As filed with the Securities and Exchange Commission on January 25, 2007
Securities Act Registration No. 333-138775
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 FUNDS GROUP
(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 Small Cap Equity Fund and Class A, B and C shares of AIM Select
Equity Fund. No filing fee is due in reliance on Section 24(f) of the Investment
Company Act of 1940.
[YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
AIM OPPORTUNITIES I FUND,
A PORTFOLIO OF AIM SPECIAL OPPORTUNITIES FUNDS
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 Opportunities
I Fund (the "Fund") to AIM Small Cap Equity 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 AIM Special
Opportunities 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 Special
Opportunities Funds 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 OPPORTUNITIES I FUND,
A PORTFOLIO OF AIM SPECIAL OPPORTUNITIES FUNDS
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 Opportunities I Fund (the "Fund"), an investment
portfolio of AIM Special Opportunities Funds ("Trust"), will be transferred to
AIM Small Cap Equity Fund ("Buying Fund"), an investment portfolio of AIM Funds
Group ("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 OPPORTUNITIES I FUND, AIM SMALL CAP EQUITY FUND,
A PORTFOLIO OF A PORTFOLIO OF
AIM SPECIAL OPPORTUNITIES FUNDS AIM FUNDS GROUP
11 GREENWAY PLAZA, SUITE 100 11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173 HOUSTON, TEXAS 77046-1173
(800) 959-4246 (800) 959-4246
</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 Opportunities I 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 Opportunities I
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 Special Opportunities Funds ("Trust"), with
AIM Small Cap Equity Fund ("Buying Fund"), an investment portfolio of AIM Funds
Group ("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 identical investment objectives. Both your
Fund and Buying Fund seek 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 February 28, 2006, as supplemented,
together with the related Statement of Additional Information dated February 28,
2006, as supplemented (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 April 24, 2006, as supplemented, (the "Buying Fund
Prospectus"), and the related Statement of Additional Information dated April
24, 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 Statements
of Additional Information described above, material incorporated by reference,
and other information about Trust and Buyer.
i
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 Reorganization............................................ 1
Comparison of Investment Objectives and Principal Strategies.. 1
Comparison of Performance..................................... 3
Comparison of Fees and Expenses............................... 7
Comparison of Multiple Class Structures....................... 12
Comparison of Sales Charges................................... 12
Comparison of Distribution and Purchase and Redemption
Procedures.................................................. 13
The Board's Recommendation.................................... 13
RISK FACTORS............................................................ 13
Risks Associated with Buying Fund............................. 13
Comparison of Risks of Buying Fund and Your Fund.............. 14
INFORMATION ABOUT BUYING FUND........................................... 14
Description of Buying Fund Shares............................. 14
Management's Discussion of Fund Performance................... 15
Financial Highlights.......................................... 15
ADDITIONAL INFORMATION ABOUT THE AGREEMENT.............................. 15
Terms of the Reorganization................................... 15
The Reorganization............................................ 15
Board Considerations.......................................... 15
Other Terms................................................... 18
Federal Income Tax Consequences............................... 19
Accounting Treatment.......................................... 19
RIGHTS OF SHAREHOLDERS.................................................. 20
CAPITALIZATION.......................................................... 20
LEGAL MATTERS........................................................... 20
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND.................. 20
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION........... 21
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING........................ 21
Proxy Statement/Prospectus.................................... 21
Time and Place of Special Meeting............................. 22
Voting in Person.............................................. 22
Voting by Proxy............................................... 22
Voting by Telephone or the Internet........................... 22
Quorum Requirement and Adjournment............................ 22
Vote Necessary to Approve the Agreement....................... 23
Proxy Solicitation............................................ 23
Other Matters................................................. 23
Ownership of Shares........................................... 23
Security Ownership of Management and Trustees................. 23
</Table>
<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>
iii
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 identical 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 identical investment objectives and invest
in similar types of securities, although Buying Fund, unlike your Fund, is not
permitted to sell securities short or utilize leverage. Both your Fund and
Buying Fund seek long-term growth of capital and normally focus their
investments in equity securities of small-capitalization companies.
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 OPPORTUNITIES I FUND AIM SMALL CAP EQUITY FUND
(YOUR FUND) (BUYING FUND)
INVESTMENT OBJECTIVES
- - Long-term growth of capital - Long-term growth of capital
INVESTMENT STRATEGIES
- - Focuses its investments in equity - Invests at least 80% of its assets in
securities, or securities convertible equity securities, including
into equity securities, of companies convertible securities, of small-
with market capitalizations, at the capitalization companies no larger
time of purchase, within the range of than the largest capitalized company
capitalizations of companies included included in the Russell 2000(R) Index.
in the Russell 2000(R) Index; however,
the fund may also invest in companies
with market capitalizations above the
range of those included in the Russell
2000(R) Index.
- - No corresponding strategy. - Under normal conditions, the top 10
holdings may comprise up to 25% of the
fund's total assets.
- - May sell put and covered call options - No corresponding strategy.
and purchase put and call options, on
securities, securities indices and
foreign currencies.
- - The portfolio managers use a multi- - Among factors which the portfolio
step, quantitatively oriented process managers may consider when purchasing
to construct the fund's portfolio. securities are: (1) the growth
They first use computer models to prospects for a company's products;
screen a large universe of primarily (2) the economic outlook for its
domestic stocks and identify a group industry; (3) a company's new product
of eligible stocks within that development; (4) its operating
universe. The quantitative analysis management capabilities; (5) the
screens for various factors, including relationship between the price of the
growth/stability of earnings, security and its estimated fundamental
valuation, profitability, financial value; (6) relevant market, economic
strength and stock price volatility. and political environments; and (7)
The portfolio managers then perform financial characteristics, such as
risk and transaction cost analyses on balance sheet analysis and return on
the stocks that were previously assets. The portfolio managers
identified. When selecting stocks for consider whether to sell a particular
the fund, the portfolio managers seek security when any one of these factors
to neutralize the effects of certain materially changes or when the
macroeconomic and market factors in an securities are no longer considered
effort to lower the volatility of the small-cap company securities.
fund's returns. Finally, the portfolio
managers conduct a qualitative
analysis of the stocks selected for
the fund's portfolio to confirm the
results of the quantitative analysis.
The portfolio managers consider
whether to sell a particular security
when the company no longer exhibits
characteristics that drive performance
or when the stock adds too much
marginal risk to the fund's portfolio.
The portfolio
</Table>
2
<Table>
managers consider whether to sell a
security short when the company
exhibits characteristics that drive
poor performance, and when a short
position in the security would
complement the risk profile of the
portfolio.
- - The fund is non-diversified, - The fund is diversified.
therefore, it can invest a greater
percentage of its assets in any one
issuer than a diversified fund can.
- - The fund may sell securities short - No corresponding strategy.
("short selling"), without holding
corresponding long positions.
- - The fund may utilize bank borrowings - No corresponding strategy.
("leverage") to purchase securities
- - May invest up to 25% of its total - May invest up to 25% of its total
assets in foreign securities. assets in foreign securities.
</Table>
COMPARISON OF PERFORMANCE
A bar chart showing the annual total returns for calendar years ended
December 31, for Class A shares of your Fund and Buying Fund can be found at
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
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.
AIM OPPORTUNITIES I 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. Your Fund's
3
returns include an adjustment for a one time payment to your Fund by AIM. Had
this payment to your Fund not been made, the returns would have been lower.
(BAR CHART)
<Table>
<Caption>
YEARS
- -----
1999.... 84.18%
2000.... 23.01%
2001.... (9.32)%
2002.... (24.78)%
2003.... 39.23%
2004.... 0.92%
2005.... 4.40%
2006.... 9.64%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
37.99% (quarter ended December 31, 1999) and the lowest quarterly return was
(18.13)% (quarter ended September 30, 2002).
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.
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
(FOR THE PERIODS ENDED DECEMBER 31,
2006) 1 YEAR 5 YEARS SINCE INCEPTION INCEPTION DATE
- ----------------------------------- ------ ------- --------------- --------------
CLASS A................................ 06/29/98
Return Before Taxes.................. 3.62% 2.71% 12.68%
Return After Taxes on Distributions.. 3.22 2.07 10.10
Return After Taxes on Distributions
and Sale of Fund Shares........... 2.89 2.29 9.95
CLASS B................................ 07/13/98
Return Before Taxes.................. 3.86 2.85 12.62
CLASS C................................ 12/30/98
Return Before Taxes.................. 7.94 3.17 11.60
S&P 500 Index(1)....................... 15.78 6.19 4.30(4) 06/30/98(4)
Russell 2000(R) Index(1)(2)............ 18.37 11.39 7.97(4) 06/30/98(4)
Lipper Small-Cap Core Fund
Index(1)(3).......................... 13.70 10.50 8.91(4) 06/30/98(4)
</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. Your Fund's
returns include an adjustment for a one
4
time payment to your Fund by AIM. Had this payment to your Fund not been made,
the returns would have been lower.
- --------
(1) The Standard & Poor's 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. The fund has also included the Russell
2000(R) Index, which the fund believes more closely reflects the
performance of the securities in which the fund invests. In addition, the
fund has included the Lipper Small-Cap Core Fund Index (which may or may
not include the fund) for comparison to a peer group.
(2) The Russell 2000(R) Index measures the performance of the 2,000 smallest
companies in the Russell 3000(R) Index, which measures the performance of
the 3,000 largest U.S. companies based on the total market
capitalization. The Russell 2000(R) Index is widely regarded as
representative of small-cap stocks.
(3) The Lipper Small-Cap Core Fund Index is an equally weighted
representation of the 30 largest funds in the Lipper Small-Cap Core
classification. These funds, by portfolio practice, invest at least 75%
of their equity assets in companies with market capitalizations (on a
three-year weighted basis) less than 250% of the dollar-weighted median
market capitalization of the smallest 500 of the middle 1,000 securities
of the S&P SuperComposite 1500 Index. Small-Cap Core funds have more
latitude in the companies in which they invest. These funds, by portfolio
practice, have an average price-to-earnings ratio, price-to-book ratio,
and three year sales-per-share growth value, compared to the S&P SmallCap
600 Index. In conjunction with the fund's management team change on May
23, 2005, and the corresponding change in the fund's investment style
from value to core, the fund has elected to use the Lipper Small-Cap Core
Fund Index to represent its peer group rather than the Lipper Small-Cap
Value Fund Index. The Lipper Small-Cap Core Fund Index more closely
reflects the performance of the types of securities in which the fund
invests.
(4) The average annual total return given is since the month-end closest to
the inception date of the fund class with the longest performance
history.
AIM SMALL CAP EQUITY 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 %
- ----- ------
2001.... 8.92%
2002.... (19.23)%
2003.... 46.17%
2004.... 9.45%
2005.... 6.58%
2006.... 16.83%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
20.83% (quarter ended June 30, 2001) and the lowest quarterly return was -23.45%
(quarter ended September 30, 2002).
5
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.
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
SINCE INCEPTION
(FOR THE PERIODS ENDED DECEMBER 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE
- ----------------------------------------- ------ ------- --------- ---------
CLASS A..................................... 08/31/00
Return Before Taxes....................... 10.43% 8.75% 7.17%
Return After Taxes on Distributions....... 7.78 7.78 6.41
Return After Taxes on Distributions and
Sale of Fund Shares.................... 9.81 7.48 6.15
CLASS B..................................... 08/31/00
Return Before Taxes....................... 10.99 8.91 7.37
CLASS C..................................... 08/31/00
Return Before Taxes....................... 15.02 9.22 7.38
S&P 500 Index(1)............................ 15.78 6.19 0.60 08/31/00(4)
Russell 2000(R) Index(1)(2)................. 18.37 11.39 7.57 08/31/00(4)
Lipper Small-Cap Core Fund Index(1)(3)...... 13.70 10.50 8.20 08/31/00(4)
</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 R will vary.
- --------
(1) The Standard & Poor's 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. The fund has also included the Russell
2000(R) Index, which the fund believes more closely reflects the
performance of the types of securities in which the fund invests. In
addition, the Lipper Small-Cap Core Fund Index (which may or may not
include the fund) is included for comparison to a peer group.
(2) The Russell 2000(R) Index measures the performance of the 2,000 smallest
companies in the Russell 3000(R) Index, which measures the performance of
the 3,000 largest U.S. companies based on the total market
capitalization. The Russell 2000(R) Index is widely regarded as
representative of small-cap stocks.
(3) The Lipper Small-Cap Core Fund Index is an equally weighted
representation of the 30 largest funds in the Lipper Small Cap Core
classification. These funds, by portfolio practice, invest at least 75%
of their equity assets in companies with market capitalizations (on a
three-year weighted basis) less than 250% of the dollar-weighted median
market capitalization of the smallest 500 of the middle 1,000 securities
of the S&P SuperComposite 1500 Index. Small-Cap Core funds have more
latitude in the companies in which they invest. These funds typically
have an average price-to-earnings ratio , price-to-book ratio, and three-
year sales-per-share growth value, compared to the S&P SmallCap 600
Index, which was incepted in 1994, consists of 600 small cap domestic
stocks chosen for market size, liquidity, (bid-asked spread, ownership,
share turnover and number of no trade days) and industry group
representation. It is a market-value weighted index, with each stock's
weight in the Index proportionate to its market value.
(4) The average annual total return given is since the month-end closest to
the inception date of the class with the longest performance history.
6
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 Opportunities I Fund ("Your Fund") and Class A, Class
B and Class C shares of AIM Small Cap Equity Fund ("Buying Fund"). Pro Forma
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 OPPORTUNITIES I FUND AIM SMALL CAP EQUITY FUND
YOUR FUND AIM SMALL CAP EQUITY FUND BUYING FUND
(AS OF 10/31/06 AS BUYING FUND PRO FORMA COMBINED
RESTATED) (12/31/05 AS RESTATED) (12/31/05)
--------------------------- --------------------------- ---------------------------
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% None(1) 5.00% 1.00% None(1) 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from fund assets)
Management fees(2)............ 0.16% 0.16% 0.16% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%
Distribution and/or Service
(12b-1) Fees(3)............... 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25% 1.00% 1.00%
Other -- Miscellaneous
Expenses(4)(5)........... 0.35% 0.35% 0.35% 0.48% 0.48% 0.48% 0.44% 0.44% 0.44%
Other -- Dividend Expenses
Attributable to Securities
Sold Short(6)............ 0.38% 0.38% 0.38% -- -- -- -- -- --
Other -- Interest Expenses.. 1.40% 1.40% 1.40% -- -- -- -- -- --
Total Other Expenses.......... 2.13% 2.13% 2.13% 0.48% 0.48% 0.48% 0.44% 0.44% 0.44%
Total Annual Fund Operating
Expenses.................... 2.54% 3.29% 3.29% 1.58% 2.33% 2.33% 1.54% 2.29% 2.29%
Fee Waiver(7)................. -- -- -- 0.11% 0.11% 0.11% 0.12% 0.12% 0.12%
Net Annual Fund Operating
Expenses.................... 2.54% 3.29% 3.29% 1.47% 2.22% 2.22% 1.42% 2.17% 2.17%
</Table>
- --------
(1) A contingent deferred sales charge may apply in some cases.
(2) AIM Opportunities I 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 AIM Opportunities I Fund. AIM Opportunities I
Fund's base management fee is 1.00%, annualized, of AIM Opportunities I
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
0.75%, annualized, of AIM Opportunities I Fund's average daily net assets
during a rolling 12 month performance period, depending on AIM
Opportunities I Fund's performance compared to the performance of the
Russell 2000(R) Index during such performance period. The total
management fee payable by AIM Opportunities I Fund is not susceptible to
estimation because it depends upon the future relative performance of AIM
Opportunities I Fund and the Russell 2000(R) Index, as well as changes in
AIM Opportunities I Fund's average daily net assets 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 AIM Opportunities I Fund's management fee.
7
(3) The Board of Trustees has approved a permanent reduction of the Rule 12b-
1 fees applicable to Buying Fund Class A shares to 0.25% effective July
1, 2005. Distribution and/or Service (12b-1) Fees reflect this agreement.
(4) Your Fund is estimated to incur $177,000 of expenses in connection with
the reorganization of which AIM will pay 100%. 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.
(5) 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.
(6) When AIM Opportunities I Fund borrows a security to make a short sale,
the fund has to pay the lender of the security the value of any dividends
earned on the borrowed security ("dividend-substitute payments"). These
dividend substitute payments are investment related expenses of the AIM
Opportunities I Fund.
(7) Effective January 1, 2005 through December 31, 2009, the advisor for
Buying Fund has contractually agreed to waive a portion of its advisory
fees to the extent necessary so that the advisory fees payable by the
Fund (based on the Fund's average daily net assets) do not exceed the
annual rate of 0.745% for the first $250 million, plus 0.73% of the next
$250 million, plus 0.715% of the next $500 million, plus 0.70% of the
next $1.5 billion, plus 0.685% of the next $2.5 billion, plus 0.67% of
the next $2.5 billion, plus 0.655% of the next $2.5 billion, plus 0.64%
of the Fund's average daily net assets in excess of $10 billion. The Fee
Waiver reflects this agreement.
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
8
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 OPPORTUNITIES I FUND (YOUR FUND)
Class A....................................... $793 $1,297 $1,826 $3,267
Class B....................................... 832 1,313 1,917 3,415(1)
Class C....................................... 432 1,013 1,717 3,585
AIM SMALL CAP EQUITY FUND (BUYING FUND)
Class A....................................... $691 $ 989 $1,332 $2,297
Class B....................................... 725 994 1,414 2,451(1)
Class C....................................... 325 694 1,214 2,639
AIM SMALL CAP EQUITY FUND (BUYING FUND) -- PRO
FORMA COMBINED
Class A....................................... $687 $ 975 $1,309 $2,253
Class B....................................... 720 979 1,391 2,407(1)
Class C....................................... 320 679 1,191 2,596
</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.
You would pay the following expenses if you did not redeem your shares:
<Table>
<Caption>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ------ ------ ------
AIM OPPORTUNITIES I FUND (YOUR FUND)
Class A....................................... $793 $1,297 $1,826 $3,267
Class B....................................... 332 1,013 1,717 3,415(1)
Class C....................................... 332 1,013 1,717 3,585
AIM SMALL CAP EQUITY FUND (BUYING FUND)
Class A....................................... $691 $ 989 $1,332 $2,297
Class B....................................... 225 694 1,214 2,451(1)
Class C....................................... 225 694 1,214 2,639
AIM SMALL CAP EQUITY FUND (BUYING FUND) -- PRO
FORMA COMBINED
Class A....................................... $687 $ 975 $1,309 $2,253
Class B....................................... 220 679 1,191 2,407(1)
Class C....................................... 220 679 1,191 2,596
</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.
9
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
1.00%, 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 0.75%, annualized, of
your Fund's average daily net assets 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 Russell 2000(R)
Index (the "Small Cap 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 Small Cap Index will be
determined by adding together (i) the change in the level of the Small Cap Index
during the First Performance Period and (ii) the value, computed consistently
with the Small Cap Index, of cash distributions made by companies whose
securities comprise the Small Cap Index accumulated to the end of the First
Performance Period, and will be expressed as a percentage of the Small Cap Index
level at the beginning of such period. The First Fee Adjustment Rate either (i)
increases the Base Fee at the rate of 0.15%, 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 Small Cap Index over the First Performance Period, or (ii) decreases the
Base Fee at the rate of 0.15%, on a pro rata basis, for each percentage point
the investment record of the Small Cap 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 your Fund 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 Small Cap
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 Small Cap Index will be determined by adding together
(i) the change in the level of the Small Cap Index during the Second Performance
Period and (ii) the value, computed consistently with the Small Cap Index, of
cash distributions made by companies whose securities comprise the Small Cap
Index accumulated to the end of the Second Performance Period, and will be
expressed as a percentage of the Small Cap Index level at the
10
beginning of such period. The Second Fee Adjustment Rate either (i) increases
the Base Fee at the rate of 0.15%, 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
Small Cap Index over the Second Performance Period, or (ii) decreases the Base
Fee at the rate of 0.15%, on a pro rata basis, for each percentage point the
investment record of the Small Cap 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 your Fund 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 has voluntarily agreed to waive management fees to the extent necessary
such that the maximum management fee payable monthly by your Fund (consisting of
the base management fee, as adjusted by the performance adjustment) will not
exceed 1.75% of your Fund's average daily net assets during the fiscal year.
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 0.85% of Buying Fund's average daily net assets. AIM has contractually
agreed to waive its advisory fees through December 31, 2009, for Buying Fund.
Thus, for the period January 1, 2005 to December 31, 2009, the following
advisory fee rates will apply to Buying Fund after the waiver:
<Table>
<Caption>
ANNUAL RATE NET ASSETS
- ----------- ----------
0.745%................................................... First $250 million
0.73%.................................................... Next $250 million
0.715%................................................... Next $500 million
0.70%.................................................... Next $1.5 billion
0.685%................................................... Next $2.5 billion
0.67%.................................................... Next $2.5 billion
0.655%................................................... Next $2.5 billion
0.64%.................................................... Over $10 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 Russell 2000(R) Index and
changes in your Fund's average daily net assets over the relevant performance
periods, the application of Buying Fund's advisory fee to the combined fund
could result in your Fund's shareholders at times paying a higher advisory fee
after the Reorganization. For example, if your Fund underperformed the Russell
2000(R) Index by more than 3%, 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 Russell 2000(R) Index, as
well as changes in your Fund's average daily net assets over the relevant
performance periods.
Your Fund recently has underperformed the Russell 2000(R) Index, resulting
in downward monthly Fee Adjustments and lower total management fees payable by
your Fund. Because the Fee Adjustment is based upon a rolling 12-month
performance period, your Fund's recent underperformance will impact the amounts
of future Fee
11
Adjustments so long as the relevant rolling 12-month performance period includes
these recent periods over which your Fund has underperformed.
As shown in the "Comparison of Fees and Expenses -- Fee Tables", based on
the performance of 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 0.16%. The effective advisory fee rate of
the Buying Fund before advisory fee waivers is 0.85% and 0.74% after advisory
fee waivers. After giving pro forma effect to the reorganization the effective
advisory fee rate of the combined fund is estimated to be 0.85% before advisory
fee waivers and 0.73% after advisory fee waivers.
Because the investment advisory fee schedule applicable to the combined
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."
The SEC has expressed concern over the termination of a fund's performance-
based advisory fee arrangements during a period of underperformance by the fund
because it may be to the advantage of the fund's advisor to terminate or
renegotiate such arrangements. AIM believes that this concern is not applicable
in a situation in which a merger transaction is presented to and approved by
shareholders, as is the case with the Reorganization.
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.
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 contained 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 - subject to a CDSC on
redemptions made within 12 certain redemptions certain redemptions
or 18 months from the date
of certain purchases
</Table>
12
<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 in "Comparison of Fees
and Expenses" include comparative information about the distribution and service
fees payable by each class of shares of your 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 14 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.
This is especially true with respect to equity securities of small-cap
companies, whose prices may go up and down more than equity securities of
larger, more-established companies. Also, since equity securities of small-cap
companies may not be traded as often as equity securities of larger, more-
established companies, it may be difficult or impossible for Buying Fund to sell
securities at a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
13
The values of convertible securities in which Buying Fund invests may also
be affected by market interest rates, the risk that the issuer may default on
interest or principal payments and the value of the underlying stock into which
these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest or dividends, their values may fall if
interest rates rise and rise if market 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 Buying Fund.
Because a large percentage of Buying Fund's assets may be invested in a
limited number of securities, a change in the value of these securities could
significantly affect the value of your investment in Buying Fund.
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 identical investment
objectives and similar investment strategies.
Under normal conditions, Buying Fund's top 10 holdings may comprise up to
25% of its total assets. Because a large percentage of Buying Fund's assets may
be invested in a limited number of securities, a change in the value of these
securities could significantly affect the value of your investment in Buying
Fund.
Your Fund 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, the fund will have
incurred an expense in the amount of the cost of the option. If the fund sells a
put option that is exercised, the fund will have to purchase the security at a
price greater than its market value. If the fund sells a call option that is
exercised, the 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,
the 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 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.
14
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.
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
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 October
31, 2006 and for the short taxable year beginning on November 1, 2006 and ending
on the Closing and (b) all of your Fund's net capital gain recognized in its
taxable year ended October 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
15
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 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.
- Your Fund has undergone various investment process and portfolio
management changes in recent years. While Buying Fund does not utilize
short selling or leverage as investment techniques, Buying Fund has had a
more enduring and stable investment process that has outperformed your
Fund in the short-term.
- 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' small cap core/blend product offerings. In considering the
Reorganization, the Board noted that the funds have identical investment
objectives and utilize 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 (leverage).
The Board considered AIM's recommendation that Buying Fund be the surviving
fund in the Reorganization primarily because the management team that will
manage the combined fund has managed Buying Fund since 2004. In addition, over
time 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
16
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 $448 million, compared to net assets for
your Fund of approximately $198 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 had provided better returns to its shareholders for the
one- and five-year periods 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................. 7.76% 2.36% N/A 13.50% June 29, 1998
Buying Fund............... 17.22% 8.49% N/A 7.62% August 31, 2000
</Table>
AVERAGE ANNUAL TOTAL RETURNS AS OF SEPTEMBER 30, 2006
<Table>
<Caption>
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION INCEPTION DATE
-------- ---------- --------- --------------- --------------
Your Fund................. 1.94% 5.00% N/A 12.58% June 29, 1998
Buying Fund............... 12.95% 12.83% N/A 7.41% August 31, 2000
</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 the 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. The
Board noted that where your Fund's performance equals or exceeds the performance
of the Russell 2000(R) Index, your Fund's advisory fee would be higher than
Buying Fund's, assuming that there are no changes in your Fund's average daily
net assets over the relevant performance periods. However, the Board also noted
that in circumstances where your Fund underperforms the Russell 2000(R) Index,
your Fund's performance-based fee could be lower than Buying Fund's advisory fee
depending on changes in your Fund's average daily net assets 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 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
17
Buying Fund as offsets to future realized capital gains. As of June 30, 2006,
your Fund's capital loss carryforwards were estimated to be zero. As of June 30,
2006, Buying Fund's net unrealized built-in gain is larger than that of your
Fund, which should increase the likelihood that more gains will be distributed
post-reorganization than would have been the case had the Reorganization not
occurred. 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 $177,000. The Board noted that
AIM had agreed to pay 100% of your Fund's expenses in connection with 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 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
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
18
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 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 Reorganizations will each 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.
19
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 June 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.................... $121,945,016 $231,043,151 $ (15,470)(1) $352,972,697
Shares Outstanding............ 9,649,366 17,242,746 (547,277)(2) 26,344,835
Net Asset Value Per Share..... $ 12.64 $ 13.40 $ 13.40
</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..................... $62,265,207 $127,361,911 $ (8,528)(1) $189,618,590
Shares Outstanding............. 5,349,072 9,938,635 (488,557)(2) 14,799,150
Net Asset Value Per Share...... $ 11.64 $ 12.81 $ 12.81
</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..................... $14,064,941 $56,538,172 $ (3,786)(1) $70,599,327
Shares Outstanding............. 1,206,432 4,414,018 (108,306)(2) 5,512,144
Net Asset Value Per Share...... $ 11.66 $ 12.81 $ 12.81
</Table>
- --------
(1) AIM will bear 100% of your Fund's Reorganization expenses, therefore Net
Assets have not been adjusted for any expenses expected to be incurred by
your Fund in connection with the Reorganization. The Buying Fund will
incur approximately $30,000 in connection with the Reorganization of
which $27,784 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 Funds Net asset Value Per Share
assuming the Reorganization would have taken place on June 30, 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.
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
20
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.
811-1474. 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. 811-01540. 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.
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.
21
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.
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
22
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 Meeting. 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. AIM will bear
100% of your Fund's costs and expenses incurred in connection with the
reorganization, including solicitation costs. Solicitation costs are expected to
be approximately $20,000.
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 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.
23
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" the fund as defined in the 1940 Act. Such control may affect the
voting rights of other shareholders.
<Table>
<Caption>
NUMBER OF PERCENT OWNED OF
NAME AND ADDRESS CLASS OF SHARES SHARES OWNED RECORD*
- ---------------- --------------- ------------ ----------------
</Table>
- --------
* Trust 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 your Fund
by executive officers and trustees of Trust as a group constituted less than 1%
of the outstanding shares of each class of your Fund as of January 22, 2007.
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 your Fund
by executive officers and trustees of Trust as a group constituted less than 1%
of the outstanding shares of each class of your Fund as of January 22, 2007.
D-1
APPENDIX I
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
AIM OPPORTUNITIES I FUND,
A SEPARATE PORTFOLIO OF
AIM SPECIAL OPPORTUNITIES FUNDS
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....................................... 6
SECTION 3.8. No Breaches or Defaults.................................. 6
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................................................ 7
SECTION 3.13. Properties and Assets.................................... 7
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........................................ 8
SECTION 3.20. Prospectus and Statement of Additional Information....... 8
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...... 9
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.................................................. 11
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......................................................... 12
SECTION 5.1. Conduct of Business...................................... 12
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.................. 13
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............................................... 16
SECTION 8.6. Enforcement.............................................. 16
SECTION 8.7. Interpretation........................................... 16
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.................... 17
SECTION 8.12. Successors and Assigns; Assignment....................... 18
EXHIBIT A Excluded Liabilities of Selling Fund
SCHEDULE 2.1 Classes of Shares of Selling Fund and Corresponding
Classes of Shares of Buying Fund
SCHEDULE 3.4 Certain Contingent Liabilities of Selling Fund
SCHEDULE 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 Special Opportunities Funds, a Delaware statutory
trust ("Seller"), acting on behalf of AIM Opportunities I Fund ("Selling Fund"),
a separate series of Seller, AIM Funds Group, a Delaware statutory trust
("Buyer"), acting on behalf of AIM Small Cap Equity 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 Funds Group, 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 Small Cap Equity 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 December 31, 2005 and
the Buying Fund Semiannual Report to Shareholders dated June 30, 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 Special Opportunities Funds, 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. 811-08697.
"Selling Fund" means AIM Opportunities I Fund, a separate series of
Seller.
"Selling Fund Auditors" means PricewaterhouseCoopers LLP.
"Selling Fund Financial Statements" means the audited financial
statements of Selling Fund for the fiscal year ended October 31, 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) 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.
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
6
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.
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.
7
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 October
31, 2006 and for the short taxable year beginning on November 1, 2006 and ending
on the Closing Date and (B) all of Selling Fund's net capital gain recognized in
its taxable year ended October 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.
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.
8
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.
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.
9
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 December 31,
2005, 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 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.
10
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, 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.
11
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, except
to the extent that Buying Fund is required by the Investment Company Act to
redeem any of its shares presented for redemption at net asset value in the
ordinary course of its business as an open-end, management investment company.
(b) Buying Fund has no plan or intention to sell or otherwise dispose of
any of the assets of Selling Fund acquired in the Reorganization, other than in
the ordinary course of its business and to the extent necessary to maintain its
status as a "regulated investment company" under the Code; provided, however,
that this Section 4.14(b) shall not preclude any of the 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. There is no
plan or intention by Buying Fund to redeem, or by any person related to Buying
Fund to acquire any of the Buying Fund Shares issued in the Reorganization
either directly or through any transaction, agreement, or arrangement with any
other person, other than redemptions in the ordinary course of Buying Fund's
business as an open-end investment company as required by the Investment Company
Act.
SECTION 4.15. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Buying Fund as of
the date on which it was issued does not contain, and as supplemented by any
supplement thereto dated prior to or on the Closing Date does not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 4.16. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal, 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.
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
12
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 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.
13
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.
(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
14
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
(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.
15
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 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.
16
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 Special Opportunities Funds
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 Funds Group
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
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
17
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).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM SPECIAL OPPORTUNITIES FUNDS, acting
on behalf of AIM OPPORTUNITIES I FUND
By: /s/ Philip A. Taylor
------------------------------------
Name: Philip A. Taylor
Title: Principal Executive Officer
AIM FUNDS GROUP, acting on behalf of AIM
SMALL CAP EQUITY 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
18
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 Opportunities I Fund AIM Small Cap Equity 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 II Fund into AIM Select Equity Fund
AIM Opportunities III Fund into AIM Select Equity Fund
AIM Advantage Health Sciences Fund into AIM Global Health Care 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 COUNSELOR SERIES TRUST
AIM Floating Rate Fund - Class A, C and R
Supplement dated September 20, 2006 to the
Prospectus dated April 14, 2006
as supplemented May 8, 2006 and July 5, 2006
AIM Multi-Sector Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated December 20, 2005
as supplemented January 17, 2006, April 13, 2006,
April 21, 2006, May 8, 2006 and July 5, 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 September 20, 2006 to the
Prospectuses dated March 31, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 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 September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
AIM FUNDS GROUP
AIM Basic Balanced Fund - Class A, B, C, R and Investor
Supplement dated September 20, 2006 to the
Prospectus dated April 24, 2006
as supplemented May 1, 2006, May 8, 2006
and July 5, 2006
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 September 20, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006 and July 5, 2006
AIM GROWTH SERIES
AIM Basic Value Fund - Class A, B, C and R
AIM Global Equity Fund - Class A, B, C and R
AIM International Allocation Fund - Class A, B, C and R
AIM Small Cap Growth Fund - Class A, B, C, R and Investor
Supplement dated September 20, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006 and July 5, 2006
AIM Conservative Allocation 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 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
Supplement dated September 20, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006, July 5, 2006
and August 23, 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 September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 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 September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 1, 2006,
May 8, 2006 and July 5, 2006
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A, B and C
AIM Trimark Endeavor Fund - Class A, B, C and R
AIM Trimark Fund - Class A, B, C and R
Supplement dated September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
AIM Trimark Small Companies Fund - Class A, B, C and R
Supplement dated September 20, 2006 to the
Prospectus dated February 28, 2006
as supplemented March 24, 2006, April 21, 2006,
May 8, 2006 and July 5, 2006
AIM China Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated March 31, 2006
as supplemented April 21, 2006, May 8, 2006,
June 27, 2006 and July 5, 2006
AIM Enhanced Short Bond Fund - Class A, C and R
Supplement dated September 20, 2006 to the
Prospectus dated March 31, 2006
as supplemented April 21, 2006 and May 8, 2006
AIM International Bond Fund - Class A, B and C
AIM Japan Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectuses dated March 31, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
1
Appendix III
AIM COUNSELOR SERIES TRUST
AIM Floating Rate Fund - Class A, C and R
Supplement dated September 20, 2006 to the
Prospectus dated April 14, 2006
as supplemented May 8, 2006 and July 5, 2006
AIM Multi-Sector Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated December 20, 2005
as supplemented January 17, 2006, April 13, 2006,
April 21, 2006, May 8, 2006 and July 5, 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 September 20, 2006 to the
Prospectuses dated March 31, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 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 September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
AIM FUNDS GROUP
AIM Basic Balanced Fund - Class A, B, C, R and Investor
Supplement dated September 20, 2006 to the
Prospectus dated April 24, 2006
as supplemented May 1, 2006, May 8, 2006
and July 5, 2006
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 September 20, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006 and July 5, 2006
AIM GROWTH SERIES
AIM Basic Value Fund - Class A, B, C and R
AIM Global Equity Fund - Class A, B, C and R
AIM International Allocation Fund - Class A, B, C and R
AIM Small Cap Growth Fund - Class A, B, C, R and Investor
Supplement dated September 20, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006 and July 5, 2006
AIM Conservative Allocation 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 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
Supplement dated September 20, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006, July 5, 2006
and August 23, 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 September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 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 September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 1, 2006,
May 8, 2006 and July 5, 2006
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A, B and C
AIM Trimark Endeavor Fund - Class A, B, C and R
AIM Trimark Fund - Class A, B, C and R
Supplement dated September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
AIM Trimark Small Companies Fund - Class A, B, C and R
Supplement dated September 20, 2006 to the
Prospectus dated February 28, 2006
as supplemented March 24, 2006, April 21, 2006,
May 8, 2006 and July 5, 2006
AIM China Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated March 31, 2006
as supplemented April 21, 2006, May 8, 2006,
June 27, 2006 and July 5, 2006
AIM Enhanced Short Bond Fund - Class A, C and R
Supplement dated September 20, 2006 to the
Prospectus dated March 31, 2006
as supplemented April 21, 2006 and May 8, 2006
AIM International Bond Fund - Class A, B and C
AIM Japan Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectuses dated March 31, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
1
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 September 20, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, April 21, 2006,
May 8, 2006 and July 5, 206
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 September 20, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006,
April 21, 2006, May 8, 2006 and July 5, 2006
AIM Total Return Bond Fund - Class A, B, C and R
Supplement dated September 20, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006,
April 21, 2006, May 1, 2006, May 8, 2006 and July 5, 2006
AIM Limited Maturity Treasury Fund - Class A and A3
Supplement dated September 20, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006,
April 21, 2006 and May 8, 2006
AIM Short Term Bond Fund - Class A, C and R
Supplement dated September 20, 2006 to the
Prospectus dated October 25, 2005
as revised June 9, 2006
AIM SECTOR FUNDS
AIM Energy Fund - Class A, B, C and Investor
AIM Financial Services 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 September 20, 2006 to the
Prospectuses dated July 31, 2006
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Opportunities I Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006,
June 2, 2006 and July 5, 2006
AIM Opportunities II Fund - Class A, B and C
AIM Opportunities III Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006,
June 2, 2006, June 30, 2006 and July 5, 2006
AIM STOCK FUNDS
AIM Dynamics Fund - Class A, B, C, R and Investor
Supplement dated September 20, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2006, April 21, 2006,
May 8, 2006 and July 5, 2006
AIM S&P 500 Index Fund - Investor Class
Supplement dated September 20, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2005, January 31, 2006,
April 21, 2006 and May 8, 2006
AIM SUMMIT FUND - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
AIM TAX-EXEMPT FUNDS
AIM High Income Municipal Fund - Class A, B and C
AIM Tax-Exempt Cash Fund - Class A and Investor
AIM Tax-Free Intermediate Fund - Class A and A3
Supplement dated September 20, 2006 to the
Prospectuses dated July 31, 2006
AIM TREASURER'S SERIES TRUST
Premier Portfolio - Investor Class
Premier Tax-Exempt Portfolio - Investor Class
Premier U.S. Government Money Portfolio - Investor Class
Supplement dated September 20, 2006 to the
Prospectus dated December 20, 2005
as supplemented April 21, 2006 and May 8, 2006
Effective December 29, 2006, shareholders of AIM Advantage Health Sciences Fund,
AIM Global Health Care Fund and AIM Gold & Precious Metals 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 Advantage Health Sciences Fund, AIM Global
Health Care Fund and AIM Gold & Precious Metals Fund are added to the list of
funds appearing immediately under the heading "SHAREHOLDER INFORMATION -
REDEEMING SHARES - REDEMPTION FEE" in the prospectus.
