defendants. The plaintiff in
this case is seeking damages and costs ad expenses.
Pursuant to an Order of the MDL Court, plaintiffs in the above lawsuits
(with the exception of Carl E. Vonder Haar, et al. v. INVESCO Funds Group, Inc.
et al. and Mike Sayegh v. Janus Capital Corporation, et al.) consolidated their
claims for pre-trial purposes into three amended complaints against various AIM-
and IFG-related parties: (i) a Consolidated Amended Class Action Complaint
purportedly brought on behalf of shareholders of the AIM Funds (the Lepera
lawsuit discussed below); (ii) a Consolidated Amended Fund Derivative Complaint
purportedly brought on behalf of the AIM Funds and fund registrants (the
Essenmacher lawsuit discussed below); and (iii) an Amended Class Action
Complaint for Violations of the Employee Retirement Income Securities Act
("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k)
plan (the Calderon lawsuit discussed below). The plaintiffs in the Vonder Haar
and Sayegh lawsuits continue to seek remand of their lawsuits to state court.
Set forth below is detailed information about these three amended complaints.
RICHARD LEPERA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED (LEAD PLAINTIFF: CITY OF CHICAGO DEFERRED COMPENSATION PLAN), V.
INVESCO FUNDS GROUP, INC., AMVESCAP, PLC, AIM INVESTMENTS, AIM ADVISORS,
INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS MANAGEMENT
LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM STOCK FUNDS, AIM
MUTUAL FUNDS, AIM COMBINATION STOCK & BOND
P-8
FUNDS, AIM SECTOR FUNDS, AIM TREASURER'S SERIES TRUST, INVESCO
DISTRIBUTORS, INC., AIM DISTRIBUTORS, INC., RAYMOND R. CUNNINGHAM, TIMOTHY
J. MILLER, THOMAS A. KOLBE, MICHAEL D. LEGOSKI, MICHAEL K. BRUGMAN, MARK
WILLIAMSON, EDWARD J. STERN, CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., RYAN GOLDBERG,
MICHAEL GRADY, CITIGROUP, INC., CITIGROUP GLOBAL MARKETS HOLDINGS, INC.,
SALOMON SMITH BARNEY, INC., MORGAN STANLEY DW, ANNA BRUGMAN, ANB
CONSULTING, LLC, KAPLAN & CO. SECURITIES INC., SECURITY TRUST COMPANY,
N.A., GRANT D. SEEGER, JB OXFORD HOLDINGS, INC., NATIONAL CLEARING
CORPORATION, JAMES G. LEWIS, KRAIG L. KIBBLE, JAMES Y. LIN, BANK OF
AMERICA CORPORATION, BANC OF AMERICA SECURITIES LLC, THEODORE C. SIHPOL,
III, BEAR STEARNS & CO., INC., BEAR STEARNS SECURITIES CORP., CHARLES
SCHWAB & CO., CREDIT SUISSE FIRST BOSTON (USA) INC., PRUDENTIAL FINANCIAL,
INC., PRUDENTIAL SECURITIES, INC., CANADIAN IMPERIAL BANK OF COMMERCE, JP
MORGAN CHASE AND CO., AND JOHN DOE DEFENDANTS 1-100, in the MDL Court
(Case No. 04-MD-15864; No. 04-CV-00814-JFM) (originally in the United
States District Court for the District of Colorado), filed on September
29, 2004. This lawsuit alleges violations of Sections 11, 12(a) (2), and
15 of the Securities Act; Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder; Section 20(a) of the Exchange Act; Sections 34(b),
36(a), 36(b) and 48(a) of the Investment Company Act; breach of fiduciary
duty/constructive fraud; aiding and abetting breach of fiduciary duty; and
unjust enrichment. The plaintiffs in this lawsuit are seeking:
compensatory damages, including interest; and other costs and expenses,
including counsel and expert fees.
CYNTHIA ESSENMACHER, SILVANA G. DELLA CAMERA, FELICIA BERNSTEIN AS
CUSTODIAN FOR DANIELLE BROOKE BERNSTEIN, EDWARD CASEY, TINA CASEY, SIMON
DENENBERG, GEORGE L. GORSUCH, PAT B. GORSUCH, L. SCOTT KARLIN, HENRY
KRAMER, JOHN E. MORRISEY, HARRY SCHIPPER, BERTY KREISLER, GERSON SMITH,
CYNTHIA PULEO, ZACHARY ALAN STARR, JOSHUA GUTTMAN, AND AMY SUGIN,
DERIVATIVELY ON BEHALF OF THE MUTUAL FUNDS, TRUSTS AND CORPORATIONS
COMPRISING THE INVESCO AND AIM FAMILY OF MUTUAL FUNDS V. AMVESCAP, PLC,
INVESCO FUNDS GROUP, INC., INVESCO DISTRIBUTORS, INC., INVESCO
INSTITUTIONAL (N.A.), INC., INVESCO ASSETS MANAGEMENT LIMITED, INVESCO
GLOBAL ASSETS MANAGEMENT (N.A.), AIM MANAGEMENT GROUP, INC., AIM ADVISERS,
INC., AIM INVESTMENT SERVICES, INC., AIM DISTRIBUTORS, INC., FUND
MANAGEMENT COMPANY, MARK H. WILLIAMSON, RAYMOND R. CUNNINGHAM, TIMOTHY
MILLER, THOMAS KOLBE, MICHAEL LEGOSKI, MICHAEL BRUGMAN, FRED A. DEERING,
VICTOR L. ANDREWS, BOB R. BAKER, LAWRENCE H. BUDNER, JAMES T. BUNCH,
GERALD J. LEWIS, JOHN W. MCINTYRE, LARRY SOLL, RONALD L. GROOMS, WILLIAM
J. GALVIN, JR., ROBERT H. GRAHAM, FRANK S. BAYLEY, BRUCE L. CROCKETT,
ALBERT R. DOWDEN, EDWARD K. DUNN, JACK M. FIELDS, CARL FRISCHILING, PREMA
MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, LOUIS S. SKLAR, OWEN DALY
II, AURUM SECURITIES CORP., AURUM CAPITAL MANAGEMENT CORP., GOLDEN GATE
FINANCIAL GROUP, LLC, BANK OF AMERICA CORP., BANC OF AMERICA SECURITIES
LLC, BANK OF AMERICA, N.A., BEAR STEARNS & CO., INC., CANARY CAPITAL
PARTNERS, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY INVESTMENT
MANAGEMENT, LLC, EDWARD J. STERN, CANADIAN IMPERIAL BANK OF COMMERCE,
CIRCLE TRUST COMPANY, RYAN GOLDBERG, MICHAEL GRADY, KAPLAN & CO.
SECURITIES, INC., JP MORGAN CHASE & CO., OPPENHEIMER & CO., INC.,
PRITCHARD CAPITAL PARTNERS LLC, TIJA MANAGEMENT, TRAUTMAN WASSERMAN &
COMPANY, INC., DEFENDANTS, AND THE INVESCO FUNDS AND THE AIM FUNDS AND ALL
TRUSTS AND CORPORATIONS THAT COMPRISE THE INVESCO FUNDS AND AIM FUNDS THAT
P-9
WERE MANAGED BY INVESCO AND AIM, NOMINAL DEFENDANTS, in the MDL Court
(Case No. 04-MD-15864-FPS; No. 04-819), filed on September 29, 2004. This
lawsuit alleges violations of Sections 206 and 215 of the Investment
Advisers Act; Sections 36(a), 36(b) and 47 of the Investment Company Act;
control person liability under Section 48 of the Investment Company Act;
breach of fiduciary duty; aiding and abetting breach of fiduciary duty;
breach of contract; unjust enrichment; interference with contract; and
civil conspiracy. The plaintiffs in this lawsuit are seeking: removal of
director defendants; removal of adviser, sub-adviser and distributor
defendants; rescission of management and other contracts between the Funds
and defendants; rescission of 12b-1 plans; disgorgement of management fees
and other compensation/profits paid to adviser defendants; compensatory
and punitive damages; and fees and expenses, including attorney and expert
fees.
MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP NATIONAL TRUST
COMPANY, INVESCO FUNDS GROUP, INC., AMVESCAP, ROBERT F. MCCULLOUGH, GORDON
NEBEKER, JEFFREY G. CALLAHAN, AND RAYMOND R. CUNNINGHAM, in the MDL Court
(Case No. 1:04-MD-15864-FPS), filed on September 29, 2004. This lawsuit
alleges violations of ERISA Sections 404, 405 and 406. The plaintiffs in
this lawsuit are seeking: declaratory judgment; restoration of losses
suffered by the plan; disgorgement of profits; imposition of a
constructive trust; injunctive relief; compensatory damages; costs and
attorneys' fees; and equitable restitution.
On August 25, 2005, the MDL Court issued rulings on the common issues of
law presented in defendants' motions to dismiss shareholder class action and
derivative complaints that were filed in unrelated lawsuits similar to the
Lepera and Essenmacher lawsuits discussed above. On November 3, 2005, the MDL
Court issued short opinions for the most part applying these rulings to the
Lepera and Essenmacher lawsuits. The MDL Court dismissed all derivative causes
of action but one: the excessive fee claim under Section 36(b) of the Investment
Company Act of 1940 (the "1940 Act"). The MDL Court dismissed all claims
asserted in the class action complaint but three: (i) the securities fraud
claims under Section 10(b) of the Securities Exchange Act of 1934; (ii) the
excessive fee claim under Section 36(b) of the 1940 Act (which survived only
insofar as plaintiffs seek recovery of fees associated with the assets involved
in market timing); and (iii) the MDL Court deferred ruling on the "control
person liability" claim under Section 48 of the 1940 Act. The question whether
the duplicative Section 36(b) claim properly belongs in the derivative complaint
or in the class action complaint will be decided at a later date. At the MDL
Court's request, the parties submitted proposed orders implementing these
rulings in the Lepera and Essenmacher lawsuits. The MDL Court has not entered
any orders on the motions to dismiss in these lawsuits and it is possible the
orders may differ in some respects from the rulings described above. Based on
the MDL Court's opinion and both parties' proposed orders, however, all claims
asserted against the Funds that have been transferred to the MDL Court will be
dismissed, although certain Funds will remain nominal defendants in the
derivative (Essenmacher) lawsuit.
On December 6, 2005, the MDL Court issued rulings on the common issues of
law presented in defendants' omnibus motion to dismiss ERISA complaints that
were filed in unrelated lawsuits that are similar to the Calderon lawsuit
discussed above. The MDL Court: (i) denied the motion to dismiss on the grounds
that the plaintiffs lack standing or that the defendants' investments in company
stock are entitled to a presumption of prudence; (ii) granted the motion to
dismiss as to defendants not named in the employee benefit plan documents as
fiduciaries but gave plaintiffs leave to replead facts sufficient to show that
such defendants acted as de facto fiduciaries; and (iii) confirmed plaintiffs'
withdrawal of their prohibited transactions and misrepresentations claims.
P-10
APPENDIX P-2
PENDING LITIGATION ALLEGING INADEQUATELY EMPLOYED FAIR VALUE PRICING
The following civil class action lawsuits involve, depending on the
lawsuit, one or more AIM Funds, IFG and/or AIM and allege that the defendants
inadequately employed fair value pricing. These lawsuits either have been served
or have had service of process waived as of February 16, 2006.
T.K. PARTHASARATHY, EDMUND WOODBURY, STUART ALLEN SMITH AND SHARON SMITH,
INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. T. ROWE
PRICE INTERNATIONAL FUNDS, INC., T. ROWE PRICE INTERNATIONAL, INC.,
ARTISAN FUNDS, INC., ARTISAN PARTNERS LIMITED PARTNERSHIP, AIM
INTERNATIONAL FUNDS, INC. AND AIM ADVISORS, INC., in the Third Judicial
Circuit Court for Madison County, Illinois (Case No. 2003-L-001253), filed
on September 23, 2003. This claim alleges: common law breach of duty and
common law negligence and gross negligence. The plaintiffs in these cases
are seeking: compensatory and punitive damages; interest; and attorneys'
fees and costs. The Third Judicial Circuit Court for Madison County,
Illinois has issued an order severing the claims of plaintiff
Parthasarathy from the claims of the other plaintiffs against AIM and
other defendants. As a result, AIM is a defendant in the following severed
action: EDMUND WOODBURY, STUART ALLEN SMITH and SHARON SMITH, Individually
and On Behalf of All Others Similarly Situated, v. AIM INTERNATIONAL
FUNDS, INC., ET AL., in the Third Judicial Circuit Court for Madison
County, Illinois (Case No. 03-L-1253A). The claims made by plaintiffs and
the relief sought in the Woodbury lawsuit are identical to those in the
Parthasarathy lawsuit. On April 22, 2005, Defendants in the Woodbury
lawsuit removed the action to Federal Court (U.S. District Court, Southern
District of Illinois, No. 05-CV-302-DRH). Based on a recent Federal
appellate court decision (the "Kircher" case), AIM and the other
defendants in the Woodbury lawsuit removed the action to Federal court
(U.S. District Court, Southern District of Illinois, Cause No.
05-CV-302-DRH) on April 22, 2005. On April 26, 2005, AIM and the other
defendants filed their Motion to Dismiss the plaintiffs' state law based
claims. On June 10, 2005, the Court dismissed the Woodbury lawsuit based
upon the Kircher ruling and ordered the court clerk to close this case.
Plaintiffs filed a Motion to Amend the Judgment arguing that the Kircher
ruling does not apply to require the dismissal of the claims against AIM
in the Woodbury lawsuit. On July 7, 2005, the Court denied this Motion.
The plaintiffs filed a Notice of Appeal. On September 2, 2005, the Court
combined the nine cases on this subject matter, including the case against
AIM.
JOHN BILSKI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
V. AIM INTERNATIONAL FUNDS, INC., AIM ADVISORS, INC., INVESCO
INTERNATIONAL FUNDS, INC., INVESCO FUNDS GROUP, INC., T. ROWE PRICE
INTERNATIONAL FUNDS, INC. AND T. ROWE PRICE INTERNATIONAL, INC., in the
United States District Court, Southern District of Illinois (East St.
Louis) (Case No. 03-772), filed on November 19, 2003. This claim alleges:
violations of Sections 36(a) and 36(b) of the Investment Company Act of
1940; common law breach of duty; and common law negligence and gross
negligence. The plaintiff in this case is seeking: compensatory and
punitive damages; interest; and attorneys' fees and costs. This lawsuit
has been transferred to the MDL Court by order of the United States
District Court, Southern District of Illinois (East St. Louis).
P-11
APPENDIX P-3
PENDING LITIGATION ALLEGING EXCESSIVE ADVISORY AND/OR DISTRIBUTION FEES
The following civil lawsuits, including purported class action and
shareholder derivative suits, involve, depending on the lawsuit, one or more of
IFG, AIM, IINA, ADI and/or INVESCO Distributors and allege that the defendants
charged excessive advisory and/or distribution fees and failed to pass on to
shareholders the perceived savings generated by economies of scale and, in some
cases, also allege that the defendants adopted unlawful distribution plans.
These lawsuits either have been served or have had service of process waived as
of February 16, 2006
All of the lawsuits discussed below have been transferred to the United
States District Court for the Southern District of Texas, Houston Division by
order of the applicable United States District Court in which they were
initially filed. By order of the United States District Court for the Southern
District of Texas, Houston Division, the Kondracki and Papia lawsuits discussed
below have been consolidated for pre-trial purpose into the Berdat lawsuit
discussed below and administratively closed. On December 8, 2005, the Court
granted plaintiffs' Motion for Leave to File a Second Amended Consolidated
Complaint. The result of the Court's order is to remove certain plaintiffs from
the suit, remove certain claims by other plaintiffs relating to certain funds
and bring in additional plaintiffs' claims relating to additional funds. On
December 29, 2005, the defendants filed a Notice of Tag-Along case in the MDL
Court regarding this matter due to the extensive allegations of market timing
contained in the plaintiffs' Second Amended Consolidated Complaint. On February
1, 2006, the MDL Court issued a Conditional Transfer Order transferring the
Berdat lawsuit to the MDL Court. The plaintiffs filed a Notice of Opposition to
this Conditional Transfer Order on February 17, 2006.
RONALD KONDRACKI V. AIM ADVISORS, INC. AND AIM DISTRIBUTOR, INC., in the
United States District Court for the Southern District of Illinois (Civil
Action No. 04-CV-263-DRH), filed on April 16, 2004. This claim alleges
violations of Section 36(b) of the Investment Company Act of 1940 (the
"Investment Company Act"). The plaintiff in this case is seeking: damages;
injunctive relief; prospective relief in the form of reduced fees;
rescission of the investment advisory agreements and distribution plans;
and costs and expenses, including counsel fees.
DOLORES BERDAT, MARVIN HUNT, MADELINE HUNT, RANDAL C. BREVER AND RHONDA
LECURU V. INVESCO FUNDS GROUP, INC., INVESCO INSTITUTIONAL (N.A.), INC.,
INVESCO DISTRIBUTORS, INC., AIM ADVISORS, INC. AND AIM DISTRIBUTORS, INC.,
in the United States District Court for the Middle District of Florida,
Tampa Division (Case No. 8:04-CV-978-T24-TBM), filed on April 29, 2004.
This claim alleges violations of Sections 36(b) and 12(b) of the
Investment Company Act. The plaintiffs in this case are seeking: damages;
injunctive relief; rescission of the investment advisory agreements and
distribution plans; and costs and expenses, including counsel fees.
FERDINANDO PAPIA, FRED DUNCAN, GRACE GIAMANCO, JEFFREY S. THOMAS, COURTNEY
KING, KATHLEEN BLAIR, HENRY BERDAT, RUTH MOCCIA, MURRAY BEASLEY AND
FRANCES J. BEASLEY V. A I M ADVISORS, INC. AND A I M DISTRIBUTORS, INC.,
in the United States District Court for the Middle District of Florida,
Tampa Division (Case No. 8:04-CV-977-T17-MSS), filed on April 29, 2004.
This claim alleges violations of Sections 36(b) and 12(b) of the
Investment Company Act. The plaintiffs in this case are seeking: damages;
injunctive relief; rescission of the investment advisory agreements and
distribution plans; and costs and expenses, including counsel fees.
P-12
APPENDIX P-4
PENDING LITIGATION ALLEGING IMPROPER MUTUAL FUND SALES PRACTICES
AND DIRECTED-BROKERAGE ARRANGEMENTS
The following civil lawsuits, including purported class action and
shareholder derivative suits, involve, depending on the lawsuit, one or more of
AIM Management, IFG, AIM, AIS and/or certain of the trustees of the AIM Funds
and allege that the defendants improperly used the assets of the AIM Funds to
pay brokers to aggressively push the AIM Funds over other mutual funds and that
the defendants concealed such payments from investors by disguising them as
brokerage commissions. These lawsuits either have been served or have had
service of process waived as of February 16, 2006.
By order of the United States District Court for the Southern District of
Texas, Houston Division, the claims made in the Beasley, Kehlbeck Trust, Fry,
Apu and Bendix lawsuits discussed below were consolidated into the Boyce lawsuit
discussed below and these other lawsuits were administratively closed. On June
7, 2005, plaintiffs filed their Consolidated Amended Complaint in which they
make substantially identical allegations to those of the individual underlying
lawsuits. However, the City of Chicago Deferred Compensation Plan has been
joined as an additional plaintiff in the Consolidated Amended Complaint.
Plaintiffs added defendants, including current and former directors/trustees of
the AIM Funds formerly advised by IFG. On December 16, 2005, the defendants
filed their Motions to Dismiss these claims.
JOY D. BEASLEY AND SHEILA MCDAID, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS
SIMILARLY SITUATED, V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP,
INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM,
MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN,
EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS,
LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES
1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH
FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND,
AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM
CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING
MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM
EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND,
AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM
INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP
GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID
CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH
FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES
II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL
ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL
CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE
FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK
FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO
ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS
FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD &
PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL
CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND,
INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL
COMPANY
P-13
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court
for the District of Colorado (Civil Action No. 04-B-0958), filed on May
10, 2004. The plaintiffs voluntarily dismissed this case in Colorado and
re-filed it on July 2, 2004 in the United States District Court for the
Southern District of Texas, Houston Division (Civil Action H-04-2589).
This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the
Investment Company Act of 1940 (the "Investment Company Act") and
violations of Sections 206 and 215 of the Investment Advisers Act of 1940
(the "Advisers Act"). The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are seeking: compensatory and
punitive damages; rescission of certain Funds' advisory agreements and
distribution plans and recovery of all fees paid; an accounting of all
fund-related fees, commissions and soft dollar payments; restitution of
all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.
RICHARD TIM BOYCE V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC.,
AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK
H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN,
EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS,
LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES
1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH
FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND,
AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM
CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING
MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM
EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND,
AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM
INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP
GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID
CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH
FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES
II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL
ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL
CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE
FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK
FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO
ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS
FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD &
PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL
CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND,
INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL
COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District
Court for the District of Colorado (Civil Action No. 04-N-0989), filed on
May 13, 2004. The plaintiff voluntarily dismissed this case in Colorado
and re-filed it on July 1, 2004 in the United States District Court for
the Southern District of Texas, Houston Division (Civil Action H-04-2587).
This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the
Investment Company Act and violations of Sections 206 and 215 of the
Advisers Act. The claim also alleges common law breach of fiduciary duty.
The plaintiff in this case is seeking: compensatory and punitive damages;
rescission of certain Funds' advisory
P-14
agreements and distribution plans and recovery of all fees paid; an
accounting of all fund-related fees, commissions and soft dollar payments;
restitution of all unlawfully or discriminatorily obtained fees and
charges; and attorneys' and experts' fees.
KEHLBECK TRUST DTD 1-25-93, BILLY B. KEHLBECK AND DONNA J. KEHLBECK, TTEES
V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT
SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON,
FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR.,
JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK,
RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND
AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED
FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND,
AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM
DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH
FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND,
AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL
GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND,
AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC
VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM
MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND,
AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND,
AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY
FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL
RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK
SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH
SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO
ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS
METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE
EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court
for the Southern District of Texas, Houston Division (Civil Action No.
H-04-2802), filed on July 9, 2004. This claim alleges violations of
Sections 34(b), 36(b) and 48(a) of the Investment Company Act and
violations of Sections 206 and 215 of the Advisers Act. The claim also
alleges common law breach of fiduciary duty. The plaintiff in this case is
seeking: compensatory and punitive damages; rescission of certain Funds'
advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar
payments; restitution of all unlawfully or discriminatorily obtained fees
and charges; and attorneys' and experts' fees.
JANICE R. FRY, BOB J. FRY, JAMES P. HAYES, VIRGINIA L. MAGBUAL, HENRY W.
MEYER AND GEORGE ROBERT PERRY V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS
GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H.
GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R.
DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA
MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND
JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA
PACIFIC GROWTH
P-15
FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND,
AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM
CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING
MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM
EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND,
AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL
FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH
FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA
FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND,
AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND
FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM
OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM
SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND,
AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL
RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK
SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH
SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO
ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS
METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE
EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court
for the Southern District of Texas, Houston Division (Civil Action No.
H-04-2832), filed on July 12, 2004. This claim alleges violations of
Sections 34(b), 36(b) and 48(a) of the Investment Company Act and
violations of Sections 206 and 215 of the Advisers Act. The claim also
alleges common law breach of fiduciary duty. The plaintiff in this case is
seeking: compensatory and punitive damages; rescission of certain Funds'
advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar
payments; restitution of all unlawfully or discriminatorily obtained fees
and charges; and attorneys' and experts' fees.
ROBERT P. APU, SUZANNE K. APU, MARINA BERTI, KHANH DINH, FRANK KENDRICK,
EDWARD A. KREZEL, DAN B. LESIUK, JOHN B. PERKINS, MILDRED E. RUEHLMAN,
LOUIS E. SPERRY, J. DORIS WILLSON AND ROBERT W. WOOD V. AIM MANAGEMENT
GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM
ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY,
BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS,
CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY,
AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE
GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC
BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL
DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT
DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED
DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM
EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE
GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP
VALUE FUND, AIM HIGH
P-16
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM
INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP
GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID
CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH
FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES
II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL
ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL
CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE
FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK
FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO
ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS
FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD &
PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL
CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District Court
for the Southern District of Texas, Houston Division (Civil Action No.
H-04-2884), filed on July 15, 2004. This claim alleges violations of
Sections 34(b), 36(b) and 48(a) of the Investment Company Act and
violations of Sections 206 and 215 of the Advisers Act. The claim also
alleges common law breach of fiduciary duty. The plaintiff in this case is
seeking: compensatory and punitive damages; rescission of certain Funds'
advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar
payments; restitution of all unlawfully or discriminatorily obtained fees
and charges; and attorneys' and experts' fees.
HARVEY R. BENDIX, CVETAN GEORGIEV, DAVID M. LUCOFF, MICHAEL E. PARMELEE,
TRUSTEE OF THE HERMAN S. AND ESPERANZA A.. DRAYER RESIDUAL TRUST U/A
1/22/83 AND STANLEY S. STEPHENSON, TRUSTEE OF THE STANLEY J. STEPHENSON
TRUST V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM
INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H.
WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD
K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS
F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100,
DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND,
AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE
CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM
CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING
MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM
EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND,
AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL
FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH
FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA
FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND,
AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND
FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM
OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM
SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM
P-17
SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND,
AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND,
INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO
DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND,
INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO
INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR
FUND, INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO
SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN
FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States
District Court for the Southern District of Texas, Houston Division (Civil
Action No. H-04-3030), filed on July 27, 2004. This claim alleges
violations of Sections 34(b), 36(b) and 48(a) of the Investment Company
Act and violations of Sections 206 and 215 of the Advisers Act. The claim
also alleges common law breach of fiduciary duty. The plaintiff in this
case is seeking: compensatory and punitive damages; rescission of certain
Funds' advisory agreements and distribution plans and recovery of all fees
paid; an accounting of all fund-related fees, commissions and soft dollar
payments; restitution of all unlawfully or discriminatorily obtained fees
and charges; and attorneys' and experts' fees.
P-18
Appendix II
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND
APRIL 30, 2006
(UNAUDITED)
SHARES VALUE
- -------------------------------- --------------------------------------------
AIM AIM
ADVANTAGE AIM ADVANTAGE AIM
HEALTH GLOBAL HEALTH GLOBAL
SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA
FUND CARE FUND COMBINING FUND CARE FUND COMBINING
- ---------- ---------- ---------- -------------- -------------- --------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS -- 78.31%
BIOTECHNOLOGY--23.22%
68,653 -- 68,653 Altus Pharmaceuticals Inc. (a)(b) $ 1,499,381 $ -- $ 1,499,381
46,542 689,874 736,416 Amgen Inc. (a) 3,150,893 46,704,470 49,855,363
70,028 472,019 542,047 Arena Pharmaceuticals, Inc. (a)(b) 991,596 6,683,789 7,675,385
87,600 662,110 749,710 ARIAD Pharmaceuticals, Inc. (a) 512,460 3,873,344 4,385,804
70,802 580,836 651,638 Array BioPharma Inc. (a) 524,643 4,303,995 4,828,638
72,400 884,635 957,035 Biogen Idec Inc. (a) 3,247,140 39,675,880 42,923,020
25,250 248,487 273,737 Cephalon, Inc. (a)(b) 1,657,915 16,315,656 17,973,571
32,131 344,138 376,269 Charles River Laboratories International, Inc. (a) 1,518,190 16,260,521 17,778,711
25,800 255,543 281,343 Coley Pharmaceutical Group, Inc. (a)(b) 412,542 4,086,133 4,498,675
40,918 391,308 432,226 Cubist Pharmaceuticals, Inc. (a) 927,611 8,870,952 9,798,563
28,227 125,391 153,618 DOV Pharmaceutical, Inc. (a)(b) 229,805 1,020,683 1,250,488
3,663,120 -- 3,663,120 Evolutionary Genomics/GenoPlex, Inc. (Acquired
09/15/97-06/25/98;
Cost $408,490) (a)(c)(d)(e)(f)(g) 0 -- 0
45,700 -- 45,700 Exelixis, Inc. (a) 491,732 -- 491,732
10,915 107,724 118,639 Genentech, Inc. (a) 870,035 8,586,680 9,456,715
47,342 -- 47,342 Genomic Health, Inc. (a) 505,612 -- 505,612
53,967 668,415 722,382 Genzyme Corp. (a) 3,300,622 40,880,261 44,180,883
24,458 241,372 265,830 Gilead Sciences, Inc. (a) 1,406,335 13,878,890 15,285,225
104,416 704,412 808,828 Human Genome Sciences, Inc. (a) 1,191,386 8,037,341 9,228,727
19,559 180,140 199,699 Idenix Pharmaceuticals Inc. (a)(b) 196,372 1,808,606 2,004,978
41,535 -- 41,535 Immunicon Corp. (a) 204,768 -- 204,768
134,819 704,814 839,633 Incyte Corp. (a) 562,195 2,939,074 3,501,269
54,611 300,219 354,830 InterMune, Inc. (a)(b) 873,230 4,800,502 5,673,732
24,000 153,900 177,900 Invitrogen Corp. (a) 1,584,240 10,158,939 11,743,179
25,537 257,414 282,951 Keryx Biopharmaceuticals, Inc.(a) 434,895 4,383,760 4,818,655
42,755 304,634 347,389 Mannkind Corp. (a)(b) 855,100 6,092,680 6,947,780
-- 166,398 166,398 Medarex, Inc. (a) -- 1,998,440 1,998,440
85,607 925,337 1,010,944 MedImmune, Inc. (a) 2,694,052 29,120,355 31,814,407
37,696 406,998 444,694 Millennium Pharmaceuticals, Inc. (a) 342,280 3,695,542 4,037,822
23,610 116,502 140,112 Myogen, Inc. (a) 780,547 3,851,556 4,632,103
60,690 618,764 679,454 NPS Pharmaceuticals, Inc. (a)(b) 520,113 5,302,808 5,822,921
17,400 186,500 203,900 OSI Pharmaceuticals, Inc. (a)(b) 462,318 4,955,305 5,417,623
97,108 854,929 952,037 Panacos Pharmaceuticals Inc. (a) 678,785 5,975,954 6,654,739
71,815 707,544 779,359 PDL BioPharma Inc. (a)(b) 2,066,836 20,363,116 22,429,952
16,100 208,400 224,500 Rigel Pharmaceuticals, Inc. (a)(b) 172,753 2,236,132 2,408,885
51,263 515,637 566,900 Serologicals Corp. (a)(b) 1,595,305 16,046,623 17,641,928
145,299 -- 145,299 Sonus Pharmaceuticals, Inc. (a)(b) 816,580 -- 816,580
90,500 -- 90,500 Sunesis Pharmaceuticals, Inc. (a)(b) 617,210 -- 617,210
15,700 138,521 154,221 Theravance, Inc. (a) 440,542 3,886,899 4,327,441
67,828 -- 67,828 TorreyPines Therapeutics, Inc.
(Acquired 09/15/97-06/25/98;
Cost $202,031) (a)(c)(d)(e)(f) 67,828 -- 67,828
11,372 118,031 129,403 Vertex Pharmaceuticals Inc. (a)(b) 413,600 4,292,787 4,706,387
48,926 312,390 361,316 ZymoGenetics, Inc. (a) 1,001,515 6,394,623 7,396,138
-------------- -------------- --------------
39,818,962 357,482,296 397,301,258
-------------- -------------- --------------
DRUG RETAIL--1.25%
78,020 641,676 719,696 CVS Corp. 2,318,754 19,070,611 21,389,365
-------------- -------------- --------------
HEALTH CARE DISTRIBUTORS--0.85%
70,940 734,619 805,559 PSS World Medical, Inc. (a) 1,279,758 13,252,527 14,532,285
-------------- -------------- --------------
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND
APRIL 30, 2006
(UNAUDITED)
SHARES VALUE
- -------------------------------- --------------------------------------------
AIM AIM
ADVANTAGE AIM ADVANTAGE AIM
HEALTH GLOBAL HEALTH GLOBAL
SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA
FUND CARE FUND COMBINING FUND CARE FUND COMBINING
- ---------- ---------- ---------- -------------- -------------- --------------
HEALTH CARE EQUIPMENT--17.71%
16,601 164,581 181,182 Advanced Medical Optics, Inc. (a)(b) $ 773,607 $ 7,669,475 $ 8,443,082
-- 122,000 122,000 Beckman Coulter, Inc. -- 6,265,920 6,265,920
41,458 415,429 456,887 Biomet, Inc. 1,541,408 15,445,650 16,987,058
136,857 1,440,510 1,577,367 Boston Scientific Corp. (a) 3,180,557 33,477,452 36,658,009
259,750 -- 259,750 Cambridge Heart, Inc. (b) 755,872 -- 755,872
60,552 210,859 271,411 Cyberonics, Inc. (a)(b) 1,404,201 4,889,820 6,294,021
70,981 459,673 530,654 Cytyc Corp. (a) 1,834,859 11,882,547 13,717,406
41,803 -- 41,803 Dade Behring Holdings, Inc. 1,630,317 -- 1,630,317
15,252 149,303 164,555 Dionex Corp. (a) 916,950 8,976,096 9,893,046
13,166 130,913 144,079 Edwards Lifesciences Corp. (a)(b) 585,097 5,817,774 6,402,871
20,129 209,700 229,829 EPIX Pharmaceuticals Inc. (a)(b) 78,302 815,733 894,035
18,000 193,600 211,600 Fisher Scientific International Inc. (a) 1,269,900 13,658,480 14,928,380
65,490 481,794 547,284 Medtronic, Inc. 3,282,359 24,147,515 27,429,874
91,915 688,407 780,322 Mentor Corp. (b) 3,982,677 29,828,675 33,811,352
75,000 -- 75,000 Nuvasive, Inc. (a) 1,494,000 -- 1,494,000
43,275 337,776 381,051 Respironics, Inc. (a) 1,584,730 12,369,357 13,954,087
92,292 679,550 771,842 St. Jude Medical, Inc. (a) 3,643,688 26,828,634 30,472,322
1,449 -- 1,449 Sensys Medical, Inc. (Acquired 04/23/04;
Cost $688) (a)(c)(d)(e)(f) 145 -- 145
4,057 -- 4,057 Sensys Medical, Inc.-Wts., expiring 08/13/06
(Acquired 10/18/01-04/23/04;
Cost $239) (c)(d)(e)(f)(h) 0 -- 0
1,622 -- 1,622 Sensys Medical, Inc.-Wts., expiring 09/17/06
(Acquired 10/05/01-04/23/04;
Cost $96) (c)(d)(e)(f)(h) 0 -- 0
1,622 -- 1,622 Sensys Medical, Inc.-Wts., expiring 10/19/06
(Acquired 11/07/01-04/23/04;
Cost $96) (c)(d)(e)(f)(h) 0 -- 0
26,000 285,000 311,000 Stryker Corp. 1,137,500 12,468,750 13,606,250
45,046 441,249 486,295 Thermo Electron Corp. (a) 1,736,073 17,005,737 18,741,810
84,095 385,879 469,974 Thoratec Corp. (a)(b) 1,514,551 6,949,681 8,464,232
12,325 130,384 142,709 Varian Inc. (a) 533,303 5,641,716 6,175,019
22,100 238,400 260,500 Varian Medical Systems, Inc. (a) 1,157,598 12,487,392 13,644,990
44,226 486,476 530,702 Wright Medical Group, Inc. (a) 1,037,984 11,417,592 12,455,576
-------------- -------------- --------------
35,075,678 268,043,996 303,119,674
-------------- -------------- --------------
HEALTH CARE FACILITIES--0.87%
53,503 -- 53,503 Community Health Systems, Inc. (a) 1,938,949 -- 1,938,949
27,608 362,817 390,425 Kindred Healthcare, Inc. (a)(b) 669,770 8,801,940 9,471,710
39,598 394,594 434,192 Tenet Healthcare Corp. (a)(b) 329,455 3,283,022 3,612,477
-------------- -------------- --------------
2,938,174 12,084,962 15,023,136
-------------- -------------- --------------
HEALTH CARE SERVICES--8.17%
139,185 -- 139,185 Allion Healthcare, Inc. (a) 1,485,104 -- 1,485,104
66,726 -- 66,726 Allscripts Healthcare Solutions, Inc. (a)(b) 1,136,344 -- 1,136,344
-- 137,000 137,000 DaVita, Inc. (a) -- 7,758,254 7,758,254
71,959 724,340 796,299 Eclipsys Corp. (a) 1,584,537 15,949,967 17,534,504
149,706 1,598,153 1,747,859 HMS Holdings Corp. (a)(g) 1,282,980 13,696,171 14,979,151
73,549 748,199 821,748 Medco Health Solutions, Inc. (a) 3,915,013 39,826,633 43,741,646
77,730 773,935 851,665 Merge Technologies Inc. (a)(b) 982,507 9,782,539 10,765,046
24,111 -- 24,111 Nighthawk Radiology Holdings, Inc. (a) 584,210 -- 584,210
31,859 331,906 363,765 Omnicare, Inc. (b) 1,806,724 18,822,389 20,629,113
45,198 474,544 519,742 Pharmaceutical Product Development, Inc. 1,621,252 17,021,893 18,643,145
98,802 -- 98,802 Trizetto Group, Inc. (a) 1,553,167 -- 1,553,167
40,326 -- 40,326 Visicu, Inc. (a)(b) 959,759 -- 959,759
-------------- -------------- --------------
16,911,597 122,857,846 139,769,443
-------------- -------------- --------------
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND
APRIL 30, 2006
(UNAUDITED)
SHARES VALUE
- -------------------------------- --------------------------------------------
AIM AIM
ADVANTAGE AIM ADVANTAGE AIM
HEALTH GLOBAL HEALTH GLOBAL
SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA
FUND CARE FUND COMBINING FUND CARE FUND COMBINING
- ---------- ---------- ---------- -------------- -------------- --------------
HEALTH CARE SUPPLIES--2.56%
30,536 303,593 334,129 Alcon, Inc. (a) $ 3,105,816 $ 30,878,444 $ 33,984,260
13,400 -- 13,400 Advanced Magnetics, Inc.(a)(b) 349,740 -- 349,740
15,343 157,601 172,944 Cooper Cos., Inc (The) 841,103 8,639,687 9,480,790
-------------- -------------- --------------
4,296,659 39,518,131 43,814,790
-------------- -------------- --------------
INDUSTRIAL CONGLOMERATES--1.80%
107,250 1,061,338 1,168,588 Tyco International Ltd. 2,826,038 27,966,256 30,792,294
-------------- -------------- --------------
LIFE & HEALTH INSURANCE--0.51%
50,302 543,805 594,107 Universal American Financial Corp. (a) 741,451 8,015,686 8,757,137
-------------- -------------- --------------
MANAGED HEALTH CARE--9.21%
66,538 658,850 725,388 Aetna Inc. 2,561,713 25,365,725 27,927,438
71,600 775,100 846,700 Aveta, Inc. (Acquired 12/21/05;
Cost $11,430,450)(a)(c)(e) 1,163,500 12,595,375 13,758,875
33,789 360,587 394,376 Coventry Health Care, Inc. (a) 1,678,300 17,910,356 19,588,656
33,187 325,407 358,594 Health Net, Inc. (a) 1,350,711 13,244,065 14,594,776
95,516 943,237 1,038,753 UnitedHealth Group Inc. 4,750,966 46,916,608 51,667,574
36,259 387,085 423,344 WellPoint, Inc. (a) 2,574,389 27,483,035 30,057,424
-------------- -------------- --------------
14,079,579 143,515,164 157,594,743
-------------- -------------- --------------
PHARMACEUTICALS--12.16%
65,902 512,317 578,219 Cypress Bioscience, Inc. (a) 490,970 3,816,762 4,307,732
65,977 538,328 604,305 Endo Pharmaceuticals Holdings Inc.(a) 2,074,977 16,930,416 19,005,393
16,555 173,333 189,888 Forest Laboratories, Inc. (a) 668,491 6,999,187 7,667,678
81,268 766,376 847,644 Impax Laboratories, Inc. (a)(b) 751,729 7,088,978 7,840,707
112,949 862,645 975,594 Johnson & Johnson 6,619,941 50,559,623 57,179,564
61,404 432,900 494,304 Medicines Co. (The) (a)(b) 1,180,185 8,320,338 9,500,523
33,300 455,700 489,000 MGI Pharma, Inc.(a) 622,044 8,512,476 9,134,520
-- 1,290,727 1,290,727 Pfizer Inc. -- 32,694,115 32,694,115
28,852 312,099 340,951 Sepracor Inc. (a)(b) 1,287,953 13,932,099 15,220,052
49,170 -- 49,170 SuperGen, Inc. (a)(b) 266,501 -- 266,501
-- 825,345 825,345 Wyeth -- 40,169,541 40,169,541
17,895 210,400 228,295 XenoPort, Inc. (a)(b) 401,743 4,723,480 5,125,223
-------------- -------------- --------------
14,364,534 193,747,015 208,111,549
-------------- -------------- --------------
Total Domestic Common Stocks & Other Equity Interests
(Cost $1,246,401,499) 134,651,184 1,205,554,490 1,340,205,674
-------------- -------------- --------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS --20.77%
CANADA--1.35%
59,955 649,321 709,276 Biovail Corp. (Pharmaceuticals) 1,562,427 16,921,305 18,483,732
72,818 359,083 431,901 Cardiome Pharma Corp. (Pharmaceuticals)(a) 771,871 3,806,280 4,578,151
-------------- -------------- --------------
2,334,298 20,727,585 23,061,883
-------------- -------------- --------------
FRANCE--3.56%
59,673 606,049 665,722 Ipsen S.A. (Pharmaceuticals) (Acquired 12/06/05;
Cost $17,425,953)(a)(b)(c)(i) 2,673,349 27,150,983 29,824,332
-- 313,000 313,000 Sanofi-Aventis (Pharmaceuticals)(i) -- 29,512,359 29,512,359
35,386 -- 35,386 Sanofi-Aventis-ADR (Pharmaceuticals) 1,664,558 -- 1,664,558
-------------- -------------- --------------
4,337,907 56,663,342 61,001,249
-------------- -------------- --------------
GERMANY--0.99%
14,865 145,794 160,659 Merck KGaA (Pharmaceuticals)(i) 1,575,007 15,447,469 17,022,476
-------------- -------------- --------------
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND
APRIL 30, 2006
(UNAUDITED)
SHARES VALUE
- -------------------------------- --------------------------------------------
AIM AIM
ADVANTAGE AIM ADVANTAGE AIM
HEALTH GLOBAL HEALTH GLOBAL
SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA
FUND CARE FUND COMBINING FUND CARE FUND COMBINING
- ---------- ---------- ---------- -------------- -------------- --------------
ISRAEL--0.50%
18,379 19,355 37,734 Teva Pharmaceutical Industries Ltd -ADR
(Pharmaceuticals)(b) $ 744,350 $ 7,837,762 $ 8,582,112
-------------- -------------- --------------
JAPAN--2.23%
50,000 507,400 557,400 Eisai Co., Ltd. (Pharmaceuticals)(b)(i) 2,284,560 23,183,716 25,468,276
70,000 688,000 758,000 Shionogi & Co., Ltd. (Pharmaceuticals)(b)(i) 1,179,614 11,593,918 12,773,532
-------------- -------------- --------------
3,464,174 34,777,634 38,241,808
-------------- -------------- --------------
SWITZERLAND--9.52%
94,409 1,006,768 1,101,177 Novartis A.G. -ADR (Pharmaceuticals) 5,429,462 57,899,227 63,328,689
59,566 587,850 647,416 Roche Holding A.G. (Pharmaceuticals) (b)(i) 9,157,741 90,376,690 99,534,431
-------------- -------------- --------------
14,587,203 148,275,917 162,863,120
-------------- -------------- --------------
UNITED KINGDOM--2.62%
22,455 221,602 244,057 AstraZeneca PLC -ADR (Pharmaceuticals) 1,237,944 12,216,918 13,454,862
310,847 3,090,447 3,401,294 iSoft Group PLC (Health Care Services)(i) 665,073 6,612,172 7,277,245
500,000 -- 500,000 Renovo Group PLC (Biotechnology) (a) 1,034,950 -- 1,034,950
43,225 439,684 482,909 Shire PLC-ADR (Pharmaceuticals) (b) 2,047,136 20,823,434 22,870,570
-------------- -------------- --------------
4,985,103 39,652,524 44,637,627
-------------- -------------- --------------
Total Foreign Stocks & Other Equity Interests
(Cost $261,930,165) 32,028,042 323,382,233 355,410,275
-------------- -------------- --------------
PREFERRED STOCKS --0.54%
BIOTECHNOLOGY--0.03%
416,667 416,667 833,334 Athersys Inc. -Series F, Conv. Pfd.