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 Advantage Health Sciences Fund - Class A,
B and C Supplement dated May 8, 2006 to
the Prospectus dated December 20, 2005
as supplemented January 17, 2006 and April 21, 2006
AIM Floating Rate Fund-Class A, B1, C and R
Supplement dated May 8, 2006 to the
Prospectus dated April 14, 2006
AIM Multi-Sector Fund - Class A, B and C
Supplement dated May 8, 2006 to the
Prospectus dated December 20, 2005
as supplemented January 17, 2006, April 13, 2006
and April 21, 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 May 8, 2006 to the
Prospectuses dated March 31, 2006 as
supplemented April 21, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 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 May 8, 2006 to the
Prospectuses dated April 24, 2006
AIM Basic Balanced Fund - Class A, B, C, R
and Investor Supplement dated May 8, 2006 to the
Prospectus dated April 24, 2006
as supplemented May 1, 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 May 8, 2006 to the
Prospectuses dated April 24, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006 and May 1, 2006
AIM INVESTMENT FUNDS
AIM China Fund - Class A, B and C
AIM Enhanced Short Bond Fund - Class A, C and R
AIM International Bond Fund - Class A, B and C
AIM Japan Fund - Class A, B and C
Supplement dated May 8, 2006 to the
Prospectuses dated March 31, 2006
as supplemented April 21, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006
AIM Trimark Small Companies Fund - Class A, B, C and R
Supplement dated May 8, 2006 to the
Prospectus dated February 28, 2006
as supplemented March 24, 2006 and April 21, 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 May 8, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005
and April 21, 2006
AIM High Yield Fund - Class A, B, C and Investor
AIM Intermediate Government Fund -
Class A, B, C, R and Investor
AIM Limited Maturity Treasury Fund - Class A and A3
AIM Municipal Bond Fund - Class A, B, C and Investor
Supplement dated May 8, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006
and April 21, 2006
AIM Income Fund - Class A, B, C, R and Investor
AIM Total Return Bond Fund - Class A, B, C and R
Supplement dated May 8, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006, April 21,
2006 and May 1, 2006
1
AIM Short Term Bond Fund - Class A, C and R
Supplement dated May 8, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2005, February 3, 2006,
March 31, 2006 and April 21, 2006
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 May 8, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006
April 13, 2006 and April 21, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006
AIM STOCK FUNDS
AIM Dynamics Fund - Class A, B, C, R and
Investor Supplement dated May 8, 2006 to the
Prospectus dated October 25, 2005
as 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
AIM SUMMIT FUND - Class A, B and C
Supplement dated May 8, 2006 to the
Prospectus dated February 28, 2006
as supplemented April 21, 2006
AIM TAX-EXEMPT FUNDS
AIM High Income Municipal Fund - Class A, B and C
Supplement dated May 8, 2006 to the
Prospectus dated July 29, 2005
as revised April 13, 2006 and
as supplemented April 21, 2006
AIM Tax-Exempt Cash Fund - Class A and Investor
Supplement dated May 8, 2006 to the
Prospectus dated July 29, 2005
as supplemented December 8, 2005,
December 23, 2005 and April 21, 2006
AIM Tax-Free Intermediate Fund - Class A and A3
Supplement dated May 8, 2006 to the
Prospectus dated July 29, 2005
as supplemented December 8, 2005, December 23, 2005,
March 31, 2006 and April 21, 2006
AIM TREASURER'S SERIES TRUST
Premier Portfolio - Investor Class
Premier Tax-Exempt Portfolio - Investor Class
Premier U.S. Government Money Portfolio - Investor Class
Supplement dated May 8, 2006 to the
Prospectus dated December 20, 2005
as supplemented 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 SMALL CAP EQUITY FUND
PROSPECTUS
APRIL 24, 2006
AIM Small Cap Equity Fund seeks to provide long-term growth of capital.
- --------------------------------------------------------------------------------
This prospectus contains important information about the Class A, B, C and R
shares of the fund. Please read it before investing and keep it for future
reference.
As with all other mutual fund securities, the Securities and Exchange Commission
has not approved or disapproved these securities or determined whether the
information in this prospectus is adequate or accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- - is not FDIC insured;
- - may lose value; and
- - is not guaranteed by a bank.
-------------------------
AIM SMALL CAP EQUITY FUND
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<Table>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- ------------------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- ------------------------------------------------------
PERFORMANCE INFORMATION 2
- ------------------------------------------------------
Annual Total Returns 2
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- ------------------------------------------------------
Fee Table 4
Expense Example 4
HYPOTHETICAL INVESTMENT AND EXPENSE
INFORMATION 5
- ------------------------------------------------------
DISCLOSURE OF PORTFOLIO HOLDINGS 6
- ------------------------------------------------------
FUND MANAGEMENT 7
- ------------------------------------------------------
The Advisor 7
Advisor Compensation 7
Portfolio Manager(s) 7
OTHER INFORMATION 8
- ------------------------------------------------------
Sales Charges 8
Dividends and Distributions 8
Future Limited Fund Offering 8
FINANCIAL HIGHLIGHTS 9
- ------------------------------------------------------
SHAREHOLDER INFORMATION A-1
- ------------------------------------------------------
Choosing a Share Class A-1
Excessive Short-Term Trading Activity
Disclosures A-5
Purchasing Shares A-8
Redeeming Shares A-10
Exchanging Shares A-13
Pricing of Shares A-16
Taxes A-17
OBTAINING ADDITIONAL INFORMATION Back Cover
- ------------------------------------------------------
</Table>
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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 SMALL CAP EQUITY 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 equity securities, including convertible securities, of
small-capitalization companies. In complying with this 80% investment
requirement, the fund's investments may include synthetic instruments. Synthetic
instruments are investments that have economic characteristics similar to the
fund's direct investments, and may include warrants, futures, options,
exchange-traded funds and American Depositary Receipts. The fund considers a
company to be a small-capitalization company if it has a market capitalization,
at the time of purchase, no larger than the largest capitalized company included
in the Russell 2000--Registered Trademark-- Index during the most recent
11-month period (based on month-end data) plus the most recent data during the
current month. The Russell 2000--Registered Trademark-- Index measures the
performance of the 2,000 smallest companies in the Russell 3000--Registered
Trademark-- Index, which measures the performance of the 3,000 largest U.S.
companies. The Russell 2000--Registered Trademark-- Index is widely regarded as
representative of small cap stocks. Under normal conditions, the top 10 holdings
may comprise up to 25% of the fund's total assets. The fund may invest up to 25%
of its total assets in foreign securities.
Among factors which the portfolio managers may consider when purchasing
securities are (1) the growth prospects for a company's products; (2) the
economic outlook for its industry; (3) a company's new product development; (4)
its operating management capabilities; (5) the relationship between the price of
the security and its estimated fundamental value; (6) relevant market, economic
and political environments; and (7) financial characteristics, such as balance
sheet analysis and return on assets. The portfolio managers consider whether to
sell a particular security when any one of these factors materially changes or
when the securities are no longer considered small-cap company securities. For
cash management purposes, the fund may also hold a portion of its assets in cash
or cash equivalents, including shares of affiliated money market funds. Any
percentage limitations with respect to assets of the fund are applied at the
time of purchase.
In 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.
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. This is
especially true with respect to equity securities of small-cap companies, whose
prices may go up and down more than equity securities of larger, more-
established companies. Also, since equity securities of small-cap companies may
not be traded as often as equity securities of larger, more-established
companies, it may be difficult or impossible for the fund to sell securities at
a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The values of convertible securities in which the fund invests may also be
affected by market interest rates, the risk that the issuer may default on
interest or principal payments and the value of the underlying stock into which
these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest or dividends, their values may fall if
interest rates rise and rise if market interest rates fall. Additionally, an
issuer may have the right to buy back certain of the convertible securities at a
time and at a price that is unfavorable to the fund.
Because a large percentage of the fund's assets may be invested in a limited
number of securities, a change in the value of these securities could
significantly affect the value of your investment in the fund.
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.
1
-------------------------
AIM SMALL CAP EQUITY 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(1)
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
<Table>
<Caption>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
2001................................................................... 8.92%
2002................................................................... -19.23%
2003................................................................... 46.17%
2004................................................................... 9.45%
2005................................................................... 6.58%
</Table>
(1) The fund's return during certain periods was positively impacted by its
investments in initial public offerings (IPOs). There can be no assurance
that the fund will have favorable IPO investment opportunities in the
future. For additional information regarding the fund's performance, please
see the "Financial Highlights" section of this prospectus.
The Class A shares' year-to-date total return as of March 31, 2006 was
10.93%.
During the periods shown in the bar chart, the highest quarterly return was
20.83% (quarter ended June 30, 2001) and the lowest quarterly return was -23.45%
(quarter ended September 30, 2002).
2
-------------------------
AIM SMALL CAP EQUITY FUND
-------------------------
PERFORMANCE INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
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(1)
- ------------------------------------------------------------------------------------------------
(for the periods ended December 31, SINCE INCEPTION
2005) 1 YEAR 5 YEARS INCEPTION DATE
- ------------------------------------------------------------------------------------------------
Class A 08/31/00
Return Before Taxes 0.76% 7.24% 5.45%
Return After Taxes on Distributions (0.88) 6.79 5.04
Return After Taxes on Distributions
and Sale of Fund Shares 2.45 6.24 4.68
Class B 08/31/00
Return Before Taxes 1.15 7.41 5.70
Class C 08/31/00
Return Before Taxes 4.86 7.69 5.83
Class R(2) 08/31/00(2)
Return Before Taxes 6.48 8.23 6.36
- ------------------------------------------------------------------------------------------------
S&P 500 Index(3) 4.91 0.54 (2.01)(6) 08/31/00(6)
Russell 2000--Registered Trademark--
Index(3,4) 4.55 8.22 5.66(6) 08/31/00(6)
Lipper Small-Cap Core Fund Index(3,5) 7.56 9.19 7.20(6) 08/31/00(6)
- ------------------------------------------------------------------------------------------------
</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 R will vary.
(1) The fund's return during certain periods was positively impacted by its
investments in IPOs. There can be no assurance that the fund will have
favorable IPO investment opportunities in the future. For additional
information regarding the fund's performance, please see the "Financial
Highlights" section of this prospectus.
(2) The return shown for the one year period is the historical performance of
the fund's Class R shares. The returns shown other periods are the blended
returns of the historical performance of the fund's Class R shares since
their inception and the restated historical performance of the fund's Class
A shares (for the periods prior to inception of the Class R shares) at net
asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to
Class R shares. The inception date shown in the table is that of the fund's
Class A shares. The inception date of the fund's Class R shares is June 3,
2002.
(3) The Standard & Poor's 500 Index 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. The fund has also included the Russell
2000--Registered Trademark-- Index, which the fund believes more closely
reflects the performance of the types of securities in which the fund
invests. In addition, the Lipper Small-Cap Core Fund Index (which may or may
not include the fund) is included for comparison to a peer group.
(4) The Russell 2000--Registered Trademark-- Index measures the performance of
the 2,000 smallest companies in the Russell 3000--Registered Trademark--
Index. This index is widely recognized as representative of small-cap
stocks.
(5) The Lipper Small-Cap Core Fund Index is an equally weighted representation
of the 30 largest funds in the Lipper Small Cap Core classification. These
funds, by portfolio practice, invest at least 75% of their equity assets in
companies with market capitalizations (on a three-year weighted basis) less
than 250% of the dollar-weighted median market capitalization of the
smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500
Index. Small-Cap Core funds have more latitude in the companies in which
they invest. These funds typically have an average price-to-earnings ratio,
price-to-book ratio, and three-year sales-per-share growth value, compared
to the S&P SmallCap 600 Index, which was incepted in 1994, consists of 600
small cap domestic stocks chosen for market size, liquidity, (bid-asked
spread, ownership, share turnover and number of no trade days) and industry
group representation. It is a market-value weighted index, with each stock's
weight in the Index proportionate to its market value.
(6) The average annual total return given is since the month-end closest to the
inception date of the class with the longest performance history.
3
-------------------------
AIM SMALL CAP EQUITY 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
your investment) CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase price
or redemption proceeds,
whichever is less) None(1) 5.00% 1.00% None(1)
- --------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
ANNUAL FUND OPERATING EXPENSES(2)
- --------------------------------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------
Management Fees 0.85% 0.85% 0.85% 0.85%
Distribution and/or
Service (12b-1) Fees(3) 0.25 1.00 1.00 0.50
Other Expenses 0.47 0.47 0.47 0.47
Total Annual Fund
Operating Expenses 1.57 2.32 2.32 1.82
Fee Waiver(4) 0.11 0.11 0.11 0.11
Net Annual Fund Operating Expenses 1.46 2.21 2.21 1.71
- --------------------------------------------------------------------------------
</Table>
(1) A contingent deferred sales charge may apply in some cases. See "Shareholder
Information--Choosing a Share Class--Sales Charges."
(2) There is no guarantee that actual expenses will be the same as those shown
in the table.
(3) The Board of Trustees has approved a permanent reduction of the Rule 12b-1
fees applicable to Class A shares to 0.25% effective July 1, 2005.
Distribution and/or Service (12b-1) Fees reflect this agreement.
(4) Effective January 1, 2005 through December 31, 2009, the advisor has
contractually agreed to waive advisory fees to the extent necessary so that
the advisory fees payable by the fund do not exceed a specified maximum
annual advisory fee rate, which fee rate includes breakpoints and is based
upon net asset levels. The fund's maximum annual advisory fee rate ranges
from 0.745% (for average net assets up to $250 million) to 0.64% (for
average net assets over $10 billion.)
If a financial institution is managing your account you may also be charged a
transaction or other fee by such financial institution.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, that the
fund's operating expenses remain the same and includes the effect of contractual
fee waivers and/or expense reimbursements, if any. To the extent fees are waived
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 $690 $986 $1,316 $2,276
Class B 724 991 1,397 2,431
Class C 324 691 1,197 2,619
Class R 174 539 941 2,098
- --------------------------------------------------------------------------------
</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 $690 $986 $1,316 $2,276
Class B 224 691 1,197 2,431
Class C 224 691 1,197 2,619
Class R 174 539 941 2,098
- --------------------------------------------------------------------------------
</Table>
4
-------------------------
AIM SMALL CAP EQUITY 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;
- - The fund's current annual expense ratio includes any applicable contractual
fee waiver or expense reimbursement for the period committed;
- - 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 a 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 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) 1.46% 1.46% 1.46% 1.46% 1.57%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses (1.96)% 1.51% 5.10% 8.82% 12.56%
End of Year Balance $ 9,784.53 $10,130.90 $10,489.54 $10,860.87 $11,233.39
Estimated Annual Expenses $ 690.41 $ 145.38 $ 150.53 $ 155.86 $ 173.44
- -----------------------------------------------------------------------------------------------
<Caption>
CLASS A (INCLUDES MAXIMUM
SALES CHARGE) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.57% 1.57% 1.57% 1.57% 1.57%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 16.42% 20.41% 24.54% 28.81% 33.23%
End of Year Balance $11,618.70 $12,017.22 $12,429.41 $12,855.74 $13,296.69
Estimated Annual Expenses $ 179.39 $ 185.54 $ 191.91 $ 198.49 $ 205.30
- -----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS A (WITHOUT MAXIMUM SALES
CHARGE) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.46% 1.46% 1.46% 1.46% 1.57%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.54% 7.21% 11.00% 14.93% 18.87%
End of Year Balance $10,354.00 $10,720.53 $11,100.04 $11,492.98 $11,887.19
Estimated Annual Expenses $ 148.58 $ 153.84 $ 159.29 $ 164.93 $ 183.53
- -----------------------------------------------------------------------------------------------
<Caption>
CLASS A (WITHOUT MAXIMUM SALES
CHARGE) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.57% 1.57% 1.57% 1.57% 1.57%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 22.95% 27.17% 31.53% 36.04% 40.71%
End of Year Balance $12,294.92 $12,716.64 $13,152.82 $13,603.96 $14,070.57
Estimated Annual Expenses $ 189.83 $ 196.34 $ 203.08 $ 210.04 $ 217.25
- -----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS B(2) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.21% 2.21% 2.21% 2.21% 2.32%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 2.79% 5.66% 8.61% 11.64% 14.63%
End of Year Balance $10,279.00 $10,565.78 $10,860.57 $11,163.58 $11,462.76
Estimated Annual Expenses $ 224.08 $ 230.33 $ 236.76 $ 243.37 $ 262.47
- -----------------------------------------------------------------------------------------------
<Caption>
CLASS B(2) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.32% 2.32% 2.32% 1.57% 1.57%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 17.70% 20.85% 24.09% 28.35% 32.75%
End of Year Balance $11,769.97 $12,085.40 $12,409.29 $12,834.93 $13,275.17
Estimated Annual Expenses $ 269.50 $ 276.72 $ 284.14 $ 198.17 $ 204.96
- -----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS C(2) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.21% 2.21% 2.21% 2.21% 2.32%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 2.79% 5.66% 8.61% 11.64% 14.63%
End of Year Balance $10,279.00 $10,565.78 $10,860.57 $11,163.58 $11,462.76
Estimated Annual Expenses $ 224.08 $ 230.33 $ 236.76 $ 243.37 $ 262.47
- -----------------------------------------------------------------------------------------------
<Caption>
CLASS C(2) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.32% 2.32% 2.32% 2.32% 2.32%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 17.70% 20.85% 24.09% 27.42% 30.83%
End of Year Balance $11,769.97 $12,085.40 $12,409.29 $12,741.86 $13,083.34
Estimated Annual Expenses $ 269.50 $ 276.72 $ 284.14 $ 291.75 $ 299.57
- -----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS R YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.71% 1.71% 1.71% 1.71% 1.82%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.29% 6.69% 10.20% 13.82% 17.44%
End of Year Balance $10,329.00 $10,668.82 $11,019.83 $11,382.38 $11,744.34
Estimated Annual Expenses $ 173.81 $ 179.53 $ 185.44 $ 191.54 $ 210.45
- -----------------------------------------------------------------------------------------------
<Caption>
CLASS R YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.82% 1.82% 1.82% 1.82% 1.82%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 21.18% 25.03% 29.01% 33.11% 37.34%
End of Year Balance $12,117.81 $12,503.16 $12,900.76 $13,311.00 $13,734.29
Estimated Annual Expenses $ 217.15 $ 224.05 $ 231.18 $ 238.53 $ 246.11
- -----------------------------------------------------------------------------------------------
</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.
5
-------------------------
AIM SMALL CAP EQUITY FUND
-------------------------
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.
6
-------------------------
AIM SMALL CAP EQUITY 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 an investment advisor since its organization in
1976. Today, the advisor, together with its subsidiaries, advises or manages
over 200 investment portfolios, including the fund, encompassing a broad range
of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment
advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the
distributor of the retail AIM funds) reached final settlements with certain
regulators, including the SEC, the New York Attorney General and the Colorado
Attorney general, to resolve civil enforcement actions and/or investigations
related to market timing and related activity in the AIM funds, including those
formerly advised by IFG. As part of the settlements, a $325 million fair fund
($110 million of which is civil penalties) has been created to compensate
shareholders harmed by market timing and related activity in funds formerly
advised by IFG. 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 have harmed applicable AIM funds. These two fair funds will be
distributed in accordance with a methodology to be determined by AIM's
independent distribution consultant, in consultation with AIM and the
independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action
and shareholder derivative suits, have been filed against certain 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
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 December 31, 2005, the advisor received
compensation of 0.74% 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 the shareholders for the twelve-month period ended December 31, 2005.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the
day-to-day management of the fund's portfolio:
- - Juliet S. Ellis (lead manager), Senior Portfolio Manager, who has been
responsible for the fund since 2004 and has been associated with the advisor
and/or its affiliates since 2004. From 2000 to 2004, she was Managing Director
and from 1993 to 2004, she was a senior portfolio manager with JPMorgan
Fleming Asset Management. As the lead manager, Ms. Ellis generally has final
authority over all aspects of the fund's investment portfolio, including but
not limited to, purchases and sales of individual securities, portfolio
construction techniques, portfolio risk assessment, and the management of
daily cash flows in accordance with portfolio holdings. The degree to which
Ms. Ellis may perform these functions, and the nature of these functions, may
change from time to time.
- - Michael Chapman, Portfolio Manager, who has been responsible for the fund
since 2005 and has been associated with the advisor and/or its affiliates
since 2001. From 1999 to 2001, he was an equity analyst with Chase Manhattan
Bank.
Effective May 1, 2006, Michael Chapman will be removed and Juan R. Hartsfield
will be added as a portfolio manager of the fund. Mr. Hartsfield has been
responsible for the fund since 2006 and has been associated with the advisor
and/or its affiliates since 2004. From 2000 to 2004, he was a co-portfolio
manager with JPMorgan Fleming Asset Management.
They are assisted by the advisor's Small Cap Core/Growth 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.
7
-------------------------
AIM SMALL CAP EQUITY FUND
-------------------------
Members of the team may change from time to time. More information on the team,
including biographies of other members of the team, may be found on the
advisor's website (http//www.aiminvestments.com). The website is not part of
this prospectus.
The fund's Statement of Additional Information provides additional
information about the portfolio managers' investments in the fund, a description
of their compensation structure, and information regarding other accounts they
manage.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Small Cap Equity Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Certain purchases of Class A shares at net asset
value may be subject to the contingent deferred sales charge listed in that
section. Purchases of Class B and Class C shares are subject to the contingent
deferred sales charges listed in that section. Certain purchases of Class R
shares may be subject to the contingent deferred sales charge listed in that
section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
FUTURE LIMITED FUND OFFERING
Due to sometimes limited availability of common stocks of smaller companies that
meet the investment criteria for the fund, the fund may periodically suspend or
limit the offering of its shares. During closed periods, the fund may impose
different standards for additional investments.
8
-------------------------
AIM SMALL CAP EQUITY 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.
For a discussion of how investments in IPO's affected the funds performance,
see the "Performance Information" section of this prospectus.
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 12.80 $ 12.03 $ 8.23 $ 10.19 $ 9.36
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.09)(a) (0.09)(a) (0.05)(a) (0.05)(a)
- --------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.96 1.22 3.89 (1.91) 0.88
==============================================================================================================
Total from investment operations 0.86 1.13 3.80 (1.96) 0.83
==============================================================================================================
Less distributions from net realized
gains (1.40) (0.36) -- -- (0.00)
==============================================================================================================
Net asset value, end of period $ 12.26 $ 12.80 $ 12.03 $ 8.23 $ 10.19
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 6.58% 9.45% 46.17% (19.23)% 8.92%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $218,915 $247,581 $266,284 $140,652 $105,146
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.51%(c) 1.53% 1.77% 1.67% 1.78%
- --------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.62%(c) 1.64% 1.77% 1.67% 1.78%
==============================================================================================================
Ratio of net investment income (loss) to
average net assets (0.84)%(c) (0.77)% (0.89)% (0.54)% (0.57)%
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate 52% 124% 112% 117% 123%
______________________________________________________________________________________________________________
==============================================================================================================
</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 $225,723,379.
9
-------------------------
AIM SMALL CAP EQUITY FUND
-------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
CLASS B
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- ------- -------
Net asset value, beginning of period $ 12.42 $ 11.77 $ 8.11 $ 10.11 $ 9.33
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19) (0.18)(a) (0.15)(a) (0.11)(a) (0.11)(a)
- ------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.94 1.19 3.81 (1.89) 0.89
============================================================================================================
Total from investment operations 0.75 1.01 3.66 (2.00) 0.78
============================================================================================================
Less distributions from net realized
gains (1.40) (0.36) -- -- --
============================================================================================================
Net asset value, end of period $ 11.77 $ 12.42 $ 11.77 $ 8.11 $ 10.11
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 5.89% 8.64% 45.13% (19.78)% 8.36%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $131,547 $156,450 $177,811 $99,551 $64,012
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.21%(c) 2.27% 2.42% 2.32% 2.44%
- ------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.32%(c) 2.29% 2.42% 2.32% 2.44%
============================================================================================================
Ratio of net investment income (loss) to
average net assets (1.54)%(c) (1.51)% (1.54)% (1.19)% (1.23)%
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate 52% 124% 112% 117% 123%
____________________________________________________________________________________________________________
============================================================================================================
</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 $138,354,957.
10
-------------------------
AIM SMALL CAP EQUITY FUND
-------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
CLASS C
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
Net asset value, beginning of period $ 12.42 $ 11.77 $ 8.11 $ 10.10 $ 9.34
- ---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19) (0.18)(a) (0.15)(a) (0.11)(a) (0.11)(a)
- ---------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.93 1.19 3.81 (1.88) 0.87
=========================================================================================================
Total from investment operations 0.74 1.01 3.66 (1.99) 0.76
=========================================================================================================
Less distributions from net realized
gains (1.40) (0.36) -- -- --
=========================================================================================================
Net asset value, end of period $ 11.76 $ 12.42 $ 11.77 $ 8.11 $ 10.10
_________________________________________________________________________________________________________
=========================================================================================================
Total return(b) 5.81% 8.64% 45.13% (19.70)% 8.14%
_________________________________________________________________________________________________________
=========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $55,009 $65,792 $75,763 $41,132 $29,548
_________________________________________________________________________________________________________
=========================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.21%(c) 2.27% 2.42% 2.32% 2.44%
- ---------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.32%(c) 2.29% 2.42% 2.32% 2.44%
=========================================================================================================
Ratio of net investment income (loss) to
average net assets (1.54)%(c) (1.51)% (1.54)% (1.19)% (1.23)%
_________________________________________________________________________________________________________
=========================================================================================================
Portfolio turnover rate 52% 124% 112% 117% 123%
_________________________________________________________________________________________________________
=========================================================================================================
</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 $58,998,908.
11
-------------------------
AIM SMALL CAP EQUITY FUND
-------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
CLASS R
------------------------------------------------------
JUNE 3, 2002
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
---------------------------------- DECEMBER 31,
2005 2004 2003 2002
------- ------- ------ -------------
Net asset value, beginning of period $ 12.71 $ 11.99 $ 8.22 $ 10.58
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.12)(a) (0.11)(a) (0.04)(a)
- ------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.94 1.20 3.88 (2.32)
================================================================================================
Total from investment operations 0.84 1.08 3.77 (2.36)
================================================================================================
Less distributions from net realized
gains (1.40) (0.36) -- --
================================================================================================
Net asset value, end of period $ 12.15 $ 12.71 $11.99 $ 8.22
________________________________________________________________________________________________
================================================================================================
Total return(b) 6.48% 9.06% 45.86% (22.31)%
________________________________________________________________________________________________
================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $17,862 $11,817 $2,502 $ 55
________________________________________________________________________________________________
================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.71%(c) 1.77% 1.92% 1.92%(d)
- ------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.82%(c) 1.79% 1.92% 1.92%(d)
================================================================================================
Ratio of net investment income (loss) to
average net assets (1.04)%(c) (1.01)% (1.04)% (0.78)%(d)
________________________________________________________________________________________________
================================================================================================
Portfolio turnover rate 52% 124% 112% 117%
________________________________________________________________________________________________
================================================================================================
</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 $15,105,357.
(d) Annualized.
12
-------------
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
All 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%(8) 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(10) the
orders limited "Purchasing
to amount less Shares -- Grandfathered
than Investors"
$1,000,000(9) 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. Class B1 shares of AIM Floating
Rate Fund are not available for purchase by either current Class B1 shareholders
or by new investors and are not discussed in the chart above. For information on
Class B1 shares, consult the fund's prospectus.
(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 Enhanced Short Bond Fund or AIM Short Term Bond Fund
unless you exchange Class C shares of another fund that are subject to a
CDSC into AIM Enhanced Short Bond Fund or AIM Short Term Bond Fund.
(8) Class C shares of AIM Floating Rate Fund have a Rule 12b-1 fee of 0.75%.
MCF--04/06
A-1
-------------
THE AIM FUNDS
-------------
(9) 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.
(10) 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.
- --------------------------------------------------------------------------------
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 Enhanced Short Bond Fund, AIM Floating Rate Fund and 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 ENHANCED SHORT BOND FUND, AIM FLOATING RATE FUND AND
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.
MCF--04/06
A-2
-------------
THE AIM FUNDS
-------------
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.
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, 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.
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 ENHANCED SHORT BOND FUND AND 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 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.
MCF--04/06
A-3
-------------
THE AIM FUNDS
-------------
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:
<Table>
<Caption>
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
- -------------------------------------------------------------------------
</Table>
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.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If ADI pays
a concession to the dealer of record, however, the Class R shares are subject to
a 0.75% CDSC at the time of redemption if all retirement plan assets are
redeemed within 12 months from the date of the retirement plan's initial
purchase.
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you are redeeming shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial advisor must notify
the transfer agent at the time of purchase that your purchase qualifies for such
treatment. Certain individuals and employer-sponsored retirement plans may link
accounts for the purpose of qualifying for lower initial sales charges. You or
your financial consultant must provide other account numbers to be considered
for Rights of Accumulation, or mark the Letter of Intent section on the account
application, or provide other relevant documentation, so that the transfer agent
can verify your eligibility for the reduction or exception. Consult the fund's
Statement of Additional Information for details.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash
Reserve Shares of AIM Money Market Fund and 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, 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.
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 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;
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- - if you are a participant in a retirement plan and your plan redeems, after
having held them for more than one year from the date of the plan's initial
purchase, all of the Class A, C or Class R shares held through such plan that
would otherwise be subject to a CDSC;
- - if you are a participant in a qualified retirement plan and redeem Class A,
Class C or Class R shares in order to fund a distribution;
- - if you participate in the Systematic Redemption Plan and withdraw up to 12% of
the value of your shares that are subject to a CDSC in any twelve-month
period;
- - if you redeem shares to pay account fees;
- - for redemptions following the death or post-purchase disability of a
shareholder or beneficial owner;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
ADDITIONAL PAYMENTS TO FINANCIAL ADVISORS
The financial advisor through which you purchase your shares may receive all or
a portion of the sales charges and Rule 12b-1 distribution fees discussed above.
In addition to those payments, ADI or one or more of its corporate affiliates
(collectively, ADI Affiliates) may make additional cash payments to financial
advisors in connection with the promotion and sale of shares of the funds. These
additional cash payments may include cash revenue sharing payments and other
payments for certain administrative services, transaction processing services
and certain other marketing support services. ADI Affiliates make these payments
from their own resources, from ADI's retention of underwriting concessions and
from payments to ADI under Rule 12b-1 plans. In this context, "financial
advisors" include any broker, dealer, bank (including bank trust departments),
registered investment advisor, financial planner, retirement plan administrator
and any other financial intermediary having a selling, administration or similar
agreement with ADI Affiliates.
ADI Affiliates make revenue sharing payments as incentives to certain
financial advisors to promote and sell shares of the funds. The benefits ADI
Affiliates receive when they make these payments include, among other things,
placing the funds on the financial advisor's funds sales system, placing the
funds on the financial advisor's preferred or recommended fund list, and access
(in some cases on a preferential basis over other competitors) to individual
members of the financial advisor's sales force or to the financial advisor's
management. Revenue sharing payments are sometimes referred to as "shelf space"
payments because the payments compensate the financial advisor for including the
funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate
financial advisors differently depending typically on the level and/or type of
considerations provided by the financial advisor. The revenue sharing payments
ADI Affiliates make may be calculated on sales of shares of the funds
(Sales-Based Payments), in which case the total amount of such payments shall
not exceed 0.25% of the public offering price of all shares sold by the
financial advisor during the particular period. Such payments also may be
calculated on the average daily net assets of the applicable AIM funds
attributable to that particular financial advisor (Asset-Based Payments), in
which case the total amount of such cash payments shall not exceed 0.25% per
annum of those assets during a defined period. Sales-Based Payments primarily
create incentives to make new sales of shares of the funds and Asset-Based
Payments primarily create incentives to retain previously sold shares of the
funds in investor accounts. ADI Affiliates may pay a financial advisor either or
both Sales-Based Payments and Asset-Based Payments.
ADI Affiliates also may make other payments to certain financial advisors
for processing certain transactions or account maintenance activities (such as
processing purchases, redemptions or exchanges or producing customer account
statements) or for providing certain other marketing support services (such as
financial assistance for conferences, seminars or sales or training programs at
which ADI Affiliates personnel may make presentations on the funds to the
financial advisor's sales force). Financial advisors may earn profits on these
payments for these services, since the amount of the payment may exceed the cost
of providing the service. Certain of these payments are subject to limitations
under applicable law.
ADI Affiliates are motivated to make the payments described above since they
promote the sale of fund shares and the retention of those investments by
clients of financial advisors. To the extent financial advisors sell more shares
of the funds or retain shares of the funds in their clients' accounts, ADI
Affiliates benefit from the incremental management and other fees paid to ADI
Affiliates by the funds with respect to those assets.
You can find further details in the fund's Statement of Additional
Information about these payments and the services provided by financial
advisors. In certain cases these payments could be significant to the financial
advisor. Your financial advisor may charge you 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
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short-term trading activity seeks to take advantage of arbitrage opportunities
from stale prices for portfolio securities, the value of fund shares held by
long-term investors may be diluted. The Boards of Trustees have adopted policies
and procedures designed to discourage excessive or short-term trading of fund
shares for all funds except the money market funds. However, there is the risk
that these funds' policies and procedures will prove ineffective in whole or in
part to detect or prevent excessive or short-term trading. These funds may alter
their policies at any time without prior notice to shareholders if the advisor
believes the change would be in the best interests of long-term shareholders.
AIM and its affiliates (collectively, AIM Affiliates) currently use the
following tools designed to discourage excessive short-term trading in the
retail funds:
(1) trade activity monitoring;
(2) trading guidelines;
(3) redemption fee on trades in certain funds; and
(4) use of fair value pricing consistent with procedures approved by the Boards
of Trustees of the funds.
Each of these tools is described in more detail below. Although these tools are
designed to discourage excessive short-term trading, you should understand that
none of these tools alone nor all of them taken together eliminate the
possibility that excessive short-term trading activity in the funds will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with long-term shareholder
interests.
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 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 below. 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.
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.
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 reserve the
discretion to accept exchanges in excess of these guidelines on a case-by-case
basis if they believe that granting such exceptions would be consistent with the
best interests of shareholders. An exchange is the purchase of shares in one
fund which is paid for with the proceeds from a redemption of shares of another
fund effectuated on the same day. The movement out of one fund (redemption) and
into one or more other funds (purchase) on the same day shall be counted as one
exchange. Exchanges effected as part of programs that have been determined by an
AIM Affiliate to be non-discretionary, such as dollar cost averaging, portfolio
rebalancing, or other automatic non-discretionary programs that involve
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exchanges, generally will not be counted toward the trading guidelines
limitation of four exchanges out of a fund per calendar year.
The ability of the AIM Affiliates to monitor exchanges made by the
underlying shareholders of omnibus accounts maintained by brokers, retirement
plan accounts and approved fee-based program accounts is severely limited or
non-existent in those instances in which the broker, retirement plan
administrator or fee-based program sponsor maintains the underlying shareholder
accounts and is unwilling or unable to implement these trading guidelines and
may be further limited by systems limitations applicable to those types of
accounts.
Some investments in the funds are made indirectly through vehicles such as
qualified tuition plans, variable annuity and insurance contracts, and funds of
funds which use the funds as underlying investments (each a conduit investment
vehicle). If shares of the funds are held in the name of a conduit investment
vehicle and not in the names of the individual investors who have invested in
the funds through the conduit investment vehicle, the conduit investment vehicle
may be considered an individual shareholder of the funds. To the extent that a
conduit investment vehicle is considered an individual shareholder of the funds,
the funds are likely to be limited in their ability to impose exchange
limitations on individual transactions initiated by investors who have invested
in the funds through the conduit investment vehicle.
REDEMPTION FEE
You may be charged a 2% redemption fee if you redeem, including redeeming by
exchange, shares of certain funds within 30 days of purchase. See "Redeeming
Shares -- Redemption Fee" for more information.
The ability of a fund to assess a redemption fee on the underlying
shareholders of omnibus accounts maintained by brokers, retirement plan accounts
and approved fee-based program accounts is severely limited or non-existent in
those instances in which the broker, retirement plan administrator or fee-based
program sponsor maintains the underlying shareholder accounts and is unwilling
or unable to assess such fees and may be further limited by systems limitations
applicable to these types of accounts.
For additional discussion of the applicability of redemption fees on shares
of the fund held through omnibus accounts, retirement plan accounts, approved
fee-based program accounts and conduit investment vehicles, see "Redeeming
Shares -- Redemption Fee".
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of Trustees of
the fund. Fair value pricing may reduce the ability of frequent traders to take
advantage of arbitrage opportunities resulting from potentially "stale" prices
of portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares -- Determination of Net Asset Value" for more
information.
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PURCHASING SHARES
If you hold your shares through a broker/dealer or other financial institution,
your eligibility to purchase those shares, the conditions for purchase and sale,
and the minimum and maximum amounts allowed may differ depending on that
institution's policies.
MINIMUM INVESTMENTS PER FUND ACCOUNT
There are no minimum investments with respect to Class R shares for fund
accounts. The minimum investments with respect to Class A, A3, B and C shares
and Investor Class shares for fund accounts are as follows:
<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 check Mail your check and the remittance slip
to the transfer agent, AIM Investment from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, TX transfer agent.
77210-4739.
By Wire Mail completed account application to the Call the transfer agent to receive a
transfer agent. Call the transfer agent at reference number. Then, use the wire
(800) 959-4246 to receive a reference number. instructions at left.
Then, use the following wire instructions:
Beneficiary Bank ABA/Routing #: 021000021
Beneficiary Account Number: 00100366807
Beneficiary Account Name: AIM Investment
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account using one of the methods Select the AIM Bank
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 methods Access your account at
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>
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GRANDFATHERED INVESTORS
Investor Class shares of a fund may be purchased only by: (1) persons or
entities who had established an account, prior to April 1, 2002, in Investor
Class shares of any of the funds currently distributed by ADI (the Grandfathered
Funds) and have continuously maintained such account in Investor Class shares
since April 1, 2002; (2) any person or entity listed in the account registration
for any Grandfathered Funds, which account was established prior to April 1,
2002 and continuously maintained since April 1, 2002, such as joint owners,
trustees, custodians and designated beneficiaries; (3) customers of certain
financial institutions, wrap accounts or other fee-based advisory programs, or
insurance company separate accounts, which have had relationships with ADI
and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously
maintained such relationships since April 1, 2002; (4) defined benefit, defined
contribution and deferred compensation plans; and (5) fund trustees, employees
of AMVESCAP PLC and its subsidiaries, AMVESCAP directors, and their immediate
families.
SPECIAL PLANS
SYSTEMATIC PURCHASE PLAN
You can arrange for periodic investments in any of the funds by authorizing the
transfer agent to withdraw the amount of your investment from your bank account
on a day or dates you specify and in an amount of at least $50. You may stop the
Systematic Purchase Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one fund account to one or more other fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the day of the month you specify, in the
amount you specify. Dollar Cost Averaging cannot be set up for the 29th through
the 31st of the month. The minimum amount you can exchange to another fund is
$50. You may participate in a dollar cost averaging program hosted by your
dealer of record, your financial advisor or another financial intermediary. If
such program is the same or similar to AIM's Dollar Cost Averaging program and
is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same fund. You may invest
your dividends and distributions per the rules listed in the "Permitted
Exchanges" section.
You must comply with the following requirements to be eligible to invest
your dividends and distributions in shares of another fund:
(1) Your account balance (a) in the fund paying the dividend must be at least
$5,000; and (b) in the fund receiving the dividend must be at least $500;
and
(2) Both accounts must have identical registration information.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your fund holdings should be rebalanced, on a percentage basis,
between two and ten of your funds on a quarterly, semiannual or annual basis.
Your portfolio will be rebalanced through the exchange of shares in one or more
of your funds for shares of the same class of one or more other funds in your
portfolio. Rebalancing will NOT occur if your portfolio is within 2% of your
stated allocation. If you wish to participate in the Program, make changes or
cancel the Program, the transfer agent must receive your request to participate,
changes, or cancellation in good order at least five business days prior to the
next rebalancing date, which is normally the 28th day of the last month of the
period you choose. You may realize taxable gains from these exchanges. We may
modify, suspend or terminate the Program at any time on 60 days prior written
notice. You may participate in a portfolio rebalancing program hosted by your
dealer of record, your financial advisor or another financial intermediary. If
such program is the same or similar to AIM's Portfolio Rebalancing Program and
is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
RETIREMENT PLANS
Shares of most of the funds can be purchased through tax-sheltered retirement
plans made available to corporations, individuals and employees of non-profit
organizations and public schools. A plan document must be adopted to establish a
retirement plan. You may use ADI sponsored retirement plans, which include IRAs,
Roth IRAs, SIMPLE IRA plans, SEP/SARSEP plans, 403(b) plans, Solo 401(k) plans
and Money Purchase/Profit Sharing plans, or another sponsor's retirement plan.
AIM Investment Services, Inc. assesses certain fees associated with the
maintenance of certain types of retirement plan accounts and the provision of
specialized recordkeeping services for those plan accounts. ADI 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.
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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 China Fund AIM High Yield Fund
AIM Developing Markets Fund AIM International Allocation Fund
AIM European Growth Fund AIM International Bond Fund
AIM European Small Company AIM International Core Equity Fund
Fund AIM International Growth Fund
AIM Floating Rate Fund AIM International Small Company Fund
AIM Global Aggressive Growth AIM Japan Fund
Fund AIM S&P 500 Index Fund
AIM Global Equity Fund AIM Trimark Fund
AIM Global Growth Fund
AIM Global Real Estate 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 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,
MCF--04/06
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THE AIM FUNDS
-------------
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, AIM Enhanced or II Fund, AIM Enhanced Short within 18 months of initial
Short Bond Fund, AIM Bond Fund, AIM Floating Rate purchase of Category I or II
Floating Rate Fund or AIM Fund or AIM Short Term Bond Fund, AIM Enhanced Short Bond
Short Term Bond Fund Fund Fund, AIM Floating Rate Fund
- Class A shares of Category III or AIM Short Term Bond Fund
Fund(2) 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, AIM Enhanced Short within 18 months of initial
Bond Fund, AIM Floating Rate purchase of Category III Fund
Fund or AIM Short Term Bond shares
Fund
- - 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) 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.
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 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.
MCF--04/06
A-11
-------------
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 day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
MCF--04/06
A-12
-------------
THE AIM FUNDS
-------------
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 B1, 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, 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 Fund
and AIM Tax-Free Intermediate Fund cannot be X
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,
Institutional or Investor Class Shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class B1 Class A. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class B1 Class B, A3, C, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class Shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class C Class C. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class C Class A, A3, B, B1, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
MCF--04/06
A-13
-------------
THE AIM FUNDS
-------------
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED
- ------------------------------------------------------------------------------------------------------------------------------------
Class R Class R X
- ------------------------------------------------------------------------------------------------------------------------------------
Class R Class A, A3, B, B1, 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 B1, P or Institutional Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Class Institutional Class X
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Class Class A, A3, B, B1, 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. X
- 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
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, B1, 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 B1 shares for Class A shares;
(4) Class C shares for other Class C shares;
(5) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II funds (i) subject to an initial sales
charge or (ii) purchased at net asset value and subject to a contingent
deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III funds purchased at net asset value for Class
A shares of a Category I or II fund, Class A shares of AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund or Class A shares of AIM Short Term Bond
Fund;
MCF--04/06
A-14
-------------
THE AIM FUNDS
-------------
(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 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.
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 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.
- --------------------------------------------------------------------------------
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.
MCF--04/06
A-15
-------------
THE AIM FUNDS
-------------
- --------------------------------------------------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each fund's shares is the fund's net asset value per share. The
funds value portfolio securities for which market quotations are readily
available at market value. The funds value all other securities and assets for
which market quotations are unavailable or unreliable at their fair value in
good faith using procedures approved by the Boards of Trustees of the funds.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or 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:
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, tranche type, industry, company
performance, spread, individual trading characteristics, institution-size
trading in similar groups of securities and other market data.
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.
MCF--04/06
A-16
-------------
THE AIM FUNDS
-------------
Futures and Options: Futures and options are valued on the basis of market
quotations, if available.
Open-end Funds: To the extent a fund invests in other open-end funds, the
investing fund will calculate its net asset value using the net asset value of
the underlying fund in which it invests.
Each fund determines the net asset value of its shares on each day the NYSE
is open for business (a business day), as of the close of the customary trading
session, or earlier NYSE closing time that day. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each business
day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government
Money Portfolio determine the net asset value of their shares every fifteen
minutes on each business day, beginning at 8:00 a.m. Eastern Time. The last net
asset value determination on any business day for Premier Portfolio and Premier
U.S. Government Money Portfolio will generally occur at 5:30 p.m. Eastern Time,
and the last net asset value determination on any business day for Premier
Tax-Exempt Portfolio will generally occur at 4:30 p.m. Eastern Time. Premier
Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money
Portfolio are authorized not to open for trading on a day that is otherwise a
business day if the Bond Market Association recommends that government
securities dealers not open for trading and any such day will not be considered
a business day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S.
Government Money Portfolio also may close early on a business day if the Bond
Market Association recommends that government securities dealers close early. If
Premier Portfolio, Premier Tax-Exempt Portfolio or Premier U.S. Government Money
Portfolio uses its discretion to close early on a business day, the last net
asset value calculation will occur as of the time of such closing.
TIMING OF ORDERS
For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio, you can purchase or redeem shares on each
business day prior to the close of the customary trading session or any earlier
NYSE closing time that day. For funds other than Premier Portfolio, Premier
Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, purchase
orders that are received and accepted before the close of the customary trading
session or any earlier NYSE closing time on a business day generally are
processed that day and settled on the next business day.
For Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S.
Government Money Portfolio, you can purchase or redeem shares on each business
day, prior to the last net asset value determination on such business day;
however, if your order is received and accepted after the close of the customary
trading session or any earlier NYSE closing time that day, your order generally
will be processed on the next business day and settled on the second business
day following the receipt and acceptance of your order.
For all funds, you can exchange shares on each business day, prior to the
close of the customary trading session or any earlier NYSE closing time that
day. Shareholders of Premier Portfolio, Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio therefore cannot exchange their shares after the
close of the customary trading session or any earlier NYSE closing time on a
particular day, even though these funds remain open after such closing time.
The funds price purchase, exchange and redemption orders at the net asset
value calculated after the transfer agent receives an order in good order. Any
applicable sales charges are applied at the time an order is processed. A fund
may postpone the right of redemption only under unusual circumstances, as
allowed by the Securities and Exchange Commission, such as when the NYSE
restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
generally taxable to you at different rates depending on the length of time the
fund holds its assets and the 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--04/06
A-17
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 this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year. 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>
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, ARE ALSO
AVAILABLE AT http://www.aiminvestments.com.
You also can 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 Small Cap Equity Fund
SEC 1940 Act file number: 811-01540
AIMinvestments.com SCE-PRO-1
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
Appendix III
AIM SMALL CAP EQUITY FUND
MANAGEMENT'S DISCUSSION 3. Technical analysis. Identifying
OF FUND PERFORMANCE the "timeliness" of a stock purchase. We
===================================================================================== review trading volume characteristics
PERFORMANCE SUMMARY and trend analysis to make sure there
======================================== are no signs of the stock deteriorating.
For the six months ended June 30,2006, FUND VS. INDEXES This also serves as a risk management
Class A Shares of AIM Small Cap Equity measure that helps us confirm our high
Fund had positive returns and, excluding CUMULATIVE TOTAL RETURNS, conviction candidates.
sales charges, outperformed the broad 12/31/05--6/30/06, EXCLUDING APPLICABLE
market, as measured by the S&P 500 SALES CHARGES. IF SALES CHARGES WERE We consider selling or trimming a
Index, and the Fund's style-specific INCLUDED, RETURNS WOULD BE LOWER. stock when:
index, the Russell 2000 Index.
o The company's fundamental business
Solid stock selection and generally Class A Shares 9.30% prospects deteriorate.
stronger performance by small-cap stocks
enabled the Fund to outperform the Class B Shares 8.84 o A stock reaches its target price.
large-cap-oriented S&P 500 Index. Solid
stock selection across sectors also Class C Shares 8.93 o The company's technical profile
enabled the Fund to outperform the deteriorates.
Russell 2000 Index. Class R Shares 9.14
MARKET CONDITIONS AND YOUR FUND
Your Fund's long-term performance S&P 500 Index (Broad Market
appears on page 5. Index) 2.71 After posting strong performance during
the first four months of 2006, domestic
Russell 2000 Index equities retreated over the last two
(Style-Specific Index) 8.21 months of the reporting period largely
due to concerns about the sustainability
Lipper Small-Cap Core Fund Index of corporate profits and fears that
(Peer Group Index) 6.30 inflation might lead the U.S. Federal
Reserve Board to continue raising
SOURCE: LIPPER INC. interest rates. While small-cap stocks
======================================== were the hardest hit in May and June,
they outperformed large- and mid-cap
===================================================================================== stocks during the reporting period.
Positive performance was broad among the
HOW WE INVEST benchmark by staying fully diversified Russell 2000 Index's economic sectors,
in all those sectors. with the best returns found in the
We focus on small-cap companies with materials, telecommunication services
visible and long-term growth o STOCK SELECTION: We select stocks and energy sectors.
opportunities, as demonstrated by based on an analysis of individual
consistent and accelerating earnings companies. Our three-step selection The Fund benefited from positive
growth. Our investment philosophy process includes: absolute performance in all 10 economic
involves: sectors, with the highest positive
1. Fundamental analysis. Building impact on performance coming from
o PORTFOLIO CONSTRUCTION: We align the financial models and conducting in-depth holdings in the financials, industrials
Fund with the S&P 600 Index, the interviews with company management. and energy sectors. On a relative basis,
benchmark we believe represents the the
small-cap-core asset class. We seek to 2. Valuation analysis. Identifying
control risk by keeping the Fund's attractively valued stocks given their
sector weightings in line with the growth potential over a one- to two-year
horizon.
(continued)
======================================= ======================================== ==========================================
PORTFOLIO COMPOSITION TOP 5 INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector 1. Regional Banks 6.1% 1. Oceaneering International, Inc. 1.6%
Industrials 22.5% 2. Property & Casualty Insurance 4.2 2. Wright Express Corp. 1.5
Financials 18.1 3. Oil & Gas Exploration & 3. Genlyte Group Inc. (The) 1.3
Production 3.9
Information Technology 16.1 4. Transaction Systems
4. Industrial Machinery 3.8 Architects, Inc. 1.3
Health Care 13.4
5. Application Software 3.5 5. Warren Resources Inc. 1.3
Consumer Discretionary 10.4
TOTAL NET ASSETS $448.0 MILLION 6. Philadelphia Consolidated
Energy 7.7 Holding Corp. 1.2
TOTAL NUMBER OF HOLDINGS* 114
Materials 4.0 7. NTELOS Holdings Corp. 1.2
Consumer Staples 3.8 8. CyberSource Corp. 1.2
Utilities 1.7 9. Penn Virginia Corp. 1.2
Telecommunication Services 1.2 10. Jones Lang LaSalle Inc. 1.1
Money Market Funds Plus
Other Assets Less Liabilities 1.1
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.
======================================= ======================================== ==========================================
3
AIM SMALL CAP EQUITY FUND
Fund outperformed the Russell 2000 Index technology and materials sectors. In the JULIET S. ELLIS,
in six of 10 sectors, with the widest information technology (IT) sector, Fund Chartered Financial
margin of outperformance in the performance was hindered by several [ELLIS Analyst, senior portfolio
consumer discretionary, financials and software holdings, including INTERGRAPH, PHOTO] manager, is lead manager
energy sectors. EPICOR SOFTWARE and HYPERION SOLUTIONS. of AIM Small Cap Equity
After beginning to recover in early 2006 Fund. Ms. Ellis joined
The Fund outperformed the Russell following disappointing fourth quarter AIM in 2004. She previously
2000 Index in the consumer discretionary 2005 results, the stock price of each of served as senior portfolio manager of two
sector primarily due to solid stock these companies began to fall when the small-cap funds for another company and
selection in retailing stocks. Fund small-cap market started to decline in was responsible for the management of
holding GYMBOREE, a children's apparel early May. Despite the pullback, we more than $2 billion in assets. Ms. Ellis
retailer, was up more than 50% during continued to own these three stocks at began her investment career in 1981 as a
the reporting period as the company's the close of the reporting period due to financial consultant. She is a Cum Laude
strategy to broaden its assortment of attractive fundamentals. and Phi Beta Kappa graduate of Indiana
merchandise led to strong sales growth. University with a B.A. in economics and
Another retailing holding that made key In the materials sector, political science.
contributions was CHRISTOPHER & BANKS. underperformance versus the Russell 2000
An underweight position in media stocks Index was largely due to an underweight JUAN R. HARTSFIELD,
also drove outperformance, as many position in metals and mining stocks. Chartered Financial
broadcast and publishing stocks had Many of these stocks had strong [HARTSFIELD Analyst, portfolio
declined during the period. performance during the reporting period. PHOTO] manager, is manager of
AIM Small Cap Equity
Solid stock selection in the Overall positioning of the Fund was Fund. Prior to joining
financials sector also contributed to little changed during the period. AIM in 2004, he began
outperformance relative to the Russell Exposure was added to the industrials his investment career in 2000 as
2000 Index. We had particular success and health care sectors and reduced in an equity analyst and most recently
with a number of bank stocks, including the IT and financials sectors. All served as a portfolio manager. Mr.
HANCOCK HOLDING, a leading provider of changes to the Fund were based on our Hartsfield earned a B.S. in petroleum
commercial and consumer banking services bottom-up stock selection process of engineering from The University of Texas
along the Gulf Coasts of Mississippi and identifying what we consider high and an M.B.A. from the University of
Louisiana. This bank has benefited from quality growth companies trading at what Michigan.
strong earnings growth as a result of we believe are attractive valuations.
increased deposits associated with the Assisted by the Small Cap Growth/Core Team
rebuilding efforts along the Gulf Coast. IN CLOSING
Commercial real estate services provider
JONES LANG LASALLE also made a Although we are pleased to have provided
significant contribution to Fund positive returns for our investors for
performance. This company delivered the reporting period, we are always
strong results in all business segments, striving to improve performance and help
exceeding sales and earnings you meet your financial goals. We remain
expectations in the fourth quarter of committed to our investment process of
2005 and the first quarter of 2006. focusing on the attractively priced
stocks of small-cap companies with
Oil prices reached new highs during growing cash flow and earnings.
the first six months of 2006, driving
the performance of many holdings in the We thank you for your commitment to
energy sector. Within this sector, AIM Small Cap Equity Fund.
several of the Fund's oil service
holdings performed well. The top THE VIEWS AND OPINIONS EXPRESSED IN
contributor to Fund performance during MANAGEMENT'S DISCUSSION OF FUND
the reporting period was OCEANEERING PERFORMANCE ARE THOSE OF A I M ADVISORS,
INTERNATIONAL, a company that provides INC. THESE VIEWS AND OPINIONS ARE
offshore oil companies with underwater SUBJECT TO CHANGE AT ANY TIME BASED ON
drilling support, construction, FACTORS SUCH AS MARKET AND ECONOMIC
inspection and repair services. The CONDITIONS. THESE VIEWS AND OPINIONS MAY
stock price appreciated significantly NOT BE RELIED UPON AS INVESTMENT ADVICE
during the period as unprecedented OR RECOMMENDATIONS, OR AS AN OFFER FOR A
growth in the deepwater drilling markets PARTICULAR SECURITY. THE INFORMATION IS
led to strong revenue and earnings NOT A COMPLETE ANALYSIS OF EVERY ASPECT
growth. FMC TECHNOLOGIES, a company that OF ANY MARKET, COUNTRY, INDUSTRY,
also offers underwater drilling products SECURITY OR THE FUND. STATEMENTS OF FACT
and services, also performed well during ARE FROM SOURCES CONSIDERED RELIABLE,
the period. BUT A I M ADVISORS, INC. MAKES NO
REPRESENTATION OR WARRANTY AS TO THEIR
The Fund underperformed relative to COMPLETENESS OR ACCURACY. ALTHOUGH
the Russell 2000 Index in the HISTORICAL PERFORMANCE IS NO GUARANTEE
information OF FUTURE RESULTS, THESE INSIGHTS MAY
HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY. [RIGHT ARROW GRAPHIC]
See important Fund and index FOR A PRESENTATION OF YOUR FUND'S
disclosures on the inside front cover. LONG-TERM PERFORMANCE, PLEASE SEE PAGE 5.
4
Appendix IV
AIM SMALL CAP EQUITY FUND
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
2006 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.26 $ 12.80 $ 12.03 $ 8.23 $ 10.19 $ 9.36
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.10) (0.09)(a) (0.09)(a) (0.05)(a) (0.05)(a)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.19 0.96 1.22 3.89 (1.91) 0.88
==============================================================================================================================
Total from investment operations 1.14 0.86 1.13 3.80 (1.96) 0.83
==============================================================================================================================
Less distributions from net realized gains -- (1.40) (0.36) -- -- (0.00)
==============================================================================================================================
Net asset value, end of period $ 13.40 $ 12.26 $ 12.80 $ 12.03 $ 8.23 $ 10.19
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 9.30% 6.58% 9.45% 46.17% (19.23)% 8.92%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $231,043 $218,915 $247,581 $266,284 $140,652 $105,146
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.51%(c) 1.51% 1.53% 1.77% 1.67% 1.78%
- ------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.62%(c) 1.62% 1.64% 1.77% 1.67% 1.78%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.78)%(c) (0.84)% (0.77)% (0.89)% (0.54)% (0.57)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(d) 38% 52% 124% 112% 117% 123%
______________________________________________________________________________________________________________________________
==============================================================================================================================
</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 and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$234,988,490.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS B
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2006 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.77 $ 12.42 $ 11.77 $ 8.11 $ 10.11 $ 9.33
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.19) (0.18)(a) (0.15)(a) (0.11)(a) (0.11)(a)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.14 0.94 1.19 3.81 (1.89) 0.89
==============================================================================================================================
Total from investment operations 1.04 0.75 1.01 3.66 (2.00) 0.78
==============================================================================================================================
Less distributions from net realized gains -- (1.40) (0.36) -- -- --
==============================================================================================================================
Net asset value, end of period $ 12.81 $ 11.77 $ 12.42 $ 11.77 $ 8.11 $ 10.11
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 8.84% 5.89% 8.64% 45.13% (19.78)% 8.36%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $127,362 $131,547 $156,450 $177,811 $99,551 $64,012
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.26%(c) 2.21% 2.27% 2.42% 2.32% 2.44%
- ------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.37%(c) 2.32% 2.29% 2.42% 2.32% 2.44%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.53)%(c) (1.54)% (1.51)% (1.54)% (1.19)% (1.23)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(d) 38% 52% 124% 112% 117% 123%
______________________________________________________________________________________________________________________________
==============================================================================================================================
</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 and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$136,108,066.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM SMALL CAP EQUITY FUND
NOTE 13--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS C
-----------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------
2006 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.76 $ 12.42 $ 11.77 $ 8.11 $ 10.10 $ 9.34
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.19) (0.18)(a) (0.15)(a) (0.11)(a) (0.11)(a)
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.15 0.93 1.19 3.81 (1.88) 0.87
==============================================================================================================================
Total from investment operations 1.05 0.74 1.01 3.66 (1.99) 0.76
==============================================================================================================================
Less distributions from net realized gains -- (1.40) (0.36) -- -- --
==============================================================================================================================
Net asset value, end of period $ 12.81 $ 11.76 $ 12.42 $ 11.77 $ 8.11 $ 10.10
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 8.93% 5.81% 8.64% 45.13% (19.70)% 8.14%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $56,538 $55,009 $65,792 $75,763 $41,132 $29,548
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.26%(c) 2.21% 2.27% 2.42% 2.32% 2.44%
- ------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.37%(c) 2.32% 2.29% 2.42% 2.32% 2.44%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.53)%(c) (1.54)% (1.51)% (1.54)% (1.19)% (1.23)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(d) 38% 52% 124% 112% 117% 123%
______________________________________________________________________________________________________________________________
==============================================================================================================================
</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 and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$58,255,183.
(d) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM SMALL CAP EQUITY FUND
A PORTFOLIO OF AIM FUNDS GROUP
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 959-4246
AIM OPPORTUNITIES I FUND
A PORTFOLIO OF AIM SPECIAL OPPORTUNITIES FUNDS
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 Opportunities I 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 Opportunities I 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 1 800-959-4246. 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 April 24, 2006, as
supplemented May 1, 2006, June 30, 2006, August 1, 2006, September 20, 2006 and
December 13, 2006 (the "Statement of Additional Information") for AIM Funds
Group (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 - Unaudited semiannual financial statements of the Fund
Appendix III - Pro forma financial statements of the Fund
S-2
THE TRUST
This Statement of Additional Information relates to AIM Funds Group
(the "Trust") and its investment portfolio, AIM Small Cap Equity 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 audited financial statements of the Fund, and the report thereon by
PricewaterhouseCoopers LLP, are set forth under the heading "Financial
Statements" in the Trust's Statement of Additional Information attached hereto
as Appendix I.
The unaudited semiannual financial statements of the Fund are attached
hereto as Appendix II.
The pro forma financial statements of the Fund are attached hereto as
Appendix III.
S-4
APPENDIX I
RETAIL CLASSES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
Supplement dated December 13, 2006
to the Statement of Additional Information dated April 24, 2006,
as supplemented May 1, 2006, June 30, 2006, August 1, 2006,
September 20, 2006 and October 30, 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 pages 11 and 12
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 page 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
RETAIL CLASSES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
Supplement dated October 30, 2006 to
the Statement of Additional Information dated April 24, 2006
as supplemented May 1, 2006, June 30, 2006, August 1, 2006 and
September 20, 2006
Effective November 1, 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 MID CAP BASIC VALUE FUND" on page
H-2 of the Statement of Additional Information. The following table reflects
information as of December 31, 2005 (except as noted):
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS INVESTMENT VEHICLES OTHER ACCOUNTS
(ASSETS IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2)
DOLLAR RANGE OF -------------------- -------------------- -----------------------
INVESTMENTS IN EACH NUMBER OF NUMBER OF NUMBER OF
PORTFOLIO MANAGER FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ----------------- ------------------- --------- --------- --------- ------ --------- ------
AIM MID CAP BASIC VALUE FUND
R. Canon Coleman II* $10,001-$50,000 7 $ 9,746.7 1 $16.7 3137 $977.7
Michael Chapman(3) $100,001-$500,000 None None None None None None
Michael Simon** $100,001-$500,000 11 $11,030.4 1 $16.7 3137 $977.7
Bret Stanley** $500,001-$1,000,000 10 $18,831.0 1 $16.7 3137 $977.7
* As of October 20, 2006, the dollar range of investments for Mr. Coleman in
AIM Mid Cap Basic Value Fund is $500,001-$1,000,000.
** As of September 30, 2006, the dollar range of investments for Mr. Simon and
Mr. Stanley in AIM Mid Cap Basic Value Fund is $100,001-$500,000 and
$500,001-$1,000,000, respectively.
- ----------
(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) Mr. Chapman will begin serving as portfolio manager on AIM Mid Cap Basic
Value Fund on November 1, 2006. The information provided for Mr. Chapman is
as of September 30, 2006.
AIM FUNDS GROUP
RETAIL CLASSES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
Supplement dated September 20, 2006
to the Statement of Additional Information dated April 24, 2006,
as supplemented May 1, 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:
TRUSTEE
AND/OR
"NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- ------------------------------------------- --------------------
INTERESTED PERSONS
Philip A. Taylor* - 1954 2006 Director, Chief Executive Officer and President, None"
Trustee, President and A I M Management Group Inc., AIM Mutual Fund Dealer
Principal Executive Officer 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.; Trustee, President
and Principal Executive Officer, The AIM Family of
Funds(R) (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(R) (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(R) (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 Septmber 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 FUNDS GROUP
RETAIL CLASSES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
Supplement dated August 1, 2006
to the Statement of Additional Information dated April 24, 2006,
as supplemented May 1, 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:
TRUSTEE
AND/OR
"NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- ------------------------------------------- --------------------
INTERESTED PERSONS
Robert H. Graham(1) - 1946 1992 Director and Chairman, A I M Management Group Inc. None"
Trustee and Vice Chair (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(R)
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(R)
- ----------
(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
"OTHER OFFICERS
Philip A. Taylor(2) - 1954 2006 Director, Chief Executive Officer and President, None"
President and Principal A I M Management Group Inc., AIM Mutual Fund Dealer
Executive Officer 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(R)
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 FUNDS GROUP
RETAIL CLASS SHARES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
Supplement dated June 30, 2006 to the
Statement of Additional Information dated April 24, 2006
as supplemented May 1, 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 39 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 BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
Supplement dated May 1, 2006
to the Statement of Additional Information dated April 24, 2006
The following information replaces in its entirety the information appearing
under the heading "PORTFOLIO MANAGERS - PORTFOLIO MANAGER FUND HOLDINGS AND
INFORMATION ON OTHER MANAGED ACCOUNTS - AIM BASIC BALANCED FUND" on page H-1 of
the Statement of Additional Information:
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS INVESTMENT VEHICLES OTHER ACCOUNTS
(ASSETS IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2)
DOLLAR RANGE OF --------------------- -------------------- -----------------------
"PORTFOLIO INVESTMENTS IN NUMBER OF NUMBER OF NUMBER OF
MANAGER EACH FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
---------- --------------- --------- --------- --------- ------ --------- ------
AIM BASIC BALANCED FUND
R. Canon Coleman II $1-$10,000 7 $ 8,048.6 1 $ 16.7 3137 $977.7
Jan H. Friedli None 5 $ 1,276.2 2 $748.1 None None
Brendan D. Gau(3) $10,001-$50,000 None None None None None None
Scot W. Johnson $10,001-$50,000 8 $ 3,042.5 2 $748.1 None None
Matthew Seinsheimer $10,001-$50,000 7 $ 8,048.6 1 $ 16.7 3137 $977.7
Michael Simon None 11 $ 9,332.3 1 $ 16.7 3137 $977.7
Bret Stanley None 10 $17,132.9 1 $ 16.7 3137 $977.7
- ----------
(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) Mr. Gau began serving as portfolio manager on May 1, 2006. Ownership
information has been provided as of March 31, 2006."
STATEMENT OF
ADDITIONAL INFORMATION
AIM FUNDS GROUP
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 FUNDS GROUP 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 APRIL 24, 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 BASIC BALANCED FUND APRIL 24, 2006
AIM EUROPEAN SMALL COMPANY FUND APRIL 24, 2006
AIM GLOBAL VALUE FUND APRIL 24, 2006
AIM INTERNATIONAL SMALL COMPANY FUND APRIL 24, 2006
AIM MID CAP BASIC VALUE FUND APRIL 24, 2006
AIM SELECT EQUITY FUND APRIL 24, 2006
AIM SMALL CAP EQUITY FUND APRIL 24, 2006
AIM FUNDS GROUP
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
----
GENERAL INFORMATION ABOUT THE TRUST ..................................... 1
Fund History ......................................................... 1
Shares of Beneficial Interest ........................................ 1
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS ................ 3
Classification ....................................................... 3
Investment Strategies and Risks ...................................... 3
Equity Investments ................................................ 7
Foreign Investments ............................................... 7
Debt Investments .................................................. 9
Other Investments ................................................. 11
Investment Techniques ............................................. 12
Derivatives ....................................................... 18
Additional Securities or Investment Techniques .................... 24
Fund Policies ........................................................ 24
Temporary Defensive Positions ........................................ 27
Portfolio Turnover ................................................... 27
Policies and Procedures for Disclosure of Fund Holdings .............. 27
MANAGEMENT OF THE TRUST ................................................. 30
Board of Trustees .................................................... 30
Management Information ............................................... 30
Trustee Ownership of Fund Shares .................................. 33
Compensation ......................................................... 33
Retirement Plan For Trustees ...................................... 33
Deferred Compensation Agreements .................................. 34
Purchase of Class A Shares of the Funds at Net Asset Value ........ 34
Code of Ethics ....................................................... 34
Proxy Voting Policies ................................................ 34
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES ..................... 35
INVESTMENT ADVISORY AND OTHER SERVICES .................................. 35
Investment Advisor ................................................... 35
Expense Limitation ................................................... 37
Portfolio Managers ................................................ 38
Securities Lending Arrangements ................................... 38
Service Agreements ................................................... 38
Other Service Providers .............................................. 39
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
PURCHASE, REDEMPTION AND PRICING OF SHARES .............................. 44
Transactions through Financial Intermediaries ........................ 44
Purchase and Redemption of Shares .................................... 44
i
Offering Price ....................................................... 64
Redemptions In Kind .................................................. 65
Backup Withholding ................................................... 66
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS ................................ 67
Dividends and Distributions .......................................... 67
Tax Matters .......................................................... 67
DISTRIBUTION OF SECURITIES .............................................. 75
Distribution Plans ................................................... 75
Distributor .......................................................... 77
FINANCIAL STATEMENTS .................................................... 78
PENDING LITIGATION ...................................................... 79
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 Funds Group (the "Trust") is a Delaware statutory trust which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company. The Trust currently
consists of seven separate portfolios: AIM Basic Balanced Fund, AIM European
Small Company Fund, AIM Global Value Fund, AIM International Small Company Fund,
AIM Mid Cap Basic Value Fund, AIM Select Equity Fund and AIM Small Cap Equity
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 30, 1984 as a Massachusetts
business trust. The Trust reorganized as a Delaware business trust on October
15, 1993. The following Funds were included in the reorganization: AIM Select
Equity Fund and AIM Premier Equity Fund. In addition, on October 15, 1993, AIM
Balanced Fund acquired all the assets and assumed all of the liabilities of AIM
Convertible Securities Fund, Inc., a Maryland corporation. All historical
financial and other information contained in this Statement of Additional
Information for periods prior to October 15, 1993 relating to these Funds (or a
class thereof) is that of the predecessor funds (or the corresponding class
thereof). Prior to July 13, 2001, AIM Select Equity Fund was known as AIM Select
Growth Fund and prior to May 1, 1998, such Fund was known as AIM Growth Fund.