(Acquired 04/17/00;
Cost $10,000,000) (a)(c)(d)(e)(f) 235,293 235,293 470,586
103,055 103,055 206,110 Ingenex, Inc.-Series B, Pfd. (Acquired 09/27/94;
Cost $1,200,000) (a)(c)(d)(e)(f) 0 -- 0
-------------- -------------- --------------
235,293 235,293 470,586
-------------- -------------- --------------
HEALTH CARE DISTRIBUTORS--0.07%
2,000,000 -- 2,000,000 Locus Pharmaceuticals, Inc.-Series C, Pfd.
(Acquired 11/21/00;
Cost $4,500,000) (a)(c)(d)(e)(f) 978,000 -- 978,000
588,235 -- 588,235 Locus Pharmaceuticals, Inc.-Series D, Pfd.
(Acquired 09/06/01;
Cost $2,352,940) (a)(c)(d)(e)(f) 287,647 -- 287,647
-------------- -------------- --------------
1,265,647 -- 1,265,647
-------------- -------------- --------------
HEALTH CARE EQUIPMENT--0.40%
125,000 -- 125,000 Masimo Corp.-Series C, Pfd (Acquired 10/07/98;
Cost $1,000,000) (a)(c)(d)(e)(f) 2,525,000 -- 2,525,000
15,909 -- 15,909 Masimo Corp.-Series F, Conv. Pfd (Acquired 09/14/99;
Cost $174,999) (a)(c)(d)(e)(f) 321,362 -- 321,362
2,439,026 -- 2,439,026 Neothermia Corp.-Series C, Pfd. (Acquired 03/26/01;
Cost $2,000,001)(a)(c)(d)(e)(f) 2,219,514 -- 2,219,514
2,173,209 -- 2,173,209 Sensys Medical, Inc.-Series A-2, Pfd.
(Acquired 02/25/98-09/30/05;
Cost $7,627,993) (a)(c)(d)(e)(f)(g) 1,608,175 -- 1,608,175
-------------- -------------- --------------
6,674,051 -- 6,674,051
-------------- -------------- --------------
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND
APRIL 30, 2006
(UNAUDITED)
SHARES VALUE
- -------------------------------- --------------------------------------------
AIM AIM
ADVANTAGE AIM ADVANTAGE AIM
HEALTH GLOBAL HEALTH GLOBAL
SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA
FUND CARE FUND COMBINING FUND CARE FUND COMBINING
- ---------- ---------- ---------- -------------- -------------- --------------
PHARMACEUTICALS--0.04%
93,867 93,867 187,734 BioImagene, Inc.-Series B-2, Pfd. (Acquired 05/24/01;
Cost $2,700,000) (a)(c)(d)(e)(f) $ 94,336 $ 94,336 $ 188,672
1,471,072 -- 1,471,072 Predix Pharmaceuticals Holdings, Inc.-Series A,
Conv. Pfd. (Acquired 11/07/97-09/21/04;
Cost $1,511,468) (a)(c)(d)(e)(f) 357,228 -- 357,228
850,039 850,039 Predix Pharmaceuticals Holdings, Inc.-Series C,
Conv. Pfd. (Acquired 08/05/04;
Cost $187,323) (a)(c)(d)(e)(f) 206,419 -- 206,419
-------------- -------------- --------------
657,983 94,336 752,319
-------------- -------------- --------------
Total Preferred Stocks (Cost $33,254,724) 8,832,974 329,629 9,162,603
-------------- -------------- --------------
PRINCIPAL
AMOUNT
- ----------
BONDS & NOTES--0.01%
PHARMACEUTICALS--0.01%
$222,563 $ -- $222,563 Sensys Medical, Inc., Sec. Notes, 8.00%, 06/30/06
(Acquired 03/16/05-06/15/05;
Cost $222,563) (c)(d)(e)(f) 222,563 -- 222,563
-------------- -------------- --------------
SHARES
----------
MONEY MARKET FUNDS--0.91%
5,596,960 5,596,960 Liquid Assets Portfolio-Institutional Class (j) -- 5,596,960 5,596,960
4,442,258 -- 4,442,258 Premier Portfolio-Institutional Class (j) 4,442,258 -- 4,442,258
5,596,960 5,596,960 STIC Prime Portfolio-Institutional Class (j) -- 5,596,960 5,596,960
Total Money Market Funds (Cost $15,636,178) 4,442,258 11,193,920 15,636,178
Adjustment for Extinguishment of Debt--(1.40%)
(Cost $24,418,246) (k) (24,000,000) (24,000,000)
Total Investments (excluding investments purchased
with cash collateral from securities
loaned)--99.14% (Cost $1,533,026,883) 156,177,021 1,540,460,272 1,696,637,293
-------------- -------------- --------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS--7.00%
-- 47,089,563 47,089,563 Liquid Assets Portfolio-Institutional Class (j)(l) -- 47,089,563 47,089,563
25,710,819 -- 25,710,819 Premier Portfolio-Institutional Class (j)(l) 25,710,819 -- 25,710,819
-- 47,089,563 47,089,563 STIC Prime Portfolio-Institutional Class (j)(l) -- 47,089,563 47,089,563
Total Money Market Funds (purchased with cash
collateral from securities loaned)
(Cost $119,889,945) 25,710,819 94,179,126 119,889,945
-------------- -------------- --------------
TOTAL INVESTMENTS -- 106.14% (Cost $1,652,916,828) 181,887,840 1,634,639,398 1,816,527,238
-------------- -------------- --------------
OTHER ASSETS LESS LIABILITIES -- -6.15%(m) (23,410,436) (81,770,910) (105,181,346)
-------------- -------------- --------------
NET ASSETS -- 100.00% $ 158,477,404 $1,552,868,488 $1,711,345,892
============== ============== ==============
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND
APRIL 30, 2006
(UNAUDITED)
SHARES VALUE
- -------------------------------- --------------------------------------------
AIM AIM
ADVANTAGE AIM ADVANTAGE AIM
HEALTH GLOBAL HEALTH GLOBAL
SCIENCES HEALTH PRO FORMA SCIENCES HEALTH PRO FORMA
FUND CARE FUND COMBINING FUND CARE FUND COMBINING
- ---------- ---------- ---------- -------------- -------------- --------------
SECURITIES SOLD SHORT(*)
COMMON STOCKS--0.00% (N)
BIOTECHNOLOGY--0.00%
20,000 -- -- Celegene Corp. $ 843,200 $ -- $ --
-------------- -------------- --------------
HEALTH CARE DISTRIBUTORS--0.00%
34,929 -- -- AmerisourceBergen Corp. 1,507,186 -- --
-------------- -------------- --------------
HEALTH CARE EQUIPMENT--0.00%
200,000 -- -- Quidell Corp. 2,290,000 -- --
-------------- -------------- --------------
HEALTH CARE SERVICES--0.00%
19,128 -- -- Express Scripts, Inc. 1,494,662 -- --
-------------- -------------- --------------
MANAGED HEALTH CARE--0.00%
14,000 -- -- Cigna Corp. 1,498,000 -- --
-------------- -------------- --------------
Total Securities Sold Short (Total
Proceeds $7,131,178) $ 7,633,048 $ --
Adjustment for liquidation of short sale positions (7,633,048) --
-------------- --------------
Total Securities Sold Short After Adjustments (Total
Proceeds $0) (o) $ -- $ --
-------------- --------------
Investment Abbreviations:
ADR - American Depositary Receipt
Conv.-Convertible
Disc. - Discounted
Pfd.-Preferred
Sec.-Secured
Wts.-Warrants
Notes to Proforma Combining Schedule of Investments:
* At April 30, 2006, AIM Advantage Health Sciences Fund engaged in short
selling (uncovered short positions) and borrowing for the purposes of
making additional investments; two strategies that the buying fund AIM
Global Health Care Fund is restricted from engaging in. Therefore, prior to
the closing of the reorganization AIM Advantage Health Sciences Fund will
cover all of its open short positions and sell off securities in a
sufficient amount to return the borrowings on the line of credit. With the
exception of the two items noted above all securities held by AIM Advantage
Health Sciences Fund comply with the investment objectives, strategies and
restrictions of AIM Global Health Care Fund at April 30, 2006.
reorganization.
(a) Non-income producing security.
(b) All or a portion of this security was out on loan at April 30, 2006.
(c) Security not registered under the Securities Act of 1993, 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. AIM Global Health Care Fund has no rights to demand registration of
these securities. The aggregate market value of these securities at April
30, 2006 was $12,960,359, which represented 8.17% of the Net Assets of AIM
Advantage Health Sciences. The aggregate market value of these securities
at April 30, 2006 was $40,075,987, which represented 2.58% of the Net
Assets of AIM Global Health Care Fund. The aggregate market value of these
securities at April 30, 2006 was $53,036,346, which represented 3.10% of
the pro forma combining Net Assets of AIM Global Health Care Fund. Unless
otherwise indicated, these securities are not considered to be illiquid.
Notes to Proforma Combining Schedule of Investments-(continued)
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate market value of these
securities at April 30, 2006 was $9,123,510, which represented 5.75% of the
Net Assets of AIM Advantage Health Sciences Fund. The aggregate market
value of these securities at April 30, 2006 was $329,629, which represented
0.20% of the Net Assets of AIM Global Health Care Fund. The aggregate
market value of these securities at April 30, 2006 was $9,453,139, which
represented 0.55% of the pro forma combining Net Assets of AIM Global
Health Care Fund. See Note 4.
(e) Security considered to be illiquid. AIM Global Health Care Fund is limited
to investing 15% of net assets in illiquid securities at the time of
purchase. The aggregate value of these securities considered illiquid at
April 30, 2006 was $10,287,010, which represented 6.49% of the Net Assets
of AIM Advantage Health Sciences Fund. The aggregate value of these
securities considered illiquid at April 30, 2006 was $12,925,004, which
represented 0.83% of the Net Assets of AIM Global Health Care Fund. The
aggregate value of these securities considered illiquid at April 30, 2006
was $23,212,014, which represented 1.36% of the pro forma combining Net
Assets of AIM Global Health Care Fund.
(f) Security is considered venture capital.
(g) Affiliated company. The Investment Company Act of 1940 defines affiliates
as those companies in which a find holds 5% or more of the outstanding
voting securities. AIM Global Health Care Fund has not owned enough of the
outstanding voting securities of the issuer to have control (as defined in
the Investment Company Act of 1940) of that issuer. The market value of
these securities as of April 30, 2006 was $1,608,175, which represented
1.01% of the Net Assets of AIM Advantage Health Sciences Fund. The market
value of these securities as of April 30, 2006 was $13,696,171, which
represented 0.88% of the Net Assets of AIM Global Health Care Fund. The
market value of these securities as of April 30, 2006 was $16,587,326,
which represented 0.97% of the pro forma combining Net Assets of AIM Global
Health Care Fund.
(h) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(i) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at April 30, 2006 was $221,412,651,
which represented 12.94% of the pro forma combining Net Assets of AIM
Global Health Care Fund. See Note 4.
(j) Liquid Assets Portfolio, Premier Portfolio and STIC Prime Portfolio are
affiliated with AIM Advantage Health Sciences Fund and AIM Global Health
Care Fund by having the same investment advisor.
(k) At April 30, 2006 AIM Advantage Health Sciences Fund had an outstanding
loan of $24,000,000 that will be extinguished prior to the closing of the
reorganization. AIM Advantage Health Sciences Fund is expected to sell
securities valued at $24,000,000 and accordingly the value of the AIM
Advantage Health Sciences Fund investments and the payable for the loan
outstanding have been reduced by $24,000,000. The AIM Advantage Health
Sciences Fund cost of securities has been reduced by $24,418,246 based on
the proportion of borrowing to total investments. This does not reflect an
estimate of the actual gains or losses expected to be realized as a result
of the securities sold as the specific securities and value of those
securities is not known at this time, but has been included to incorporate
the concept that there will be a reduction in the costs of securities owned
upon the liquidation of securities to raise cash for extinguishing the
debt.
(l) 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.
(m) The estimated transaction costs for the reorganization, which includes
legal, accounting, filing, printing, postage and solicitation, are
estimated to be $143,000 for AIM Advantage Health Sciences. AIM Advantage
Health Sciences will bear all of the transaction costs and accordingly the
liabilities of AIM Advantage Health Sciences Fund have been increased. In
addition AIM Global Health Care Fund will bear approximately $30,000 with
respect to the reorganization and accordingly the liabilities of AIM Health
Care Fund have been increased by $30,000.
(n) Collateral on short sales segregated by AIM Advantage Health Sciences Fund
in the amount of $8,640,606, which represents 113.20% of the market value
of securities sold short.
(o) At April 30, 2006 AIM Advantage Health Sciences Fund had open short
positions valued at $7,633 049 with proceeds of $7,131,178 that are
required to be covered prior to the closing of the reorganization,
accordingly the liability for securities sold short and proceeds on short
sales have been adjusted to reflect this change.
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS WHICH ARE AN
INTEGRAL PART OF THE FINANCIAL STATEMENTS.
PRO FORMA COMBINING STATEMENT OF ASSETS & LIABILITIES
OF AIM ADVANTAGE HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND
APRIL 30, 2006
(Unaudited)
AIM AIM
ADVANTAGE AIM GLOBAL HEALTH
HEALTH GLOBAL CARE FUND
SCIENCES HEALTH CARE PRO FORMA
FUND FUND ADJUSTMENTS ** COMBINING
------------ -------------- -------------- --------------
ASSETS:
Investments, at value * $174,126,588 $1,515,570,181 $(24,000,000)(a) $1,665,696,769
(cost $171,286,275 - AIM Advantage Health Sciences Fund)
(cost $1,357,644,435 - AIM Global Health Care Fund)
(cost $1,528,930,710- Pro Forma Combining)
Investments in affiliates, at value 31,761,252 119,069,217 -- 150,830,469
(cost $38,189,559 - AIM Advantage Health Sciences Fund)
(cost $110,214,805 - AIM Global Health Care Fund)
(cost $148,404,364 - Pro Forma Combining)
Total Investments 205,887,840 1,634,639,398 (24,000,000)(a) 1,816,527,238
(cost $209,475,834 - AIM Advantage Health Sciences Fund)
(cost $1,467,859,240 - AIM Global Health Care Fund)
(cost adjustment $(24,418,246) - AIM Advantage Health
Sciences Fund)
(cost $1,652,916,828- Pro Forma Combining)
Cash -- -- 1,217,597(b) 1,217,597
Foreign currencies, at value 633,382 12,844,934 -- 13,478,316
(cost $624,012 - AIM Advantage Health Sciences Fund)
(cost $12,664,264 - AIM Global Health Care Fund)
(cost $13,288,276 - Pro Forma Combining)
Receivables for:
Deposits with brokers for securities sold short 8,934,633 -- (8,934,633)(b) --
Investments sold 563,233 8,566,016 -- 9,129,249
Fund shares sold 229,389 726,667 -- 956,056
Dividends and interest 90,896 542,510 -- 633,406
Short stock rebates 22,613 -- (22,613)(b) --
Investment for trustee deferred compensation and retirement
plans 41,911 213,101 -- 255,012
Other assets 73,135 61,259 -- 134,394
------------ -------------- ------------ --------------
Total assets 216,477,032 1,657,593,885 (31,739,649) 1,842,331,268
------------ -------------- ------------ --------------
LIABILITIES:
Payables for:
Fund shares reacquired 238,760 2,344,228 -- 2,582,988
Foreign currency contracts -- 6,366,348 -- 6,366,348
Trustee deferred compensation and retirement plans 49,078 297,246 -- 346,324
Collateral upon return of securities loaned 25,710,819 94,179,126 -- 119,889,945
Loan outstanding 24,000,000 -- (24,000,000)(a) --
Securities sold short, at value (proceeds $7,131,178) 7,633,049 -- (7,633,049)(b) --
Accrued interest expense 106,600 -- (106,600)(a) --
Accrued distribution fees 31,649 437,058 -- 468,707
Accrued trustees' and officer's fees and benefits -- 3,608 -- 3,608
Accrued transfer agent fees -- 926,578 -- 926,578
Accrued reorganization expenses -- -- 173,000 173,000
Accrued operating expenses 86,673 141,205 -- 227,878
------------ -------------- ------------ --------------
Total liabilities 57,856,628 104,695,397 (31,566,649) 130,985,376
------------ -------------- ------------ --------------
Net assets applicable to shares outstanding $158,620,404 $1,552,898,488 $ (173,000) $1,711,345,892
------------ -------------- ------------ --------------
NET ASSETS CONSIST OF:
Shares of beneficial interest $147,592,628 $1,206,115,697 $ -- $1,353,708,325
Undistributed net investment income (loss) (830,391) (4,975,041) (173,000) (5,978,432)
Undistributed net realized gain from investment securities, foreign
currencies, foreign currency contracts and securities sold short 15,937,774 191,327,797 -- 207,265,571
Unrealized appreciation of investment securities, foreign
currencies, foreign currency contracts and securities sold short (4,079,607) 160,430,035 -- 156,350,428
------------ -------------- ------------ --------------
$158,620,404 $1,552,898,488 $ (173,000) $1,711,345,892
============ ============== ============ ==============
NET ASSETS:
Class A $153,450,494 $ 566,996,553 $ (149,293) $ 720,297,754
Class B $ 3,145,023 $ 149,457,427 $ (5,722) $ 152,596,728
Class C $ 2,024,887 $ 46,315,136 $ (2,721) $ 48,337,302
Investor Class $ -- $ 790,129,372 $ (15,264) $ 790,114,108
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 8,571,701 18,575,660 (3,548,925) 23,598,436
Class B 183,482 5,437,503 (69,184) 5,551,801
Class C 122,108 1,683,895 (48,554) 1,757,449
Investor Class -- 25,882,358 -- 25,882,358
Class A:
Net asset value per share $ 17.90 $ 30.52 $ 30.52
Offering price per share:
(Net asset value of $17.90 / 94.50% - AIM Advantage Health
Sciences Fund)
(Net asset value of $30.52 / 94.50% - AIM Global Health
Care Fund)
$ 18.94 $ 32.30 $ 32.30
Class B:
Net asset value and offering price per share $ 17.14 $ 27.49 $ 27.49
Class C:
Net asset value and offering price per share $ 16.58 $ 27.50 $ 27.50
Investor Class:
Net asset value and offering price per share $ -- $ 30.53 $ 30.53
* At April 30, 2006, securities with an aggregate value of $25,127,048 and
$90,972,895 were on loan to brokers for AIM Advantage Health Sciences Fund
and AIM Global Health Care Fund, respectively.
** See Note 2 Pro Forma Adjustments.
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS WHICH ARE AN
INTEGRAL PART OF THE FINANCIAL STATEMENTS.
PRO FORMA COMBINING STATEMENT OF OPERATIONS
OF AIM ADVANTAGE HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND
FOR THE YEAR ENDED APRIL 30, 2006
(Unaudited)
AIM AIM
ADVANTAGE AIM GLOBAL HEALTH
HEALTH GLOBAL CARE FUND
SCIENCES HEALTH CARE PRO FORMA
FUND FUND ADJUSTMENTS * COMBINING
----------- ------------ ------------- -------------
INVESTMENT INCOME:
Dividends $ 2,314,670 $ 9,256,619 $ (269,817)(c) $ 11,301,472
(net of foreign withholding tax of $77,402 - AIM Advantage Health
Sciences Fund)
(net of foreign withholding tax of $520,771 - AIM Global Health Care
Fund)
(net of foreign withholding tax of $598,173 - Pro Forma Combining)
Dividends from affiliated money market funds 215,282 1,431,707 -- 1,646,989
(including securities lending income of $39,506 - AIM Advantage Health
Sciences Fund)
(including securities lending income of $226,516 - AIM Global Health
Care Fund)
(including securities lending income of $266,022 - Pro Forma Combining)
Short stock rebates 303,821 -- (303,821)(b) --
Interest 30,437 -- -- 30,437
----------- ------------ ----------- ------------
Total investment income 2,864,210 10,688,326 (573,638) 12,978,898
----------- ------------ ----------- ------------
EXPENSES:
Advisory fees 3,012,967 9,312,131 (2,048,503)(d) 10,276,595
Administrative services fees 50,000 349,613 (16,785)(e) 382,828
Custodian fees 50,637 227,448 (15,572)(f) 262,513
Distribution fees:
Class A 398,546 1,510,460 -- 1,909,006
Class B 19,410 1,567,619 -- 1,587,029
Class C 8,299 468,184 -- 476,483
Investor Class -- 1,630,112 -- 1,630,112
Dividends on short sales 9,448 -- (9,448)(b) --
Interest and line of credit fees 1,090,064 -- (1,090,064)(b) --
Transfer agent fees--A, B, C & Investor 273,186 4,046,491 (5,227)(g) 4,314,450
Trustees' and officer's fees and benefits 15,007 46,900 (10,891)(h) 51,016
Other 177,052 554,036 (72,572)(i) 658,516
----------- ------------ ----------- ------------
Total expenses 5,104,616 19,712,994 (3,269,062) 21,548,548
----------- ------------ ----------- ------------
Less: Fees waived, expenses reimbursed and expense offset arrangements (574,595) (435,560) 501,265 (508,890)
----------- ------------ ----------- ------------
Net expenses 4,530,021 19,277,434 (2,767,797) 21,039,658
----------- ------------ ----------- ------------
Net investment income (loss) (1,665,811) (8,589,108) 2,194,159 (8,060,760)
----------- ------------ ----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FOREIGN CURRENCY CONTRACTS, OPTION CONTRACTS AND SECURITIES
SOLD SHORT:
Net realized gain (loss) from:
Investment securities 26,390,175 178,612,349 (3,076,258)(c) 201,926,266
(includes net gains from securities sold to affiliates of $522,587 -
AIM Advantage Health Sciences Fund)
(includes net gains from securities sold to affiliates of $4,833,530
- AIM Global Health Care Fund)
(includes net gains from securities sold to affiliates of $5,356,117
- Pro Forma Combining)
Foreign currencies (58,553) (845,691) -- (904,244)
Foreign currency contracts -- 5,169,796 -- 5,169,796
Option contracts written 17,978 144,858 162,836
Securities sold short (1,610,221) -- 1,610,221(b) --
----------- ------------ ----------- ------------
24,739,379 183,081,312 (1,466,037) 206,354,654
----------- ------------ ----------- ------------
Net unrealized appreciation (depreciation) of:
Investment securities 6,664,681 88,327,961 (776,891)(c) 94,215,751
Foreign currencies 8,295 172,060 -- 180,355
Foreign currency contracts -- (6,540,825) (6,540,825)
Option contracts written 4,931 (16,991) (12,060)
Securities sold short (905,609) -- 905,609(b) --
----------- ------------ ----------- ------------
5,772,298 81,942,205 128,718 87,843,221
----------- ------------ ----------- ------------
Net gain from investment securities, foreign currencies, foreign currency
contracts, option contracts and securities sold short 30,511,677 265,023,517 (1,337,319) 294,197,875
----------- ------------ ----------- ------------
Net increase in net assets resulting from operations $28,845,866 $256,434,409 $ 856,840 $286,137,115
=========== ============ =========== ============
* See Note 2 to Proforma Adjustments.
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS WHICH ARE AN
INTEGRAL PART OF THE FINANCIAL STATEMENTS.
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
OF AIM ADVANTAGE HEALTH SCIENCES FUND INTO AIM GLOBAL HEALTH CARE FUND
APRIL 30, 2006
(UNAUDITED)
NOTE 1 - BASIS OF PRO FORMA PRESENTATION
The pro forma financial statements and the accompanying pro forma schedule of
investments give effect to the proposed Agreement and Plan of Reorganization
(the "Plan") between AIM Global Health Care Fund ("Buying Fund") and AIM
Advantage Health Sciences Fund ("Selling Fund") and the consummation of the
transactions contemplated therein to be accounted for as a tax-free
reorganization of investment companies. Selling Fund and Buying Fund are both
registered open-end management investment companies that issue their shares in
separate series. The Plan would be accomplished by an exchange of shares of
Buying Fund for the net assets of Selling Fund and the distribution of Buying
Fund shares to Selling Fund shareholders. If the Plan were to have taken place
at April 30, 2006, Selling Fund - Class A shareholders would have received
5,022,776 shares of Buying Fund - Class A shares, Selling Fund - Class B
shareholders would have received 114,298 shares of Buying Fund - Class B shares
and Selling Fund - Class C shareholders would have received 73,554 shares of
Buying Fund - Class C shares.
The preparation of pro forma combined 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 pro forma combined
financial statements and the reported amounts of revenues and expenses during
the reporting period. Certain expenses have been adjusted to reflect the
expected expenses of the combined entity. The merger adjustments represent those
adjustments needed to present the results of operations of the pro forma
combined Buying Fund as if the proposed merger had taken effect on April 30,
2006. [Adjustments include estimated costs of securities transactions for Buying
Fund to be in compliance with its investment restrictions and strategies.]
Actual results could differ from those estimates.
The pro forma financial statements should be read in conjunction with the
historical financial statements of Selling Fund and Buying Fund.
NOTE 2 - PRO FORMA ADJUSTMENTS
(a) With respect to the Pro Forma Statement of Assets and Liabilities as of
April 30, 2006, Selling Fund is expected to sell securities valued at
$24,000,000 and accordingly the value of the Selling Fund's investments and the
payable for the loan outstanding have been reduced by $24,000,000. The Selling
Fund's cost of securities has been reduced by $24,418,246 based on the
proportion of borrowing to total investments at April 30, 2006. This does not
reflect an estimate of the actual gains or losses expected to be realized as a
result of the securities sold as the specific securities and value of those
securities is not known at this time, but has been included to incorporate the
concept that there will be a reduction in the costs of securities owned upon the
liquidation of securities to raise cash for extinguishing the debt.
(b) For the 12 months ended April 30, 2006 Selling Fund engaged in short selling
(uncovered short positions) and borrowing for the purposes of making additional
investments; two strategies that the Buying Fund is restricted from engaging in.
Therefore, the Pro Forma Combining Statement of Assets and Liabilities and the
Pro Forma Combining Statement of Operations have been adjusted to eliminate the
estimated effects of these strategies as of April 30, 2006 and for the 12 months
ended April 30, 2006, respectively.
(c) During the 12 months ended April 30, 2006, the Selling Fund had average
borrowings of approximately 12% as a percentage of total investments,
accordingly the dividend income, realized gains and the change in unrealized
appreciation in the Pro Forma Combining Statement of Operations have been
reduced by 12% to eliminate the estimated effects of the borrowings on the
results of operations. This is an estimate of the effects on the results of
operations based on the relative amount of borrowings.
(d) Under the terms of the investment advisory contract of Buying Fund, the
advisory fees based on pro forma combined assets for the year ended April 30,
2006 are $10,276,595.
(e) Pursuant to the master administrative services agreement for Buying Fund,
fees paid on pro forma combined assets for the year ended April 30, 2006 are
$382,828. The administrative services fees were adjusted to reflect the fees in
effect under the administrative services agreement for Buying Fund.
(f) Custodian fees were reduced by $15,572 to reflect the transaction costs on
the pro forma combined assets for the year ended April 30, 2006.
(g) Transfer agency fees were restated to reflect the pro forma combined number
of open accounts under the terms of the transfer agency agreement of Buying
Fund. The effect of this restatement is to reduce transfer agency fees on a pro
forma basis by $5,227 for Class A, Class B, Class C and Investor class shares.
(h) Trustees' and Officer's fees and benefits were reduced by $10,891 to
eliminate the effects of duplicative fixed costs of retainer and meeting fees.
(i) Other Expenses were reduced by $72,572 to eliminate the effects of
duplicative fixed costs of production of reports to shareholders and
professional services fees.
NOTE 3 - REORGANIZATION COSTS
Selling Fund is expected to incur an estimated $143,000 in reorganization costs.
These costs represent the estimated non recurring expense of Selling Fund
carrying out their obligations under the Plans and consist of management's
estimate of professional services fees, printing costs and mailing charges
related to the proposed reorganizations. Buying Fund is expected to incur
approximately $30,000 of expenses in connection with the Reorganization and will
bear all of those costs and expenses.
NOTE 4 - SECURITY VALUATION POLICY
Securities, including restricted securities, are valued according to the
following policy for Selling Fund and Buying Fund.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price as of the close of the customary trading session
on the exchange where the security is principally traded, or lacking any sales
on a particular day, the security is valued at the closing bid price on that
day. Each security traded in the over-the-counter market (but not securities
reported on the NASDAQ National Market System) is valued on the basis of prices
furnished by independent pricing services, which may be considered fair valued,
or market makers. Each security reported on the NASDAQ National Market System is
valued at the NASDAQ Official Closing Price ("NOCP") as of the close of the
customary trading session on the valuation date or absent a NOCP, at the closing
bid price.
Futures contracts are valued at the final settlement price set by an
exchange on which they are principally traded. Listed options are valued at the
mean between the last bid and the ask prices from the exchange on which they are
principally traded. Options not listed on an exchange are valued by an
independent source at the mean between the last bid and ask prices. For purposes
of determining net asset value per share, futures and option contracts generally
will be valued 15 minutes after the close of the customary trading session of
the New York Stock Exchange ("NYSE").
Investments in open-end registered investment companies and closed-end
registered investment companies that do not trade on an exchange are valued at
the end of day net asset value per share. Investments in closed-end registered
investment companies that trade on an exchange are valued at the last sales
price as of the close of the customary trading session on the exchange where the
security is principally traded.
Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated quotes
provided by the pricing service may be determined without exclusive reliance on
quoted prices, and may reflect appropriate factors such as institution-size
trading in similar groups of securities, developments related to specific
securities, dividend rate, yield, quality, type of issue, coupon rate, maturity,
individual trading characteristics and other market data.
Short-term obligations having 60 days or less to maturity and commercial paper
are valued at amortized cost which approximates market value.
Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and are
valued at the last bid price in the case of equity securities and in the case of
debt obligations, the mean between the last bid and asked prices.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the close of
the NYSE. Generally, trading in foreign securities is substantially completed
each day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of the close of the respective markets. Events affecting the
values of such foreign securities may occur between the times at which the
particular foreign market closes and the close of the customary trading session
of the NYSE which would not ordinarily be reflected in the computation of the
Fund's net asset value. If the event is likely to have affected the closing
price of the security, the security will be valued at fair value in good faith
using procedures approved by the Board of Trustees. Adjustments to closing
prices to reflect fair value may also be based on a screening process of an
independent pricing service to indicate the degree of certainty, based on
historical data, that the closing price in the principal market where a foreign
security trades is not the current market value as of the close of the NYSE.
Foreign securities meeting the approved degree of certainty that the price is
not reflective of current market value will be priced at the indication of fair
value from the independent pricing service. Multiple factors may be considered
by the independent pricing service in determining adjustments to reflect fair
value and may include information relating to sector indices, ADRs and domestic
and foreign index futures.
Securities for which market quotations are not readily available or are
unreliable are valued at fair value as determined in good faith by or under the
supervision of the Trust's officers following procedures approved by the Board
of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers
and information providers and other market data may be reviewed in the course of
making a good faith determination of a security's fair value.
NOTE 5 - FEDERAL INCOME TAXES
The Selling Fund and the Buying Fund intend to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a regulated
investment company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gain) which is
distributed to shareholders. Therefore, no provision for federal income taxes is
recorded in the pro forma financial statements.