Each of the other Funds commenced operations as a series of the Trust. Prior to
July 1, 2002, AIM Premier Equity Fund was known as AIM Value Fund. Prior to
April 30, 2003, AIM Global Value Fund was known as AIM Worldwide Spectrum Fund.
Prior to December 30, 2004, AIM International Small Company Fund was known as
AIM International Emerging Growth Fund. On July 18, 2005, AIM Basic Balanced
Fund acquired the assets of AIM Balanced Fund, and AIM Total Return Fund. On
April 10, 2006, AIM Charter Fund acquired the assets of AIM Premier Equity Fund.
SHARES OF BENEFICIAL INTEREST
Shares of beneficial interest of the Trust are redeemable at their net
asset value (subject, in certain circumstances, to a contingent deferred sales
charge 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 Basic Balanced Fund X X X X X X
AIM European Small Company Fund X X X
1
INSTITUTIONAL INVESTOR
FUND CLASS A CLASS B CLASS C CLASS R CLASS CLASS
---- ------- ------- ------- ------- ------------- --------
AIM Global Value Fund X X X X
AIM International Small Company Fund X X X X
AIM Mid Cap Basic Value Fund X X X X X
AIM Select Equity Fund X X X
AIM Small Cap Equity X X X X X
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 or subscription
rights, and are freely transferable. Other than the automatic conversion of
Class B shares to Class A shares, there are no conversion rights. Shares do not
have cumulative voting rights, which means that in situations in which
shareholders elect trustees, holders of more than 50% of the shares voting for
the election of trustees can elect all of the trustees of the Trust, and the
holders of less than 50% of the shares voting for the election of trustees will
not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations. There is a remote possibility; however, that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. The Trust
2
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the trustees
to all parties, and each party thereto must expressly waive all rights of action
directly against shareholders of the Trust. The Trust Agreement provides for
indemnification out of the property of a Fund for all losses and expenses of any
shareholder of such Fund held liable on account of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial loss due to
shareholder liability is limited to circumstances in which a Fund is unable to
meet its obligations and the complaining party is not held to be bound by the
disclaimer.
The trustees and officers of the Trust will not be liable for any act,
omission or obligation of the Trust or any trustee or officer; however, a
trustee or officer is not protected against any liability to the Trust or to the
shareholders to which a trustee or officer would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his or her office with the Trust
("Disabling Conduct"). The Trust's Bylaws generally provide for indemnification
by the Trust of the trustees, the officers and employee's 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 settlements 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 European Small Company Fund and AIM International Small Company
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(R). The
table has been marked to indicate those securities and investment techniques
that AIM may use to manage a Fund. A Fund may not use all of these techniques at
any one time. A Fund's transactions in a particular security or use of a
particular technique is subject to limitations imposed by a Fund's investment
objective, policies and restrictions described in that Fund's Prospectus and/or
this Statement of Additional Information, as well as federal securities laws.
The Funds' investment objectives, policies, strategies and practices are
non-fundamental unless otherwise indicated. A more detailed description of the
securities and investment techniques, as well as the risks associated with those
securities and investment techniques that the Funds utilize, follows the table.
The descriptions of the securities and investment techniques in this section
supplement the discussion of principal investment strategies contained in each
Fund's Prospectus; where a particular type of security or investment technique
is not discussed in a Fund's Prospectus, that security or investment technique
is not a principal investment strategy.
3
AIM FUNDS GROUP
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
-------------------------------------------------------------------------------------
AIM
AIM EUROPEAN AIM AIM
BASIC SMALL GLOBAL INTERNATIONAL AIM MID CAP AIM SMALL
SECURITY/ BALANCED COMPANY VALUE SMALL COMPANY BASIC VALUE AIM SELECT CAP EQUITY
INVESTMENT TECHNIQUE FUND FUND FUND FUND FUND EQUITY FUND FUND
- -------------------- -------- -------- ------ ------------- ----------- ----------- ----------
EQUITY INVESTMENTS
Common Stock X X X X X X X
Preferred Stock X X X X X X X
Convertible Securities X X X X X X X
Alternative
Entity Securities X X X X X X X
FOREIGN INVESTMENTS
Foreign Securities X X X X X X X
Foreign Government
Obligations X X X X X X X
Foreign Exchange
Transactions X X X X X X X
DEBT INVESTMENTS
U.S. Government
Obligations X X X X X X X
Mortgage-Backed and
Asset-Backed
Securities X
Collateralized
Mortgage Obligations
Investment Grade
Corporate Debt
Obligations X X X X X X X
Junk Bonds X
Liquid Assets X X X X X X X
OTHER INVESTMENTS
REITs X X X X X X X
Other Investment
Companies X X X X X X X
Defaulted Securities
Municipal Forward
Contracts
Variable or Floating
Rate Instruments
4
AIM FUNDS GROUP
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
-------------------------------------------------------------------------------------
AIM
AIM EUROPEAN AIM AIM
BASIC SMALL GLOBAL INTERNATIONAL AIM MID CAP AIM SMALL
SECURITY/ BALANCED COMPANY VALUE SMALL COMPANY BASIC VALUE AIM SELECT CAP EQUITY
INVESTMENT TECHNIQUE FUND FUND FUND FUND FUND EQUITY FUND FUND
- -------------------- -------- -------- ------ ------------- ----------- ----------- ----------
Indexed Securities
Zero-Coupon and
Pay-in-Kind Securities
Synthetic Municipal
Instruments
INVESTMENT TECHNIQUES
Delayed Delivery
Transactions X X X X X X X
When-Issued Securities X X X X X X X
Short Sales X X X X X X X
Margin Transactions
Swap Agreements X X X X X X X
Interfund Loans X X X X X X X
Borrowing X X X X X X X
Lending Portfolio
Securities X X X X X X X
Repurchase Agreements X X X X X X X
Reverse Repurchase
Agreements X X X X X X X
Dollar Rolls X
Illiquid Securities X X X X X X X
Rule 144A Securities X X X X X X X
Unseasoned Issuers X X X X X X X
Portfolio Transactions
Sale of Money Market
Securities
Standby Commitments
DERIVATIVES
Equity-Linked
Derivatives X X X X X X X
Put Options X X X X X X X
5
AIM FUNDS GROUP
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
-------------------------------------------------------------------------------------
AIM
AIM EUROPEAN AIM AIM
BASIC SMALL GLOBAL INTERNATIONAL AIM MID CAP AIM SMALL
SECURITY/ BALANCED COMPANY VALUE SMALL COMPANY BASIC VALUE AIM SELECT CAP EQUITY
INVESTMENT TECHNIQUE FUND FUND FUND FUND FUND EQUITY FUND FUND
- -------------------- -------- -------- ------ ------------- ----------- ----------- ----------
Call Options X X X X X X X
Straddles X X X X X X X
Warrants X X X X X X X
Futures Contracts and
Options on Futures
Contracts X X X X X X X
Forward Currency
Contracts X X X X X X X
Cover X X X X X X X
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Investments in
Entities with
Relationships with
the Funds/Advisor X X X X X X X
6
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 a Fund.
The Funds will invest in a convertible debt security based primarily on the
characteristics of the equity security into which it converts, and without
regard to the credit rating of the convertible security (even if the credit
rating is below investment grade). To the extent that a Fund invests in
convertible debt securities with credit ratings below investment grade, such
securities may have a higher likelihood of default, although this may be
somewhat offset by the convertibility feature.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited
partnerships, limited liability companies, business trusts or other
non-corporate entities may issue equity securities that are similar to common or
preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities issued
by issuers outside the United States, and include securities in the form of
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or
other securities representing underlying securities of foreign issuers.
Depositary Receipts are typically issued by a bank or trust company and evidence
ownership of underlying securities issued by foreign corporations.
Each Fund may invest up to 25% of its total assets (at least 80% of total
assets for AIM International Small Company Fund, at least 80% of net assets for
AIM European Small Company Fund and up to 80% of total assets for AIM Global
Value Fund) in foreign securities.
7
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 European Small Company Fund and AIM
International Small Company Fund may each invest up to 35%, AIM Global Value
Fund may invest up to 20%, and AIM Basic Balanced Fund, AIM Mid Cap Basic Value
Fund, AIM Select Equity Fund and AIM Small Cap Equity Fund may each invest up to
5% of their total assets in securities of companies located in developing
countries. Developing countries are those countries which are not included in
the MSCI World Index. The Funds consider various factors when determining
whether a company is in a developing country, including whether (1) it is
organized under the laws of a developing country; (2) it has a principal office
in a developing country; (3) it derives 50% or more of its total revenues from
business in a developing country; or (4) its securities are traded principally
on a stock exchange, or in an over-the-counter market, in a developing country.
Investments in developing countries present risks greater than, and in addition
to, those presented by investments in foreign issuers in general. A number of
developing countries restrict, to varying degrees, foreign investment in stocks.
Repatriation of investment income, capital, and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. A number of the currencies of developing countries have
experienced significant declines against the U.S. dollar in recent years, and
devaluation may occur subsequent to investments in these currencies by a Fund.
Inflation and rapid fluctuations in inflation rates have had and may continue to
have negative effects on the economies and securities markets of certain
emerging market countries. Many of the developing securities markets are
relatively small or less diverse, have low trading volumes, suffer periods of
relative illiquidity, and are characterized by significant price volatility.
There is a risk in developing countries that a future economic or political
crisis could lead to price controls, forced mergers of companies, expropriation
or confiscatory taxation, seizure, nationalization, or creation of government
monopolies, any of which may have a detrimental effect on a Fund's investments.
8
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign
governments are often, but not always, supported by the full faith and credit of
the foreign governments, or their subdivisions, agencies or instrumentalities,
that issue them. These securities involve the risks discussed above with respect
to foreign securities. Additionally, the issuer of the debt or the governmental
authorities that control repayment of the debt may be unwilling or unable to pay
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 governments of developing countries. Foreign government
obligations of developing countries, and some structures of emerging market debt
securities, both of which are generally below investment grade, are sometimes
referred to as "Brady Bonds".
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct
purchases of futures contracts with respect to foreign currency, and contractual
agreements to purchase or sell a specified currency at a specified future date
(up to one year) at a price set at the time of the contract. Such contractual
commitments may be forward contracts entered into directly with another party or
exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies of
the different countries in which it will invest as a hedge against possible
variations in the foreign exchange rates between those currencies. A Fund may
commit the same percentage of its assets to foreign exchange hedges as it can
invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging")
or portfolio positions ("position hedging") to hedge foreign currency exposure
through foreign exchange transactions. Transaction hedging is the purchase or
sale of foreign currency with respect to specific receivables or payables of a
Fund accruing in connection with the purchase or sale of its portfolio
securities, the sale and redemption of shares of the Fund, or the payment of
dividends and distributions by the Fund. Position hedging is the purchase or
sale of foreign currency with respect to portfolio security positions (or
underlying portfolio security positions, such as in an ADR) denominated or
quoted in a foreign currency. Additionally, foreign exchange transactions may
involve some of the risks of investments in foreign securities.
Debt Investments
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities include bills, notes and bonds
issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S.
Treasury obligations representing future interest or principal payments on U.S.
Treasury notes or bonds. Stripped securities are sold at a discount to their
"face value," and may exhibit greater price volatility than interest-bearing
securities since investors receive no payment until maturity. Obligations of
certain agencies and instrumentalities of the U.S. Government, such as the
Government National Mortgage Association ("GNMA"), are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association ("FNMA"), are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the 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
investments from the U.S. Government.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES - Mortgage-backed securities
are mortgage-related securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, or issued by nongovernment entities.
Mortgage-related securities represent pools of mortgage loans
9
assembled for sale to investors by various government agencies such as GNMA and
government-related organizations such as FNMA and the Federal Home Loan Mortgage
Corporation ("FHLMC"), as well as by nongovernment issuers such as commercial
banks, savings and loan institutions, mortgage bankers and private mortgage
insurance companies. Although certain mortgage-related securities are guaranteed
by a third party or otherwise similarly secured, the market value of the
security, which may fluctuate, is not so secured.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities they issue. Mortgage-related securities issued by GNMA
include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes")
which are guaranteed as to the timely payment of principal and interest. That
guarantee is backed by the full faith and credit of the U.S. Treasury. GNMA is a
corporation wholly owned by the U.S. Government within the Department of Housing
and Urban Development. Mortgage-related securities issued by FNMA include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") and
are guaranteed as to payment of principal and interest by FNMA itself and backed
by a line of credit with the U.S. Treasury. FNMA is a government-sponsored
entity wholly owned by public stockholders. Mortgage-related securities issued
by FHLMC include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs") guaranteed as to payment of principal and interest by FHLMC
itself and backed by a line of credit with the U.S. Treasury. FHLMC is a
government-sponsored entity wholly owned by public stockholders.
Other asset-backed securities are structured like mortgage-backed
securities, but instead of mortgage loans or interests in mortgage loans, the
underlying assets may include such items as motor vehicle installment sales or
installment loan contracts, leases of various types of real and personal
property, and receivables from credit card agreements. Regular payments received
in respect of such securities include both interest and principal. Asset-backed
securities typically have no U.S. Government backing. Additionally, the ability
of an issuer of asset-backed securities to enforce its security interest in the
underlying assets may be limited.
If a Fund purchases a mortgage-backed or other asset-backed security at a
premium, that portion may be lost if there is a decline in the market value of
the security whether resulting from changes in interest rates or prepayments in
the underlying collateral. As with other interest-bearing securities, the prices
of such securities are inversely affected by changes in interest rates. However,
though the value of a mortgage-backed or other asset-backed security may decline
when interest rates rise, the converse is not necessarily true, since in periods
of declining interest rates the mortgages and loans underlying the securities
are prone to prepayment, thereby shortening the average life of the security and
shortening the period of time over which income at the higher rate is received.
When interest rates are rising, though, the rate of prepayment tends to
decrease, thereby lengthening the period of time over which income at the lower
rate is received. For these and other reasons, a mortgage-backed or other
asset-backed security's average maturity may be shortened or lengthened as a
result of interest rate fluctuations and, therefore, it is not possible to
predict accurately the security's return.
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S.
dollar-denominated debt obligations issued or guaranteed by U.S. corporations or
U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers
and debt obligations of foreign issuers denominated in foreign currencies. Such
debt obligations include, among others, bonds, notes, debentures and variable
rate demand notes. In choosing corporate debt securities on behalf of a Fund,
its investment adviser may consider (i) general economic and financial
conditions; (ii) the specific issuer's (a) business and management, (b) cash
flow, (c) earnings coverage of interest and dividends, (d) ability to operate
under adverse economic conditions, (e) fair market value of assets, and (f) in
the case of foreign issuers, unique political, economic or social conditions
applicable to such issuer's country; and, (iii) other considerations deemed
appropriate.
Description of debt securities ratings are found in Appendix A.
10
JUNK BONDS. AIM Global Value Fund may invest up to 5% of its assets 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.
LIQUID ASSETS. Cash equivalents include money market instruments (such as
certificates of deposit, time deposits, bankers' acceptances from U.S. or
foreign banks, and repurchase agreements), shares of affiliated money market
funds or high-quality debt obligations (such as U.S. Government obligations,
commercial paper, master notes and other short-term corporate instruments, and
municipal obligations).
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITS"). REITs are trusts that sell equity
or debt securities to investors and use the proceeds to invest in real estate or
interests therein. A REIT may focus on particular projects, such as apartment
complexes, or geographic regions, such as the southeastern United States, or
both.
To the extent consistent with their respective investment objectives and
policies, each Fund may invest up to 15% of its total assets in equity and/or
debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the Fund
could conceivably own real estate directly as a result of a default on the
securities it owns. A Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic conditions, adverse changes in the climate
for real estate, environmental liability risks, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
limitations on rents, changes in neighborhood values, the appeal of properties
to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by
any changes in the value of the underlying property owned by the trusts, while
mortgage REITs may be affected by the quality of any credit extended. Equity and
mortgage REITs are dependent upon management skill, are not diversified, and are
therefore subject to the risk of financing single or a limited number of
projects. Such trusts are also subject to heavy cash flow dependency, defaults
by borrowers, self-liquidation, and the possibility of failing to maintain an
exemption from the 1940 Act. Changes in interest rates may also affect the value
of debt securities held by a Fund. By investing in REITs indirectly through a
Fund, a shareholder will bear not only his/her proportionate share of the
expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of
another investment company, including Affiliated Money Market Funds (defined
below), the Fund will indirectly bear its proportionate share of the advisory
fees and other operating expenses of such investment company. The Funds have
obtained an exemptive order from the SEC allowing them to invest in money
11
market funds that have AIM or an affiliate of AIM as an investment advisor (the
"Affiliated Money Market Funds"), provided that investments in Affiliated Money
Market Funds do not exceed 25% of the total assets of the investing Fund.
The following restrictions apply to investments in other investment
companies other than Affiliated Money Market Funds: (i) a Fund may not purchase
more than 3% of the total outstanding voting stock of another investment
company; (ii) a Fund may not invest more than 5% of its total assets in
securities issued by another investment company; and (iii) a Fund may not invest
more than 10% of its total assets in securities issued by other investment
companies.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also referred
to as forward commitments, involve commitments by a Fund to dealers or issuers
to acquire or sell securities at a specified future date beyond the customary
settlement for such securities. These commitments may fix the payment price and
interest rate to be received or paid on the investment. A Fund may purchase
securities on a delayed delivery basis to the extent it can anticipate having
available cash on settlement date. Delayed delivery agreements will not be used
as a speculative or leverage technique.
Investment in securities on a delayed delivery basis may increase a Fund's
exposure to market fluctuation and may increase the possibility that the Fund
will incur short-term gains subject to federal taxation or short-term losses if
the Fund must engage in portfolio transactions in order to honor a delayed
delivery commitment. Until the settlement date, a Fund will segregate liquid
assets of a dollar value sufficient at all times to make payment for the delayed
delivery transactions. Such segregated liquid assets will be marked-to-market
daily, and the amount segregated will be increased if necessary to maintain
adequate coverage of the delayed delivery commitments. No additional delayed
delivery agreements or when-issued commitments (as described below) will be made
by a Fund if, as a result, more than 25% of the Fund's total assets would become
so committed.
The delayed delivery securities, which will not begin to accrue interest or
dividends until the settlement date, will be recorded as an asset of a Fund and
will be subject to the risk of market fluctuation. The purchase price of the
delayed delivery securities is a liability of a Fund until settlement. Absent
extraordinary circumstances, a Fund will not sell or otherwise transfer the
delayed delivery basis securities prior to settlement.
A Fund may enter into buy/sell back transactions (a form of delayed
delivery agreement). In a buy/sell back transaction, a Fund enters a trade to
sell securities at one price and simultaneously enters a trade to buy the same
securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis
means that the date for delivery of and payment for the securities is not fixed
at the date of purchase, but is set after the securities are issued. The payment
obligation and, if applicable, the interest rate that will be received on the
securities are fixed at the time the buyer enters into the commitment. A Fund
will only make commitments to purchase such securities with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in a
Fund's portfolio are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and, if applicable, changes in
the level of interest rates. Therefore, if a Fund is to remain substantially
fully invested at the same time that it has purchased securities on a
when-issued basis, there will be a possibility that the market value of the
Fund's assets will fluctuate to a greater degree. Furthermore, when the time
comes for the Fund to meet its obligations under when-issued commitments, the
Fund will do so by using then available cash flow, by sale of the segregated
liquid assets, by sale of other securities or, although it would not normally
expect to do so, by directing the sale of the when-issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation).
12
Investment in securities on a when-issued basis may increase a Fund's
exposure to market fluctuation and may increase the possibility that the Fund
will incur short-term gains subject to federal taxation or short-term losses if
the Fund must sell another security in order to honor a when-issued commitment.
If a Fund purchases a when-issued security, the Fund's 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. Each Fund may engage in 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, a Fund will segregate with its
custodian an equal amount of the securities sold short or securities convertible
into or exchangeable for such securities. A Fund will not sell a security short
against the box, 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.
A Fund will make a short sale, as a hedge, when it believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund or a security convertible into or exchangeable for such security, or
when the Fund does not want to sell the security it owns, because it wishes to
defer recognition of gain or loss for federal income tax purposes. In such case,
any future losses in a Fund's long position should be reduced by a gain in the
short position. Conversely, any gain in the long position should be reduced by a
loss in the short position. The extent to which such gains or losses are reduced
will depend upon the amount of the security sold short relative to the amount a
Fund owns, either directly or indirectly, and, in the case where the Fund owns
convertible securities, changes in the conversion premium. In determining the
number of shares to be sold short against a Fund's position in a convertible
security, the anticipated fluctuation in the conversion premium is considered.
Short sales against the box may be subject to special tax treatment as
"constructive sales" and require a 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."
AIM Global Value Fund is permitted and intends from time to time to effect
short sales that are not "against the box." In a short sale that is not "against
the box", AIM Global Value Fund does not own the security borrowed. To secure
its obligation to deliver to such broker-dealer the securities sold short, AIM
Global Value Fund must segregate an amount of cash or liquid securities equal to
the difference between the current market value of the securities sold short and
any cash or liquid securities deposited as collateral with the broker in
connection with the short sale (including the proceeds of the short sale). As a
result of these requirements, AIM Global Value Fund will not gain any leverage
merely by selling short, except to the extent that it earns interest on the
immobilized cash or liquid securities.
The amounts deposited with the broker or segregated, as described above, do
not have the effect of limiting the amount of money that the Funds may lose on a
short sale. In a short sale that is not "against the box", AIM Global Value Fund
will normally close out a short position by purchasing on the open market and
delivering to the broker-dealer an equal amount of the securities sold short.
In a short sale that is not "against the box", AIM Global Value Fund will
realize a gain if the price of a security declines between the date of the short
sale and the date on which the Fund replaces the borrowed security. On the other
hand, the Fund will incur a loss if the price of the security increases between
those dates. The amount of any gain will be decreased and the amount of any loss
increased by any premium or interest that the Fund may be required to pay in
connection with a short sale. It should be noted that possible losses from short
sales that are not "against the box" differ from those that could
13
arise from a cash investment in a security in that losses from short sales that
are not "against the box" may be limitless, while the losses from a cash
investment in a security cannot exceed the total amount of the Fund's investment
in the security. For example, if the Fund purchases a $10 security, potential
loss is limited to $10; however, if the Fund sells a $10 security short, it may
have to purchase the security for return to the broker-dealer when the market
value of that security is $50, thereby incurring a loss of $40.
In addition to enabling the Funds to hedge against market risk, short sales
may afford the Funds an opportunity to earn additional current income to the
extent the Funds are able to enter into arrangements with broker-dealers through
which the short sales are executed to receive income with respect to the
proceeds of the short sales during the period the Funds' short positions remain
open. There is no assurance that the Funds will be able to enter into such
arrangements.
MARGIN TRANSACTIONS. None of the Funds will purchase any security on
margin, except that each Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of portfolio securities. The
payment by a Fund of initial or variation margin in connection with futures or
related options transactions will not be considered the purchase of a security
on margin.
SWAP AGREEMENTS. Each Fund may enter into interest rate, index and currency
exchange rate swap agreements for purposes of attempting to obtain a particular
desired return at a lower cost to the Fund than if it had invested directly in
an instrument that yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods ranging
from a few weeks to more than one year. In a standard "swap" transaction, two
parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments. The
gross returns to be exchanged or "swapped" between the parties are calculated
with respect to a "notional amount," i.e., the return on or increase in value of
a particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index. Commonly used swap agreements include: (i) interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates exceed a specified rate, or "cap"; (ii)
interest rate floors, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified level, or "floor"; and (iii) interest rate collars, under which a
party sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels.
The "notional amount" of the swap agreement is only a fictitious basis on
which to calculate the obligations that the parties to a swap agreement have
agreed to exchange. 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 obligations or rights will be the
net amount owned 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.
CREDIT DEFAULT SWAPS. AIM Basic Balanced Fund may enter into Credit Default
Swaps ("CDS"). A CDS is an agreement between two parties pursuant to which one
party agrees to make one or more payments to the other, while the other party
would assume the risk of a referenced debt obligation in the event of default.
CDS may be direct ("unfunded swaps") or indirect in the form of a structured
note ("funded swaps"). Unfunded and funded credit default swaps may be on a
single security or on a basket of securities. AIM Basic Balanced Fund may buy a
CDS ("buy credit protection") in which it pays a fixed payment over the life of
the swap in exchange for a counterparty taking on the risk of default of a
referenced debt obligation ("Reference Entity"). Alternatively, AIM Basic
Balanced Fund may sell a CDS ("sell protection") in which it will receive a
fixed payment in exchange for taking on the credit risk of the Reference Entity.
An investment in a CDS may cause the portfolio performance to be more or less
volatile.
14
CDS agreements are typically individually negotiated and structured. CDS
agreements may be entered into for investment or hedging purposes. AIM Basic
Balanced Fund may enter into CDS to create direct or synthetic long or short
exposure to domestic or foreign corporate debt securities or sovereign debt
securities
As a buyer of a CDS, AIM Basic Balanced Fund would pay a fixed spread over
the life of the agreement to the seller of the CDS. If an event of default
occurs, the fixed payment stream would cease, AIM Basic Balanced Fund would
deliver defaulted bonds to the seller and the seller would pay the full notional
value, or the "par value", of the reference obligation to AIM Basic Balanced
Fund. AIM Basic Balanced Fund may already own the reference bonds or may
purchase a deliverable bond in the market. Alternatively, the two counterparties
may agree to cash settlement. If no event of default occurs, AIM Basic Balanced
Fund pays the fixed stream of cash flows to the seller, and no other exchange
occurs.
As a seller of CDS, AIM Basic Balanced Fund would receive a fixed payment
stream. If an event of default occurs, the fixed payment stream stops, AIM Basic
Balanced Fund would pay the buyer par, and, in return, AIM Basic Balanced Fund
would receive deliverable bonds. Alternatively, if cash settlement is elected,
AIM Basic Balanced Fund would pay the buyer par less the market value of the
referenced bonds. If no event of default occurs, AIM Basic Balanced Fund
receives the cash flow payment over the life of the agreement.
Risks of CDS include the risk that a counterparty may default on amounts
owed to AIM Basic Balanced Fund, basis risk (risk that the price of a derivative
used to hedge or reflect an underlying bond behaves differently than the price
of that bond), liquidity risk and market risk.
Credit Derivatives may create covered or uncovered exposure to AIM Basic
Balanced Fund. AIM Basic Balanced Fund generally will employ a strategy of
setting aside liquid assets to cover any potential obligation. This strategy
would be employed to avoid multiplying AIM Basic Balanced Fund's economic
exposure and would limit risks of leveraging. For example, AIM Basic Balanced
Fund may sell protection on a Reference Entity bearing the risk of delivering
par to the counterparty. AIM Basic Balanced Fund would set aside liquid assets,
marked to the market daily, to cover this potential obligation.
CDS agreements are generally governed by a single master agreement for each
counterparty, and the agreements allow for netting of counterparties'
obligations on specific transactions. AIM Basic Balanced Fund's obligation or
rights will be the net amount owed to or by the counterparty. AIM Basic Balanced
Fund's current obligations under a swap agreement will be accrued daily (on a
net basis), and AIM Basic Balanced Fund will maintain liquid assets in an amount
equal to amounts owed to a swap counterparty less the value of any collateral
posted. AIM Basic Balanced Fund will not enter into a transaction with any
single counterparty if the net amount owed or to be received under existing
transactions under swap agreements with that counterparty would exceed 5% of AIM
Basic Balanced Fund's net assets determined on the date the CDS is entered into.
CDS Options. AIM Basic Balanced Fund may additionally enter into CDS option
transactions which grant the holder the right, but not the obligation, to enter
into a credit default swap at a specified future date and under specified terms
in exchange for a purchase price ("premium"). The writer of the option bears the
risk of any unfavorable move in the value of the CDS relative to the market
value on the exercise date, while the purchaser may allow the option to expire
unexercised.
For a discussion of the tax considerations relating to swap agreements, See
"Dividends, Distributions and Tax Matters - Swap Agreements."
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
15
Funds. The ability of a Fund to lend its securities to other AIM Funds is
subject to certain other terms and conditions.
BORROWING. Each Fund may borrow money to a limited extent for temporary or
emergency purposes. If there are unusually heavy redemptions because of changes
in interest rates or for any other reason, a Fund may have to sell a portion of
its investment portfolio at a time when it may be disadvantageous to do so.
Selling fund securities under these circumstances may result in a lower net
asset value per share or decreased dividend income, or both. The Trust believes
that, in the event of abnormally heavy redemption requests, a Fund's borrowing
ability would help to mitigate any such effects and could make the forced sale
of their portfolio securities less likely.
LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio
securities (principally to broker-dealers) where such loans are callable at any
time and are continuously secured by segregated collateral equal to no less than
the market value, determined daily, of the loaned securities. Such collateral
will be cash, letters of credit, or debt securities issued or guaranteed by the
U.S. Government or any of its agencies. Each Fund may lend portfolio securities
to the extent of one-third of its total assets.
A Fund will not have the right to vote securities while they are being
lent, but it can call a loan in anticipation of an important vote. The Fund
would receive income in lieu of dividends on loaned securities and would, at the
same time, earn interest on the loan collateral or on the investment of any cash
collateral. Lending securities entails a risk of loss to the Fund if and to the
extent that the market value of the loaned securities increases and the
collateral is not increased accordingly, or in the event of a default by the
borrower. The Fund could also experience delays and costs in gaining access to
the collateral.
Any cash received as collateral for loaned securities will be invested, in
accordance with a Fund's investment guidelines, in short-term money market
instruments or Affiliated Money Market Funds. For purposes of determining
whether a Fund is complying with its investment policies, strategies and
restrictions, the Fund will consider the loaned securities as assets of the
Fund, but will not consider any collateral received as a Fund asset.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a
Fund acquires ownership of a security from a broker-dealer or bank that agrees
to repurchase the security at a mutually agreed upon time and price (which is
higher than the purchase price), thereby determining the yield during 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
16
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, the
Fund will not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale will be invested in short-term
instruments, and the income from these investments, together with any additional
fee income received on the sale, could generate income for a Fund exceeding the
yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities under a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of
the securities may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the Fund's obligation to repurchase
the securities. At the time the Fund enters into a dollar roll, it will
segregate liquid assets having a dollar value equal to the repurchase price, and
will monitor the account to ensure that such equivalent value is maintained. The
Funds typically enters into dollar roll transactions to enhance their return
either on an income or total return basis or to manage pre-payment risk. Dollar
rolls are considered borrowings by a Fund under the 1940 Act.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
disposed of within seven days in the normal course of business at the price at
which they are valued. Illiquid securities may include securities that are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in
certain circumstances, be resold pursuant to Rule 144A under the 1933 Act, and
thus may or may not constitute illiquid securities.
Each Fund may invest up to 15% of its net assets in securities that are
illiquid. Limitations on the resale of restricted securities may have an adverse
effect on their marketability, which may prevent a Fund from disposing of them
promptly at reasonable prices. A Fund may have to bear the expense of
registering such securities for resale, and the risk of substantial delays in
effecting such registrations.
RULE 144A SECURITIES. Rule 144A securities are securities which, while
privately placed, are eligible for purchase and resale pursuant to Rule 144A
under the 1933 Act. This Rule permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Board, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the Funds' restriction on investment in illiquid
securities. Determination of whether a Rule 144A security is liquid or not is a
question of fact. In making this determination AIM will consider the trading
markets for the specific security taking into account the unregistered nature of
a Rule 144A security. In addition, AIM could consider the (i) frequency of
trades and quotes, (ii) number of dealers and potential purchasers, (iii) dealer
undertakings to make a market, and (iv) nature of the security and of market
place trades (for example, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). AIM will also
monitor the liquidity of Rule 144A securities and, if as a result of changed
17
conditions, AIM determines that a Rule 144A security is no longer liquid, AIM
will review a Fund's holdings of illiquid securities to determine what, if any,
action is required to assure that such Fund complies with its restriction on
investment in illiquid securities. Investing in Rule 144A securities could
increase the amount of each Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
UNSEASONED ISSUERS. Investments in the equity securities of companies
having less than three years' continuous operations (including operations of any
predecessor) involve more risk than investments in the securities of more
established companies because unseasoned issuers have only a brief operating
history and may have more limited markets and financial resources. As a result,
securities of unseasoned issuers tend to be more volatile than securities of
more established companies.
Derivatives
The Funds may each invest in forward currency contracts, futures contracts,
options on securities, options on indices, options on currencies, and options on
futures contracts to attempt to hedge against the overall level of investment
and currency risk normally associated with each Fund's investments. The Funds
may also invest in equity-linked derivative products designed to replicate the
composition and performance of particular indices. These instruments are often
referred to as "derivatives," which may be defined as financial instruments
whose performance is derived, at least in part, from the performance of another
asset (such as a security, currency or an index of securities).
EQUITY-LINKED DERIVATIVES. Equity-Linked Derivatives are interests in a
securities portfolio designed to replicate the composition and performance of a
particular index. Equity-Linked Derivatives are exchange traded. The performance
results of Equity-Linked Derivatives will not replicate exactly the performance
of the pertinent index due to transaction and other expenses, including fees to
service providers, borne by the Equity-Linked Derivatives. Examples of such
products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial
Average Instruments ("DIAMONDS") and Optimised Portfolios As Listed Securities
("OPALS"). Investments in Equity-Linked Derivatives involve the same risks
associated with a direct investment in the types of securities included in the
indices such products are designed to track. There can be no assurance that the
trading price of the Equity-Linked Derivatives will equal the underlying value
of the basket of securities purchased to replicate a particular index or that
such basket will replicate the index. Investments in Equity-Linked Derivatives
may constitute investments in other investment companies and, therefore, a Fund
may be subject to the same investment restrictions with Equity-Linked
Derivatives as with other investment companies. See "Other Investment
Companies."
PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy
the underlying security, contract or foreign currency at the stated exercise
price at any time prior to the expiration of the option (or on a specified date
if the option is a European style option), regardless of the market price or
exchange rate of the security, contract or foreign currency, as the case may be
at the time of exercise. If the purchaser exercises the call option, the writer
of a call option is obligated to sell the underlying security, contract or
foreign currency. A put option gives the purchaser the right to sell the
underlying security, contract or foreign currency at the stated exercise price
at any time prior to the expiration date of the option (or on a specified date
if the option is a European style option), regardless of the market price or
exchange rate of the security, contract or foreign currency, as the case may be
at the time of exercise. If the purchaser exercises the put option, the writer
of a put option is obligated to buy the underlying security, contract or foreign
currency. The premium paid to the writer is consideration for undertaking the
obligations under the option contract. Until an option expires or is offset, the
option is said to be "open." When an option expires or is offset, the option is
said to be "closed."
A Fund will not write (sell) options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
the time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
18
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 or
any further consideration, for securities of the same issue as, and equal in
amount to, the securities subject to the call option. In return for the premium
received for writing a call option, the Fund foregoes the opportunity for profit
from a price increase in the underlying security, contract, or foreign currency
above the exercise price so long as the option remains open, but retains the
risk of loss should the price of the security, contract, or foreign currency
decline.
A Fund may write a put option without owning the underlying security if it
covers the option as described below in the section "Cover." A Fund may only
write a put option on a security as part of an investment strategy, and not for
speculative purposes. In return for the premium received for writing a put
option, the Fund assumes the risk that the price of the underlying security,
contract, or foreign currency will decline below the exercise price, in which
case the put would be exercised and the Fund would suffer a loss.
If an option that a Fund has written expires, it will realize a gain in the
amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security, contract or currency during the option
period. If the call option is exercised, a Fund will realize a gain or loss from
the sale of the underlying security, contract or currency, which will be
increased or offset by the premium received. A Fund would write a put option at
an exercise price that, reduced by the premium received on the option, reflects
the price it is willing to pay for the underlying security, contract or
currency. The obligation imposed upon the writer of an option is terminated upon
the expiration of the option, or such earlier time at which a Fund effects a
closing purchase transaction by purchasing an option (put or call as the case
may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. Closing transactions may be effected in order
to realize a profit on an outstanding call option, to prevent an underlying
security, contract or currency from being called or to permit the sale of the
underlying security, contract or currency. Furthermore, effecting a closing
transaction will permit a Fund to write another call option on the underlying
security, contract or currency with either a different exercise price or
expiration date, or both.
Purchasing Options. A Fund may purchase a call option for the purpose of
acquiring the underlying security, contract or currency for its portfolio. The
Fund is not required to own the underlying security in order to purchase a call
option, and may only cover this transaction with cash, liquid assets and/or
short-term debt securities. Utilized in this fashion, the purchase of call
options would enable a Fund to acquire the security, contract or currency at the
exercise price of the call option plus the premium paid. So long as it holds
such a call option, rather than the underlying security or currency itself, the
Fund is partially protected from any unexpected increase in the market price of
the underlying security, contract or currency. If the market price does not
exceed the exercise price, the Fund could purchase the security on the open
market and could allow the call option to expire, incurring a loss only to the
extent of the premium paid for the option. Each of the Funds may also purchase
call options on underlying securities, contracts or currencies against which it
has written other call options. For example, where a Fund has written a call
option on an underlying security, rather than entering a closing transaction of
the written option, it may purchase a call option with a different exercise
strike and/or expiration date that would eliminate some or all of the risk
associated with the written call. Used in combinations, these strategies are
commonly referred to as "call spreads."
19
A Fund may only purchase a put option on an underlying security, contract
or currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security, contract or currency. Such
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit
realized when the security, contract or currency is delivered upon the exercise
of the put option. Conversely, if the underlying security, contract or currency
does not decline in value, the option may expire worthless and the premium paid
for the protective put would be lost. A Fund may also purchase put options on
underlying securities, contracts or currencies against which it has written
other put options. For example, where a Fund has written a put option on an
underlying security, rather than entering a closing transaction of the written
option, it may purchase a put option with a different exercise price and/or
expiration date that would eliminate some or all of the risk associated with the
written put. Used in combinations, these strategies are commonly referred to as
"put spreads." Likewise, a Fund may write call options on underlying securities,
contracts or currencies against which it has purchased protective put options.
This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or
traded in over-the-counter ("OTC") markets. Listed options are third-party
contracts (i.e., performance of the obligations of the purchaser and seller is
guaranteed by the exchange or clearing corporation) and have standardized strike
prices and expiration dates. OTC options are two-party contracts with negotiated
strike prices and expiration dates. A Fund will not purchase an OTC option
unless it believes that daily valuations for such options are readily
obtainable. OTC options differ from exchange-traded options in that OTC options
are transacted with dealers directly and not through a clearing corporation
(which guarantees performance). Consequently, there is a risk of non-performance
by the dealer. Since no exchange is involved, OTC options are valued on the
basis of an average of the last bid prices obtained from dealers, unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. In the case of OTC options, there can be no assurance that a
liquid secondary market will exist for any particular option at any specific
time. Because purchased OTC options in certain cases may be difficult to dispose
of in a timely manner, the Fund may be required to treat some or all of these
options (i.e., the market value) as illiquid securities. Although a Fund will
enter into OTC options only with dealers that are expected to be capable of
entering into closing transactions with it, there is no assurance that the Fund
will in fact be able to close out an OTC option position at a favorable price
prior to expiration. In the event of insolvency of the dealer, a Fund might be
unable to close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are similar
in many respects to options on securities, except that an index option gives the
holder the right to receive, upon exercise, cash instead of securities, if the
closing level of the securities index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. The amount of cash is equal to the difference between the
closing price of the index and the exercise price of the call or put times a
specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes
index options it may be required to set aside assets to reduce the risks
associated with writing those options. This process is described in more detail
below in the section "Cover."
STRADDLES. The Funds, for hedging purposes, may write straddles
(combinations of put and call options on the same underlying security) to adjust
the risk and return characteristics of the Fund's overall
20
position. A possible combined position would involve writing a covered call
option at one strike price and buying a call option at a lower price, in order
to reduce the risk of the written covered call option in the event of a
substantial price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out.
WARRANTS. Warrants are, in effect, longer-term call options. They give the
holder the right to purchase a given number of shares of a particular company at
specified prices within certain periods of time. The purchaser of a warrant
expects that the market price of the security will exceed the purchase price of
the warrant plus the exercise price of the warrant, thus giving him a profit.
Since the market price may never exceed the exercise price before the expiration
date of the warrant, the purchaser of the warrant risks the loss of the entire
purchase price of the warrant. Warrants generally trade in the open market and
may be sold rather than exercised. Warrants are sometimes sold in unit form with
other securities of an issuer. Units of warrants and common stock may be
employed in financing young, unseasoned companies. The purchase price of a
warrant varies with the exercise price of the warrant, the current market value
of the underlying security, the life of the warrant and various other investment
factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is a
two party agreement to buy or sell a specified amount of a specified security or
currency (or delivery of a cash settlement price, in the case of an index
future) for a specified price at a designated date, time and place
(collectively, "Futures Contracts"). A stock index Futures Contract provides for
the delivery, at a designated date, time and place, of an amount of cash equal
to a specified dollar amount times the difference between the stock index value
at the close of trading on the contract and the price agreed upon in the Futures
Contract; no physical delivery of stocks comprising the index is made. Brokerage
fees are incurred when a Futures Contract is bought or sold, and margin deposits
must be maintained at all times when a Futures Contract is outstanding.
A Fund will enter into Futures Contracts for hedging purposes only; that
is, Futures Contracts will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures Contracts will be
purchased to protect the Fund against an increase in the price of securities or
currencies it has committed to purchase or expects to purchase. A Fund's hedging
may include sales of Futures Contracts as an offset against the effect of
expected increases in interest rates, and decreases in currency exchange rates
and stock prices, and purchases of Futures Contracts as an offset against the
effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
The Funds currently may not invest in any security (including futures
contracts or options thereon) that is secured by physical commodities.
The Funds will only enter into Futures Contracts that are traded (either
domestically or internationally) on futures exchanges and are standardized as to
maturity date and underlying financial instrument. Futures exchanges and trading
thereon in the United States are regulated under the Commodity Exchange Act and
by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges
and trading thereon are not regulated by the CFTC and are not subject to the
same regulatory controls. For a further discussion of the risks associated with
investments in foreign securities, see "Foreign Investments" in this Statement
of Additional Information.
Closing out an open Futures Contract is effected by entering into an
offsetting Futures Contract for the same aggregate amount of the identical
financial instrument or currency and the same delivery date. There can be no
assurance, however, that a Fund will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular time.
If a Fund is not able to enter into an offsetting transaction, it will continue
to be required to maintain the margin deposits on the Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that must
be deposited by a Fund in order to initiate Futures Contracts trading and
maintain its open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered ("initial margin") is intended to ensure the
21
Fund's performance under the Futures Contract. The margin required for a
particular Futures Contract is set by the exchange on which the Futures Contract
is traded and may be significantly modified from time to time by the exchange
during the term of the Futures Contract.
Subsequent payments, called "variation margin," received from or paid to
the futures commission merchant through which a Fund entered into the Futures
Contract will be made on a daily basis as the price of the underlying security,
currency or index fluctuates making the Futures Contract more or less valuable,
a process known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a
Futures Contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to maintain the
position being hedged by the Futures Contract or option or to maintain cash or
securities in a segregated account.
Options on Futures Contracts. Options on Futures Contracts are similar to
options on securities or currencies except that options on Futures Contracts
give the purchaser the right, in return for the premium paid, to assume a
position in a Futures Contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the delivery of
the Futures Contract position by the writer of the option to the holder of the
option will be accompanied by delivery of the accumulated balance in the
writer's Futures Contract margin account. The Funds currently may not invest in
any security (including futures contracts or options thereon) that is secured by
physical commodities.
Limitations on Futures Contracts and Options on Futures Contracts and on
Certain Options on Currencies. To the extent that a Fund enters into Futures
Contracts, options on Futures Contracts and options on foreign currencies traded
on a CFTC-regulated exchange, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the total assets of the Fund, after taking
into account unrealized profits and unrealized losses on any contracts it has
entered into. This guideline may be modified by the Board, without a shareholder
vote. This limitation does not limit the percentage of the Fund's assets at risk
to 5%.
Pursuant to federal securities rules and regulations, a Fund's use of
Futures Contracts and options on Futures Contracts may require that Fund to set
aside assets to reduce the risks associated with using Futures Contracts and
options on Futures Contracts. This process is described in more detail below in
the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation,
usually arranged with a commercial bank or other currency dealer, to purchase or
sell a currency against another currency at a future date and price as agreed
upon by the parties. A Fund either may accept or make delivery of the currency
at the maturity of the forward currency contract. A Fund may also, if its contra
party agrees prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract. Forward currency contracts are
traded over-the-counter, and not on organized commodities or securities
exchanges. As a result, it may be more difficult to value such contracts, and it
may be difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward currency contracts with respect to a specific
purchase or sale of a security, or with respect to its portfolio positions
generally. When a Fund purchases a security denominated in a foreign currency
for settlement in the near future, it may immediately purchase in the forward
market the currency needed to pay for and settle the purchase. By entering into
a forward currency contract with respect to the specific purchase or sale of a
security denominated in a foreign currency, the Fund can secure an exchange rate
between the trade and settlement dates for that purchase or sale transaction.
This practice is sometimes referred to as
22
"transaction hedging." Position hedging is the purchase or sale of foreign
currency with respect to portfolio security positions denominated or quoted in a
foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of forward currency contracts does not eliminate fluctuations in the
prices of the underlying securities a Fund owns or intends to acquire, but it
does establish a rate of exchange in advance. In addition, while forward
currency contract sales limit the risk of loss due to a decline in the value of
the hedged currencies, they also limit any potential gain that might result
should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of
forward currency contracts may require that Fund to set aside assets to reduce
the risks associated with using forward currency contracts. This process is
described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts and
options (other than options purchased by a Fund) expose a Fund to an obligation
to another party. A Fund will not enter into any such transactions unless, in
addition to complying with all the restrictions noted in the disclosure above,
it owns either (1) an offsetting ("covered") position in securities, currencies,
or other options, forward currency contracts or futures contracts or (2) cash,
liquid assets and/or short-term debt securities with a value sufficient at all
times to cover its potential obligations not covered as provided in (1) above.
Each Fund will comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash or liquid securities. To the
extent that a futures contract, forward currency contract or option is deemed to
be illiquid, the assets used to "cover" the Fund's obligation will also be
treated as illiquid for purposes of determining the Fund's maximum allowable
investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an
obligation to another party, but rather provide the Funds with a right to
exercise, the Funds intend to "cover" the cost of any such exercise. To the
extent that a purchased option is deemed illiquid, the 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.
23
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any
particular option, futures contract or option thereon or, forward currency
contract at any particular time.
(5) As described above, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties. If a Fund were
unable to close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair a Fund's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For
example, if a Fund determines that the cost of hedging will exceed the potential
benefit to the Fund, the Fund will not enter into such transaction.
Additional Securities or Investment Techniques
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.
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 European Small Company Fund and AIM International Small
Company Fund are not subject to restriction (1). Fundamental restrictions may be
changed only by a vote of the lesser of (i) 67% or more of the Fund's shares
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or represented by proxy, or (ii) more than 50% of the
Fund's outstanding shares. Any investment restriction that involves a maximum or
minimum percentage of securities or assets (other than with respect to
borrowing) shall not be considered to be violated unless an excess over or a
deficiency under the percentage occurs immediately after, and is caused by, an
acquisition or disposition of securities or utilization of assets by the Fund.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the Fund
would fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as such statute, rules and
regulations are amended from time to time or are interpreted from time to time
by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or
except to the extent that the Fund may be permitted to do so by exemptive order
or similar relief (collectively, with the 1940 Act Laws and Interpretations, the
"1940 Act Laws, Interpretations and Exemptions"). In complying with this
restriction, however, the Fund may purchase securities of other investment
companies to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions.
(2) The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions.
24
(3) The Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions involving
the acquisition, disposition or resale of its portfolio securities, regardless
of whether the Fund may be considered to be an underwriter under the 1933 Act.
(4) The Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act Laws,
Interpretations and Exemptions) of its investments in the securities of issuers
primarily engaged in the same industry. This restriction does not limit the
Fund's investments in (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or (ii) tax-exempt obligations
issued by governments or political subdivisions of governments. In complying
with this restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that invest,
deal, or otherwise engage in transactions in real estate or interests therein,
or investing in securities that are secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities.
(7) The Fund may not make personal loans or loans of its assets to persons
who control or are under common control with the Fund, except to the extent
permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction
does not prevent the Fund from, among other things, purchasing debt obligations,
entering into repurchase agreements, loaning its assets to broker-dealers or
institutional investors, or investing in loans, including assignments and
participation interests.
(8) The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and restrictions as the Fund.
The investment restrictions set forth above provide each of the Funds with
the ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though each of the Funds has this flexibility, the Board has
adopted non-fundamental restrictions for each of the Funds relating to certain
of these restrictions which AIM must follow in managing the Funds. Any changes
to these non-fundamental restrictions, which are set forth below, require the
approval of the Board.
NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment
restrictions apply to each of the Funds, except AIM European Small Company Fund
and AIM International Small Company Fund are not subject to restriction (1).
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
25
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 European Small Company Fund normally invests at least 80% of its
assets in securities of European small companies. For purposes of the foregoing
sentence, "assets" means net assets, plus the amount of any borrowings for
investment purposes. The Fund will provide written notice to its shareholders
prior to any change to this policy, as required by the 1940 Act Laws,
Interpretations and Exemptions.
(2) AIM Small Cap Equity Fund normally invests at least 80% of its assets
in equity securities, including convertible securities, of small-capitalization
companies. For purposes of the foregoing sentence, "assets" means net assets,
plus the amount of any borrowings for investment purposes. The Fund will provide
written notice to its shareholders prior to any change to this policy, as
required by the 1940 Act Laws, Interpretations and Exemptions.
(3) AIM Mid Cap Basic Value Fund normally invests at least 80% of its
assets in securities of mid-capitalization companies that offer potential for
capital growth. 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.
(4) AIM Select Equity Fund normally invests at least 80% of its assets in
equity securities, including convertible securities, with prospects for
above-average market returns, without regard to market capitalization. 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.
26
(5) AIM International Small Company Fund normally invests at least 80% of
its assets in securities of small international companies. For purposes of the
foregoing sentence, "assets" means net assets, plus the amount of any borrowings
for investment purposes. The Fund will provide written notice to its
shareholders prior to any change to this policy, as required by the 1940 Act
Laws, Interpretations and Exemptions.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market or other conditions, or
atypical circumstances such as unusually large cash inflows or redemptions, the
Funds may temporarily hold all or a portion of their assets in cash, cash
equivalents or high-quality debt instruments. Each of the funds may also invest
up to 25% of its total assets in Affiliated Money Market Funds for these
purposes.
PORTFOLIO TURNOVER
AIM European Small Company Fund's portfolio turnover rate decreased from
130% in 2003 to 71% in 2004. This variation can be attributed to the Fund's high
fluctuation in flows during the 2003 period. Since then flows have steadied and
the fund is now at its normal level.
AIM Global Value Fund's portfolio turnover rate decreased from 129% in 2004
to 51% in 2005. This variation can be attributed to the change in the lead
manager of the fund on February 28, 2005 to Glen Hilton. Although the fund's
investment strategy and process remained the same, the current lead manager has
a longer term investment perspective than what was previously utilized. AIM
Global Value Fund's portfolio turnover rate decreased from 372% in 2003 to 129%
in 2004. This variation can be attributed to the realignment of the Fund's
portfolio to fit the investment process of the current management team of the
Fund in early 2002. This would have increased the turnover for 2003.
AIM Select Equity Fund's portfolio turnover rate increased from 38% in 2004
to 91% in 2005. This variation can be attributed to the change in mandate to
allow investment in securities outside the AIM complex that added to the
increase in turnover. AIM Select Equity Fund's portfolio turnover rate decreased
from 69% in 2003 to 38% in 2004. This variation can be attributed to the
realignment of the Fund's portfolio in 2003 by the Fund's current management
team.
AIM Small Cap Equity Fund's portfolio turnover rate decreased from 124% in
2004 to 52% in 2005. This variation can be attributed to the lower turnover
strategy utilized by the new management team that took over September 1, 2004.
POLICIES AND PROCEDURES FOR DISCLOSURE OF FUND HOLDINGS
The Board has adopted policies and procedures with respect to the
disclosure of the Funds' portfolio holdings (the "Holdings Disclosure Policy").
AIM and the Board may amend the Holdings Disclosure Policy at any time without
prior notice. Details of the Holdings Disclosure Policy and a description of the
basis on which employees of AIM and its affiliates may release information about
portfolio securities in certain contexts are provided below.
PUBLIC RELEASE OF PORTFOLIO HOLDINGS. The Funds disclose the following
portfolio holdings information on http://www.aiminvestments.com(1):
- ----------
(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
INFORMATION APPROXIMATE DATE OF WEBSITE POSTING INFORMATION REMAINS POSTED ON WEBSITE
----------- ----------------------------------- -------------------------------------
Top ten holdings as of month-end 15 days after month-end Until replaced with the following
month's top ten holdings
Select holdings included in the Fund's Quarterly 29 days after calendar quarter-end Until replaced with the following
Performance Update quarter's Quarterly Performance Update
Complete portfolio holdings as of calendar 30 days after calendar quarter-end For one year
quarter-end
Complete portfolio holdings as of fiscal 60-70 days after fiscal quarter-end For one year
quarter-end
These holdings are listed along with the percentage of the Fund's net
assets they represent. Generally, employees of AIM and its affiliates may not
disclose such portfolio holdings until one day after they have been posted on
http://www.aiminvestments.com. You may also obtain the publicly available
portfolio holdings information described above by contacting us at
1-800-959-4246.
SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS PURSUANT TO NON-DISCLOSURE
AGREEMENT. Employees of AIM and its affiliates may disclose non-public full
portfolio holdings on a selective basis only if the Internal Compliance Controls
Committee (the "ICCC") of A I M Management Group Inc. ("AIM Management")
approves the parties to whom disclosure of non-public full portfolio holdings
will be made. The ICCC must determine that the proposed selective disclosure
will be made for legitimate business purposes of the applicable Fund and address
any perceived conflicts of interest between shareholders of such Fund and AIM or
its affiliates as part of granting its approval.
The Board exercises continuing oversight of the disclosure of Fund
portfolio holdings by (1) overseeing the implementation and enforcement of the
Holdings Disclosure Policy and the AIM Funds Code of Ethics by the Chief
Compliance Officer (or her designee) of AIM and the AIM Funds and (2)
considering reports and recommendations by the Chief Compliance Officer
concerning any material compliance matters (as defined in Rule 38a-1 under the
1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940, as
amended) that may arise in connection with the Holdings Disclosure Policy.
Pursuant to the Holdings Disclosure Policy, the Board reviews the types of
situations in which AIM provides 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);
- 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
28
portfolio holdings will maintain the confidentiality of such portfolio holdings
and will not trade on such information ("Non-disclosure Agreements"). Please
refer to Appendix B for a list of examples of persons to whom AIM provides
non-public portfolio holdings on an ongoing basis.
AIM will also disclose non-public portfolio holdings information if such
disclosure is required by applicable laws, rules or regulations, or by
regulatory authorities having jurisdiction over AIM and its affiliates or the
Funds.
The Holdings Disclosure Policy provides that AIM will not request, receive
or accept any compensation (including compensation in the form of the
maintenance of assets in any Fund or other mutual fund or account managed by AIM
or one of its affiliates) for the selective disclosure of portfolio holdings
information.
DISCLOSURE OF CERTAIN PORTFOLIO HOLDINGS AND RELATED INFORMATION WITHOUT
NON-DISCLOSURE AGREEMENT. AIM and its affiliates that provide services to the
Funds, and the Funds' subadvisors, if applicable, and each of their employees
may receive or have access to portfolio holdings as part of the day to day
operations of the Funds.
From time to time, employees of AIM and its affiliates may express their
views orally or in writing on one or more of the Funds' portfolio securities or
may state that a Fund has recently purchased or sold, or continues to own, one
or more securities. The securities subject to these views and statements may be
ones that were purchased or sold since a Fund's most recent quarter-end and
therefore may not be reflected on the list of the Fund's most recent quarter-end
portfolio holdings disclosed on the website. Such views and statements may be
made to various persons, including members of the press, brokers and other
financial intermediaries that sell shares of the Funds, shareholders in the
applicable Fund, persons considering investing in the applicable Fund or
representatives of such shareholders or potential shareholders, such as
fiduciaries of a 401(k) plan or a trust and their advisers, and other entities
for which AIM or its affiliates provides or may provide investment advisory
services. The nature and content of the views and statements provided to each of
these persons may differ.
From time to time, employees of AIM and its affiliates also may provide
oral or written information ("portfolio commentary") about a Fund, including,
but not limited to, how the Fund's investments are divided among various
sectors, industries, countries, investment styles and capitalization sizes, and
among stocks, bonds, currencies and cash, security types, bond maturities, bond
coupons and bond credit quality ratings. This portfolio commentary may also
include information on how these various weightings and factors contributed to
Fund performance. AIM may also provide oral or written information ("statistical
information") about various financial characteristics of a Fund or its
underlying portfolio securities including, but not limited to, alpha, beta,
R-squared, coefficient of determination, duration, maturity, information ratio,
sharpe ratio, earnings growth, payout ratio, price/book value, projected
earnings growth, return on equity, standard deviation, tracking error, weighted
average quality, market capitalization, percent debt to equity, price to cash
flow, dividend yield or growth, default rate, portfolio turnover, and risk and
style characteristics. This portfolio commentary and statistical information
about a Fund may be based on the Fund's portfolio as of the most recent
quarter-end or the end of some other interim period, such as month-end. The
portfolio commentary and statistical information may be provided to various
persons, including those described in the preceding paragraph. The nature and
content of the information provided to each of these persons may differ.
DISCLOSURE OF PORTFOLIO HOLDINGS BY TRADERS. Additionally, employees of AIM
and its affiliates may disclose one or more of the portfolio securities of a
Fund when purchasing and selling securities through broker-dealers, requesting
bids on securities, obtaining price quotations on securities, or in connection
with litigation involving the Funds' portfolio securities. AIM does not enter
into formal Non-disclosure Agreements in connection with these situations;
however, the Funds would not continue to conduct business with a person who AIM
believed was misusing the disclosed information.
DISCLOSURE OF PORTFOLIO HOLDINGS OF OTHER AIM-MANAGED PRODUCTS. AIM and its
affiliates manage products sponsored by companies other than AIM, including
investment companies, offshore
29
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 business and affairs of the Trust are managed by or under the direction
of 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 general oversight by 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, Lewis F. Pennock,
Raymond Stickel, Jr. (Chair), Dr. Larry Soll, Dr. Prema Mathai-Davis and Ruth H.
Quigley (Vice Chair). The Audit Committee's primary purposes are to: (i) assist
the Board in oversight of the independent registered public accountant's
qualifications, independence and performance; (ii) appoint independent
registered public accountants for the Funds; (iii) to the extent required by
Section 10A(h) and (i) of the Exchange Act, to pre-approve all permissible
non-audit services that are provided to Funds by their independent registered
public accountants; (iv) pre-approve, in accordance with Rule 2-01(c)(7)(ii) of
Regulation S-X, certain non-audit services provided by the Funds' independent
registered public accountants to the Funds' investment adviser and certain other
affiliated entities; (v) to oversee the financial reporting process for the
Funds; (vi) the extent required by Regulation 14A under the Exchange Act, to
prepare an audit committee report for inclusion in any proxy statement issued by
a Fund; (vii) assist the Board's oversight of the performance of the Funds'
internal audit function to the extent an internal audit function exists; (viii)
assist the Board's oversight of the integrity of the Funds' financial
statements; and (ix) assist
30
the Board's oversight of the Funds' compliance with legal and regulatory
requirements. During the fiscal year ended December 31, 2005, the Audit
Committee held seven meetings.
The members of the Compliance Committee are Frank S. Bayley, Bruce L.
Crockett (Chair), Albert R. Dowden (Vice Chair) and Mr. Stickel. 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 December 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.
The Governance Committee will consider nominees recommended by a
shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Governance Committee or the Board, as applicable, shall make the
final determination of persons to be nominated. During the fiscal year ended
December 31, 2005, the Governance Committee held seven meetings.
31
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, Fields, Carl Frischling, Robert H.
Graham, Pennock, Soll, Stickel and Mark H. Williamson and 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 December 31, 2005,
the investments committee held seven 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 each of the foregoing areas, making regular reports to the Board.
During the fiscal year ended December 31, 2005, the Valuation Committee held
three meetings.
The members of the Special Market Timing Litigation Committee are Messrs.
Bayley, Bunch (Chair), Crockett and Dowden (Vice Chair). The Special Market
Timing Litigation Committee is responsible: (i) for receiving reports from time
to time from management, counsel for management, counsel for the 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
32
filed against 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
December 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 trustee of other AIM Funds. Each such trustee receives a fee,
allocated among the AIM Funds for which he or she serves as a 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 from 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.
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 benefit will equal 75% of the trustee's
annual retainer paid to or accrued by any Covered Fund with respect to such
trustee during the twelve-month period prior to retirement, including the amount
of any retainer deferred under a separate deferred compensation agreement
between the Covered Fund and the trustee. The amount of the annual retirement
benefit does not include additional compensation paid for Board meeting fees or
compensation paid and Vice
33
Chairs of certain Board committees, whether such amounts are paid directly to
the trustee or deferred. The annual retirement benefit is 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 commence payment of retirement benefits upon retirement
from the Board before age 72; in such a case, the annual retirement benefit is
subject to a reduction for early payment.
Deferred Compensation Agreements
Messrs. Crockett, Dunn, Fields, Frischling, Sklar and Drs. Mathai-Davis and
Soll (for purposes of this paragraph only, the "Deferring Trustees") have each
executed a Deferred Compensation Agreement (collectively, the "Compensation
Agreements"). Pursuant to the Compensation Agreements, the Deferring Trustees
have the option to elect to defer receipt of up to 100% of their compensation
payable by the Trust, and such amounts are placed into a deferral account and
deemed to be invested in one or more AIM Funds selected by the Deferring
Trustees. 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."
CODE OF ETHICS
AIM, the Trust and AIM Distributors have adopted a Code of Ethics governing
personal trading activities of all employees of AIM and its subsidiaries. The
Code of Ethics is 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. Personal trading, including personal trading
involving securities that may be purchased or held by a fund within the AIM
Family of Funds, is permitted under the Code 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.
PROXY VOTING POLICIES
The Board has delegated responsibility for decisions regarding proxy voting
for securities held by each Fund to AIM, the Fund's investment advisor. AIM will
vote such proxies in accordance with its proxy policies and procedures, which
have been reviewed and approved by the Board, and which are found in Appendix 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.
34
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.
AIM is also responsible for furnishing to the Funds, at AIM's expense, the
services of persons believed to be competent to perform all supervisory and
administrative services required by the Funds, in the judgment of the trustees,
to conduct their respective businesses effectively, as well as the offices,
equipment and other facilities necessary for their operations. Such functions
include the maintenance of each Fund's accounts and records, and the preparation
of all requisite corporate documents such as tax returns and reports to the SEC
and shareholders.
The Advisory Agreement provides that each Fund will pay or cause to be paid
all expenses of such Fund not assumed by AIM, including, without limitation:
brokerage commissions, taxes, legal, auditing or governmental fees, custodian,
transfer and shareholder service agent costs, expenses of issue, sale,
redemption, and repurchase of shares, expenses of registering and qualifying
shares for sale, expenses relating to trustee and shareholder meetings, the cost
of preparing and distributing reports and notices to shareholders, the fees and
other expenses incurred by the Trust on behalf of each Fund in connection with
membership in investment company organizations, and the cost of printing copies
of prospectuses and statements of additional information distributed to the
Funds' shareholders.
AIM, at its own expense, furnishes to the Trust office space and
facilities. AIM furnishes to the Trust all personnel for managing the affairs of
the Trust and each of its series of shares.
Pursuant to its Advisory Agreement with the Trust, AIM receives a monthly
fee from each Fund calculated at the following 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.
35
MAXIMUM
ADVISORY FEE
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATES COMMITTED
FUND NAME PER ADVISORY AGREEMENT RATE AFTER JANUARY 1, 2005 UNTIL DATE
--------- --------------------------------- --------------------------------- -----------------
AIM Basic Balanced Fund 0.65% of the first $1 billion 0.62% of the first $250 million December 31, 2009
0.60% of the next $4 billion 0.605% of the next $250 million
0.55% of amount over $5 billion 0.59% of the next $500 million
0.575% of the next $1.5 billion
0.56% of the next $2.5 billion
0.545% of the next $2.5 billion
0.53% of the next $2.5 billion
0.515% of amount over $10 billion
AIM European Small Company Fund 0.95% of average daily net assets 0.935% of the first $250 million June 30, 2006
0.91% of the next $250 million
0.885% of the next $500 million
0.86% of the next $1.5 billion
0.835% of the next $2.5 billion
0.81% of the next $2.5 billion
0.785% of the next $2.5 billion
0.76% of amount over $10 billion
AIM Global Value Fund 0.85% of the first $1 billion 0.80% of the first $250 million June 30, 2006
0.80% of amount over $1 billion 0.78% of the next $250 million
0.76% of the next $500 million
0.74% of the next $1.5 billion
0.72% of the next $2.5 billion
0.70% of the next $2.5 billion
0.68% of the next $2.5 billion
0.66% of amount over $10 billion
AIM International Small Company Fund 0.95% of average daily net assets 0.935% of the first $250 million December 31, 2009
0.91% of the next $250 million
0.885% of the next $500 million
0.86% of the next $1.5 billion
0.835% of the next $2.5 billion
0.81% of the next $2.5 billion
0.785% of the next $2.5 billion
0.76% of amount over $10 billion
AIM Mid Cap Basic Value Fund 0.80% of the first $1 billion 0.745% of the first $250 million December 31, 2009
0.75% of the next $4 billion 0.73% of the next $250 million
0.70% of amount over $5 billion 0.715% of the next $500 million
0.70% of the next $1.5 billion
0.685% of the next $2.5 billion
0.67% of the next $2.5 billion
0.655% of the next $2.5 billion
0.64% of amount over $10 billion
AIM Select Equity Fund 0.80% of the first $150 million 0.695% of the first $250 million June 30, 2006
0.625% of amount over $150 0.67% of the next $250 million
million (1) 0.645% of the next $500 million
0.62% of the next $1.5 billion
0.595% of the next $2.5 billion
0.57% of the next $2.5 billion
0.545% of the next $2.5 billion
0.52% of amount over $10 billion
36
MAXIMUM
ADVISORY FEE
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATES COMMITTED
FUND NAME PER ADVISORY AGREEMENT RATE AFTER JANUARY 1, 2005 UNTIL DATE
--------- --------------------------------- --------------------------------- -----------------
AIM Small Cap Equity Fund 0.85% of all assets 0.745% of the first $250 million December 31, 2009
0.73% of the next $250 million
0.715% of the next $500 million
0.70% of the next $1.5 billion
0.685% of the next $2.5 billion
0.67% of the next $2.5 billion
0.655% of the next $2.5 billion
0.64% of amount over $10 billion
(1) AIM has voluntarily agreed to waive advisory fees payable by the Fund in an
amount equal to 0.025% for each $5 billion increment in net assets over $5
billion, up to a maximum waiver of 0.175% on net assets in excess of $35
billion.
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 December 31, 2006, to limit Total
Annual Fund Operating Expenses (excluding (i) interest; (ii) taxes; (iii)
dividend expense on short sales; (iv) extraordinary items (these are expenses
that are not anticipated to arise from each Fund's day-to-day operations), or
items designated as such by each fund's Board; (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:
EXPENSE
FUND LIMITATION
---- ----------
AIM European Small Company Fund
Class A Shares 1.90%
Class B Shares 2.65%
Class C Shares 2.65%
AIM Global Value Fund
Class A Shares 1.90%
Class B Shares 2.65%
Class C Shares 2.65%
AIM International Small Company Fund
Class A Shares 1.90%
Class B Shares 2.65%
Class C Shares 2.65%
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.
37
The management fees payable by each Fund, the amounts waived by AIM and the
net fees paid by each Fund for the last three fiscal years ended December 31 are
found in Appendix G.
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
Trust's Board of Trustees, including the independent trustees, by votes cast in
person at a meeting called for such purpose. Under the Administrative Services
Agreement, AIM is entitled to receive from the Funds reimbursement of its costs
or such reasonable compensation as may be approved by the Board of Trustees.
Currently, AIM is reimbursed for the services of the Trust's principal financial
officer and her staff, and any expenses related to fund accounting services.
Administrative services fees paid to AIM by each Fund for the last three
fiscal years ended December 31 are found in Appendix I.
38
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment Services, Inc. ("AIS"), 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. 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
BROKERAGE TRANSACTIONS
AIM makes decisions to buy and sell securities for each Fund, selects
broker-dealers (each, a "Broker"), effects the Funds' investment portfolio
transactions, allocates brokerage fees in such
39
transactions and, where applicable, negotiates commissions and spreads on
transactions. AIM's primary consideration in effecting a security transaction is
to obtain best execution, which AIM defines as prompt and efficient execution of
the transaction at the best obtainable price with payment of commissions,
mark-ups or mark-downs which are reasonable in relation to the value of the
brokerage services provided by the Broker. While AIM seeks reasonably
competitive commission rates, the Funds may not pay the lowest commission or
spread available. See "Broker Selection" below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. Portfolio transactions placed in such markets may be
effected on a principal basis at net prices without commissions, but which
include compensation to the Broker in the form of a mark-up or mark-down, or on
an agency basis, which involves the payment of negotiated brokerage commissions
to the Broker, including electronic communication networks. Purchases of
underwritten issues include a commission or concession paid by the issuer (not
the Funds) to the underwriter. Purchases of money market instruments may be made
directly from issuers without the payment of commissions.