Appendix III
AIM Global Health Care Fund
SCHEDULE OF INVESTMENTS
October 31, 2006
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-76.53%
BIOTECHNOLOGY-21.41%
Altus Pharmaceuticals Inc.(a) 158,074 $ 2,605,059
- ------------------------------------------------------------------------------
Amgen Inc.(a) 646,300 49,060,633
- ------------------------------------------------------------------------------
Arena Pharmaceuticals, Inc.(a) 249,846 3,810,151
- ------------------------------------------------------------------------------
Array BioPharma Inc.(a) 444,107 4,361,131
- ------------------------------------------------------------------------------
Biogen Idec Inc.(a) 500,886 23,842,173
- ------------------------------------------------------------------------------
BioMarin Pharmaceutical Inc.(a) 229,102 3,672,505
- ------------------------------------------------------------------------------
Celgene Corp.(a) 159,114 8,503,052
- ------------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc.(a) 326,221 7,264,942
- ------------------------------------------------------------------------------
Genentech, Inc.(a) 181,740 15,138,942
- ------------------------------------------------------------------------------
Genzyme Corp.(a) 658,462 44,452,770
- ------------------------------------------------------------------------------
Gilead Sciences, Inc.(a) 637,543 43,926,713
- ------------------------------------------------------------------------------
Human Genome Sciences, Inc.(a) 704,412 9,403,900
- ------------------------------------------------------------------------------
InterMune, Inc.(a)(b) 174,945 3,866,284
- ------------------------------------------------------------------------------
Keryx Biopharmaceuticals, Inc.(a) 257,414 3,614,092
- ------------------------------------------------------------------------------
Mannkind Corp.(a)(b) 179,040 3,625,560
- ------------------------------------------------------------------------------
Medarex, Inc.(a) 413,074 5,336,916
- ------------------------------------------------------------------------------
MedImmune, Inc.(a) 68,819 2,204,961
- ------------------------------------------------------------------------------
Myogen, Inc.(a) 231,276 12,095,735
- ------------------------------------------------------------------------------
Myriad Genetics, Inc.(a) 144,240 3,878,614
- ------------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.(a) 91,975 3,520,803
- ------------------------------------------------------------------------------
Panacos Pharmaceuticals Inc.(a) 596,617 4,092,793
- ------------------------------------------------------------------------------
PDL BioPharma Inc.(a) 617,936 13,056,988
- ------------------------------------------------------------------------------
Theravance, Inc.(a) 138,521 4,357,871
- ------------------------------------------------------------------------------
United Therapeutics Corp.(a)(b) 284,214 17,010,208
- ------------------------------------------------------------------------------
Vertex Pharmaceuticals Inc.(a) 324,099 13,158,419
- ------------------------------------------------------------------------------
ZymoGenetics, Inc.(a) 417,753 6,704,936
==============================================================================
312,566,151
==============================================================================
DRUG RETAIL-0.82%
CVS Corp. 379,329 11,903,344
==============================================================================
HEALTH CARE DISTRIBUTORS-0.88%
PSS World Medical, Inc.(a) 641,296 12,902,876
==============================================================================
HEALTH CARE EQUIPMENT-12.57%
Baxter International Inc. 350,840 16,128,115
- ------------------------------------------------------------------------------
Biomet, Inc. 310,117 11,734,827
- ------------------------------------------------------------------------------
Cytyc Corp.(a) 1,014,716 26,808,797
- ------------------------------------------------------------------------------
Dexcom Inc.(a) 760,328 6,690,886
- ------------------------------------------------------------------------------
Hospira, Inc.(a) 390,556 14,196,711
- ------------------------------------------------------------------------------
Mentor Corp. 462,067 21,624,735
- ------------------------------------------------------------------------------
NxStage Medical, Inc.(a)(b) 796,891 5,841,211
- ------------------------------------------------------------------------------
Respironics, Inc.(a) 524,200 18,514,744
- ------------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 298,343 10,248,082
- ------------------------------------------------------------------------------
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------------
<Caption>
HEALTH CARE EQUIPMENT-(CONTINUED)
Thoratec Corp.(a) 575,245 $ 9,060,109
- ------------------------------------------------------------------------------
Varian Medical Systems, Inc.(a) 238,400 13,078,624
- ------------------------------------------------------------------------------
Wright Medical Group, Inc.(a) 437,018 10,798,715
- ------------------------------------------------------------------------------
Zimmer Holdings, Inc.(a) 261,079 18,800,299
==============================================================================
183,525,855
==============================================================================
HEALTH CARE SERVICES-7.25%
DaVita, Inc.(a) 452,957 25,197,998
- ------------------------------------------------------------------------------
Express Scripts, Inc.(a) 210,314 13,401,208
- ------------------------------------------------------------------------------
HMS Holdings Corp.(a)(c) 697,959 9,589,957
- ------------------------------------------------------------------------------
Medco Health Solutions, Inc.(a) 748,199 40,028,646
- ------------------------------------------------------------------------------
Omnicare, Inc. 168,405 6,379,181
- ------------------------------------------------------------------------------
Quest Diagnostics Inc. 225,904 11,236,465
==============================================================================
105,833,455
==============================================================================
HEALTH CARE SUPPLIES-0.62%
Cooper Cos., Inc. (The) 157,601 9,082,546
==============================================================================
HEALTH CARE TECHNOLOGY-1.09%
Eclipsys Corp.(a) 506,262 10,727,692
- ------------------------------------------------------------------------------
TriZetto Group, Inc. (The)(a) 301,083 5,145,508
==============================================================================
15,873,200
==============================================================================
INDUSTRIAL CONGLOMERATES-1.78%
Tyco International Ltd. 884,484 26,030,364
==============================================================================
LIFE & HEALTH INSURANCE-0.69%
Universal American Financial Corp.(a) 543,805 10,109,335
==============================================================================
LIFE SCIENCES TOOLS & SERVICES-5.45%
Charles River Laboratories International,
Inc.(a) 344,138 14,770,403
- ------------------------------------------------------------------------------
Dionex Corp.(a) 148,481 8,077,367
- ------------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 102,816 8,803,106
- ------------------------------------------------------------------------------
Invitrogen Corp.(a) 208,884 12,117,361
- ------------------------------------------------------------------------------
Millipore Corp.(a) 15,710 1,013,766
- ------------------------------------------------------------------------------
Molecular Devices Corp.(a) 115,595 2,328,083
- ------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc. 580,980 18,388,017
- ------------------------------------------------------------------------------
Thermo Electron Corp.(a) 203,382 8,718,986
- ------------------------------------------------------------------------------
Varian Inc.(a) 113,006 5,298,851
==============================================================================
79,515,940
==============================================================================
MANAGED HEALTH CARE-7.20%
Aetna Inc. 358,216 14,765,663
- ------------------------------------------------------------------------------
Aveta, Inc. (Acquired 12/21/05; Cost
$9,929,723)(a)(d)(e) 735,535 12,504,095
- ------------------------------------------------------------------------------
Coventry Health Care, Inc.(a) 283,083 13,290,747
- ------------------------------------------------------------------------------
Health Net Inc.(a) 507,105 21,049,929
- ------------------------------------------------------------------------------
</Table>
F-1
AIM Global Health Care Fund
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
MANAGED HEALTH CARE-(CONTINUED)
UnitedHealth Group Inc. 600,974 $ 29,315,512
- ------------------------------------------------------------------------------
WellPoint Inc.(a) 186,942 14,267,413
==============================================================================
105,193,359
==============================================================================
PHARMACEUTICALS-16.77%
Allergan, Inc. 209,604 24,209,262
- ------------------------------------------------------------------------------
Cadence Pharmaceuticals, Inc.(a) 372,454 3,575,558
- ------------------------------------------------------------------------------
Cypress Bioscience, Inc.(a) 512,317 4,037,058
- ------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings Inc.(a) 234,947 6,705,387
- ------------------------------------------------------------------------------
Forest Laboratories, Inc.(a) 324,707 15,891,161
- ------------------------------------------------------------------------------
Johnson & Johnson 862,645 58,142,273
- ------------------------------------------------------------------------------
Lilly (Eli) and Co. 251,500 14,086,515
- ------------------------------------------------------------------------------
Medicines Co. (The)(a) 211,805 5,498,458
- ------------------------------------------------------------------------------
Pfizer Inc. 1,892,645 50,438,989
- ------------------------------------------------------------------------------
POZEN Inc.(a)(b) 248,481 4,132,239
- ------------------------------------------------------------------------------
Sepracor Inc.(a) 147,297 7,624,093
- ------------------------------------------------------------------------------
Warner Chilcott Ltd.-Class A(a) 716,017 9,451,424
- ------------------------------------------------------------------------------
Wyeth 706,922 36,074,230
- ------------------------------------------------------------------------------
Xenoport Inc.(a) 210,400 5,064,328
==============================================================================
244,930,975
==============================================================================
Total Domestic Common Stocks (Cost
$945,118,511) 1,117,467,400
==============================================================================
FOREIGN COMMON STOCKS & OTHER EQUITY
INTERESTS-20.28%
AUSTRALIA-0.24%
CSL Ltd. (Biotechnology)(f) 82,064 3,560,173
==============================================================================
CANADA-1.05%
Cardiome Pharma Corp. (Pharmaceuticals)(a) 529,099 6,089,930
- ------------------------------------------------------------------------------
MDS Inc. (Life Sciences Tools & Services) 520,200 9,174,276
==============================================================================
15,264,206
==============================================================================
FRANCE-3.53%
Ipsen S.A. (Pharmaceuticals) (Acquired
12/06/05; Cost $15,863,951)(d)(f) 606,049 25,008,627
- ------------------------------------------------------------------------------
Sanofi-Aventis (Pharmaceuticals)(f) 313,000 26,585,039
==============================================================================
51,593,666
==============================================================================
GERMANY-1.27%
Merck KGaA (Pharmaceuticals) 175,391 18,490,861
==============================================================================
JAPAN-2.02%
Eisai Co., Ltd. (Pharmaceuticals)(f) 328,500 16,773,207
- ------------------------------------------------------------------------------
Shionogi & Co., Ltd. (Pharmaceuticals)(b)(f) 636,850 12,735,627
==============================================================================
29,508,834
==============================================================================
SPAIN-0.34%
Grifols S.A. (Biotechnology) (Acquired
05/16/06 Cost $2,701,233)(a)(d)(f) 480,110 5,018,549
==============================================================================
</Table>
<Table>
SHARES VALUE
- ------------------------------------------------------------------------------
<Caption>
SWITZERLAND-9.70%
Novartis A.G.-ADR (Pharmaceuticals) 978,109 $ 59,400,560
- ------------------------------------------------------------------------------
Roche Holding A.G. (Pharmaceuticals)(f) 470,758 82,269,351
==============================================================================
141,669,911
==============================================================================
UNITED KINGDOM-2.13%
AstraZeneca PLC-ADR (Pharmaceuticals) 221,602 13,008,037
- ------------------------------------------------------------------------------
Shire PLC-ADR (Pharmaceuticals) 328,714 18,029,963
==============================================================================
31,038,000
==============================================================================
Total Foreign Common Stocks & Other
Equity Interests (Cost $202,608,969) 296,144,200
==============================================================================
PREFERRED STOCKS-0.02%
BIOTECHNOLOGY-0.01%
Athersys Inc.-Series F, Conv. Pfd. (Acquired
04/17/00; Cost $5,000,000)(a)(d)(e)(g)(h) 416,667 235,293
- ------------------------------------------------------------------------------
Ingenex, Inc.-Series B, Pfd. (Acquired
09/27/94; Cost $600,000)(a)(d)(e)(g)(h) 103,055 0
==============================================================================
235,293
==============================================================================
PHARMACEUTICALS-0.01%
BioImagene, Inc.-Series B-2, Pfd. (Acquired
05/24/01; Cost $1,350,000)(a)(d)(e)(g)(h) 93,867 94,336
==============================================================================
Total Preferred Stocks (Cost $6,950,000) 329,629
==============================================================================
MONEY MARKET FUNDS-1.43%
Liquid Assets Portfolio-Institutional
Class(i) 10,405,502 10,405,502
- ------------------------------------------------------------------------------
Premier Portfolio-Institutional Class(i) 10,405,502 10,405,502
==============================================================================
Total Money Market Funds (Cost
$20,811,004) 20,811,004
==============================================================================
TOTAL INVESTMENTS (excluding investments
purchased with cash collateral from
securities loaned)-98.26% (Cost
$1,175,488,484) 1,434,752,233
==============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-1.10%
Liquid Assets Portfolio-Institutional
Class(i)(j) 8,025,662 8,025,662
- ------------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(i)(j) 8,025,662 8,025,662
==============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $16,051,324) 16,051,324
==============================================================================
TOTAL INVESTMENTS-99.36% (Cost
$1,191,539,808) 1,450,803,557
==============================================================================
OTHER ASSETS LESS LIABILITIES-0.64% 9,296,489
==============================================================================
NET ASSETS-100.00% $1,460,100,046
______________________________________________________________________________
==============================================================================
</Table>
F-2
AIM Global Health Care Fund
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security was out on loan at October 31, 2006.
(c) Affiliated company. The Investment Company Act of 1940 defines affiliates as
those issuances in which a fund holds 5% or more of the outstanding voting
securities. The Fund has not owned enough of the outstanding voting
securities of the issuer to have control (as defined in the Investment
Company Act of 1940) of that issuer. The value of this security as of
October 31, 2006 represented 0.66% of the Fund's Net Assets. See Note 3.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate value of these securities at October 31, 2006 was $42,860,900,
which represented 2.94% of the Fund's Net Assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(e) Security considered to be illiquid. The Fund is limited to investing 15% of
net assets in illiquid securities at the time of purchase. The aggregate
value of these securities considered illiquid at October 31, 2006 was
$12,833,724, which represented 0.88% of the Fund's Net Assets.
(f) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate value of these securities at October 31, 2006 was $171,950,573,
which represented 11.78% of the Fund's Net Assets. See Note 1A.
(g) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The aggregate value of these
securities at October 31, 2006 was $329,629, which represented 0.02% of the
Fund's Net Assets. See Note 1A.
(h) Security is considered venture capital.
(i) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(j) The security has been segregated to satisfy the commitment to return the
cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-3
AIM Global Health Care Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2006
<Table>
ASSETS:
Investments, at value (cost $1,152,860,973)* $1,404,351,272
- ------------------------------------------------------------
Investments in affiliates, at value (cost
$38,678,835) 46,452,285
============================================================
Total investments (cost $1,191,539,808) 1,450,803,557
============================================================
Foreign currencies, at value (cost $518) 519
- ------------------------------------------------------------
Cash 1,715,290
- ------------------------------------------------------------
Receivables for:
Investments sold 43,073,141
- ------------------------------------------------------------
Fund shares sold 619,096
- ------------------------------------------------------------
Dividends 502,534
- ------------------------------------------------------------
Foreign currency contracts outstanding 4,275,400
- ------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 210,751
- ------------------------------------------------------------
Other assets 27,508
============================================================
Total assets 1,501,227,796
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 14,974,969
- ------------------------------------------------------------
Fund shares reacquired 8,472,978
- ------------------------------------------------------------
Trustee deferred compensation and
retirement plans 301,787
- ------------------------------------------------------------
Collateral upon return of securities
loaned 16,051,324
- ------------------------------------------------------------
Accrued distribution fees 430,296
- ------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 2,875
- ------------------------------------------------------------
Accrued transfer agent fees 741,052
- ------------------------------------------------------------
Accrued operating expenses 152,469
============================================================
Total liabilities 41,127,750
============================================================
Net assets applicable to shares outstanding $1,460,100,046
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,072,248,155
- ------------------------------------------------------------
Undistributed net investment income (loss) (196,077)
- ------------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies
and foreign currency contracts 124,513,802
- ------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and foreign
currency contracts 263,534,166
============================================================
$1,460,100,046
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 539,665,871
____________________________________________________________
============================================================
Class B $ 138,788,067
____________________________________________________________
============================================================
Class C $ 42,463,134
____________________________________________________________
============================================================
Investor Class $ 739,182,974
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 17,251,688
____________________________________________________________
============================================================
Class B 4,945,582
____________________________________________________________
============================================================
Class C 1,512,116
____________________________________________________________
============================================================
Investor Class 23,626,537
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 31.28
- ------------------------------------------------------------
Offering price per share
(Net asset value of $31.28 divided by
94.50%) $ 33.10
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 28.06
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 28.08
____________________________________________________________
============================================================
Investor Class:
Net asset value and offering price per
share $ 31.29
____________________________________________________________
============================================================
</Table>
* At October 31, 2006, securities with an aggregate value of $15,424,594 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-4
AIM Global Health Care Fund
STATEMENT OF OPERATIONS
For the year ended October 31, 2006
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $745,126) $ 9,396,462
- --------------------------------------------------------------------------
Dividends from affiliates (includes securities lending
income of $296,727) 2,166,871
==========================================================================
Total investment income 11,563,333
==========================================================================
EXPENSES:
Advisory fees 9,503,577
- --------------------------------------------------------------------------
Administrative services fees 379,812
- --------------------------------------------------------------------------
Custodian fees 204,615
- --------------------------------------------------------------------------
Distribution fees:
Class A 1,393,021
- --------------------------------------------------------------------------
Class B 1,487,420
- --------------------------------------------------------------------------
Class C 452,253
- --------------------------------------------------------------------------
Investor Class 1,964,596
- --------------------------------------------------------------------------
Transfer agent fees 4,268,998
- --------------------------------------------------------------------------
Trustees' and officer's fees and benefits 43,786
- --------------------------------------------------------------------------
Other 524,759
==========================================================================
Total expenses 20,222,837
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (104,815)
==========================================================================
Net expenses 20,118,022
==========================================================================
Net investment income (loss) (8,554,689)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FOREIGN CURRENCY CONTRACTS
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (includes net gains from securities
sold to affiliates of $4,075,862) 143,887,046
- --------------------------------------------------------------------------
Foreign currencies 15,550
- --------------------------------------------------------------------------
Foreign currency contracts (4,356,776)
==========================================================================
139,545,820
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (9,650,044)
- --------------------------------------------------------------------------
Foreign currencies 68,353
- --------------------------------------------------------------------------
Foreign currency contracts (9,570)
- --------------------------------------------------------------------------
Option contracts written (175,192)
==========================================================================
(9,766,453)
==========================================================================
Net gain from investment securities, foreign currencies,
foreign currency contracts and option contracts 129,779,367
==========================================================================
Net increase in net assets resulting from operations $121,224,678
__________________________________________________________________________
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
AIM Global Health Care Fund
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2006 and 2005
<Table>
<Caption>
2006 2005
- ----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (8,554,689) $ (7,152,220)
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, foreign currency contracts and option
contracts 139,545,820 50,260,671
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, foreign
currency contracts and option contracts (9,766,453) 67,462,270
==============================================================================================
Net increase in net assets resulting from operations 121,224,678 110,570,721
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (17,233,165) --
- ----------------------------------------------------------------------------------------------
Class B (5,229,262) --
- ----------------------------------------------------------------------------------------------
Class C (1,560,543) --
- ----------------------------------------------------------------------------------------------
Investor Class (24,873,030) --
==============================================================================================
Decrease in net assets resulting from distributions (48,896,000) --
==============================================================================================
Share transactions-net:
Class A (40,904,171) (62,648,022)
- ----------------------------------------------------------------------------------------------
Class B (20,671,331) (32,952,102)
- ----------------------------------------------------------------------------------------------
Class C (4,768,512) (2,314,428)
- ----------------------------------------------------------------------------------------------
Investor Class (107,480,024) 787,288,620
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (173,824,038) 689,374,068
==============================================================================================
Net increase (decrease) in net assets (101,495,360) 799,944,789
==============================================================================================
NET ASSETS:
Beginning of year 1,561,595,406 761,650,617
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(196,077) and $(201,937), respectively) $1,460,100,046 $1,561,595,406
______________________________________________________________________________________________
==============================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
AIM Global Health Care Fund
NOTES TO FINANCIAL STATEMENTS
October 31, 2006
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Health Care Fund (the "Fund") is a series portfolio 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 nine
separate series portfolios, each authorized to issue an unlimited number of
shares of beneficial interest. The Fund currently consists of 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.
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 or official closing price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales or official closing price on a
particular day, the security may be valued at the closing bid price on that
day. Securities traded in the over-the-counter market are valued based on
the prices furnished by independent pricing services, in which case the
securities may be considered fair valued, or by market makers. Futures
contracts are valued at the final settlement price set by an exchange on
which they are principally traded. Listed options are valued at the mean
between the last bid and the ask prices from the exchange on which they are
principally traded. Options not listed on an exchange are valued by an
independent source at the mean between the last bid and ask prices. For
purposes of determining net asset value per share, futures and option
contracts generally are valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
Investments in open-end registered investment companies and closed-end
registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
registered investment companies that trade on an exchange are valued at the
last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.
Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated
quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
issue, coupon rate, maturity, individual trading characteristics and other
market data. Short-term obligations having 60 days or less to maturity and
commercial paper are recorded at amortized cost which approximates value.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. If market quotations are available and reliable for
foreign exchange traded equity securities, the securities will be valued at
the market quotations. Because trading hours for certain foreign securities
end before the close of the NYSE, closing market quotations may become
unreliable. If between the time trading ends on a particular security and
the close of the customary trading session on the NYSE, events occur that
are significant and may make the closing price unreliable, the Fund may
fair value the security. If the event is likely to have affected the
closing price of the security, the security will be valued at fair value in
good faith using procedures approved by the Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current value
as of the close of the NYSE. Foreign securities meeting the approved degree
of certainty that the price is not reflective of current value will be
priced at the indication of fair value from the independent pricing
service. Multiple factors may be considered by the independent pricing
service in determining adjustments to reflect fair value and may include
information relating to sector indices, ADRs and domestic and foreign index
futures.
Securities for which market 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
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net
F-7
AIM Global Health Care Fund
gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. COUNTRY DETERMINATION -- For the purposes of making investment selection
decisions and presentation in the Schedule of Investments, AIM may
determine the country in which an issuer is located and/or credit risk
exposure based on various factors. These factors include the laws of the
country under which the issuer is organized, where the issuer maintains a
principal office, the country in which the issuer derives 50% or more of
its total revenues and the country that has the primary market for the
issuer's securities, as well as other criteria. Among the other criteria
that may be evaluated for making this determination are the country in
which the issuer maintains 50% or more of its assets, the type of security,
financial guarantees and enhancements, the nature of the collateral and the
sponsor organization. Country of issuer and/or credit risk exposure has
been determined to be the United States of America unless otherwise noted.
D. 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 treat a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a
regulated investment company and to distribute substantially all of the
Fund's taxable earnings to shareholders. As such, the Fund will not be
subject to federal income taxes on otherwise taxable income (including net
realized capital gain) that is distributed to shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular
class of the Fund and which are directly attributable to that class are
charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.
G. ACCOUNTING ESTIMATES -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period including estimates and assumptions related to
taxation. Actual results could differ from those estimates.
H. INDEMNIFICATIONS -- Under the Trust's organizational documents, each
Trustee, officer, employee or other agent of the Trust (including the
Trust's investment manager) is indemnified against certain liabilities that
may arise out of performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain
a variety of indemnification clauses. The Fund's maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Fund that have not yet occurred. The risk of material
loss as a result of such indemnification claims is considered remote.
I. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollar amounts at date of
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
currencies are translated into U.S. dollar amounts on the respective dates
of such transactions. The Fund does not separately account for the portion
of the results of operations resulting from changes in foreign exchange
rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign
exchange rates and the fluctuation of market prices on investments (net of
estimated foreign tax withholding) are included with the net realized and
unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from (i) sales
of foreign currencies, (ii) currency gains or losses realized between the
trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
currency gains and losses arise from changes in the fair values of assets
and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.
J. 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.
Realized and unrealized gains and losses on these contracts are included in
the Statement of Operations. The Fund could be exposed to risk, which may
be in excess of the amount reflected in the Statement of Assets and
Liabilities, if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
K. COVERED CALL OPTIONS -- The Fund may write call options.. A call option
gives the purchaser of such option the right to buy, and the writer (the
Fund) the obligation to sell, the underlying security at the stated
exercise price during the option period. Written call options are recorded
as a liability in the Statement of Assets and Liabilities. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. 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.
F-8
AIM Global Health Care Fund
Realized gains and losses on these contracts are included in the Statement
of Operations. 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. Risks may exceed amounts recognized in the
Statement of Assets and Liabilities.
L. COLLATERAL -- To the extent the Fund has pledged or segregated a security
as collateral and that security is subsequently sold, it is the Fund's
practice to replace such collateral no later than the next business day.
This practice does not apply to securities pledged as collateral for
securities lending transactions.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM based on the annual rate of the Fund's
average daily net assets as follows:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $350 million 0.75%
- --------------------------------------------------------------------
Next $350 million 0.65%
- --------------------------------------------------------------------
Next $1.3 billion 0.55%
- --------------------------------------------------------------------
Next $2 billion 0.45%
- --------------------------------------------------------------------
Next $2 billion 0.40%
- --------------------------------------------------------------------
Next $2 billion 0.375%
- --------------------------------------------------------------------
Over $8 billion 0.35%
___________________________________________________________________
====================================================================
</Table>
AIM has voluntarily agreed to waive advisory fees of the Fund in the amount
of 25% of the advisory fee AIM receives from the affiliated money market funds
on investments by the Fund in such affiliated money market funds (excluding
investments made in affiliated money market funds with cash collateral from
securities loaned by the fund). Voluntary fee waivers or reimbursements may be
modified or discontinued at any time upon consultation with the Board of
Trustees without further notice to investors.
For the year ended October 31, 2006, AIM waived advisory fees of $10,004.
At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP")
agreed to reimburse expenses incurred by the Fund in connection with market
timing matters in the AIM Funds, which may include legal, audit, shareholder
reporting, communications and trustee expenses. These expenses along with the
related expense reimbursement are included in the Statement of Operations. For
the year ended October 31, 2006, AMVESCAP reimbursed expenses of the Fund in the
amount of $3,570.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the year ended
October 31, 2006, AIM was paid $379,812.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AIS") a fee for providing transfer agency
and shareholder services to the Fund and reimburse AIS for certain expenses
incurred by AIS in the course of providing such services. AIS may make payments
to intermediaries that provide omnibus account services, sub-accounting services
and/or networking services. All fees payable by AIS to intermediaries that
provide omnibus account services or sub-accounting are charged back to the Fund,
subject to certain limitations approved by the Trust's Board of Trustees. For
the year ended October 31, 2006, the Fund paid AIS $4,268,998.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B,
Class C and Investor Class shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,
Class B, Class C and Investor Class shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays ADI compensation at the annual rate of 0.25% of the
Fund's average daily net assets of Class A shares, 1.00% of the average daily
net assets of Class B and Class C shares and 0.25% of the average daily net
assets of Investor Class shares. Of the Rule 12b-1 payments, up to 0.25% of the
average daily net assets of the Class A, Class B, Class C or Investor Class
shares may be paid to furnish continuing personal shareholder services to
customers who purchase and own shares of such classes. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge.
National Association of Securities Dealers ("NASD") Rules impose a cap on the
total sales charges, including asset-based sales charges that may be paid by any
class of shares of the Fund. Pursuant to the Plans, for the year ended October
31, 2006, the Class A, Class B, Class C and Investor Class shares paid
$1,393,021, $1,487,420, $452,253 and $1,964,596, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year
ended October 31, 2006, ADI advised the Fund that it retained $92,711 in
front-end sales commissions from the sale of Class A shares and $805, $84,731
and $4,671 from Class A, Class B and Class C shares, respectively, for CDSC
imposed on redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of
AIM, AIS and/or ADI.
F-9
AIM Global Health Care Fund
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant procedures approved by the Board of Trustees, to
invest daily available cash balances and cash collateral from securities lending
transactions in affiliated money market funds. The Fund and the money market
funds below have the same investment advisor and therefore, are considered to be
affiliated. The tables below show the transactions in and earnings from
investments in affiliated money market funds for the year ended October 31,
2006.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES AT PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/05 COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $14,651,082 $342,077,818 $(346,323,398) $ -- $10,405,502 $ 934,143 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-
Institutional
Class -- 104,576,664 (94,171,162) -- 10,405,502 462,977 --
- -----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 14,651,082 255,091,953 (269,743,035) -- -- 473,024 --
===================================================================================================================================
Subtotal $29,302,164 $701,746,435 $(710,237,595) $ -- $20,811,004 $1,870,144 $ --
===================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES AT PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 10/31/05 COST FROM SALES (DEPRECIATION) 10/31/06 INCOME* GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 87,949,707 $247,470,825 $(327,394,870) $ -- $ 8,025,662 $147,940 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 87,949,707 247,470,825 (327,394,870) -- 8,025,662 148,787 --
==================================================================================================================================
Subtotal $175,899,414 $494,941,650 $(654,789,740) $ -- $16,051,324 $296,727 $ --
==================================================================================================================================
</Table>
* Net of compensation to counterparties.
INVESTMENTS IN OTHER AFFILIATES:
The Investment Company Act of 1940 defines affiliates as those issuances in
which a fund holds 5% or more of the outstanding voting securities. The Fund has
not owned enough of the outstanding voting securities of the issuer to have
control (as defined in the Investment Company Act of 1940) of that issuer. The
following is a summary of the transactions with affiliates for the year ended
October 31, 2006
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
10/31/05 AT COST FROM SALES (DEPRECIATION) 10/31/06 INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
HMS Holdings
Corp. (cost
$1,816,507) $ 13,492,400 $ -- $ (11,367,799) $700,948 $ 9,589,957 $ -- $6,764,408
===================================================================================================================================
Total
Investments
in
Affiliates $218,693,978 $1,196,688,085 $(1,376,395,134) $700,948 $46,452,285 $2,166,871 $6,764,408
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</Table>
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the year ended October 31, 2006, the Fund
engaged in securities sales of $16,074,256, which resulted in net realized gains
of $4,075,862, and securities purchases of $6,568,204.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions, (ii) custodian credits which result
from periodic overnight cash balances at the custodian and (iii) a one time
custodian fee credit to be used to offset future custodian fees. For the year
ended October 31, 2006, the Fund received credits from these arrangements, which
resulted in the reduction of the Fund's total expenses of $91,241.
F-10
AIM Global Health Care Fund
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to pay remuneration to each Trustee and Officer of the Fund who is not an
"interested person" of AIM. Trustees have the option to defer compensation
payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also
include amounts accrued by the Fund to fund such deferred compensation amounts.
Those Trustees who defer compensation have the option to select various AIM
Funds in which their deferral accounts shall be deemed to be invested. Finally,
current Trustees are eligible to participate in a retirement plan that provides
for benefits to be paid upon retirement to Trustees over a period of time based
on the number of years of service. The Fund may have certain former Trustees who
also participate in a retirement plan and receive benefits under such plan.
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund
to fund such retirement benefits. Obligations under the deferred compensation
and retirement plans represent unsecured claims against the general assets of
the Fund.
During the year ended October 31, 2006, the Fund paid legal fees of $8,907
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the Securities and Exchange Commission, the
Fund may participate in an interfund lending facility that AIM has established
for temporary borrowings by the AIM Funds. An interfund loan will be made under
this facility only if the loan rate (an average of the rate available on bank
loans and the rate available on investments in overnight repurchase agreements)
is favorable to both the lending fund and the borrowing fund. A loan will be
secured by collateral if the Fund's aggregate borrowings from all sources
exceeds 10% of the Fund's total assets. To the extent that the loan is required
to be secured by collateral, the collateral is marked to market daily to ensure
that the market value is at least 102% of the outstanding principal value of the
loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the year ended October 31, 2006, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured
revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave
funds as a compensating balance in the account so the custodian bank can be
compensated by earning the additional interest; or (ii) compensate by paying the
custodian bank at a rate agreed upon by the custodian bank and AIM, not to
exceed the contractually agreed upon rate.
NOTE 8--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of
the Fund's total assets. Such loans are secured by collateral equal to no less
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. Cash collateral received in connection with these loans is
invested in short-term money market instruments or affiliated money market
funds. It is the Fund's policy to obtain additional collateral from or return
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the
collateral held may be temporarily less than the value of the securities on
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return
the securities. The Fund could also experience delays and costs in gaining
access to the collateral. The Fund bears the risk of any deficiency in the
amount of the collateral available for return to the borrower due to any loss on
the collateral invested.
At October 31, 2006, securities with an aggregate value of $15,424,594 were
on loan to brokers. The loans were secured by cash collateral of $16,051,324
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended October 31, 2006, the Fund received dividends on cash
collateral investments of $296,727 for securities lending transactions, which
are net of compensation to counterparties.
F-11
AIM Global Health Care Fund
NOTE 9--FOREIGN CURRENCY CONTRACTS
<Table>
<Caption>
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT -------------------------------------- VALUE UNREALIZED
DATE DELIVER RECEIVE 10/31/06 APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------------------
11/08/06 GBP 15,520,000 USD 29,610,590 $ 29,607,353 $ 3,237
- ---------------------------------------------------------------------------------------------------------------------------------
11/08/06 EUR 53,250,000 USD 68,879,203 67,996,949 882,254
- ---------------------------------------------------------------------------------------------------------------------------------
11/08/06 CHF 177,000,000 USD 145,747,530 142,392,079 3,355,451
=================================================================================================================================
Total open foreign currency contracts $4,240,942
=================================================================================================================================
</Table>
<Table>
<Caption>
CLOSED FOREIGN CURRENCY CONTRACTS AT PERIOD END
- ---------------------------------------------------------------------------------------------------------------------------------
CONTRACT TO
-------------------------------------- VALUE REALIZED
CLOSED DATE DELIVER RECEIVE 10/31/06 GAIN
- ---------------------------------------------------------------------------------------------------------------------------------
08/15/06 USD 3,563,258 EUR 2,750,000 $ 3,528,800 $ 34,458
=================================================================================================================================
Total foreign currency contracts $4,275,400
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
<Table>
CHF - Swiss Franc
EUR - Euro
GBP - British Pound Sterling
USD - U.S. Dollar
</Table>
NOTE 10--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
TRANSACTIONS DURING THE PERIOD
- ------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- ------------------------------------------------------------------------------------
Beginning of period 600 $ 199,192
- ------------------------------------------------------------------------------------
Exercised (600) (199,192)
====================================================================================
End of period -- $ --
____________________________________________________________________________________
====================================================================================
</Table>
NOTE 11--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years October 31, 2006 and
2005 was as follows:
<Table>
<Caption>
2006 2005
- -----------------------------------------------------------------------------------
Distributions paid from long-term capital gain $48,896,000 $ --
___________________________________________________________________________________
===================================================================================
</Table>
TAX COMPONENTS OF NET ASSETS:
As of October 31, 2006, the components of net assets on a tax basis were as
follows:
<Table>
<Caption>
2006
- ------------------------------------------------------------------------------
Undistributed long-term gain $ 138,569,904
- ------------------------------------------------------------------------------
Unrealized appreciation -- investments 249,478,064
- ------------------------------------------------------------------------------
Temporary book/tax differences (196,077)
- ------------------------------------------------------------------------------
Shares of beneficial interest 1,072,248,155
==============================================================================
Total net assets $1,460,100,046
______________________________________________________________________________
==============================================================================
</Table>
F-12
AIM Global Health Care Fund
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is due to differences in the timing of recognition of gains and
losses on investments for tax and book purposes. The Fund's unrealized
appreciation (depreciation) difference is attributable primarily to losses on
wash sales and the tax deferral of losses on certain option contracts. The
tax-basis unrealized appreciation on investments amount includes appreciation on
foreign currencies of $29,475.
The temporary book/tax differences are a result of timing differences
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and
retirement plan expenses.
The Fund does not have a capital loss carryforward as of October 31, 2006.
NOTE 12--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities,
U.S. Treasury obligations and money market funds, if any) purchased and sold by
the Fund during the year ended October 31, 2006 was $1,245,371,171 and
$1,465,816,975, respectively.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
- ------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $269,852,086
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (20,403,497)
==============================================================================
Net unrealized appreciation of investment securities $249,448,589
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $1,201,354,968.
</Table>
NOTE 13--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency
transactions, merger expenses and net operating losses, on October 31, 2006,
undistributed net investment income (loss) was increased by $8,560,549,
undistributed net realized gain was decreased by $15,550 and shares of
beneficial interest decreased by $8,544,999. This reclassification had no effect
on the net assets of the Fund.
F-13
AIM Global Health Care Fund
NOTE 14--SHARE INFORMATION
The Fund currently consists of four different classes of shares: Class A, Class
B, Class C and Investor Class. Investor Class shares of the Fund are offered
only to certain grandfathered investors.
Class A shares are sold with a front-end sales charge unless certain waiver
criteria are met. Class B shares and Class C shares are sold with CDSC. Investor
Class shares are sold at net asset value. Under certain circumstances, Class A
shares are subject to CDSC. Generally, Class B shares will automatically convert
to Class A shares on or about the month-end which is at least eight years after
the date of purchase.
<Table>
<Caption>
CHANGES IN SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
2006(A) 2005
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,953,021 $ 59,888,031 1,946,091 $ 55,019,351
- ------------------------------------------------------------------------------------------------------------------------
Class B 450,233 12,430,712 537,747 13,820,503
- ------------------------------------------------------------------------------------------------------------------------
Class C 343,417 9,538,681 555,603 14,168,389
- ------------------------------------------------------------------------------------------------------------------------
Investor Class 1,056,376 32,328,843 369,060 11,047,153
========================================================================================================================
Issued as reinvestment of dividends:
Class A 537,542 16,276,764 -- --
- ------------------------------------------------------------------------------------------------------------------------
Class B 181,425 4,961,982 -- --
- ------------------------------------------------------------------------------------------------------------------------
Class C 53,848 1,473,808 -- --
- ------------------------------------------------------------------------------------------------------------------------
Investor Class 799,951 24,230,526 -- --
========================================================================================================================
Issued in connection with acquisitions:(b)
Class A -- -- 368,152 10,701,977
- ------------------------------------------------------------------------------------------------------------------------
Class B -- -- 117,495 3,103,206
- ------------------------------------------------------------------------------------------------------------------------
Class C -- -- 168,018 4,441,104
- ------------------------------------------------------------------------------------------------------------------------
Investor Class -- -- 28,635,830 832,396,790
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 211,052 6,451,381 385,626 10,779,491
- ------------------------------------------------------------------------------------------------------------------------
Class B (234,284) (6,451,381) (423,694) (10,779,491)
========================================================================================================================
Reacquired:
Class A (4,082,361) (123,520,347) (4,928,710) (139,148,841)
- ------------------------------------------------------------------------------------------------------------------------
Class B (1,148,199) (31,612,644) (1,531,933) (39,096,320)
- ------------------------------------------------------------------------------------------------------------------------
Class C (572,962) (15,781,001) (814,778) (20,923,921)
- ------------------------------------------------------------------------------------------------------------------------
Investor Class (5,353,563) (164,039,393) (1,881,117) (56,155,323)
========================================================================================================================
(5,804,504) $(173,824,038) 23,503,390 $ 689,374,068
________________________________________________________________________________________________________________________
========================================================================================================================
</Table>
(a) There is one entity that is record owner of more than 5% of the
outstanding shares of the Fund and it owns 9% of the outstanding shares
of the Fund. ADI has an agreement with this entity to sell Fund shares.
The Fund, AIM and/or AIM affiliates may make payments to this entity,
which is considered to be related to the Fund, for providing services to
the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
keeping and account servicing. The Trust has no knowledge as to whether
all or any portion of the shares owned of record by this entity are
owned beneficially.
(b) As of the opening of business on July 18, 2005, the Fund acquired all
the net assets of AIM Health Sciences Fund pursuant to a plan of
reorganization approved by the Trustees of the Fund on March 22, 2005
and by the shareholders of AIM Health Sciences Fund on June 28, 2005.
The acquisition was accomplished by a tax free exchange of 29,289,495
shares of the Fund for 16,440,625 shares of AIM Health Sciences Fund
shares outstanding as of the close of business on July 15, 2005. Each
class of shares of AIM Health Sciences Fund was exchanged for the like
class of shares of the Fund based on the relative net asset value of AIM
Health Sciences Fund to the net asset value of the Fund on the close of
business, July 15, 2005. AIM Health Sciences Fund's net assets as of the
close of business on July 15, 2005 of $850,643,077, including
$80,900,111 of unrealized appreciation, were combined with the net
assets of the Fund immediately before the acquisition of $752,218,175.
The combined aggregate net assets of the Fund subsequent to the
reorganization were $1,602,861,252.
NOTE 15--NEW ACCOUNTING STANDARD
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48").
FIN 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement for a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The provisions for FIN 48 are effective for
fiscal years beginning after December 15, 2006. Management is currently
assessing the impact of FIN 48, if any, on the Fund's financial statements and
intends for the Fund to adopt the FIN 48 provisions during 2007.