Traditionally, commission rates have not been negotiated on stock markets
outside the United States. Although in recent years many overseas stock markets
have adopted a system of negotiated rates, a number of markets maintain an
established schedule of minimum commission rates.
Brokerage commissions paid by each of the Funds for the last three fiscal
years ended December 31 are found in Appendix J.
COMMISSIONS
During the last three fiscal years ended December 31, none of the Funds
paid brokerage commissions to Brokers affiliated with the Funds, AIM, AIM
Distributors, or any affiliates of such entities.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of an AIM Fund, provided the conditions of an exemptive order
received by the AIM Funds from the SEC are met. In addition, a Fund may purchase
or sell a security from or to certain other AIM Funds or 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
40
[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.
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.
41
AIM and AIM Capital attempt to reduce or eliminate the potential conflicts
of interest concerning the use of Soft Dollar Products by directing client
trades for Soft Dollar Products only if AIM and AIM Capital conclude that the
Broker supplying the product is capable of providing best execution.
Certain Soft Dollar Products may be available directly from a vendor on a
hard dollar basis; other Soft Dollar Products are available only through Brokers
in exchange for soft dollars. AIM uses soft dollars to purchase two types of
Soft Dollar Products:
- 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
42
projections and interest rate sensitivity analyses, which are relevant
to fixed income securities.
- Other Specialized Tools - other specialized products, such as
consulting analyses, access to industry experts, and distinct
investment expertise such as forensic accounting or custom built
investment-analysis software.
If AIM determines that any service or product has a mixed use (i.e., it
also serves functions that do not assist the investment decision-making or
trading process), AIM will allocate the costs of such service or product
accordingly in its reasonable discretion. AIM will allocate brokerage
commissions to Brokers only for the portion of the service or product that AIM
determines assists it in the investment decision-making or trading process and
will pay for the remaining value of the product or service in cash.
Outside research assistance is useful to AIM since the Brokers used by AIM
tend to provide more in-depth analysis of a broader universe of securities and
other matters than AIM's staff follows. In addition, such services provide AIM
with a diverse perspective on financial markets. Some Brokers may indicate that
the provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Funds. However, the Funds are not under any obligation to deal
with any Broker in the execution of transactions in portfolio securities. In
some cases, Soft Dollar Products are available only from the Broker providing
them. In other cases, Soft Dollar Products may be obtainable from alternative
sources in return for cash payments. AIM believes that because Broker research
supplements rather than replaces AIM's research, the receipt of such research
tends to improve the quality of AIM's investment advice. The advisory fee paid
by the Funds is not reduced because AIM receives such services. To the extent
the Funds' portfolio transactions are used to obtain Soft Dollar Products, the
brokerage commissions obtained by the Funds might exceed those that might
otherwise have been paid.
AIM may determine target levels of brokerage business with various Brokers on
behalf of its clients (including the Funds) over a certain time period. The
target levels will be based upon the following factors, among others: (1) the
execution services provided by the Broker; and (2) the research services
provided by the Broker. Portfolio transactions may be effected through Brokers
that recommend the Funds to their clients, or that act as agent in the purchase
of a Fund's shares for their clients, provided that AIM believes such Brokers
provide best execution and such transactions are executed in compliance with
AIM's policy against using directed brokerage to compensate Brokers for
promoting or selling AIM Fund shares. AIM will not enter into a binding
commitment with Brokers to place trades with such Brokers involving brokerage
commissions in precise amounts.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during the
last fiscal year ended December 31, 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 December 31, 2005
is found in Appendix K.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous AIM Funds and other accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more other accounts. However, the
position of each account in the same security and the length of time that each
account may hold its investment in the same security may vary. The timing and
amount of purchase by each account will also be determined by its cash position.
If the purchase or sale of securities is consistent with the investment policies
of the Fund(s) and one or more other accounts, and is considered at or about the
same time, AIM
43
will allocate transactions in such securities among the Fund(s) and these
accounts on a pro rata basis based on order size or in such other manner
believed by AIM to be fair and equitable. AIM may combine such transactions, in
accordance with applicable laws and regulations, to obtain the most favorable
execution. Simultaneous transactions could, however, adversely affect a Fund's
ability to obtain or dispose of the full amount of a security which it seeks to
purchase or sell.
ALLOCATION OF 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 capital/liquidity suitability and sector/style suitability of the
investment with the AIM Fund's or account's investment objective, policies and
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.
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.
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
44
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
Enhanced Short Bond Fund, AIM Floating Rate Fund and AIM Short Term Bond Fund
are subject to an initial sales charge of 2.50%. The sales charge is used to
compensate AIM Distributors and participating dealers for their expenses
incurred in connection with the distribution of the Funds' shares. You may also
be charged a transaction or other fee by the financial institution managing your
account.
Class A Shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve
Shares of AIM Money Market Fund are sold without an initial sales charge.
CATEGORY I FUNDS
AIM Advantage Health Sciences Fund
AIM Asia Pacific Growth Fund
AIM Basic Balanced Fund
AIM Basic Value Fund
AIM Capital Development Fund
AIM Charter Fund
AIM China 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 Metal 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 Japan 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 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 Real Estate Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund
AIM Structured Core Fund
AIM Structured Growth Fund
AIM Structured Value Fund
AIM Summit Fund
AIM Technology Fund
AIM Trimark Endeavor Fund
AIM Trimark Fund
AIM Trimark Small Companies Fund
AIM Utilities Fund
Investor's Sales Charge Dealer
-------------------------- 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
45
CATEGORY II FUNDS
AIM High Income Municipal Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM International Bond Fund
AIM Municipal Bond Fund
AIM Total Return Bond Fund
Investor's Sales Charge Dealer
-------------------------- 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
Investor's Sales Charge Dealer
-------------------------- Concession
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- -------------
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
AIM ENHANCED SHORT BOND FUND, AIM FLOATING RATE FUND AND AIM SHORT TERM
BOND FUND
Investor's Sales Charge Dealer
-------------------------- 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
46
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 Category I, II or III Fund and Class A shares of AIM
Enhanced Short Bond Fund, AIM Floating Rate Fund and 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 Enhanced
Short Bond Fund, AIM Floating Rate Fund and 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 Enhanced Short Bond
Fund, AIM Floating Rate Fund and AIM Short Term Bond Fund, each share 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 Enhanced Short Bond Fund, AIM Floating
Rate Fund 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 PURCHASES
1% of the first $2 million
plus 0.80% of the next $1 million
plus 0.50% of the next $17 million
plus 0.25% of amounts in excess of $20 million
If (i) the amount of any single purchase order plus (ii) the public
offering price of all other shares owned by the same customer submitting the
purchase order on the day on which the purchase order is received equals or
exceeds $1,000,000, the purchase will be considered a "jumbo accumulation
purchase." With regard to any individual jumbo accumulation purchase, AIM
Distributors may make payment to the dealer of record based on the cumulative
total of jumbo accumulation purchases made by the same customer over the life of
his or her account(s).
If an investor made a Large Purchase of Class A shares of a Category III
Fund or AIM Short Term Bond Fund on and after November 15, 2001 and through
October 30, 2002 and exchanges those shares for Class A shares of a Category I
or II Fund, AIM Distributors will pay an additional dealer concession of 0.75%
upon exchange.
If an investor makes a Large Purchase of Class 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 Enhanced Short Bond Fund, AIM Floating Rate
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, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund or
AIM Short Term Bond
47
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. For
purchases 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, AIM Distributors may
make the following payments to investment dealers or other financial service
firms for sales of such shares at net asset value ("NAV") to certain retirement
plans provided that the applicable dealer of record is able to establish that
the retirement plan's purchase of Class A shares is a new investment (as defined
below):
PERCENT OF PURCHASE
0.50% of the first $20 million
plus 0.25% of amounts in excess of $20 million
This payment schedule will be applicable to purchases of Class A shares at
NAV by the following types of retirement plans: (i) all plans maintained
pursuant to Sections 401 and 457 of the Code, and (ii) plans maintained pursuant
to Section 403 of the Code if the employer or plan sponsor is a tax-exempt
organization operated pursuant to Section 501(c)(3) of the Code.
A "new investment" means a purchase paid for with money that does not
represent (i) the proceeds of one or more redemptions of AIM Fund shares, (ii)
an exchange of AIM Fund shares, (iii) the repayment of one or more retirement
plan loans that were funded through the redemption of AIM Fund shares, or (iv)
money returned from another fund family. If AIM Distributors pays a dealer
concession in connection with a plan's purchase of Class A shares at NAV, such
shares may be subject to a CDSC of 1.00% of net assets for 12 months, commencing
on the date the plan first invests in Class A shares of an AIM Fund. If the
applicable dealer of record is unable to establish that a plan's purchase of
Class A shares at NAV is a new investment, AIM Distributors will not pay a
dealer concession in connection with such purchase and such shares will not be
subject to a CDSC.
With regard to any individual jumbo accumulation purchase, AIM Distributors
may make payment to the dealer of record based on the cumulative total of jumbo
accumulation purchases made by the same plan over the life of the plan's
account(s).
PURCHASERS QUALIFYING FOR REDUCTIONS IN INITIAL SALES CHARGES. As shown in
the tables above, purchases of certain amounts of AIM Fund shares may reduce the
initial sales charges. These reductions are available to purchasers that meet
the qualifications listed below. We will refer to purchasers that meet these
qualifications as "Qualified Purchasers."
DEFINITIONS
As used herein, the terms below shall be defined as follows:
- "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;
48
- "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 Sections 401, 403 (only if
the employer or plan sponsor is a tax-exempt organization operated
pursuant to Section 501(c)(3) of the Code), 408 (includes SEP, SARSEP
and SIMPLE IRA plans) or 457 of the Code, if:
a. the employer or plan sponsor submits all contributions for all
participating employees in a single contribution transmittal (the
AIM Funds will not accept separate contributions submitted with
respect to individual participants);
b. each transmittal is accompanied by a single check or wire
transfer; and
c. if the AIM Funds are expected to carry separate accounts in the
names of each of the plan participants, (i) the employer or plan
sponsor notifies AIM Distributors in writing that the separate
accounts of all plan participants should be linked, and (ii) all
new participant accounts are established by submitting an
appropriate Account Application on behalf of each new participant
with the contribution transmittal.
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.
49
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 anytime 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.
- 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
50
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, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund and AIM Short
Term Bond Fund are subject to an 18-month, 1% CDSC.
RIGHTS OF ACCUMULATION
A Qualified Purchaser may also qualify for reduced initial sales charges
based upon his, her or its existing investment in shares of any of the AIM Funds
at the time of the proposed purchase. To determine whether or not a reduced
initial sales charge applies to a proposed purchase, AIM Distributors takes into
account not only the money which is invested upon such proposed purchase, but
also the value of all shares of the AIM Funds owned by such purchaser,
calculated at their then current public offering price.
If a purchaser qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money being invested, even if only a
portion of that amount exceeds the breakpoint for the reduced sales charge. For
example, if a purchaser already owns qualifying shares of any AIM Fund with a
value of $20,000 and wishes to invest an additional $20,000 in a fund with a
maximum initial sales charge of 5.50%, the reduced initial sales charge of 5.25%
will apply to the full $20,000 purchase and not just to the $15,000 in excess of
the $25,000 breakpoint.
To qualify for obtaining the discount applicable to a particular purchase,
the purchaser or his dealer must furnish the Transfer Agent with a list of the
account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
Rights of Accumulation are also available to holders of the Connecticut
General Guaranteed Account, established for tax-qualified group annuities, for
contracts purchased on or before June 30, 1992.
51
If an investor's new purchase of 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
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 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
purchasers responsibilities 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, trustee or employee (and
members of their Immediate Family) of AIM Management, its affiliates
or The AIM Family of Funds,(R) and any foundation, trust, employee
benefit plan or deferred compensation plan established exclusively for
the benefit of, or by, such persons;
- Any current or retired officer, director, or employee (and members of
their Immediate Family), of DST Systems, Inc. or Personix, a division
of Fiserv Solutions, Inc.;
- Sales representatives and employees (and members of their Immediate
Family) of selling group members of financial institutions that have
arrangements with such selling group members;
- Purchases through approved fee-based programs;
- Employer-sponsored retirement plans that are Qualified Purchasers, as
defined above, provided that:
a. a plan's assets are at least $1 million;
52
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 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 former 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;
- - 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;
53
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 AIM Investment Services, Inc. ("AIS");
- - 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 make these payments from their own
resources, from AIM Distributors' retention of underwriting concessions and from
payments to AIM Distributors under Rule 12b-1 plans. These additional cash
payments are described below. The categories described below are not mutually
exclusive. The same financial advisor may receive payments under more than one
or all categories. Most financial advisors that sell shares of AIM funds receive
one or more types of these cash payments. Financial advisors negotiate the cash
payments to be paid on an individual basis. Where services are provided, the
costs of providing the services and the overall package of services provided may
vary from one financial advisor to another. ADI Affiliates do not make an
independent assessment of the cost of providing such services.
In this context, "financial advisors" include any broker, dealer, bank
(including bank trust departments), transfer agent, registered investment
advisor, financial planner, retirement plan administrator and any other
financial intermediary having a selling, administration or similar agreement
with ADI Affiliates. 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 H. 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
54
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 for
entertainment events it deems appropriate, subject to ADI Affiliates guidelines
and applicable law. These payments may vary depending upon the nature of the
event or the relationship.
ADI Affiliates 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,
55
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 this prospectus. You can ask your financial
advisor about any payments it receives from ADI Affiliates or the AIM funds, as
well as about fees and/or commissions it charges.
Purchases of Class B Shares
Class B shares are sold at net asset value, and are not subject to an
initial sales charge. Instead, investors may pay a CDSC if they redeem their
shares within six years after purchase. See the Prospectus for additional
information regarding contingent deferred sales charges. AIM Distributors may
pay sales commissions to dealers and institutions who sell Class B shares of the
AIM Funds at the time of such sales. Payments will equal 4.00% of the purchase
price and will consist of a sales commission equal to 3.75% plus an advance of
the first year service fee of 0.25%.
Class B1 Shares
Class B1 shares are held by certain shareholders who held Class B shares of
AIM Floating Rate Fund's predecessor, closed-end AIM Floating Rate Fund. Class
B1 shares are not available for purchase by either current Class B1 shareholders
or new investors. See the Prospectus for additional information, including
information regarding contingent deferred sales charges.
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 Enhanced Short Bond Fund or AIM Short Term Bond Fund unless you exchange
shares of another AIM Fund that are subject to a CDSC into AIM Enhanced Short
Bond Fund or 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
with respect to Funds other than AIM Enhanced Short Bond Fund or AIM Floating
Rate Fund 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%.
Payments with respect to AIM Floating Rate Fund will equal 0.75% of the purchase
price and will consist of a sales commission of 0.50% 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 Enhanced Short Bond Fund or 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.
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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.
Purchase and Redemption of Class P Shares
Class P shares of the 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, each
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 the 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 the 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 the 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, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund
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 service fee of 0.25% of average daily net assets and such
payments will commence immediately.
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Purchases of Institutional Class Shares
Institutional Class shares are sold at net asset value, and are not subject
to an initial sales charge or to a CDSC.
Exchanges
TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to be
acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such purchases may be delayed for
up to five business days if it is determined that a fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange. If a
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such
shareholder will not begin to accrue dividends until the sixth business day
after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with certain
dealers and investment advisory firms to accept telephone instructions to
exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AIS at (800) 959-4246. If a
shareholder is unable to reach AIS by telephone, he may also request exchanges
by fax, telegraph or use overnight courier services to expedite exchanges by
mail, which will be effective on the business day received by AIS as long as
such request is received 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.
58
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints AIS as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by AIS in the designated account(s),
present or future, with full power of substitution in the premises. AIS and AIM
Distributors are thereby authorized and directed to accept and act upon any
telephone redemptions of shares held in any of the account(s) listed, from any
person who requests the redemption. An investor acknowledges by signing the form
that he understands and agrees that AIS and AIM Distributors may not be liable
for any loss, expense or cost arising out of any telephone redemption requests
effected in accordance with the authorization set forth in these instructions if
they reasonably believe such request to be genuine, but may in certain cases be
liable for losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. AIS reserves the right to cease
to act as attorney-in-fact subject to this appointment, and AIM Distributors
reserves the right to modify or terminate the telephone redemption privilege at
any time without notice. An investor may elect not to have this privilege by
marking the appropriate box on the application. Then any redemptions must be
effected in writing by the investor.
SYSTEMATIC REDEMPTION PLAN. A Systematic Redemption Plan permits a
shareholder of an AIM Fund to withdraw on a regular basis at least $50 per
withdrawal. Under a Systematic Redemption Plan, all shares are to be held by
AIS. 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, AIM Enhanced Short Bond Fund, AIM Floating
Rate Fund and AIM Short Term Bond Fund, upon the redemption of Class B shares or
Class C shares (no CDSC applies to Class C shares of AIM Enhanced Short Bond
Fund or AIM Short Term Bond Fund unless you exchange shares of another AIM Fund
that are subject to a CDSC into AIM Enhanced Short Bond Fund or 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, AIM Enhanced Short Bond Fund, AIM Floating Rate 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, AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund 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 a Fund for at least 12
months, or (ii) the redemption is not a complete redemption of shares
held by the plan;
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- 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, AIM Cash Reserve
Shares of AIM Money Market Fund, and shares of AIM Enhanced Short Bond
Fund, AIM Floating Rate Fund or AIM Short Term Bond acquired by
exchange from 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,
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 exchanges of
Category I or II Fund, AIM Enhanced Short Bond Fund, AIM Floating Rate
Fund or AIM Short Term Bond Fund shares;
- Redemptions of shares of Category III Funds, shares of AIM Tax-Exempt
Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund acquired
by exchange from Class A shares of a Category III Fund purchased prior
to November 15, 2001;
- Redemptions of shares of Category I or II Funds, AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund 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, AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund or AIM Short Term Bond Fund, unless
the Category I or II Fund, AIM Enhanced Short Bond Fund, AIM Floating
Rate 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, AIM Enhanced Short Bond Fund, AIM Floating
Rate Fund or AIM Short Term Bond Fund shares;
- Redemptions of Category I or II Funds, AIM Enhanced Short Bond Fund,
AIM Floating Rate Fund 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, AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund or AIM Short Term Bond Fund held by
an Investor Class shareholder.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS B, B1 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;
60
- Redemptions made in connection with participant-directed exchanges
between options in an employer-sponsored benefit plan;
- Redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan;
- Redemptions made in connection with a distribution from any retirement
plan or account that is permitted in accordance with the provisions of
Section 72(t)(2) of the Code, and the regulations promulgated
thereunder;
- Redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of
the Code upon hardship of the covered employee (determined pursuant to
Treasury Regulation Section 1.401(k)-1(d)(2)); and
- Redemptions made by or for the benefit of certain states, counties or
cities, or any instrumentalities, departments or authorities thereof
where such entities are prohibited or limited by applicable law from
paying a sales charge or commission.
CDSCs will not apply to the following redemptions of Class B, Class B1 or
Class C shares, as applicable:
- Additional purchases of Class C shares of AIM International Core
Equity Fund and AIM Real Estate Fund by shareholders of record on
April 30, 1995, of AIM International Value Fund, predecessor to AIM
International Core Equity Fund, and AIM Real Estate Fund, except that
shareholders whose broker-dealers maintain a single omnibus account
with AIS on behalf of those shareholders, perform sub-accounting
functions with respect to those shareholders, and are unable to
segregate shareholders of record prior to April 30, 1995, from
shareholders whose accounts were opened after that date will be
subject to a CDSC on all purchases made after March 1, 1996;
- 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 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 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.
61
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 notifies 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 Enhanced Short
Bond Fund or AIM Short Term Bond Fund if you received such Class C
shares by exchanging Class C shares of AIM Enhanced Short Bond Fund or
AIM Short Term Bond Fund; and
- Redemptions of Class C shares of AIM Enhanced Short Bond Fund or AIM
Short Term Bond Fund if you received such Class C shares by exchanging
Class C shares of another Fund and the original purchase was subject
to a CDSC.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS R SHARES AND FORMER CLASS
K SHAREHOLDERS THAT ACQUIRED CLASS A SHARES.
CDSCs will not apply to redemptions of Class A shares acquired as a result
of conversion of Class K shares into Class A shares where the retirement plan's
dealer of record notified the distributor prior to the time of purchase that the
dealer waived the upfront payment otherwise payable to him.
CDSCs will not apply to the following redemptions of Class R shares:
- 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 an 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. The
Fund will be deemed to have received the purchase or redemption order when the
Fund's authorized agent or its designee accepts the order. The order will be
priced at the net asset value next determined after the order is accepted by the
Fund's authorized agent.
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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 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
63
mailing of confirmations promptly after the transactions. The investor also
acknowledges that the ability to effect internet transactions may be terminated
at any time by the AIM Funds.
ABANDONED PROPERTY. It is the responsibility of the investor to ensure that
AIS maintains a correct address for his account(s). An incorrect address may
cause an investor's account statements and other mailings to be returned to AIS.
Upon receiving returned mail, AIS will attempt to locate the investor or
rightful owner of the account. If unsuccessful, AIS will retain a shareholder
locator service with a national information database to conduct periodic
searches for the investor. If the search firm is unable to locate the investor,
the search firm will determine whether the investor's account has legally been
abandoned. AIS is legally obligated to escheat (or transfer) abandoned property
to the appropriate state's unclaimed property administrator in accordance with
statutory requirements. The investor's last known address of record determines
which state has jurisdiction.
OFFERING PRICE
The following formula may be used to determine the public offering price
per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price) = Offering
Price.
For example, at the close of business on December 30, 2005, AIM Global
Value Fund - Class A shares had a net asset value per share of $13.98. The
offering price, assuming an initial sales charge of 5.50%, therefore was $14.79.
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 statements due to adjustments
required by generally accepted accounting principles made to the net assets of
the Fund at period end.
Each equity security (excluding convertible bonds) held by a Fund is valued
at its last sales price on the exchange where the security is principally traded
or, lacking any sales on a particular day, the security is valued at the closing
bid price on that day. Each equity security traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) is valued on the basis of prices furnished by independent pricing
vendors or market makers. Each security reported on the NASDAQ National Market
System is valued at the NASDAQ Official Closing Price ("NOCP") or absent a NOCP,
at the closing bid price on that day. Debt securities (including convertible
bonds) are fair valued using an evaluated quote on the basis of prices provided
by an independent pricing vendor. Evaluated quotes provided by the pricing
vendors may be determined without exclusive reliance on quoted prices, and may
reflect appropriate factors such as institution-size trading in similar groups
of securities,
64
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 available, including situations where market
quotations are unreliable, are valued at fair value as determined in good faith
by or under the supervision of the Trust's officers in accordance with
procedures approved by the Board. Short-term investments are valued at amortized
cost when the security has 60 days or less to maturity.
Generally, trading in corporate bonds, U.S. Government securities and money
market instruments is substantially completed each day at various times prior to
the close of the customary trading session of the NYSE. The values of such
securities used in computing the net asset value of a Fund's shares are
determined at such times. Occasionally, events affecting the values of such
securities may occur between the times at which such values are determined and
the close of the customary trading session of the NYSE. If AIM believes a
development/event has actually caused a closing price to no longer reflect
current market value, the closing prices may be adjusted to reflect the fair
value of the affected security as of the close of the NYSE as determined in good
faith using procedures approved by the Board.
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Trading in certain foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value of
each Fund's shares are determined as of the close of the respective markets.
Events affecting the values of such 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 which are not business days of the Fund. Because the net asset
value per share of each Fund is determined only on business days of the Fund,
the 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,
65
on behalf of the Fund, is obligated to redeem for cash all shares presented to
such Fund for redemption by any one shareholder in an amount up to the lesser of
$250,000 or 1% of that Fund's net assets in any 90-day period. The Rule 18f-1
Election is irrevocable while Rule 18f-1 under the 1940 Act is in effect unless
the SEC by order permits withdrawal of such Rule 18f-1 Election.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying
the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, generally must withhold 28% of redemption
payments and reportable dividends (whether paid or accrued) in the case of any
shareholder who fails to provide the Fund with a taxpayer identification number
("TIN") and a certification that he is not subject to backup withholding.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
2. the IRS notifies the Fund that the investor furnished an incorrect
TIN;
3. the investor or the Fund is notified by the IRS that the investor is
subject to backup withholding because the investor failed to report
all of the interest and dividends on such investor's tax return (for
reportable interest and dividends only);
4. the investor fails to certify to the Fund that the investor is not
subject to backup withholding under (3) above (for reportable interest
and dividend accounts opened after 1983 only); or
5. the investor does not certify his TIN. This applies only to non-exempt
mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1), (2) or (5) above
applies.
Certain payees and payments are exempt from backup withholding and
information reporting. AIM or AIS will not provide Form 1099 to those payees.
Investors should contact the IRS if they have any questions concerning
withholding.
IRS PENALTIES - Investors who do not supply the AIM Funds with a correct
TIN will be subject to a $50 penalty imposed by the IRS unless such failure is
due to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
generally remains in effect for a period starting on the date the Form is signed
and ending on the last day of the third succeeding calendar year. Such
shareholders may, however, be subject to federal income tax withholding at a 30%
rate on ordinary income dividends and other distributions. Under applicable
treaty law, residents of treaty countries may qualify for a reduced rate of
withholding or a withholding exemption.
66
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, except for AIM Basic
Balanced Fund. 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 losses, if any, carried
forward from previous fiscal periods. All dividends and distributions will be
automatically reinvested in additional shares of the same class of each Fund
unless the shareholder has requested in writing to receive such dividends and
distributions in cash or that they be invested in shares of another AIM Fund,
subject to the terms and conditions set forth in the Prospectus under the
caption "Special Plans - Automatic Dividend Investment." Such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. If a shareholder's account does not have any shares in it
on a dividend or capital gain distribution payment date, the dividend or
distribution will be paid in cash whether or not the shareholder has elected to
have such dividends or distributions reinvested.
It is the present policy of the AIM Basic Balanced Fund to declare and pay
quarterly net investment income dividends and declare and pay annually capital
gain distributions.
Dividends on Class B, Class C and Class R shares are expected to be lower
than those for Class A and Investor Class 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 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 Internal Revenue Code of 1986, as amended
(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.
67
Each Fund may use "equalization accounting" in determining the portion of
its net investment income and capital gain net income that has been distributed.
A Fund that elects to use equalization accounting will allocate a portion of its
realized investment income and capital gain to redemptions of Fund shares and
will reduce the amount of such income and gain that it distributes in cash.
However, each Fund intends to make cash distributions for each taxable year in
an aggregate amount that is sufficient to satisfy the Distribution Requirement
without taking into account its use of equalization accounting. The Internal
Revenue Service has not published any guidance concerning the methods to be used
in allocating investment income and capital gain to redemptions of shares. In
the event that the Internal Revenue Service determines that a Fund is using an
improper method of allocation and has underdistributed its net investment income
and capital gain net income for any taxable year, such Fund may be liable for
additional federal income tax.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock, securities or foreign currencies (to the extent
such currency gain is directly related to the regulated investment company's
principal business of investing in stock or securities), other income
(including, but not limited to, gains from options, futures or forward
contracts) derived from its business of investing in such stock, securities or
currencies and net income derived from certain publicly traded partnerships (the
"Income Requirement"). Under certain circumstances, a fund may be required to
sell portfolio holdings to meet this requirement.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company (the "Asset Diversification Test"). Under this test, at the
close of each quarter of each Fund's taxable year, at least 50% of the value of
the Fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers, as to which the Fund has not invested more than 5% of the
value of the Fund's total assets in securities of such issuer and as to which
the Fund does not hold more than 10% of the outstanding voting securities of
such issuer, and no more than 25% of the value of its total assets may be
invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), of two or
more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses or, collectively, of 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 Test where the
68
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 a capital gain or loss.
Certain hedging transactions that may be engaged in by certain of the Funds
(such as short sales) may be subject to special tax treatment as "constructive
sales" under Section 1259 of the Code if a Fund holds certain "appreciated
financial positions" (defined generally as any interest (including a futures or
forward contract, short sale or option) with respect to stock, certain debt
instruments, or partnership interests if there would be a gain were such
interest sold, assigned, or otherwise terminated at its fair market value). Upon
entering into a constructive sales transaction with respect to an appreciated
financial position, a Fund will generally be deemed to have constructively sold
such appreciated financial position and will recognize gain as if such position
were sold, assigned, or otherwise terminated at its fair market value on the
date of such constructive sale (and will take into account any gain for the
taxable year which includes such date).
Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds may enter into will be subject to
special tax treatment as "Section 1256 contracts." Section 1256 contracts that a
Fund holds are treated as if they are sold for their fair market value on the
last business day of the taxable year, regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date. Any
gain or loss recognized as a consequence of the year-end deemed disposition of
Section 1256 contracts is combined with any other gain or loss that was
previously recognized upon the termination of Section 1256 contracts during that
taxable year. The net amount of such gain or loss for the entire taxable year
(including gain or loss arising as a consequence of the year-end deemed sale of
such contracts) is deemed to be 60% long-term and 40% short-term gain or loss.
However, in the case of Section 1256 contracts that are forward foreign currency
exchange contracts, the net gain or loss is separately determined and (as
discussed above) generally treated as ordinary income or loss. If such a future
or option is held as an offsetting position and can be considered a straddle
under Section 1092 of the Code, such a straddle will constitute a mixed
straddle. A mixed straddle will be subject to both Section 1256 and Section 1092
unless certain elections are made by the Fund.
Other hedging transactions in which the Funds may engage may result in
"straddles" or "conversion transactions" for U.S. federal income tax purposes.
The straddle and conversion transaction rules may affect the character of gains
(or in the case of the straddle rules, losses) realized by the Funds. In
addition, losses realized by the Funds on positions that are part of a straddle
may be deferred under
69
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 a 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 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 Internal Revenue Service determines that a
70
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
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.
Ordinary income dividends paid by a Fund to individuals and other
noncorporate taxpayers will be treated as qualified dividend income that is
subject to tax at a maximum rate of 15% to the extent of the amount of
qualifying dividends received by the Fund from domestic corporations and from
foreign corporations that are either incorporated in a possession of the United
States, or are eligible for benefits under certain income tax treaties with the
United States that include an exchange of information program. In addition,
qualifying dividends include dividends paid with respect to stock of a foreign
corporation that is readily tradable on an established securities market in the
United States. 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
71
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 from earnings and profits will be
treated as a return of capital to the extent of (and in reduction of) the
shareholder's tax basis in his shares; any excess will be treated as gain from
the sale of his shares.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the ex-dividend date.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the IRS.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by a Fund, such distribution generally will be taxable
even though it represents a return of invested capital. Investors should be
careful to consider the tax implications of buying shares of a Fund just prior
to a distribution. The price of shares purchased at this time may reflect the
amounts 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
72
acquisition of the shares subsequently acquired. The wash sale rules may also
limit the amount of loss that may be taken into account on disposition after
such adjustment.
BACKUP WITHHOLDING. The Funds may be required to withhold 28% of taxable
distributions and/or redemption payments. For more information refer to
"Purchase, Redemption and Pricing of Shares - Backup Withholding."
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United
States, is a nonresident alien individual, foreign trust or estate, foreign
corporation, or foreign partnership ("foreign shareholder"), depends on whether
the income from a Fund is "effectively connected" with a U.S. trade or business
carried on by such shareholder. If the income from a Fund is not effectively
connected with a U.S. trade or business carried on by a foreign shareholder,
distributions (other than distributions of long-term and short-term capital gain
and of certain types of interest income) will be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) upon the gross amount of the
distribution. Such a foreign shareholder would generally be exempt from U.S.
federal income tax on gain realized on the redemption of shares of a Fund,
capital gain dividends and amounts retained by a Fund that are designated as
undistributed net capital gain.
As a consequence of the enactment of the American Jobs Creation Act of
2004, such a foreign shareholder will also generally be exempt from U.S. federal
income tax on distributions that a Fund designates as "short-term capital gain
dividends" or as "interest-related dividends" for Fund taxable years beginning
after December 31, 2004 and before January 1, 2008. The aggregate amount that
may be designated as short-term capital gain dividends for a Fund's taxable year
is 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 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, 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
73
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 non-resident alien shareholder'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 taxes paid by the Fund that are attributable to any
distributions they receive; and (ii) either to deduct their pro-rata share of
foreign tax in computing their taxable income, or to use it (subject to various
Code limitations) as a foreign tax credit against Federal income tax (but not
both). No deduction for foreign tax may be claimed by a non-corporate
shareholder who does not itemize deductions or who is subject to alternative
minimum tax.
Unless certain requirements are met, a credit for foreign tax is subject to
the limitation that it may not exceed the shareholder's U.S. tax (determined
without regard to the availability of the credit) attributable to the
shareholder's foreign source taxable income. In determining the source and
character of distributions received from a Fund for this purpose, shareholders
will be required to allocate Fund distributions according to the source of the
income realized by the Fund. Each Fund's gain from the sale of stock and
securities and certain currency fluctuation gain and loss will generally be
treated as derived from U.S. sources. In addition, the limitation on the foreign
tax credit is applied separately to foreign source "passive" income, such as
dividend income, and the portion of foreign source income consisting of
qualified dividend income is reduced by approximately 57% to account for the tax
rate differential. Individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign tax included on Form 1099 and
whose foreign source income is all "qualified passive income" may elect each
year to be exempt from the foreign tax credit limitation and will be able to
claim a foreign tax credit without filing Form 1116 with its corresponding
requirement to report income and tax by country. Moreover, no foreign tax credit
will be allowable to any shareholder who has not held his shares of the Fund for
at least 16 days during the 30-day period beginning 15 days before the day such
shares become ex-dividend with respect to any Fund distribution to which foreign
income taxes are attributed (taking into account certain holding period
reduction requirements of the Code). Because of these limitations, shareholders
may be unable to claim a credit for the full amount of their proportionate
shares of the foreign income tax paid by a Fund.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing
general discussion of U.S. federal income tax consequences is based on the Code
and the regulations issued thereunder as in effect on April 7, 2006. Future
legislative or administrative changes or court decisions may significantly
74
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income, qualified dividend
income and capital gain dividends may differ from the rules for U.S. federal
income taxation described above. Distributions may also be subject to additional
state, local and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ
significantly from those summarized above. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in the Funds.
DISTRIBUTION OF SECURITIES
DISTRIBUTION PLANS
The Trust has adopted distribution plans pursuant to Rule 12b-1 under the
1940 Act with respect to each Fund's Class A shares, Class B shares, Class C
shares and, if applicable, Class R and Investor Class shares (collectively the
"Plans"). Each Fund, pursuant to the Plans, except the Investor Class Plan, pays
AIM Distributors compensation at the annual rate, shown immediately below, of
the Fund's average daily net assets of the applicable class.
FUND CLASS A CLASS B CLASS C CLASS R
- ---- ------- ------- ------- -------
AIM Basic Balanced Fund 0.25% 1.00 1.00 0.50
AIM European Small Company Fund 0.25 1.00 1.00 N/A
AIM Global Value Fund 0.25 1.00 1.00 N/A
AIM International Small Company Fund 0.25 1.00 1.00 N/A
AIM Mid Cap Basic Value Fund 0.25 1.00 1.00 0.50
AIM Select Equity Fund 0.25 1.00 1.00 N/A
AIM Small Cap Equity Fund 0.25 1.00 1.00 0.50
AIM Basic Balanced Fund, pursuant to its Investor Class plan, pays AIM
Distributors an amount necessary to reimburse AIM Distributors for its actual
allocated share of expenses incurred pursuant to the Investor Class Plan for the
period, up to a maximum annual rate of 0.25% of the average daily net assets of
the Investor Class shares of the Fund.