F-14
AIM Global Health Care Fund
NOTE 16--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,
-----------------------------------------------------------------------------
2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.77 $ 26.38 $ 24.09 $ 22.41 $ 29.93
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15) (0.18)(a) (0.17)(a) (0.13) (0.29)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.59 3.57 2.46 1.81 (3.17)
=======================================================================================================================
Total from investment operations 2.44 3.39 2.29 1.68 (3.46)
=======================================================================================================================
Less distributions from net realized
gains (0.93) -- -- -- (4.06)
=======================================================================================================================
Net asset value, end of period $ 31.28 $ 29.77 $ 26.38 $ 24.09 $ 22.41
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 8.31% 12.85% 9.51% 7.50% (13.76)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $539,666 $554,679 $550,319 $536,746 $533,216
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.22%(c) 1.48% 1.89% 1.94% 1.86%
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.22%(c) 1.60% 1.91% 1.94% 1.86%
=======================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.46)%(c) (0.64)% (0.63)% (0.56)% (1.10)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 83% 92% 64% 99% 153%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $557,208,445.
<Table>
<Caption>
CLASS B
-----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.99 $ 24.08 $ 22.09 $ 20.66 $ 28.03
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a)
- -----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.36 3.24 2.26 1.66 (2.93)
=======================================================================================================================
Total from investment operations 2.00 2.91 1.99 1.43 (3.31)
=======================================================================================================================
Less distributions from net realized
gains (0.93) -- -- -- (4.06)
=======================================================================================================================
Net asset value, end of period $ 28.06 $ 26.99 $ 24.08 $ 22.09 $ 20.66
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 7.52% 12.08% 9.01% 6.92% (14.21)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $138,788 $153,766 $168,468 $179,646 $187,793
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36%
- -----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36%
=======================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 83% 92% 64% 99% 153%
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $148,741,953.
F-15
AIM Global Health Care Fund
NOTE 16--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.01 $ 24.09 $ 22.11 $ 20.67 $ 28.03
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.36) (0.33)(a) (0.27)(a) (0.23) (0.38)(a)
- ------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.36 3.25 2.25 1.67 (2.92)
==================================================================================================================
Total from investment operations 2.00 2.92 1.98 1.44 (3.30)
==================================================================================================================
Less distributions from net realized
gains (0.93) -- -- -- (4.06)
==================================================================================================================
Net asset value, end of period $ 28.08 $ 27.01 $ 24.09 $ 22.11 $ 20.67
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 7.51% 12.12% 8.95% 6.97% (14.18)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $42,463 $45,591 $42,863 $43,482 $46,759
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.97%(c) 2.14% 2.39% 2.44% 2.36%
- ------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.97%(c) 2.26% 2.41% 2.44% 2.36%
==================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.21)%(c) (1.30)% (1.13)% (1.06)% (1.60)%
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate 83% 92% 64% 99% 153%
__________________________________________________________________________________________________________________
==================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges.
(c) Ratios are based on average daily net assets of $45,225,318.
<Table>
<Caption>
INVESTOR CLASS
-------------------------------
JULY 15, 2005
(DATE SALES
YEAR ENDED COMMENCED) TO
OCTOBER 31, OCTOBER 31,
2006 2005
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.77 $ 28.95
- ---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15) (0.04)(a)
- ---------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.60 0.86
=============================================================================================
Total from investment operations 2.45 0.82
=============================================================================================
Less distributions from net realized gains (0.93) --
=============================================================================================
Net asset value, end of period $ 31.29 $ 29.77
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 8.35% 2.83%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $739,183 $807,560
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets 1.22%(c) 1.25%(d)
=============================================================================================
Ratio of net investment income (loss) to average net assets (0.46)%(c) (0.41)%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 83% 92%
_____________________________________________________________________________________________
=============================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $785,838,302.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-16
AIM Global Health Care Fund
NOTE 17--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the
distributor of the retail AIM Funds) reached final settlements with certain
regulators, including the Securities and Exchange Commission ("SEC"), the New
York Attorney General and the Colorado Attorney General, to resolve civil
enforcement actions and/or investigations related to market timing and related
activity in the AIM Funds, including those formerly advised by IFG. As part of
the settlements, a $325 million fair fund ($110 million of which is civil
penalties) has been created to compensate shareholders harmed by market timing
and related activity in funds formerly advised by IFG. Additionally, AIM and ADI
created a $50 million fair fund ($30 million of which is civil penalties) to
compensate shareholders harmed by market timing and related activity in funds
advised by AIM, which was done pursuant to the terms of the settlement. These
two fair funds may increase as a result of contributions from third parties who
reach final settlements with the SEC or other regulators to resolve allegations
of market timing and/or late trading that also may have harmed applicable AIM
Funds. These two fair funds will be distributed in accordance with a methodology
to be determined by AIM's independent distribution consultant, in consultation
with AIM and the independent trustees of the AIM Funds and acceptable to the
staff of the SEC. Management of AIM and the Fund are unable to estimate the
impact, if any, that the distribution of these two fair funds may have on the
Fund or whether such distribution will have an impact on the Fund's financial
statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
PENDING LITIGATION AND REGULATORY INQUIRIES
On August 30, 2005, the West Virginia Office of the State Auditor --
Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and
Notice of Right to Hearing to AIM and ADI (Order No. 05-1318). The WVASC makes
findings of fact that AIM and ADI entered into certain arrangements permitting
market timing of the AIM Funds and failed to disclose these arrangements in the
prospectuses for such Funds, and conclusions of law to the effect that AIM and
ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to
cease any further violations and seeks to impose monetary sanctions, including
restitution to affected investors, disgorgement of fees, reimbursement of
investigatory, administrative and legal costs and an "administrative
assessment," to be determined by the Commissioner. Initial research indicates
that these damages could be limited or capped by statute.
Civil lawsuits, including purported class action and shareholder derivative
suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or
related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity
in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees
and failed to pass on to shareholders the perceived savings generated by
economies of scale and that the defendants adopted unlawful distribution
plans; and
- that the defendants improperly used the assets of the AIM Funds to pay
brokers to aggressively promote the sale of the AIM Funds over other
mutual funds and that the defendants concealed such payments from
investors by disguising them as brokerage commissions (all the claims in
this category of lawsuits were dismissed with prejudice by the court on
September 29, 2006, except for the Section 36(b) claim which was dismissed
with leave to amend to plead it properly as a derivative claim).
These lawsuits allege as theories of recovery, depending on the lawsuit,
violations of various provisions of the Federal and state securities laws and
ERISA, negligence, breach of fiduciary duty and/or breach of contract. These
lawsuits seek remedies that include, depending on the lawsuit, damages,
restitution, injunctive relief, imposition of a constructive trust, removal of
certain directors and/or employees, various corrective measures under ERISA,
rescission of certain AIM Funds' advisory agreements and/or distribution plans
and recovery of all fees paid, an accounting of all fund-related fees,
commissions and soft dollar payments, restitution of all commissions and fees
paid, and prospective relief in the form of reduced fees.
All lawsuits based on allegations of market timing, late trading and related
issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court"). Pursuant to an Order of the MDL Court,
plaintiffs in these lawsuits consolidated their claims for pre-trial purposes
into three amended complaints against various AIM- and IFG-related parties: (i)
a Consolidated Amended Class Action Complaint purportedly brought on behalf of
shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative
Complaint purportedly brought on behalf of the AIM Funds and fund registrants;
and (iii) an Amended Class Action Complaint for Violations of the Employee
Retirement Income Securities Act ("ERISA") purportedly brought on behalf of
participants in AMVESCAP's 401(k) plan. Based on orders issued by the MDL Court,
all claims asserted against the AIM Funds that have been transferred to the MDL
Court have been dismissed, although certain Funds remain nominal defendants in
the Consolidated Amended Fund Derivative Complaint. On September 15, 2006, the
MDL Court granted the AMVESCAP defendants' motion to dismiss the Amended Class
Action Complaint for Violations of ERISA and dismissed such Complaint. The
plaintiff has commenced an appeal from that decision.
IFG, AIM, ADI and/or related entities and individuals have received
inquiries from numerous regulators in the form of subpoenas or other oral or
written requests for information and/or documents related to one or more of the
following issues, among others, some of which concern one or more AIM Funds:
market timing activity, late trading, fair value pricing, excessive or improper
advisory and/or distribution fees, mutual fund sales practices, including
revenue sharing and directed-brokerage arrangements, investments in securities
of other registered investment companies, contractual plans, issues related to
Section 529 college savings plans and procedures for locating lost security
holders. IFG, AIM and ADI have advised the Fund that they are
F-17
AIM Global Health Care Fund
NOTE 17--LEGAL PROCEEDINGS--(CONTINUED)
providing full cooperation with respect to these inquiries. Regulatory actions
and/or additional civil lawsuits related to these or other issues may be filed
against the AIM Funds, IFG, AIM and/or related entities and individuals in the
future.
At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Pending Litigation and Regulatory
Inquiries described above may have on AIM, ADI or the Fund.
F-18
AIM Global Health Care Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of AIM Investment Funds
and Shareholders of AIM Global Health Care Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of AIM Global Health Care Fund (one of
the funds constituting AIM Investment Funds, hereafter referred to as the
"Fund") at October 31, 2006, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2006 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
December 20, 2006
Houston, Texas
F-19
AIM Global Health Care Fund
TAX DISCLOSURES
REQUIRED FEDERAL INCOME TAX INFORMATION
The Fund distributed long-term capital gains of $48,896,000 for the Fund's tax
year ended October 31, 2006.
TAX INFORMATION FOR NON-RESIDENT ALIEN SHAREHOLDERS
The percentage of qualifying assets not subject to the U.S. estate tax for the
fiscal quarters ended January 31, 2006, April 30, 2006, July 31, 2006 and
October 31, 2006 are 24.60%, 22.26%, 23.85% and 21.89%, respectively.
F-20
PART C. OTHER INFORMATION
Item 15. Indemnification
Indemnification provisions for officers, trustees, and employees of the
Registrant are set forth in Article VIII of the Registrant's Amended and
Restated Agreement and Declaration of Trust and Article VIII of its Amended
and Restated Bylaws, and are hereby incorporated by reference. Under the
Amended and Restated Agreement and Declaration of Trust, effective as of
September 14, 2005, as amended (i) Trustees or officers, when acting in
such capacity, shall not be personally liable for any act, omission or
obligation of the Registrant or any Trustee or officer except by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office with the Trust; (ii) every
Trustee, officer, employee or agent of the Registrant shall be indemnified
to the fullest extent permitted under the Delaware Statutory Trust act, the
Registrant's Bylaws and other applicable law; and (iii) in case any
shareholder or former shareholder of the Registrant shall be held to be
personally liable solely by reason of his being or having been a
shareholder of the Registrant or any portfolio or class and not because of
his acts or omissions or for some other reason, the shareholder or former
shareholder (or his heirs, executors, administrators or other legal
representatives, or, in the case of a corporation or other entity, its
corporate or general successor) shall be entitled, out of the assets
belonging to the applicable portfolio (or allocable to the applicable
class), to be held harmless from and indemnified against all loss and
expense arising from such liability in accordance with the Bylaws and
applicable law. The Registrant, on behalf of the affected portfolio (or
class), shall upon request by the shareholder, assume the defense of any
such claim made against the shareholder for any act or obligation of that
portfolio (or class).
A I M Advisors, Inc. ("AIM"), the Registrant and other investment companies
managed by AIM, their respective officers, trustees, directors and
employees (the "Insured Parties") are insured under a joint Mutual Fund and
Investment Advisory Professional and Directors and Officers Liability
Policy, issued by ICI Mutual Insurance Company, with a $60,000,000 limit of
liability (an additional $20,000,000 coverage applies to independent
directors/trustees only).
Section 16 of the Master Investment Advisory Agreement between the
Registrant and AIM provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of AIM or any of its officers, directors or
employees, that AIM shall not be subject to liability to the Registrant or
to any series of the Registrant, or to any shareholder of any series of the
Registrant for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security. Any liability of AIM to any
series of the Registrant shall not automatically impart liability on the
part of AIM to any other series of the Registrant. No series of the
Registrant shall be liable for the obligations of any other series of the
Registrant.
Section 7 of the Master Intergroup Sub-Advisory Contract for Mutual Funds
(the "Sub-Advisory Contract") between AIM and AIM Funds Management Inc.,
between AIM and INVESCO Asset Management Limited, between AIM and INVESCO
Asset Management (Japan) Limited, between AIM and INVESCO Institutional
(N.A.), Inc and between AIM and INVESCO Hong Kong Limited provides that the
Sub-advisor shall not be liable for any costs or liabilities arising from
any error of judgment or mistake of law or any loss suffered by any series
of the Registrant or the Registrant in connection with the matters to which
the Sub-Advisory Contract relates except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Sub-advisor
in the
C-1
performance by the Sub-advisor of its duties or from reckless disregard by
the Sub-advisor of its obligations and duties under the Sub-Advisory
Contract.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in connection with the
successful defense of any action suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the shares being
registered, such indemnification by it is against public policy, as
expressed in the Act and be governed by final adjudication of such issue.
Item 16. Exhibits
1 (a) - (1) Amended and Restated Agreement and Declaration of Trust of
Registrant, dated September 14, 2005.(15)
- (2) Amendment No. 1, dated January 9, 2006, to the Amended and Restated
Agreement and Declaration of Trust of Registrant, dated September 14,
2005.(16)
(3) Amendment No. 2, dated May 24, 2006, to the Amended and Restated
Agreement and Declaration of Trust of Registrant, dated September 14,
2005.(19)
(4) Amendment No. 3, dated July 5, 2006, to the Amended and Restated
Agreement and Declaration of Trust of Registrant, dated September 14,
2005.(19)
2 (a) - (1) Amended and Restated By-Laws of Registrant, adopted effective
September 14, 2005.(15)
(2) Amendment, adopted effective August 1, 2006, to Amended and
Restated By-Laws of Registrant, adopted effective September 14,
2005.(19)
3 - Voting Trust Agreements - None
4 - Form of Agreement and Plan of Reorganization between AIM Counselor
Series Trust, on behalf of AIM Advantage Health Sciences Fund, and
Registrant, on behalf of AIM Global Health Care Fund is attached as
Appendix I to the Combined Proxy Statement Prospectus relating to AIM
Advantage Health Sciences Fund contained in this Registrant Statement.
5 - All rights of security holders are contained in the Registrant's
Amended and Restated Agreement and Declaration of Trust.