All of the Plans compensate or reimburse AIM Distributors, as applicable,
for the purpose of financing any activity which is primarily intended to result
in the sale of shares of the Funds. Such activities include, but are not limited
to, the following: printing of prospectuses and statements of additional
information and reports for other than existing shareholders; overhead;
preparation and distribution of advertising material and sales literature;
expenses of organizing and conducting sales seminars; supplemental payments to
dealers and other institutions such as asset-based sales charges or as payments
of service fees under shareholder service arrangements; and costs of
administering each Plan.
Amounts payable by a Fund under the Class A, Class B, Class C and Class R
Plans need not be directly related to the expenses actually incurred by AIM
Distributors on behalf of each Fund. 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 allocated share of expenses exceeds the fee
payable to AIM Distributors at any given time, under these Plans the Funds will
not be obligated to pay more than that fee. If AIM Distributors' actual
allocated share of expenses is less than the fee it receives, under these Plans
AIM Distributors will retain the full amount of the fee.
Amounts payable by AIM Basic Balanced Fund under its Investor Class Plan
are directly related to the expenses incurred by AIM Distributors on behalf of
the Fund, as this Plan obligates the Fund to
75
reimburse AIM Distributors for its actual allocated share of expenses incurred
pursuant to the Investor Class Plan for the period, up to a maximum annual rate
of 0.25% of the average daily net assets of the Investor Class shares of the
Fund. If AIM Distributors' actual allocated share of expenses incurred pursuant
to the Investor Class Plan for the period exceeds the 0.25% annual cap, under
this Plan AIM Basic Balanced Fund will not be obligated to pay more than the
0.25% annual cap. If AIM Distributors' actual allocated share of expenses
incurred pursuant to the Investor Class Plan for the period is less than the
0.25% annual cap, under this Plan AIM Distributors is entitled to be reimbursed
only for its actual allocated share of expenses.
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 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 or 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. 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.
76
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 December 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 December 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 to curb sharp fluctuations in rates of
redemptions and sales, thereby reducing the chance that an unanticipated
increase in net redemptions could adversely affect the performance of each Fund.
Unless terminated earlier in accordance with their terms, the Plans
continue from year to year as long as such continuance is specifically approved,
in person, at least annually by the Board, including a majority of the Rule
12b-1 Trustees. A Plan may be terminated as to any Fund or class by the vote of
a majority of the Rule 12b-1 Trustees or, with respect to a particular class, by
the vote of a majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
the Plans may be amended by the trustees, including a majority of the Rule 12b-1
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Independent Trustees is committed to the discretion of the
Independent Trustees.
The Class B Plan obligates Class B shares to continue to make payments to
AIM Distributors following termination of the Class B shares Distribution
Agreement with respect to Class B shares sold by or attributable to the
distribution efforts of AIM Distributors or its predecessors, unless there has
been a complete termination of the Class B Plan (as defined in such Plan) and
the Class B Plan expressly authorizes AIM Distributors to assign, transfer or
pledge its rights to payments pursuant to the Class B Plan.
DISTRIBUTOR
The Trust has entered into master distribution agreements, as amended,
relating to the Funds (the "Distribution Agreements") with AIM Distributors, a
registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which
AIM Distributors acts as the distributor of shares of the Funds. The address of
AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees
and officers of the Trust are affiliated with AIM Distributors. See "Management
of the Trust."
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds on a continuous basis directly and
through other broker-dealers with whom AIM Distributors has entered into
selected dealer agreements. AIM Distributors has not undertaken to sell any
specified number of shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own resources to
dealers and institutions who sell Class B, Class C and Class R shares of the
Funds at the time of such sales.
77
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 December 31 are found in Appendix O.
FINANCIAL STATEMENTS
Each Fund's Financial Statements for the period ended December 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.
78
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 continue to
serve as your Fund's investment advisor. There is not 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.
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;
79
rescission of certain Funds' advisory agreements; interest; and attorneys' and
experts' fees. A list identifying such lawsuits (excluding those lawsuits that
have been recently transferred as mentioned herein) 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 (excluding the Berdat excessive fees consolidated lawsuit that has
been conditionally transferred to 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. 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.
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
80
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.
81
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.
A-1
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor
senior financial obligations and contracts. Such obligations generally have an
original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior
ability for repayment of senior short-term obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong
ability to repay senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Note: In addition, in certain countries the prime rating may be modified by
the issuer's or guarantor's senior unsecured long-term debt rating.
Moody's municipal ratings are as follows:
MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS
Municipal Ratings are opinions of the investment quality of issuers and
issues in the US municipal and tax-exempt markets. As such, these ratings
incorporate Moody's assessment of the default probability and loss severity of
these issuers and issues.
Municipal Ratings are based upon the analysis of four primary factors relating
to municipal finance: economy, debt, finances, and administration/management
strategies. Each of the factors is evaluated individually and for its effect on
the other factors in the context of the municipality's ability to repay its
debt.
A-2
AAA: Issuers or issues rated Aaa demonstrate the strongest creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
AA: Issuers or issues rated Aa demonstrate very strong creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
A: Issuers or issues rated A present above-average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
BAA: Issuers or issues rated Baa represent average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
BA: Issuers or issues rated Ba demonstrate below-average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
B: Issuers or issues rated B demonstrate weak creditworthiness relative to
other US municipal or tax-exempt issuers or issues.
CAA: Issuers or issues rated Caa demonstrate very weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
CA: Issuers or issues rated Ca demonstrate extremely weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
C: Issuers or issues rated C demonstrate the weakest creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa to Caa. The modifier 1 indicates that the issue
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic category.
MOODY'S MIG/VMIG US SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for
short-term obligations that are considered investment grade. These ratings are
designated as Moody's Investment Grade (MIG) and are divided into three levels -
MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality
are designated SG, or speculative grade.
In the case of variable rate demand obligations (VRDOs), a two-component
rating is assigned. The first element represents Moody's evaluation of the
degree of risk associated with scheduled principal and interest payments. The
second element represents Moody's evaluation of the degree of risk associated
with the demand feature, using the MIG rating scale.
The short-term rating assigned to the demand feature of VRDOs is designated
as VMIG. When either the long- or short-term aspect of a VRDO is not rated, that
piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG ratings expire at note maturity. By contrast, VMIG rating expirations
will be a function of each issue's specific structural or credit features.
Gradations of investment quality are indicated by rating symbols, with each
symbol representing a group in which the quality characteristics are broadly the
same.
A-3
MIG 1/VMIG 1: This designation denotes superior credit quality. Excellent
protection is afforded by established cash flows, highly reliable liquidity
support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of
protection are ample although not as large as in the preceding group.
MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and
cash flow protection may be narrow and market access for refinancing is likely
to be less well established.
SG: This designation denotes speculative-grade credit quality. Debt instruments
in this category may lack sufficient margins of protection.
STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS
Issue credit ratings are based in varying degrees, on the following
considerations: likelihood of payment - capacity and willingness of the obligor
to meet its financial commitment on an obligation in accordance with the terms
of the obligation; nature of and provisions of the obligation; and protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above.
S&P describes its ratings for corporate and municipal bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in a small degree.
A: Debt rated A has a strong capacity to meet its financial commitments although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions.
NR: Not Rated.
A-4
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or
demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, AAA/A-1+). With short-term demand debt, the note rating symbols are
used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
These categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated 'B' are regarded as having only speculative capacity for timely
payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless Standard & Poor's believes
such payments will be made during such grace period.
S&P SHORT-TERM MUNICIPAL RATINGS
An S&P note rating reflect the liquidity factors and market-access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note); and source of payment
(the more dependant the issue is on the market for its refinancing, the more
likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
A-5
SP-3: Speculative capacity to pay principal and interest.
FITCH LONG-TERM CREDIT RATINGS
Fitch Ratings provides an opinion on the ability of an entity or of a
securities issue to meet financial commitments, such as interest, preferred
dividends, or repayment of principal, on a timely basis. These credit ratings
apply to a variety of entities and issues, including but not limited to
sovereigns, governments, structured financings, and corporations; debt,
preferred/preference stock, bank loans, and counterparties; as well as the
financial strength of insurance companies and financial guarantors.
Credit ratings are used by investors as indications of the likelihood of
getting their money back in accordance with the terms on which they invested.
Thus, the use of credit ratings defines their function: "investment grade"
ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' -
'F3') indicate a relatively low probability of default, while those in the
"speculative" or "non-investment grade" categories (international Long-term 'BB'
- - 'D'; Short-term 'B' - 'D') either signal a higher probability of default or
that a default has already occurred. Ratings imply no specific prediction of
default probability. However, for example, it is relevant to note that over the
long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than
0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and
for 'B' rated bonds, 3.0%.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Entities or issues carrying the same rating are of similar but not
necessarily identical credit quality since the rating categories do not fully
reflect small differences in the degrees of credit risk.
Fitch credit and research are not recommendations to buy, sell or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
of taxability of payments of any security.
The ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch Ratings believes to be
reliable. Fitch Ratings does not audit or verify the truth or accuracy of such
information. Ratings may be changed or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
Our program ratings relate only to standard issues made under the program
concerned; it should not be assumed that these ratings apply to every issue made
under the program. In particular, in the case of non-standard issues, i.e.,
those that are linked to the credit of a third party or linked to the
performance of an index, ratings of these issues may deviate from the applicable
program rating.
Credit ratings do not directly address any risk other than credit risk. In
particular, these ratings do not deal with the risk of loss due to changes in
market interest rates and other market considerations.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong capacity for timely payment of financial
commitments, which is unlikely to be affected by foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor has a very strong capacity for timely payment of financial commitments
which is not significantly vulnerable to foreseeable events.
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
A-6
BBB: Bonds considered to be investment grade and of good credit quality. The
obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances are more
likely to impair this capacity.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of
information available to be inadequate for ratings purposes.
RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is
a reasonable possibility of a rating change and the likely direction of such
change. These are designated as "Positive," indicating a potential upgrade,
"Negative," for potential downgrade, or "Evolving," if ratings may be raised,
lowered or maintained. RatingWatch is typically resolved over a relatively short
period.
FITCH SPECULATIVE GRADE BOND RATINGS
BB: Bonds are considered speculative. There is a possibility of credit risk
developing, particularly as the result of adverse economic changes over time.
However, business and financial alternatives may be available to allow financial
commitments to be met.
B: Bonds are considered highly speculative. Significant credit risk is present
but a limited margin of safety remains. While bonds in this class are currently
meeting financial commitments, the capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC: Default is a real possibility. Capacity for meeting financial commitments
is solely reliant upon sustained, favorable business or economic developments.
CC: Default of some kind appears probable.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and are valued on the basis of their prospects
for achieving partial or full recovery value in liquidation or reorganization of
the obligor. "DDD" represents the highest potential for recovery on these bonds,
and "D" represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in categories below CCC.
FITCH SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings. A Short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
A-7
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as in
the case of the higher ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
A-8
APPENDIX B
PERSONS TO WHOM AIM PROVIDES
NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS
(AS OF APRIL 15, 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)
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 Trading Analytics Analyst
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 Chase 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)
Lehman Brothers, Inc. Broker (for certain AIM funds)
B-1
SERVICE PROVIDER DISCLOSURE CATEGORY
- ----------------------------------------------------- ---------------------------------------------------------------------
Lipper, Inc. 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)
MS Securities Services, Inc. and Morgan Stanley & Co. Securities Lender (for certain AIM funds)
Incorporated
McDonald Investments Inc. Broker (for certain AIM funds)
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)
Page International Financial Printer
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
Protective Securities Broker (for certain AIM funds)
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);
Securiti es 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 March 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 predecessor entities, if any.
TRUSTEE
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
INTERESTED PERSONS
Robert H. Graham(1) -- 1946 1992 Director and Chairman, A I M Management Group Inc. None
Trustee, Vice Chair, President (financial services holding company); Director and
and Principal Executive Officer Vice Chairman, AMVESCAP PLC; Chairman, AMVESCAP
PLC - AIM Division (parent of AIM and a global
investment management firm); and Trustee, Vice
Chair, President and Principal Executive Officer
of the AIM Family of Funds
Formerly: President and Chief Executive Officer,
A I M Management Group Inc.; Director, Chairman
and President, A I M Advisors, Inc. (registered
investment advisor); Director and Chairman, A I M
Capital Management, Inc. (registered investment
advisor), A I M Distributors, Inc. (registered
broker dealer), AIM Investment Services, Inc.,
(registered transfer agent), and Fund Management
Company (registered broker dealer); and Chief
Executive Officer, AMVESCAP PLC - Managed Products
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, None
Trustee and Executive Vice A I M Management Group Inc. (financial services
President holding company); Director, 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);
Chief Executive Officer, AMVESCAP PLC - AIM
Division (parent of AIM and a global investment
management firm); and Trustee and Executive Vice
President of the AIM Family of Funds
Formerly: Director, Chairman, President and Chief
Executive Officer, INVESCO Funds Group, Inc.; and
President and Chief Executive Officer, INVESCO
Distributors, Inc.; and 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
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
INDEPENDENT TRUSTEES
Bruce L. Crockett -- 1944 1987 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 2001 Retired Badgley Funds, Inc.
Trustee (registered
Formerly: Partner, law firm of Baker & McKenzie investment company)
(2 portfolios)
James T. Bunch - 1942 2003 Founder, Green, Manning & Bunch, Ltd. (investment None
Trustee banking firm); and Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
Albert R. Dowden -- 1941 2000 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
Jack M. Fields -- 1952 1997 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 1993 Partner, law firm of Kramer Levin Naftalis and Cortland Trust, Inc.
Trustee Frankel LLP (registered
investment company)
(3 portfolios)
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
C-2
TRUSTEE
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
Larry Soll, Ph.D. - 1942 2003 Retired None
Trustee
Raymond Stickel, Jr. - 1944 2005 Retired Director, Mainstay
Trustee VP Series Funds,
Formerly; Partner, Deloitte & Touche Inc. (21 portfolios)
OTHER OFFICERS
Russell C. Burk - 1958 2005 Senior Vice President and Senior Officer of the N/A
Senior Vice President and AIM Family of Funds
Senior Officer
Formerly: Director of Compliance and Assistant
General Counsel, ICON Advisers, Inc.; Financial
Consultants, Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual Funds, Inc.
John M. Zerr(3) - 1962 2006 Director, Senior Vice President, Secretary and N/A
Senior Vice President, Chief General Counsel, A I M Management Group Inc.
Legal Officer and Secretary (financial services holding company) and A I M
Advisors, Inc.; Director and Vice President,
INVESCO Distributors, Inc.; Vice President, A I M
Capital Management, Inc., 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)
- ----------
(3) Mr. Zerr was elected Senior Vice President, Chief Legal Officer and
Secretary effective March 29, 2006.
C-3
TRUSTEE
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
Lisa O. Brinkley - 1959 2004 Global Compliance Director, AMVESCAP PLC; and Vice N/A
Vice President 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, Chief Legal Officer
and Secretary of the AIM Family of Funds; and
Senior Vice President and General Counsel, Liberty
Financial Companies, Inc. and Liberty Funds Group,
LLC
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M Advisors, N/A
Vice President,Treasurer and Inc.; and Vice President, Treasurer and Principal
Principal Financial Officer Financial Officer of the AIM Family of Funds
Formerly: Senior Vice President, AIM Investment
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;
Executive Vice President, A I M Management Group
Inc.; and Vice President of the AIM Family of
Funds
Formerly: Senior Vice President, AIM Private Asset
Management, Inc.; and Chief Equity Officer and
Senior Investment Officer, A I M Capital
Management, Inc.
C-4
TRUSTEE
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
Karen Dunn Kelley - 1960 1992 Director of Cash Management, Managing Director and N/A
Vice President Chief Cash Management Officer, A I M Capital
Management, Inc.; Director and President, Fund
Management Company; Vice President, A I M
Advisors, Inc. and the AIM Family of Funds
Todd L. Spillane(4) - 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
- ----------
(4) Mr. Spillane was elected Chief Compliance Officer effective March 29, 2006.
C-5
TRUSTEE OWNERSHIP OF PORTFOLIO SHARES AS OF DECEMBER 31, 2005
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
DOLLAR RANGE OF EQUITY SECURITIES INVESTMENT COMPANIES OVERSEEN BY
NAME OF TRUSTEE PER PORTFOLIO TRUSTEE IN THE AIM FAMILY OF FUNDS(R)
--------------- ------------------------------------------------ -------------------------------------
Robert H. Graham Basic Balanced Over $100,000 Over $100,000
Premier Equity $50,001 - $100,000
Small Cap Equity Over $100,000
Mark H. Williamson European Small Company $50,001 - $100,000 Over $100,000
International Small Company Over $100,000
Bob R. Baker European Small Company $50,001 - $100,000 Over $100,000
International Small Company Over $100,000
Frank S. Bayley European Small Company $10,001 - $50,000 Over $100,000
James T. Bunch -0- Over $100,000(5)
Bruce L. Crockett International Small Company $10,001 - $50,000 Over $100,000(5)
Mid Cap Basic Value $10,001 - $50,000
Premier Equity $1 - $10,000
Select Equity $1 - $10,000
Small Cap Equity $10,001 - $50,000
Albert R. Dowden Small Cap Equity $10,001 - $50,000 Over $100,000
Edward K. Dunn, Jr.(6) European Small Company $10,001 - $50,000 Over $100,000(5)
International Small Company $10,001 - $50,000
Jack M. Fields Premier Equity Over $100,000 Over $100,000(5)
Carl Frischling European Small Company Over $100,000 Over $100,000(5)
International Small Company Over $100,000
Premier Equity $50,001 - $100,000
Select Equity Over $100,000
Prema Mathai-Davis European Small Company $10,001 - $50,000 Over $100,000(5)
Lewis F. Pennock Basic Balanced $10,001 - $50,000 Over $100,000
Global Value $10,001 - $50,000
Select Equity $1 - $10,000
Ruth H. Quigley European Small Company $1 - $10,000 $50,001 - $100,000
International Small Company $1 - $10,000
Larry Soll Basic Balanced $10,001 - $50,000 Over $100,000(5)
International Small Company $10,001 - $50,000
Raymond Stickel, Jr.(7) -0- Over $100,000
- ----------
(5) Includes the total amount of compensation deferred by the trustee at his or
her election pursuant to a deferred compensation plan. Such deferred
compensation is placed in a deferral account and deemed to be invested in
one or more of the AIM Funds.
(6) Mr. Dunn retired as a trustee of the Trust effective March 31, 2006.
(7) Mr. Stickel was elected as a trustee of the Trust effective October 1,
2005.
C-6
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 ESTIMATED
BENEFITS ANNUAL BENEFITS TOTAL
AGGREGATE ACCRUED UPON RETIREMENT COMPENSATION
COMPENSATION FROM BY ALL FROM ALL AIM FROM ALL
TRUSTEE THE TRUST(1) AIM FUNDS(2) FUNDS(3) AIM FUNDS(4)
------- ----------------- ------------ --------------- ------------
Bob R. Baker $17,533 $200,136 $162,613 $213,750
Frank S. Bayley 18,786 132,526 120,000 229,000
James T. Bunch 16,280 162,930 120,000 198,500
Bruce L. Crockett 29,445 83,764 120,000 359,000
Albert R. Dowden 18,786 112,024 120,000 229,000
Edward K. Dunn, Jr. (5) 18,786 141,485 120,000 229,000
Jack M. Fields 15,174 59,915 120,000 185,000
Carl Frischling(6) 16,020 59,042 120,000 195,250
Gerald J. Lewis(5) 16,280 162,930 114,375 198,500
Prema Mathai-Davis 17,533 69,131 120,000 213,750
Lewis F. Pennock 16,280 86,670 120,000 198,500
Ruth H. Quigley 17,533 154,658 120,000 213,750
Larry Soll 16,280 201,483 138,990 198,500
Raymond Stickel, Jr.(7) 4,288 -- 120,000 54,000
(1) Amounts shown are based on the fiscal year ended December 31, 2005. The
total amount of compensation deferred by all trustees of the Trust during
the fiscal year ended December 31, 2005, including earnings, was $60,727.
(2) During the fiscal year ended December 31, 2005, the total amount of
expenses allocated to the Trust in respect of such retirement benefits was
$152,755.
(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) Mr. Dunn and Mr. Lewis retired as trustees effective March 31, 2006 and
December 31, 2005, respectively.
(6) During the fiscal year ended December 31, 2005 the Trust paid $37,533 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.
(7) Mr. Stickel was elected as a 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.
E-3
4. All communications regarding proxy issues between the proxy committee
and companies or their agents, or with fellow shareholders shall be
for the sole purpose of expressing and discussing AIM's concerns for
its advisory clients' interests and not for an attempt to influence or
control management.
C. BUSINESS/DISASTER RECOVERY
If the proxy committee is unable to meet due to a temporary business
interruption, such as a power outage, a sub-committee of the proxy
committee, even if such subcommittee does not constitute a quorum of the
proxy committee, may vote proxies in accordance with the policies stated
herein. If the sub-committee of the proxy committee is not able to vote
proxies, the sub-committee shall authorize ISS to vote proxies by default
in accordance with ISS' proxy policies and procedures, which may vary
slightly from AIM's.
D. RESTRICTIONS AFFECTING VOTING
If a country's laws allow a company in that country to block the sale of
the company's shares by a shareholder in advance of a shareholder meeting,
AIM will not vote in shareholder meetings held in that country, unless the
company represents that it will not block the sale of its shares in
connection with the meeting. Administrative or other procedures, such as
securities lending, may also cause AIM to refrain from voting. Although AIM
considers proxy voting to be an important shareholder right, the proxy
committee will not impede a portfolio manager's ability to trade in a stock
in order to vote at a shareholder meeting.
E. CONFLICTS OF INTEREST
The proxy committee reviews each proxy to assess the extent to which there
may be a material conflict between AIM's interests and those of advisory
clients. A potential conflict of interest situation may include where AIM
or an affiliate manages assets for, administers an employee benefit plan
for, provides other financial products or services to, or otherwise has a
material business relationship with, a company whose management is
soliciting proxies, and failure to vote proxies in favor of management of
the company may harm AIM's relationship with the company. In order to avoid
even the appearance of impropriety, the proxy committee will not take AIM's
relationship with the company into account, and will vote the company's
proxies in the best interest of the advisory clients, in accordance with
these proxy policies and procedures.
If AIM's proxy policies and voting record do not guide the proxy
committee's vote in a situation where a conflict of interest exists, the
proxy committee will vote the proxy in the best interest of the advisory
clients, and will provide information regarding the issue to the Funds'
Board of Trustees in the next quarterly report.
If a committee member has any conflict of interest with respect to a
company or an issue presented, that committee member should inform the
proxy committee of such conflict and abstain from voting on that company or
issue.
F. FUND OF FUNDS
When an AIM Fund (an "Investing Fund") that invests in another AIM Fund(s)
(an "Underlying Fund") has the right to vote on the proxy of the Underlying
Fund, the Investing Fund will echo the votes of the other shareholders of
the Underlying AIM Fund.
G. CONFLICT IN THESE POLICIES
If following any of the policies listed herein would lead to a vote that
the proxy committee deems to be not in the best interest of AIM's advisory
clients, the proxy committee will vote the proxy in the manner that they
deem to be the best interest of AIM's advisory clients and will inform the
Funds' Board of Trustees of such vote and the circumstances surrounding it
promptly thereafter.
E-4
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 April 6, 2006.
AIM BASIC BALANCED FUND
CLASS A CLASS B CLASS C CLASS R INVESTOR INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
- ------------------- ---------- ---------- ---------- ---------- ------------ -------------
AIM Advisors Inc.
Attn: Corporate Controller
11 E Greenway Plaza., Ste. 1919
Houston, TX 77046-1103 -- -- -- -- -- 24.96%*
AMVESCAP National Trust
Company FBO AIM Management Group
Non Qualified Deferred Comp Plan
P.O. Box 105779
Atlanta, GA 30348-5779 62.15%
Counsel Trust FBO Crittenden
Health Systems 401k Savings Plan
235 St. Charles Way, Suite 100
York, PA 17402-4658 -- -- -- 8.36% -- --
F-1
CLASS A CLASS B CLASS C CLASS R INVESTOR INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
- ------------------- ---------- ---------- ---------- ---------- ------------ -------------
INVESCO Funds Group Inc.
ATTN: Corporate Controller
11 E Greenway Plz., Ste. 1919
Houston, TX 77046-1103 -- -- -- -- -- 12.89%
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East, 2nd Floor
Jacksonville, FL 32246-6484 6.47% 5.54% 10.18% -- -- --
MG Trust Co. CUST
Fresh Meadow Mechanical Corp.
700 17th St. Ste. 300
Denver, CO 80202-3531 -- -- -- 7.09% -- --
Reliance Trust Co. CUST FBO
Tahoe Regional Planning Agency
P.O. Box 48529
Atlanta, GA 30362-1529 -- -- -- 8.65% -- --
Charles Schwab & Co Inc
Special Custody Acct for the
Exclusive Benefit of Customers
Attn: Mutual Funds 101 Montgomery
St. San Francisco, CA 94104-4122 14.93%
F-2
CLASS A CLASS B CLASS C CLASS R INVESTOR INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
- ------------------- ---------- ---------- ---------- ---------- ------------ -------------
Symetra Investment Services Inc.
P.O. Box 34443
Seattle, WA 98124-1443 -- -- -- 20.50% -- --
* Owned of record and beneficially.
AIM EUROPEAN SMALL COMPANY FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
- ------------------- ------------------- ------------------- -------------------
Citigroup Global Markets
ATTN: Cindy Tempesta 7th Fl
333 34th St. New York,
NY 10001-2402 -- 6.09% 5.00%
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East 2nd Fl
Jacksonville, FL 32246-6484 7.61% -- 17.01%
Morgan Stanley DW
ATTN: Mutual Fund Operations
3 Harborside Pl. Fl 6
Jersey City, NJ 07311-3907 -- -- 5.20%
F-3
AIM GLOBAL VALUE FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ----------------
AIM International Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plaza, Suite 100
Houston, TX 77046-1113 -- -- -- 99.92%
Charles Schwab & CO. Inc.
Special Custody FBO Customers (SIM)
ATTN: Mutual Funds
101 Montgomery St.
San Francisco, CA 94014-4122 12.61% -- -- --
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East, 2nd Fl
Jacksonville, FL 32246-6484 7.82% 8.61% 14.12% --
AIM INTERNATIONAL SMALL COMPANY FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ----------------
AIM International Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plaza, Suite 100
Houston, TX 77046-1113 -- -- -- 99.70%
Citigroup Global Markets
ATTN: Cindy Tempesta 7th Fl
333 34th St.
New York, NY 10001-2402 -- 10.28% 11.71% --
F-4
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ----------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East
2nd Fl
Jacksonville, FL 32246-6484 15.53% 6.86% 20.45% --
Morgan Stanley DW
Attn: Mutual Fund Operations
3 Harborside Pl. Fl 6
Jersey City, NJ 07311-3907 -- 8.19% 6.55% --
AIM MID CAP BASIC VALUE FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ---------------- ----------------
AIM Advisors Inc.
Attn: Corporate Controller
11 E Greenway Plaza., Ste. 1919
Houston, TX 77046-1103 -- -- -- 6.02% --
AIM Moderate Asset Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plz., Ste. 100
Houston, TX 77046-1113 -- -- -- -- 78.58%
AIM Moderate Growth Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plz., Ste. 100
Houston, TX 77046-1113 -- -- -- -- 17.46%
F-5
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ---------------- ----------------
American Congress on Surveying
Curtis Wayne Sumner
3155 Kinross Cir.
Herndon, VA 20171-4042 -- -- -- 8.45% --
Diamond Speed Products Inc.
Gene Jenke
1631 S. Michigan Ave Apt. 201
Chicago, IL 60616-1252 -- -- -- 11.17% --
Doy Tech Inc.
Jun Yuan Deng
38594 Whitman Ter.
Fremont, CA 94536-6055 -- -- -- 9.76% --
Donna M. Lambert
Donna M. Lambert -- -- -- 5.00% --
660 Cardinal St.
Plantation, FL 33324-8213
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East,
2nd Fl
Jacksonville, FL 32246-6484 -- -- 6.09% 13.60% --
New Foundations Consulting
Richard M. Tapply
78 Old Lake Shore Rd.
Gilford, NH 03249-6522 -- -- -- 11.13% --
Spin Vision Inc.
Scott M Spicer
A1 Country Club Road
East Rochester, NY 14445-2257 -- -- -- 5.39% --
F-6
AIM SELECT EQUITY FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ----------------
Citigroup Global Markets
ATTN: Cindy Tempesta 7th Fl
333 34th St.
New York, NY 10001-2402 5.57% -- 5.74%
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East, 2nd Fl
Jacksonville, FL 32246-6484 5.29% -- 6.20%
AIM SMALL CAP EQUITY FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ---------------- ----------------
AIM Moderate Growth Allocation
Fund Omnibus Account
c/o AIM Advisors
11 E. Greenway Plz., Ste. 100
Houston, TX 77046-1113 -- -- -- -- 99.85%
Hartford Life Insurance Co.
Separate Account 401k
P.O. Box 2999
Hartford, CT 06104-2999 -- -- -- 11.78% --
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East
2nd Fl
Jacksonville, FL 32246-6484 6.70% -- 13.07% -- --
F-7
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ---------------- ----------------
MG Trustco Ttee
Godwin Pappas Langley Ronquillo LL
700 17th Street, Suite 300
Denver, CO 80202-3531 -- -- -- 7.91% --
Reliance Trust Co.
FBO Knightsbridge Solutions 401k -- -- -- 5.20% --
P.O. Box 48529
Atlanta, GA 30362-1529
Symetra Investments Inc.
P.O. Box 34443
Seattle, WA 98124-1443 -- -- -- 10.26% --
MANAGEMENT OWNERSHIP
As of April 6, 2006, the trustees and officers as a group owned less than
1% of the outstanding shares of each class of each Portfolio.
F-8
APPENDIX G
MANAGEMENT FEES
For the last three fiscal years ended December 31, the management fees payable
by each Fund, the amounts waived by AIM and the net fees paid by each Fund were
as follows:
2005 2004 2003
---------------------------------- ---------------------------------- ----------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT NET
FEE FEE MANAGEMENT FEE FEE MANAGEMENT FEE FEE MANAGEMENT
FUND NAME PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AIM Basic Balanced
Fund $5,363,006 $ 27,926 $5,335,080 $1,094,829 $ 292 $1,094,537 $ 762,772 $ 87,087 $ 675,685
AIM European Small
Company Fund 3,641,450 95,494 3,545,956 898,035 908 897,127 329,310 235,934 93,376
AIM Global Value Fund 1,048,456 66,341 982,115 310,539 49,124 261,415 119,494 119,494 -0-
AIM International
Small Company Fund 4,891,684 153,257 4,738,427 1,828,269 1,642 1,826,627 433,171 158,359 274,812
AIM Mid Cap Basic
Value Fund 1,852,909 129,266 1,723,643 1,259,409 1,532 1,257,877 585,948 87,608 498,340
AIM Select Equity Fund 2,866,180 15,623 2,850,557 3,284,662 3,147 3,281,515 3,333,532 4,384 3,329,148
AIM Small Cap Equity
Fund 3,735,906 491,753 3,244,153 4,233,084 3,093 4,229,991 3,062,023 3,786 3,058,237
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 December 31, 2005:
DOLLAR OTHER REGISTERED MUTUAL OTHER POOLED INVESTMENT OTHER ACCOUNTS
RANGE FUNDS (ASSETS IN MILLIONS) VEHICLES (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2)
OF -------------------------- ----------------------------- -----------------------
INVESTMENTS NUMBER NUMBER NUMBER
IN EACH OF OF OF
PORTFOLIO MANAGER FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ------------------ ----------- -------- --------- -------- -------- -------- --------
AIM BASIC BALANCED FUND
R. Canon
Coleman II $1-$10,000 7 $ 8,048.6 1 $ 16.7 3137 $977.7
Jan H. Friedli None 5 $ 1,276.2 2 $ 748.1 None None
Scot W. Johnson $10,001-
$50,000 8 $ 3,042.5 2 $ 748.1 None None
Matthew
Seinsheimer $10,001-
$50,000 7 $ 8,048.6 1 $ 16.7 3137 $977.7
Michael Simon None 11 $ 9,332.3 1 $ 16.7 3137 $977.7
Bret Stanley None 10 $17,132.9 1 $ 16.7 3137 $977.7
AIM EUROPEAN SMALL COMPANY FUND
Borge Endresen $10,001-
$50,000 4 $ 2,885.6 3 $ 125.2 None None
Jason T. Holzer over
$1,000,000 8 $ 5,456.5 10 $2,574.4 692 $289.6
AIM GLOBAL VALUE FUND
Glen Hilton None None None 3 $1,262.3 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 models.
H-1
DOLLAR OTHER REGISTERED MUTUAL OTHER POOLED INVESTMENT OTHER ACCOUNTS
RANGE FUNDS (ASSETS IN MILLIONS) VEHICLES (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2)
OF -------------------------- ----------------------------- -----------------------
INVESTMENTS NUMBER NUMBER NUMBER
IN EACH OF OF OF
PORTFOLIO MANAGER FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ------------------ ----------- -------- --------- -------- -------- -------- --------
AIM INTERNATIONAL SMALL COMPANY
Shuxin Cao $50,001-
$100,000 8 $ 4,520.1 1 $ 30.6 692 $ 289.6
Borge Edresen $10,001-
$50,000 4 $ 2,649.8 3 $ 125.2 None None
Jason T. Holzer $500,001-
$1,000,000 8 $ 5,220.7 10 $2,574.4 692 $ 289.6
Richard Nield $10,001-
$50,000 1 $ 955.1 7 $2,475.5 None None
AIM MID CAP BASIC VALUE FUND
R. Canon
Coleman III $10,001-
$50,000 7 $ 9,746.7 1 $ 16.7 3137 $ 977.7
Matthew W. $100,001-
Seinsheimer $500,000 7 $ 9,746.7 1 $ 16.7 3137 $ 977.7
Michael Simon $100,001-
$500,000 11 $11,030.4 1 $ 16.7 3137 $ 977.7
Bret Stanley $500,001-
$1,000,000 10 $18,831.0 1 $ 16.7 3137 $ 977.7
AIM PREMIER EQUITY FUND
Lanny H.
Sachnowitz None 14 $13,508.7 1 $ 68.4 212 $ 30.6
Ronald S. Sloan None 9 $ 9,967.8 1 $ 11.1 9451 $2,220.0
Bret W. Stanley None 10 $13,920.6 1 $ 16.7 3137 $ 977.7
AIM SELECT EQUITY FUND
Derek Izuel None 4 $ 884.8 6 $ 901.9 None None
Duy Nguyen $10,001-
$50,000 4 $ 884.8 6 $ 901.9 None None
AIM SMALL CAP EQUITY FUND
Juliet Ellis $100,001-
$500,000 8 $ 2,585.8 None None None None
Juan Hartsfield(3) None 7 $ 2,542.5 None None None None
POTENTIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager
has day-to-day management responsibilities with respect to more than one Fund or
other account. More specifically, portfolio managers who manage multiple Funds
and /or other accounts may be presented with one or more of the following
potential conflicts:
- ----------
(3) Mr. Hartsfield began serving as a portfolio manager on AIM Small Cap Equity
Fund on May 1, 2006.
H-2
- - 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.
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.
DESCRIPTION OF COMPENSATION STRUCTURE
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.