6 (a) - (1) Master Investment Advisory Agreement, dated September 11, 2000,
between Registrant and A I M Advisors, Inc.(2)
- (2) Amendment No. 1, dated September 1, 2001, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(3)
C-2
- (3) Amendment No. 2, dated December 28, 2001, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(4)
- (4) Amendment No. 3, dated July 1, 2002, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(5)
- (5) Amendment No. 4, dated September 23, 2002, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(6)
- (6) Amendment No. 5, dated November 1, 2002, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(6)
- (7) Amendment No. 6, dated February 28, 2003, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(6)
- (8) Amendment No. 7, dated June 23, 2003, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(7)
- (9) Amendment No. 8, dated November 3, 2003, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(9)
- (10) Amendment No. 9, dated November 24, 2003, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(10)
- (11) Amendment No. 10, dated July 18, 2005, to the Master Investment
Advisory Agreement, dated September 11, 2000, between Registrant and A
I M Advisors, Inc.(14)
- (12) Form of Amendment No. 11, dated March 31, 2006, to the Master
Investment Advisory Agreement, dated September 11, 2000, between
Registrant and A I M Advisors, Inc.(16)
(b) - Master Intergroup Sub-Advisory Contract for Mutual Funds, dated
November 4, 2003, between A I M Advisors, Inc. and AIM Funds Management
Inc.(9)
(c) - Form of Master Intergroup Sub-Advisory Contract for Mutual Funds, dated
March 31, 2006, between A I M Advisors, Inc. and INVESCO Asset
Management Limited on behalf of AIM International Bond Fund.(16)
(d) - Form of Master Intergroup Sub-Advisory Contract for Mutual Funds, dated
March 31, 2006, between A I M Advisors, Inc. and INVESCO Asset
Management (Japan) Limited on behalf of AIM Japan Fund.(16)
(e) - Form of Master Intergroup Sub-Advisory Contract for Mutual Funds, dated
March 31, 2006, between A I M Advisors, Inc. and INVESCO Institutional
(N.A.), Inc. on behalf of AIM Enhanced Short Bond Fund.(16)
C-3
(f) - Form of Master Intergroup Sub-Advisory Contract for Mutual Funds, dated
March 31, 2006, between A I M Advisors, Inc. and INVESCO Hong Kong
Limited on behalf of AIM China Fund.(16)
7 (a) - (1) Amended and Restated Master Distribution Agreement (all classes of
shares except Class B shares), dated August 18, 2003, between
Registrant and A I M Distributors, Inc.(8)
- (2) Amendment No. 1, dated October 29, 2003, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(9)
- (3) Amendment No. 2, dated November 4, 2003, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(9)
- (4) Amendment No. 3, dated November 20, 2003, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(9)
- (5) Amendment No. 4, dated November 24, 2003, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(9)
- (6) Amendment No. 5, dated November 25, 2003, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(9)
- (7) Amendment No. 6, dated January 6, 2004, to the Amended and Restated
Master Distribution Agreement (all classes of shares except Class B
shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(10)
- (8) Amendment No. 7, dated March 31, 2004, to the Amended and Restated
Master Distribution Agreement (all classes of shares except Class B
shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(10)
- (9) Amendment No. 8, dated April 30, 2004, to the Amended and Restated
Master Distribution Agreement (all classes of shares except Class B
shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(10)
- (10) Amendment No. 9, dated September 14, 2004, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(11)
- (11) Amendment No. 10, dated September 15, 2004, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(11)
- (12) Amendment No. 11, dated October 15, 2004, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(11)
- (13) Amendment No. 12, dated November 30, 2004, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(11)
C-4
- (14) Amendment No. 13, dated December 30, 2004, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(12)
- (15) Amendment No. 14, dated February 23, 2005, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(13)
- (16) Amendment No. 15, dated March 15, 2005, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(13)
- (17) Amendment No. 16, dated April 29, 2005, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(14)
- (18) Amendment No. 17, dated July 13, 2005, to the Amended and Restated
Master Distribution Agreement (all classes of shares except Class B
shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(15)
- (19) Amendment No. 18, dated July 18, 2005, to the Amended and Restated
Master Distribution Agreement (all classes of shares except Class B
shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(15)
- (20) Amendment No. 19, dated October 22, 2005, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(15)
- (21) Amendment No. 20, dated October 25, 2005, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(15)
- (22) Amendment No. 21, dated October 31, 2005, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(15)
- (23) Amendment No. 22, dated January 31, 2006, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(17)
- (24) Form of Amendment No. 23, dated March 13, 2006, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(16)
- (25) Form of Amendment No. 24, dated March 27, 2006, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(16)
- (26) Form of Amendment No. 25, dated March 31, 2006, to the Amended and
Restated Master Distribution Agreement (all classes of shares except
Class B shares), dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(16)
(b) - (1) Amended and Restated Master Distribution Agreement (Class B shares)
dated August 18, 2003, between Registrant and A I M Distributors,
Inc.(8)
C-5
- (2) Amendment No. 1, dated October 1, 2003, to the Amended and Restated
Master Distribution Agreement (Class B shares), dated August 18, 2003,
between Registrant and A I M Distributors, Inc.(9)
- (3) Amendment No. 2, dated October 29, 2003, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(9)
- (4) Amendment No. 3, dated November 3, 2003, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(9)
- (5) Amendment No. 4, dated November 4, 2003, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(9)
- (6) Amendment No. 5, dated November 20, 2003, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(9)
- (7) Amendment No. 6, dated November 24, 2003, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(9)
- (8) Amendment No. 7, dated November 25, 2003, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(9)
- (9) Amendment No. 8, dated March 31, 2004, to the Amended and Restated
Master Distribution Agreement (Class B shares), dated August 18, 2003,
between Registrant and A I M Distributors, Inc.(10)
- (10) Amendment No. 9, dated April 30, 2004, to the Amended and Restated
Master Distribution Agreement (Class B shares), dated August 18, 2003,
between Registrant and A I M Distributors, Inc.(10)
- (11) Amendment No. 10, dated September 15, 2004, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(11)
- (12) Amendment No. 11, dated October 15, 2004, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(11)
- (13) Amendment No. 12, dated December 30, 2004, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(12)
- (14) Amendment No. 13, dated March 15, 2005, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(14)
C-6
- (15) Amendment No. 14, dated April 29, 2005, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(14)
- (16) Amendment No. 15, dated July 18, 2005, to the Amended and Restated
Master Distribution Agreement (Class B shares), dated August 18, 2003,
between Registrant and A I M Distributors, Inc.(14)
- (17) Amendment No. 16, dated October 31, 2005, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(15)
- (18) Form of Amendment No. 17, dated March 13, 2006, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(16)
- (19) Form of Amendment No. 18, dated March 27, 2006, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(16)
- (20) Form of Amendment No. 19, dated March 31, 2006, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated August
18, 2003, between Registrant and A I M Distributors, Inc.(16)
8 (a) - AIM Funds Retirement Plan for Eligible Directors/Trustees, as restated
October 1, 2001.(4)
(b) - Form of AIM Funds Director Deferred Compensation Agreement, as amended
September 26, 2002.(6)
9 (a) - (1) Master Custodian Contract, dated May 1, 2000, between Registrant
and State Street Bank and Trust Company.(2)
- (2) Amendment, dated May 1, 2000, to the Master Custodian Contract,
dated May 1, 2000, between Registrant and State Street Bank and Trust
Company.(2)
- (3) Amendment, dated June 29, 2001, to the Master Custodian Contract,
dated May 1, 2000, between Registrant and State Street Bank and Trust
Company.(4)
- (4) Amendment, dated April 2, 2002, to the Master Custodian Contract,
dated May 1, 2000, between Registrant and State Street Bank and Trust
Company.(5)
- (5) Amendment, dated September 8, 2004, to the Master Custodian
Contract, dated May 1, 2000, between Registrant and State Street Bank
and Trust Company.(12)
(6) Amendment, dated February 8, 2006, to the Master Custodian
Contract, dated May 1, 2000, between Registrant and State Street Bank
and Trust Company. (17)
(b) - (1) Subcustodian Agreement, dated September 9, 1994, between
Registrant, Texas Commerce Bank National Association, State Street Bank
and Trust Company and A I M Fund Services, Inc. (now known as AIM
Investment Services, Inc.)(3)
C-7
- (2) Amendment No. 1, dated October 2, 1998, to the Subcustodian
Agreement, dated September 9, 1994, between Registrant, Chase Bank of
Texas, N.A. (formerly Texas Commerce Bank National Association), State
Street Bank and Trust Company and A I M Fund Services, Inc. (now known
as AIM Investment Services, Inc.)(3)
- (3) Amendment No. 2, dated March 15, 2002, to the Subcustodian
Agreement, dated September 9, 1994, between Registrant, JPMorgan Chase
Bank (formerly Chase Bank of Texas, N.A., State Street Bank and Trust
Company and A I M Fund Services, Inc. (now known as AIM Investment
Services, Inc.)(5)
(4) Amendment No. 3, dated May 1, 2004, to the Subcustodian Agreement,
dated September 9, 1994, among the Registrant, JP Morgan Chase Bank
(formerly Chase Bank of Texas, N.A.), State Street Bank and Trust
Company and A I M Investment Services, Inc.(17)
(c) - Subcustodian Agreement, dated January 20, 1993, between State Street
Bank and Trust Company and The Bank of New York.(4)
10 (a) - (1) Amended and Restated Master Distribution Plan (Class A Shares),
effective as of August 18, 2003.(8)
- (2) Amendment No. 1, dated October 29, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(9)
- (3) Amendment No. 2, dated November 4, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(9)
- (4) Amendment No. 3, dated November 20, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(9)
- (5) Amendment No. 4, dated November 24, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(9)
- (6) Amendment No. 5, dated November 25, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(9)
- (7) Amendment No. 6, dated March 31, 2004, to the Registrant's Amended
and Restated Master Distribution Plan (Class A Shares).(10)
- (8) Amendment No. 7, dated April 30, 2004, to the Registrant's Amended
and Restated Master Distribution Plan (Class A Shares).(10)
- (9) Amendment No. 8, dated September 15, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(11)
- (10) Amendment No. 9, dated October 15, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(11)
- (11) Amendment No. 10, dated December 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(12)
- (12) Amendment No. 11, dated January 1, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(12)
C-8
- (13) Amendment No. 12, dated March 15, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(14)
- (14) Amendment No. 13, dated April 29, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares).(14)
- (15) Amendment No. 14, dated July 1, 2005, to the Registrant's Amended
and Restated Master Distribution Plan (Class A Shares).(14)
- (16) Amendment No. 15, dated July 18, 2005, to the Registrant's Amended
and Restated Master Distribution Plan (Class A Shares).(14)
- (17) Amendment No. 16, dated October 31, 2005, to the Amended and
Restated Master Distribution Plan (Class A Shares)(15)
- (18) Amendment No. 17, dated March 13, 2006, to the Amended and
Restated Master Distribution Plan (Class A Shares)(16)
- (19) Amendment No. 18, dated March 27, 2006, to the Amended and
Restated Master Distribution Plan (Class A Shares)(16)
- (20) Amendment No. 19, dated March 31, 2006, to the Amended and
Restated Master Distribution Plan (Class A Shares).(16)
(b) - (1) Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature), effective as of August 18, 2003.(8)
- (2) Amendment No. 1, dated October 29, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(9)
- (3) Amendment No. 2, dated November 4, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(9)
- (4) Amendment No. 3, dated November 20, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(9)
- (5) Amendment No. 4, dated November 24, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(9)
- (6) Amendment No. 5, dated November 25, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(9)
- (7) Amendment No. 6, dated March 31, 2004, to the Registrant's Amended
and Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(10)
- (8) Amendment No. 7, dated April 30, 2004, to the Registrant's Amended
and Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(10)
- (9) Amendment No. 8, dated September 15, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(11)
- (10) Amendment No. 9, dated October 15, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(11)
C-9
- (11) Amendment No. 10, dated December 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(12)
- (12) Amendment No. 11, dated March 15, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(14)
- (13) Amendment No. 12, dated April 29, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(14)
- (14) Amendment No. 13, dated July 18, 2005, to the Registrant's Amended
and Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(14)
- (15) Amendment No. 14, dated October 31, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(15)
- (16) Amendment No. 15, dated March 13, 2006, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(16)
- (17) Amendment No. 16, dated March 27, 2006, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(16)
- (18) Amendment No. 17, dated March 31, 2006, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(16)
(c) - (1) Amended and Restated Master Distribution Plan (Class C Shares),
effective as of August 18, 2003.(8)
- (2) Amendment No. 1, dated October 29, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(9)
- (3) Amendment No. 2, dated November 4, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(9)
- (4) Amendment No. 3, dated November 20, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(9)
- (5) Amendment No. 4, dated November 24, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(9)
- (6) Amendment No. 5, dated November 25, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(9)
- (7) Amendment No. 6, dated March 31, 2004, to the Registrant's Amended
and Restated Master Distribution Plan (Class C Shares).(10)
- (8) Amendment No. 7, dated April 30, 2004, to the Registrant's Amended
and Restated Master Distribution Plan (Class C Shares).(10)
- (9) Amendment No. 8, dated September 15, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(11)
- (10) Amendment No. 9, dated October 15, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(11)
C-10
- (11) Amendment No. 10, dated December 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(12)
- (12) Amendment No. 11, dated March 15, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(14)
- (13) Amendment No. 12, dated April 29, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares).(14)
- (14) Amendment No. 13 dated July 18, 2005 to the Registrant's Amended
and Restated Master Distribution Plan (Class C Shares).(14)
- (15) Amendment No. 14, dated October 31, 2005, to the Amended and
Restated Master Distribution Plan (Class C Shares).(15)
- (16) Amendment No. 15, dated March 13, 2006, to the Amended and
Restated Master Distribution Plan (Class C Shares).(16)
- (17) Amendment No. 16, dated March 27, 2006, to the Amended and
Restated Master Distribution Plan (Class C Shares).(16)
- (18) Amendment No. 17, dated March 31, 2006, to the Amended and
Restated Master Distribution Plan (Class C Shares).(16)
(d) - (1) Amended and Restated Master Distribution Plan (Class R shares),
effective as of August 18, 2003.(8)
- (2) Amendment No. 1, dated November 4, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(9)
- (3) Amendment No. 2, dated November 24, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(9)
- (4) Amendment No. 3, dated November 25, 2003, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(9)
- (5) Amendment No. 4, dated April 30, 2004, to the Registrant's Amended
and Restated Master Distribution Plan (Class R Shares).(10)
- (6) Amendment No. 5, dated September 14, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(11)
- (7) Amendment No. 6, dated October 15, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(11)
- (8) Amendment No. 7, dated April 29, 2005, to the Registrant's Amended
and Restated Master Distribution Plan (Class R Shares).(14)
- (9) Amendment No. 8, dated July 18, 2005, to the Registrant's Amended
and Restated Master Distribution Plan (Class R Shares).(14)
- (10) Amendment No. 9, dated October 25, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(15)
C-11
- (11) Amendment No. 10, dated October 31, 2005, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(15)
- (12) Amendment No. 11, dated March 13, 2006, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(16)
- (13) Amendment No. 12, dated March 27, 2006, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(16)
- (14) Amendment No. 13, dated March 31, 2006, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares).(16)
(e) - (1) Amended and Restated Master Distribution Plan (Compensation)
(Investor Class Shares) effective July 1, 2004.(13)
- (2) Amendment No. 1, dated October 15, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Compensation) (Investor
Class Shares).(13)
- (3) Amendment No. 2, dated November 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Compensation) (Investor
Class Shares).(13)
- (4) Amendment No. 3, dated April 29, 2005, to the Registrant's Amended
and Restated Master Distribution Plan (Compensation) (Investor Class
Shares).(13)
- (5) Amendment No. 4, dated July 18, 2005, to the Registrant's Amended
and Restated Master Distribution Plan (Compensation) (Investor Class
Shares).(18)
(f) - Form of Master Related Agreement to Amended and Restated Master
Distribution Plan (Class A Shares).(16)
(g) - Form of Master Related Agreement to Amended and Restated Master
Distribution Plan (Class C Shares).(16)
(h) - Form of Master Related Agreement to Amended and Restated Master
Distribution Plan (Class R Shares).(16)
(i) - Master Related Agreement to Amended and Restated Master Distribution
Plan (Compensation) (Investor Class Shares).(16)
(j) - Ninth Amended and Restated Multiple Class Plan of The AIM Family of
Funds(R) effective December 12, 2001, as amended and restated effective
December 6, 2005.(16)
11 - Consent of Ballard Spahr Andrews & Ingersoll, LLP is filed herewith.
12 Opinion of Counsel and Consent of Ballard Spahr Andrews & Ingersoll,
LLP, supporting the tax matters and consequences to shareholders will
be filed as part of a Post-Effective Amendment to this Registration
Statement.
13 (a) - Second Amended and Restated Transfer Agency and Service Agreement,
dated October 1, 2005, between Registrant and AIM Investment Services,
Inc.(15)
(b) - (1) Amended and Restated Master Administrative Services Agreement,
dated July 1, 2004, between Registrant and A I M Advisors, Inc.(10)
C-12
- (2) Amendment No. 1, dated December 2, 2004, to the Amended and
Restated Master Administrative Services Agreement.(11)
- (3) Amendment No. 2, dated July 18, 2005, to the Amended and Restated
Master Administrative Services Agreement.(14)
- (4) Form of Amendment No. 3, dated March 31, 2006, to the Amended and
Restated Master Administrative Services Agreement.(16)
(c) - Memorandum of Agreement, regarding securities lending, dated October
29, 2003, between Registrant (on behalf of all Funds) and A I M
Advisors, Inc.(16)
(d) - Memorandum of Agreement, regarding expense limitations, dated January
1, 2006, between Registrant (on behalf of AIM Developing Markets Fund,
AIM Trimark Endeavor, AIM Trimark Fund and AIM Trimark Small Companies
Fund) and A I M Advisors, Inc.(16)
(e) - Memorandum of Agreement dated May 5, 2005, between Registrant (on
behalf of all Funds) and A I M Advisors, Inc.(16)
(f) - Form of Memorandum of Agreement, regarding expense limitations, dated
March 31, 2006, between Registrant (on behalf of AIM China Fund, AIM
Enhanced Short Bond Fund, AIM International Bond Fund and AIM Japan
Fund) and A I M Advisors, Inc.(16)
(g) - Form of Memorandum of Agreement, regarding fee waivers, dated March 31,
2006, between Registrant (on behalf of AIM Enhanced Short Bond Fund)
and A I M Advisors, Inc.(18)
(h) - Second Amended and Restated Interfund Loan Agreement dated April 30,
2004 between Registrant and A I M Advisors, Inc.(12)
(i) - Expense Reimbursement Agreement, dated June 30, 2003, between
Registrant and A I M Fund Services, Inc. (now known as AIM Investment
Services, Inc.).(10)
14 - Consent of PricewaterhouseCoopers LLP is filed herewith.
15 - Financial Statements for the period ended October 31, 2005 are
incorporated by reference to the Fund's annual report to shareholders
contained in the Registrant's Form N-CSR filed on January 6, 2006.
16 - Powers of Attorney for Baker, Bayley, Bunch, Crockett, Dowden, Fields,
Frischling, Graham, Mathai-Davis, Pennock, Quigley, Soll, Stickel,
Taylor and Zerr.(19)
17 Form of Proxy relating to the Special Meeting of Shareholders of AIM
Advantage Health Sciences Fund is filed herewith.
C-13
- ----------
(1) Incorporated herein by reference to PEA No. 58, to Registrant's
Registration Statement on Form N-1A, filed on February 24, 2000.
(2) Incorporated herein by reference to PEA No. 59, to Registrant's
Registration Statement on Form N-1A, filed on February 28, 2001.
(3) Incorporated herein by reference to PEA No. 60, to Registrant's
Registration Statement on Form N-1A, filed on October 12, 2001.
(4) Incorporated herein by reference to PEA No. 61, to Registrant's
Registration Statement on Form N-1A, filed on January 30, 2002.
(5) Incorporated herein by reference to PEA No. 62, to Registrant's
Registration Statement on Form N-1A,filed on August 14, 2002.b
(6) Incorporated herein by reference to PEA No. 63, to Registrant's
Registration Statement on Form N-1A,filed on February 20, 2003.
(7) Incorporated herein by reference to PEA No. 64, to Registrant's
Registration Statement on Form N-1A, filed on August 20, 2003.
(8) Incorporated herein by reference to PEA No. 65, to Registrant's
Registration Statement on Form N-1A, filed on October 10, 2003.
(9) Incorporated herein by reference to PEA No. 66, to Registrant's
Registration Statement on Form N-1A, filed on February 25, 2004.
(10) Incorporated herein by reference to PEA No. 67, to Registrant's
Registration Statement on Form N-1A, filed August 31, 2004.
(11) Incorporated herein by reference to PEA No. 70, to Registrant's
Registration Statement on Form N-1A, filed on December 23, 2004.
(12) Incorporated herein by reference to PEA No. 71, to Registrant's
Registration Statement on Form N-1A, filed on February 23, 2005.
(13) Incorporated herein by reference to PEA No. 72, to Registrant's
Registration Statement on Form N-1A, filed on March 1, 2005.
(14) Incorporated herein by reference to PEA No. 74, to Registrant's
Registration Statement on Form N-1A, filed on August 24, 2005.
(15) Incorporated herein by reference to PEA No. 75, to Registrant's
Registration Statement on Form N-1A, filed on December 15, 2005.
(16) Incorporated herein by reference to PEA No. 76, to Registrant's
Registration Statement on Form N-1A, filed on January 13, 2006.
(17) Incorporated herein by reference to PEA No. 77, to Registrant's
Registration Statement on Form N-1A, filed on February 23, 2006.
(18) Incorporated herein by reference to PEA No. 78, to Registrant's
Registration Statement on Form N-1A, filed on March 24, 2006.
(19) Incorporated herein by reference to Registrant's Initial Registration
Statement on From N-14, filed on November 16, 2006.
Item 17. (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 [17 CRF 203.145C], 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 agrees that every prospectus that is
filled 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.
(3) The undersigned Registrant undertakes to file an opinion of
counsel supporting the tax matters and consequences to shareholders
discussed in the prospectus in a post-effective amendment to this
registration statement.
C-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to its Registration Statement on Form
N-14 to be signed on its behalf by the undersigned, thereto duly authorized, in
the City of Houston, State of Texas, on the 25th day of January, 2007.
REGISTRANT: AIM INVESTMENT FUNDS
By: /s/ Philip A. Taylor
------------------------------------
Philip A. Taylor, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement on Form N-14 has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------------- ----------------------------- ----------------
/s/ Philip A. Taylor Trustee & President January 25, 2007
- ------------------------------------- (Principal Executive Officer)
(Philip A. Taylor)
/s/ Bob R. Baker* Trustee January 25, 2007
- -------------------------------------
(Bob R. Baker)
/s/ Frank S. Bayley* Trustee January 25, 2007
- -------------------------------------
(Frank S. Bayley)
/s/ James T. Bunch* Trustee January 25, 2007
- -------------------------------------
(James T. Bunch)
/s/ Bruce L. Crockett* Chair & Trustee January 25, 2007
- -------------------------------------
(Bruce L. Crockett)
/s/ Albert R. Dowden* Trustee January 25, 2007
- -------------------------------------
(Albert R. Dowden)
/s/ Jack M. Fields* Trustee January 25, 2007
- -------------------------------------
(Jack M. Fields)
/s/ Carl Frischling* Trustee January 25, 2007
- -------------------------------------
(Carl Frischling)
/s/ Robert H. Graham* Trustee January 25, 2007
- -------------------------------------
(Robert H. Graham)
/s/ Prema Mathai-Davis* Trustee January 25, 2007
- -------------------------------------
(Prema Mathai-Davis)
/s/ Lewis F. Pennock* Trustee January 25, 2007
- -------------------------------------
(Lewis F. Pennock)
/s/ Ruth H. Quigley* Trustee January 25, 2007
- -------------------------------------
(Ruth H. Quigley)
/s/ Larry Soll* Trustee January 25, 2007
- -------------------------------------
(Larry Soll)
/s/ Raymond Stickel, Jr.* Trustee January 25, 2007
- -------------------------------------
(Raymond Stickel, Jr.)
/s/ Sidney M. Dilgren Vice President & Treasurer January 25, 2007
- ------------------------------------- (Principal Financial and
(Sidney M. Dilgren) Accounting Officer)
*By /s/ Philip A. Taylor
---------------------------------
Philip A. Taylor
Attorney-in-Fact
* Philip A. Taylor, pursuant to powers of attorney filed in Registrant's
Registration Statement on Form N-14 on November 16, 2006.
INDEX
Exhibit
Number Description
- ------- -----------
11 Consent of Ballard Spahr Andrews & Ingersoll, LLP.
14 Consent of PricewaterhouseCoopers LLP
17 Form of Proxy relating to the Special meeting of Shareholders of AIM
Advantage Health Sciences Fund