H-3
High fund performance (against applicable peer group) would deliver
compensation generally associated with top pay in the industry (determined
by reference to the third-party provided compensation survey information)
and poor fund performance (versus applicable peer group) could result in no
bonus. The amount of fund assets under management typically has an impact
on the bonus potential (for example, managing more assets increases the
bonus potential); however, this factor typically carries less weight than
relative performance. 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.
H-4
APPENDIX I
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the
last three fiscal years ended December 31:
FUND NAME 2005 2004 2003
--------- -------- -------- --------
AIM Basic Balanced Fund $280,598 $ 50,000 $ 50,000
AIM European Small Company Fund 108,161 50,000 50,000
AIM Global Value Fund 50,000 50,000 50,000
AIM International Small Company Fund 140,293 50,000 50,000
AIM Mid Cap Basic Value Fund 93,271 50,000 50,000
AIM Select Equity Fund 115,815 131,215 133,014
AIM Small Cap Equity Fund 137,856 144,542 112,855
I-1
APPENDIX J
BROKERAGE COMMISSIONS
Brokerage commissions(1) paid by each of the Funds listed below during the
last three fiscal years ended December 31 were as follows:
FUND 2005 2004 2003
- --------------------------------------- ---------- ---------- ----------
AIM Basic Balanced Fund(2) $ 256,812 $ 69,379 $ 64,027
AIM European Small Company Fund(3) 1,084,123 422,682 196,726
AIM Global Value Fund(4) 367,969 263,911 229,443
AIM International Small Company Fund(5) 1,791,061 1,276,368 408,813
AIM Mid Cap Basic Value Fund 161,856 180,373 143,936
AIM Select Equity Fund(6) 518,323 637,302 1,367,378
AIM Small Cap Equity Fund(7) 727,084 2,275,749 1,690,283
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 commissions paid by AIM Basic Balanced Fund for
the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 can be attributed to higher turnover. The
turnover ratio increased from 64% for the fiscal year ended December 31,
2004 to 90% for the fiscal year ended December 31, 2005.
3 The variation in brokerage commissions paid by European Small Company Fund
for the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 can be attributed to an increase in new net
flows seen by the Fund during the period. The variation in brokerage
commissions paid by AIM European Small Company Fund for the fiscal year
ended December 31, 2004 as compared to the prior fiscal year ended December
31, 2003 can be attributed to the Fund's high fluctuation in flows during
the 2003 period.
4 The variation in brokerage commissions paid by AIM Global Value Fund for
the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 was due to an increase in new net flows seen
by the Fund during the period.
5 The variation in brokerage commissions paid by AIM International Small
Company Fund for fiscal year ended December 31, 2005 as compared to the
prior fiscal year ended December 31, 2004 was due to an increase in new net
flows seen by the Fund during the period. The variation in brokerage
commissions paid by AIM International Small Company Fund for fiscal year
ended December 31, 2004 as compared to the fiscal year ended December 31,
2003 was predominantly due to the significant increase in new net flows as
seen by the Fund toward the end of 2004.
6 The variation in brokerage commissions paid by AIM Select Equity Fund for
the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 was due to an increase in the use of program
trades, which generally involve lower commissions than agency trades. The
variation of brokerage commissions paid by AIM Select Equity Fund for the
fiscal year end December 31, 2004 as compared to the prior fiscal year
ended December 31, 2003 can be attributed to the realignment of the Fund's
portfolio in 2003 by the Fund's current management team.
7 The variation in brokerage commissions paid by AIM Small Cap Equity Fund
for the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 was due to the lower turnover from 124% to 52%
resulting in lower trading costs. The variation in brokerage commissions
paid by AIM Small Cap Equity Fund for the fiscal year ended December 31,
2004 as compared to the prior fiscal year ended December 31, 2003 was due
to an increase in transactions executed with commissions as a result of the
realignment of the Fund's portfolio to fit the investment process of the
current management team that assumed management of the Fund in September of
2004.
J-1
APPENDIX K
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended December 31, 2005, each Fund allocated
the following amount of transactions to broker-dealers that provided AIM with
certain research, statistics and other information:
Related Brokerage
Fund Transactions(1) Commissions(1)
- ------------------------------------ --------------- -----------------
AIM Basic Balanced Fund $373,253,135 $ 528,596
AIM European Small Company Fund 519,391,105 1,177,387
AIM Global Value Fund 167,541,130 370,555
AIM International Small Company Fund 658,123,550 2,296,851
AIM Mid Cap Basic Value Fund 106,427,318 169,572
AIM Select Equity Fund 684,812,547 478,909
AIM Small Cap Equity Fund 308,656,464 1,687,445
(1) Amount is inclusive of commission paid to and brokerage transactions placed
with certain brokers that provide execution, research and other services.
During the last fiscal year ended December 31, 2005, the Funds purchased
securities issued by the following companies, which are "regular" brokers or
dealers of one or more of the Funds identified below:
Market Value (as of
Fund/Issuer Security December 31, 2005)
- -------------------------------------- ----------------------- -------------------
AIM Basic Balanced Fund
Bank of New York Co., Inc. (The) Common Stock $24,624,509
JPMorgan Chase & Co. Common Stock 43,735,125
Merrill Lynch & Co., Inc. Common Stock 24,659,816
Morgan Stanley Common Stock 26,324,523
ABN AMRO Preferred Stock, 5,900,000
UBS Preferred Funding Trust I Preferred Stock 1,368,248
Bank of America Mortgage Securities Asset-Backed Securities 1,373,187
Credit Suisse First Boston Mortgage
Securities Corp. Asset-Backed Securities 6,067,942
Morgan Stanley Mortgage Loan Trust Asset-Backed Securities 1,848,569
Lehman Brothers Inc. Bonds & Notes 1,062,001
AIM Select Equity Fund
Bank of America Corp. Common Stock $12,802,010
Goldman Sachs Group, Inc. (The) Common Stock 1,979,505
Lehman Brothers Holdings Inc. Common Stock 3,704,113
Merrill Lynch & Co., Inc. Common Stock 2,282,501
Morgan Stanley Common Stock 2,184,490
State Street Corp. Common Stock 698,544
K-1
APPENDIX L
CERTAIN FINANCIAL ADVISORS THAT RECEIVE ONE OR MORE TYPES OF PAYMENTS
1st 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
Legg 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 Fianancial Corporation
Signator Investors, Inc.
Spelman & Company, Inc.
State Farm VP Management Corp
Stifel Nicolaus & Company, Inc.
SunAmerica Securities, 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 December 31, 2005 follows:
INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS
FUND SHARES SHARES SHARES SHARES SHARES
- ------------------------------------ ---------- ---------- ---------- ------- --------
AIM Basic Balanced Fund(1) $1,166,814 $2,918,775 $1,054,623 $14,866 $431,604
AIM European Small Company Fund 773,147 453,236 549,167 N/A N/A
AIM Global Value Fund 193,365 387,057 172,371 N/A N/A
AIM International Small Company Fund 979,597 656,745 819,334 N/A N/A
AIM Mid Cap Basic Value Fund 362,707 656,543 286,200 395 N/A
AIM Select Equity Fund 672,000 1,222,895 254,994 N/A N/A
AIM Small Cap Equity Fund 678,339 1,383,549 589,989 75,527 N/A
(1) Investor Class shares of AIM Basic Balanced Fund commenced sales 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 December 31, 2005 follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $4,264 $465 $ 731 $-0- $1,142,269 $18,305 $ 780
AIM European Small Company Fund 8,202 683 2,343 -0- 728,962 30,897 2,060
AIM Global Value Fund 3,124 352 435 -0- 174,572 14,339 543
AIM International Small Company Fund 7,387 743 1,617 -0- 936,522 31,540 1,788
AIM Mid Cap Basic Value Fund 7,323 814 1,507 -0- 319,010 32,848 1,205
AIM Select Equity Fund -0- -0- -0- -0- 672,000 -0- -0-
AIM Small Cap Equity Fund 4,338 466 832 -0- 653,299 18,572 832
An estimate by category of the allocation of actual fees paid by Class B
shares of the Funds during the year ended December 31, 2005, follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $3,919 $415 $ 768 $2,189,081 $707,530 $16,239 $ 823
AIM European Small Company Fund 5,040 531 1,311 339,927 86,765 18,679 983
AIM Global Value Fund 1,481 188 418 290,293 88,205 6,472 -0-
AIM International Small Company Fund 7,056 738 1,641 492,558 126,856 26,665 1,231
AIM Mid Cap Basic Value Fund 2,351 293 406 492,407 152,754 8,126 203
AIM Select Equity Fund 2,032 201 418 917,171 293,448 9,067 558
AIM Small Cap Equity Fund 2,030 212 354 1,037,662 333,973 8,847 472
An estimate by category of the allocation of actual fees paid by Class C
shares of the Funds during the year ended December 31, 2005, follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $ 2,411 $ 255 $ 584 $ 53,766 $987,020 $10,170 $ 417
AIM European Small Company Fund 12,805 1,050 3,646 282,192 195,515 50,313 3,646
AIM Global Value Fund 2,276 276 511 58,204 99,105 11,488 511
AIM International Small Company Fund 16,502 1,471 4,493 377,433 346,318 68,624 4,493
AIM Mid Cap Basic Value Fund 3,375 293 815 74,589 192,862 13,858 408
AIM Select Equity Fund 455 -0- -0- 17,059 233,613 3,867 -0-
AIM Small Cap Equity Fund 2,006 273 380 38,745 541,178 7,217 190
An estimate by category of the allocation of actual fees paid by Class R
shares of the Funds during the year ended December 31, 2005, follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $ 218 $ 22 $ 60 $ 2,154 $11,574 $ 778 $ 60
AIM Mid Cap Basic Value Fund 9 2 3 132 161 85 3
AIM Small Cap Equity Fund 1,402 153 283 14,424 53,608 5,374 283
An estimate by category of the allocation of actual fees paid by Investor
Class shares of the Funds during the year ended December 31, 2005, follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $-0- $-0- $-0- $-0- $431,604 $-0- $-0-
N-1
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 ended December 31:
2005 2004 2003
--------------------- --------------------- ---------------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT
FUND CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
- ------------------------------------ ---------- -------- ---------- -------- ---------- --------
AIM Basic Balanced Fund $ 421,957 $ 77,055 $ 249,452 $ 44,826 $ 293,619 $ 54,699
AIM European Small Company Fund 1,347,942 219,114 581,044 90,095 74,772 11,964
AIM Global Value Fund 539,372 86,739 219,891 35,815 50,688 8,617
AIM International Small Company Fund 1,023,499 172,425 1,046,746 164,316 155,527 25,330
AIM Mid Cap Basic Value Fund 441,097 72,594 609,599 99,857 242,365 37,836
AIM Select Equity Fund 193,630 33,228 263,703 47,026 243,262 40,200
AIM Small Cap Equity Fund 429,372 82,687 415,868 69,295 1,037,324 161,868
The following chart reflects the contingent deferred sales charges paid by
Class A, Class B and Class C and Class R shareholders and retained by AIM
Distributors for the last three fiscal years ended December 31:
FUND 2005 2004 2003
- ------------------------------------ -------- -------- -------
AIM Basic Balanced Fund $112,301 $ 11,417 $ 3,417
AIM European Small Company Fund 242,494 56,226 11,872
AIM Global Value Fund 22,214 1,174 402
AIM International Small Company Fund 106,955 105,085 2,977
AIM Mid Cap Basic Value Fund 31,442 24,965 13,288
AIM Select Equity Fund 41,765 21,252 3,017
AIM Small Cap Equity Fund 45,119 44,636 11,190
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
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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.
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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
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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.
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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
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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 March 1, 2006, the MDL Court entered orders on Defendants' Motions to
dismiss in the derivative (Essenmacher) and class action (Lepera) lawsuits. The
MDL Court dismissed all derivative causes of action in the Essenmacher lawsuit
but two: (i) the excessive fee claim under Section 36(b) of the Investment
Company Act of 1940 (the "1940 Act"); and (ii) the "control person liability"
claim under Section 48 of the 1940 Act. The MDL Court dismissed all claims
asserted in the Lepera class action lawsuit 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 "control person liability" claim under Section
48 of the 1940 Act. Based on the MDL Court's March 1, 2006 orders, all claims
asserted against the Funds that have been transferred to the MDL Court have been
dismissed, although certain Funds remain nominal defendants in the derivative
(Essenmacher) lawsuit.
On February 27, 2006, Judge Motz for the MDL Court issued a memorandum
opinion on the AMVESCAP defendants' motion to dismiss the ERISA (Calderon)
lawsuit. Judge Motz granted the motion in part and denied the motion in part,
holding that: (i) plaintiff has both constitutional and statutory standing to
pursue her claims under ERISA Section 502(a)(2); (ii) plaintiff lacks standing
under ERISA Section 502(a)(3) to obtain equitable relief; (iii) the motion is
granted as to the claims alleged under ERISA Section 404 for failure to
prudently and loyally manage plan assets against certain AMVESCAP defendants;
(iv) the motion is denied as to the claims alleged under ERISA Section 404 for
failure to prudently and loyally manage plan assets against AMVESCAP and certain
other AMVESCAP defendants. The opinion also: (i) confirmed plaintiff's
abandonment of her claims that defendants engaged in prohibited transactions
and/or misrepresentation; (ii) postponed consideration of the duty to monitor
and co-fiduciary duty claims until after any possible amendments to the
complaints; (iii) stated that plaintiff may seek leave to amend her complaint
within 40 days of the date of filing of the memorandum opinion. Judge Motz
requested that the parties submit proposed orders within 30 days of the opinion
implementing his rulings.
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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. The parties are briefing
this issue for the MDL Court's consideration and final decision.
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.
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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
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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
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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
AIM SMALL CAP EQUITY FUND
SCHEDULE OF INVESTMENTS
June 30, 2006
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.91%
AEROSPACE & DEFENSE-0.98%
Curtiss-Wright Corp. 142,323 $ 4,394,934
=======================================================================
AIR FREIGHT & LOGISTICS-0.77%
UTI Worldwide, Inc. 136,448 3,442,583
=======================================================================
APPAREL RETAIL-2.88%
Christopher & Banks Corp. 151,911 4,405,419
- -----------------------------------------------------------------------
Gymboree Corp. (The)(a) 134,071 4,660,308
- -----------------------------------------------------------------------
Stage Stores, Inc. 115,613 3,815,229
=======================================================================
12,880,956
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.36%
Volcom, Inc.(a) 50,967 1,630,434
=======================================================================
APPLICATION SOFTWARE-3.52%
Epicor Software Corp.(a) 332,995 3,506,437
- -----------------------------------------------------------------------
Hyperion Solutions Corp.(a) 131,501 3,629,428
- -----------------------------------------------------------------------
Intergraph Corp.(a) 84,643 2,665,408
- -----------------------------------------------------------------------
Transaction Systems Architects, Inc.(a) 142,663 5,947,621
=======================================================================
15,748,894
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.87%
Affiliated Managers Group, Inc.(a)(b) 45,014 3,911,266
=======================================================================
AUTOMOTIVE RETAIL-0.88%
Midas, Inc.(a) 213,612 3,930,461
=======================================================================
BIOTECHNOLOGY-0.79%
Cubist Pharmaceuticals, Inc.(a) 98,640 2,483,755
- -----------------------------------------------------------------------
CV Therapeutics, Inc.(a)(b) 74,426 1,039,731
=======================================================================
3,523,486
=======================================================================
BUILDING PRODUCTS-2.01%
Goodman Global, Inc.(a) 271,960 4,128,353
- -----------------------------------------------------------------------
NCI Building Systems, Inc.(a) 68,791 3,657,617
- -----------------------------------------------------------------------
Quixote Corp. 66,492 1,198,186
=======================================================================
8,984,156
=======================================================================
CASINOS & GAMING-0.80%
Pinnacle Entertainment, Inc.(a) 117,626 3,605,237
=======================================================================
CATALOG RETAIL-0.80%
PetMed Express, Inc.(a) 325,591 3,571,733
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.48%
Black Box Corp. 89,069 $ 3,414,015
- -----------------------------------------------------------------------
Packeteer, Inc.(a) 283,971 3,220,231
=======================================================================
6,634,246
=======================================================================
COMPUTER STORAGE & PERIPHERALS-0.57%
Emulex Corp.(a) 157,378 2,560,540
=======================================================================
CONSTRUCTION & ENGINEERING-2.16%
Infrasource Services Inc.(a) 236,750 4,311,217
- -----------------------------------------------------------------------
URS Corp.(a) 92,765 3,896,130
- -----------------------------------------------------------------------
Williams Scotsman International Inc.(a) 67,413 1,472,300
=======================================================================
9,679,647
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.87%
Manitowoc Co., Inc. (The) 87,830 3,908,435
=======================================================================
CONSUMER FINANCE-0.97%
World Acceptance Corp.(a) 122,513 4,351,662
=======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.40%
BISYS Group, Inc. (The)(a) 306,281 4,196,050
- -----------------------------------------------------------------------
Wright Express Corp.(a) 228,194 6,558,295
=======================================================================
10,754,345
=======================================================================
DIVERSIFIED CHEMICALS-1.07%
FMC Corp. 74,625 4,805,104
=======================================================================
DIVERSIFIED METALS & MINING-1.00%
Compass Minerals International, Inc. 179,757 4,484,937
=======================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-2.11%
Genlyte Group Inc. (The)(a) 83,163 6,023,496
- -----------------------------------------------------------------------
Hubbell Inc.-Class B 71,850 3,423,653
=======================================================================
9,447,149
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-0.95%
Park Electrochemical Corp. 165,352 4,257,814
=======================================================================
ENVIRONMENTAL & FACILITIES SERVICES-1.92%
Rollins, Inc. 215,500 4,232,420
- -----------------------------------------------------------------------
Waste Connections, Inc.(a) 120,315 4,379,466
=======================================================================
8,611,886
=======================================================================
FOOD RETAIL-0.94%
Ruddick Corp. 172,569 4,229,666
=======================================================================
</Table>
F-1
AIM SMALL CAP EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
GAS UTILITIES-1.11%
Energen Corp. 129,362 $ 4,968,794
=======================================================================
HEALTH CARE DISTRIBUTORS-0.89%
Owens & Minor, Inc. 139,826 3,999,024
=======================================================================
HEALTH CARE EQUIPMENT-2.49%
STERIS Corp. 172,705 3,948,036
- -----------------------------------------------------------------------
Vital Signs, Inc. 95,009 4,705,796
- -----------------------------------------------------------------------
Volcano Corp.(a) 275,000 2,488,750
=======================================================================
11,142,582
=======================================================================
HEALTH CARE FACILITIES-1.09%
LCA-Vision Inc. 91,917 4,863,328
=======================================================================
HEALTH CARE SERVICES-1.09%
Amedisys, Inc.(a)(b) 129,355 4,902,555
=======================================================================
HEALTH CARE SUPPLIES-2.11%
DJO Inc.(a) 134,536 4,954,961
- -----------------------------------------------------------------------
Haemonetics Corp.(a) 96,496 4,488,029
=======================================================================
9,442,990
=======================================================================
HEALTH CARE TECHNOLOGY-1.79%
Computer Programs and Systems, Inc. 85,236 3,406,031
- -----------------------------------------------------------------------
Phase Forward Inc.(a) 400,523 4,614,025
=======================================================================
8,020,056
=======================================================================
HOTELS, RESORTS & CRUISE LINES-1.01%
Red Lion Hotels Corp.(a) 413,600 4,528,920
=======================================================================
HOUSEHOLD APPLIANCES-1.08%
Snap-on Inc. 119,968 4,849,107
=======================================================================
HOUSEHOLD PRODUCTS-0.80%
Central Garden & Pet Co.(a) 82,937 3,570,438
=======================================================================
HUMAN RESOURCE & EMPLOYMENT SERVICES-1.71%
Heidrick & Struggles International, Inc.(a) 133,956 4,533,071
- -----------------------------------------------------------------------
Kenexa Corp.(a)(b) 97,986 3,120,854
=======================================================================
7,653,925
=======================================================================
INDUSTRIAL MACHINERY-3.84%
Kadant Inc.(a) 177,219 4,076,037
- -----------------------------------------------------------------------
Middleby Corp. (The)(a) 55,292 4,786,075
- -----------------------------------------------------------------------
RBC Bearings Inc.(a) 221,894 5,036,994
- -----------------------------------------------------------------------
Valmont Industries, Inc. 71,414 3,320,037
=======================================================================
17,219,143
=======================================================================
INSURANCE BROKERS-0.82%
Hilb Rogal and Hobbs Co. 98,636 3,676,164
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.18%
NTELOS Holdings Corp.(a) 366,503 5,295,968
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES-1.62%
CyberSource Corp.(a) 451,940 $ 5,287,698
- -----------------------------------------------------------------------
DealerTrack Holdings Inc.(a) 89,046 1,968,807
=======================================================================
7,256,505
=======================================================================
INVESTMENT BANKING & BROKERAGE-0.59%
CMET Finance Holdings, Inc. (Acquired
12/08/03; Cost $4,480,000)(a)(c)(d) 44,800 919,744
- -----------------------------------------------------------------------
Thomas Weisel Partners Group, Inc.(a)(b) 89,501 1,701,414
=======================================================================
2,621,158
=======================================================================
LIFE SCIENCES TOOLS & SERVICES-1.69%
Dionex Corp.(a) 85,143 4,653,916
- -----------------------------------------------------------------------
ICON PLC-ADR (United Kingdom)(a) 53,166 2,940,080
=======================================================================
7,593,996
=======================================================================
METAL & GLASS CONTAINERS-0.97%
AptarGroup, Inc. 87,194 4,325,694
=======================================================================
MULTI-UTILITIES-0.62%
Avista Corp. 121,631 2,776,836
=======================================================================
OFFICE REIT'S-0.68%
Alexandria Real Estate Equities, Inc. 34,346 3,045,803
=======================================================================
OFFICE SERVICES & SUPPLIES-1.77%
Brady Corp.-Class A 93,450 3,442,698
- -----------------------------------------------------------------------
PeopleSupport Inc.(a) 332,286 4,472,570
=======================================================================
7,915,268
=======================================================================
OIL & GAS EQUIPMENT & SERVICES-2.68%
FMC Technologies, Inc.(a) 70,466 4,753,637
- -----------------------------------------------------------------------
Oceaneering International, Inc.(a) 158,258 7,256,129
=======================================================================
12,009,766
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-3.94%
Berry Petroleum Co.-Class A 61,822 2,049,399
- -----------------------------------------------------------------------
Comstock Resources, Inc.(a) 162,523 4,852,937
- -----------------------------------------------------------------------
Penn Virginia Corp. 73,736 5,152,672
- -----------------------------------------------------------------------
Warren Resources Inc.(a)(b) 390,452 5,606,891
=======================================================================
17,661,899
=======================================================================
OIL & GAS REFINING & MARKETING-1.11%
Alon USA Energy, Inc. 158,195 4,978,397
=======================================================================
PACKAGED FOODS & MEATS-2.05%
Flowers Foods, Inc. 173,885 4,980,066
- -----------------------------------------------------------------------
TreeHouse Foods, Inc.(a) 175,769 4,199,122
=======================================================================
9,179,188
=======================================================================
</Table>
F-2
AIM SMALL CAP EQUITY FUND
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
PHARMACEUTICALS-1.43%
Aspreva Pharmaceuticals Corp. (Canada)(a) 150,909 $ 4,095,670
- -----------------------------------------------------------------------
ViroPharma Inc.(a) 267,434 2,305,281
=======================================================================
6,400,951
=======================================================================
PROPERTY & CASUALTY INSURANCE-4.23%
Assured Guaranty Ltd. 172,845 4,385,078
- -----------------------------------------------------------------------
FPIC Insurance Group, Inc.(a)(b) 118,550 4,593,812
- -----------------------------------------------------------------------
Ohio Casualty Corp. 156,316 4,647,275
- -----------------------------------------------------------------------
Philadelphia Consolidated Holding Corp.(a) 175,841 5,338,533
=======================================================================
18,964,698
=======================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT-1.13%
Jones Lang LaSalle Inc. 57,661 5,048,221
=======================================================================
REGIONAL BANKS-6.08%
Alabama National BanCorp. 54,113 3,687,801
- -----------------------------------------------------------------------
Columbia Banking System, Inc. 87,971 3,288,356
- -----------------------------------------------------------------------
Hancock Holding Co. 68,204 3,819,424
- -----------------------------------------------------------------------
MB Financial, Inc.(b) 83,077 2,937,603
- -----------------------------------------------------------------------
Signature Bank(a) 101,278 3,279,382
- -----------------------------------------------------------------------
Sterling Bancshares, Inc. 149,618 2,805,337
- -----------------------------------------------------------------------
Sterling Financial Corp. 96,288 2,937,747
- -----------------------------------------------------------------------
United Community Banks, Inc. 146,682 4,465,000
=======================================================================
27,220,650
=======================================================================
RESTAURANTS-2.61%
O'Charley's Inc.(a) 254,431 4,325,327
- -----------------------------------------------------------------------
Papa John's International, Inc.(a) 124,263 4,125,532
- -----------------------------------------------------------------------
Steak n Shake Co. (The)(a) 215,324 3,260,005
=======================================================================
11,710,864
=======================================================================
SEMICONDUCTOR EQUIPMENT-1.61%
ATMI, Inc.(a) 169,873 4,182,273
- -----------------------------------------------------------------------
Nextest Systems Corp.(a)(b) 185,620 3,008,900
=======================================================================
7,191,173
=======================================================================
SEMICONDUCTORS-2.93%
DSP Group, Inc.(a) 161,807 4,020,904
- -----------------------------------------------------------------------
Hittite Microwave Corp.(a) 106,806 3,862,105
- -----------------------------------------------------------------------
Micrel, Inc.(a) 351,489 3,518,405
- -----------------------------------------------------------------------
Semtech Corp.(a) 120,164 1,736,370
=======================================================================
13,137,784
=======================================================================
SPECIALIZED REIT'S-2.72%
Global Signal Inc. 100,300 4,645,896
- -----------------------------------------------------------------------
LaSalle Hotel Properties 104,605 4,843,211
- -----------------------------------------------------------------------
Universal Health Realty Income Trust 86,502 2,711,838
=======================================================================
12,200,945
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
SPECIALTY CHEMICALS-1.00%
A. Schulman, Inc. 87,663 $ 2,006,606
- -----------------------------------------------------------------------
H.B. Fuller Co. 56,923 2,480,135
=======================================================================
4,486,741
=======================================================================
TECHNOLOGY DISTRIBUTORS-0.97%
Agilysys, Inc. 241,697 4,350,546
=======================================================================
TRADING COMPANIES & DISTRIBUTORS-2.31%
H&E Equipment Services, Inc.(a) 89,528 2,636,600
- -----------------------------------------------------------------------
UAP Holding Corp. 226,446 4,938,787
- -----------------------------------------------------------------------
Watsco, Inc. 46,480 2,780,433
=======================================================================
10,355,820
=======================================================================
TRUCKING-2.06%
Landstar System, Inc. 99,102 4,680,587
- -----------------------------------------------------------------------
Marten Transport, Ltd.(a) 209,408 4,552,530
=======================================================================
9,233,117
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $368,945,454) 443,148,585
=======================================================================
MONEY MARKET FUNDS-1.69%
Liquid Assets Portfolio-Institutional
Class(e) 3,798,827 3,798,827
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(e) 3,798,827 3,798,827
=======================================================================
Total Money Market Funds (Cost
$7,597,654) 7,597,654
=======================================================================
Total Investments (excluding investments
purchased with cash collateral from
securities loaned)-100.60% (Cost
$376,543,108) 450,746,239
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-3.76%
Liquid Assets Portfolio-Institutional
Class(e)(f) 8,414,559 8,414,559
- -----------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(e)(f) 8,414,559 8,414,559
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $16,829,118) 16,829,118
=======================================================================
TOTAL INVESTMENTS-104.36% (Cost $393,372,226) 467,575,357
=======================================================================
OTHER ASSETS LESS LIABILITIES-(4.36)% (19,528,510)
=======================================================================
NET ASSETS-100.00% $448,046,847
_______________________________________________________________________
=======================================================================
</Table>
F-3
AIM SMALL CAP EQUITY FUND
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security was out on loan at June 30, 2006.
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold 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 value of this security at June 30, 2006 represented 0.21% of the Fund's
Net Assets. This security is considered to be illiquid. The Fund is limited
to investing 15% of net assets in illiquid securities at time of purchase.
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at June 30,
2006 represented 0.21% of the Fund's Net Assets. See Note 1A.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(f) The security has been segregated to satisfy the 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-4
AIM SMALL CAP EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006
(Unaudited)
<Table>
ASSETS:
Investments, at value (cost $368,945,454)* $443,148,585
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $24,426,772) 24,426,772
===========================================================
Total investments (cost $393,372,226) 467,575,357
===========================================================
Receivables for:
Investments sold 1,028,793
- -----------------------------------------------------------
Fund shares sold 504,036
- -----------------------------------------------------------
Dividends 216,721
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 29,355
- -----------------------------------------------------------
Other assets 139,729
===========================================================
Total assets 469,493,991
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 2,668,818
- -----------------------------------------------------------
Fund shares reacquired 1,356,205
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 51,144
- -----------------------------------------------------------
Collateral upon return of securities loaned 16,829,118
- -----------------------------------------------------------
Accrued distribution fees 210,550
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 618
- -----------------------------------------------------------
Accrued transfer agent fees 237,419
- -----------------------------------------------------------
Accrued operating expenses 93,272
===========================================================
Total liabilities 21,447,144
===========================================================
Net assets applicable to shares outstanding $448,046,847
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $321,896,310
- -----------------------------------------------------------
Undistributed net investment income (loss) (3,494,369)
- -----------------------------------------------------------
Undistributed net realized gain from
investment securities 55,441,775
- -----------------------------------------------------------
Unrealized appreciation of investment
securities 74,203,131
===========================================================
$448,046,847
___________________________________________________________
===========================================================
NET ASSETS:
Class A $231,043,151
___________________________________________________________
===========================================================
Class B $127,361,911
___________________________________________________________
===========================================================
Class C $ 56,538,172
___________________________________________________________
===========================================================
Class R $ 22,432,774
___________________________________________________________
===========================================================
Institutional Class $ 10,670,839
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 17,242,746
___________________________________________________________
===========================================================
Class B 9,938,635
___________________________________________________________
===========================================================
Class C 4,414,018
___________________________________________________________
===========================================================
Class R 1,691,954
___________________________________________________________
===========================================================
Institutional Class 789,512
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 13.40
- -----------------------------------------------------------
Offering price per share
(Net asset value of $13.40 / 94.50%) $ 14.18
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 12.81
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 12.81
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 13.26
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 13.52
___________________________________________________________
===========================================================
</Table>
* At June 30, 2006, securities with an aggregate value of $16,708,194 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
AIM SMALL CAP EQUITY FUND
STATEMENT OF OPERATIONS
For the six months ended June 30, 2006
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 1,451,436
- -------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $10,499, after compensation
to counterparties of $200,075) 204,666
=========================================================================
Total investment income 1,656,102
=========================================================================
EXPENSES:
Advisory fees 1,933,664
- -------------------------------------------------------------------------
Administrative services fees 72,158
- -------------------------------------------------------------------------
Custodian fees 24,496
- -------------------------------------------------------------------------
Distribution fees:
Class A 291,321
- -------------------------------------------------------------------------
Class B 674,947
- -------------------------------------------------------------------------
Class C 288,882
- -------------------------------------------------------------------------
Class R 52,813
- -------------------------------------------------------------------------
Transfer agent fees -- A, B, C and R 839,437
- -------------------------------------------------------------------------
Transfer agent fees -- Institutional 201
- -------------------------------------------------------------------------
Trustees' and officer's fees and benefits 13,724
- -------------------------------------------------------------------------
Other 229,691
=========================================================================
Total expenses 4,421,334
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (268,446)
=========================================================================
Net expenses 4,152,888
=========================================================================
Net investment income (loss) (2,496,786)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES
Net realized gain from investment securities (includes net
gains from securities sold to affiliates of $2,050,442) 50,179,304
=========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (9,060,957)
=========================================================================
Net gain from investment securities 41,118,347
=========================================================================
Net increase in net assets resulting from operations $38,621,561
_________________________________________________________________________
=========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
Appendix III
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM OPPORTUNITIES I FUND INTO AIM SMALL CAP EQUITY FUND
JUNE 30, 2006
(UNAUDITED)
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
COMMON STOCKS & OTHER EQUITY
INTERESTS--104.94%
AEROSPACE & DEFENSE--1.04%
-- 142,323 142,323 Curtiss-Wright Corp. $ -- $ 4,394,934 $ 4,394,934
22,640 -- 22,640 General Dynamics Corp. 1,482,014 -- 1,482,014
14,970 -- 14,970 Rockwell Collins, Inc. 836,374 -- 836,374
------------- ------------- -------------
2,318,388 4,394,934 6,713,322
------------- ------------- -------------
AIR FREIGHT & LOGISTICS--0.75%
27,768 -- 27,768 EGL, Inc. (a) 1,393,954 -- 1,393,954
-- 136,448 136,448 UTI Worldwide, Inc. -- 3,442,583 3,442,583
------------- ------------- -------------
1,393,954 3,442,583 4,836,537
------------- ------------- -------------
AIRLINES--0.26%
28,669 -- 28,669 Continental Airlines, Inc.-Class B (a) 854,336 -- 854,336
16,814 -- 16,814 US Airways Group, Inc. (a) 849,780 -- 849,780
------------- ------------- -------------
1,704,116 -- 1,704,116
------------- ------------- -------------
APPAREL RETAIL--3.38%
13,278 -- 13,278 AnnTaylor Stores Corp. (a) 576,000 -- 576,000
23,463 -- 23,463 Buckle, Inc. (The) 982,396 -- 982,396
64,175 -- 64,175 Cato Corp. (The)-Class A 1,658,924 -- 1,658,924
21,116 -- 21,116 Charlotte Russe Holding Inc. (a) 505,517 -- 505,517
-- 151,911 151,911 Christopher & Banks Corp. -- 4,405,419 4,405,419
76,631 -- 76,631 Dress Barn, Inc. (The) (a) 1,942,596 -- 1,942,596
9,176 -- 9,176 Genesco Inc. (a) 310,791 -- 310,791
30,429 134,071 164,500 Gymboree Corp. (The) (a) 1,057,712 4,660,308 5,718,020
12,224 -- 12,224 Shoe Carnival, Inc. (a) 291,665 -- 291,665
-- 115,613 115,613 Stage Stores, Inc. -- 3,815,229 3,815,229
27,659 -- 27,659 Tween Brands, Inc. (a) 1,061,829 -- 1,061,829
36,301 -- 36,301 United Retail Group, Inc. (a) 563,029 -- 563,029
------------- ------------- -------------
8,950,459 12,880,956 21,831,415
------------- ------------- -------------
APPAREL, ACCESSORIES & LUXURY--0.34%
19,090 -- 19,090 Kellwood Co. 558,764 -- 558,764
-- 50,967 50,967 Volcom, Inc. (a) -- 1,630,434 1,630,434
------------- ------------- -------------
558,764 1,630,434 2,189,198
------------- ------------- -------------
APPLICATION SOFTWARE--3.35%
42,804 -- 42,804 Ansoft Corp. (a) 876,626 -- 876,626
49,509 -- 49,509 Aspen Tecnology, Inc. (a) 649,558 -- 649,558
11,100 -- 11,100 Blackbaud, Inc. 251,970 -- 251,970
-- 332,995 332,995 Epicor Software Corp. (a) -- 3,506,437 3,506,437
47,483 -- 47,483 FactSet Research Systems Inc. 2,245,946 -- 2,245,946
-- 131,501 131,501 Hyperion Solutions Corp. (a) -- 3,629,428 3,629,428
-- 84,643 84,643 Intergraph Corp. (a) -- 2,665,408 2,665,408
67,200 -- 67,200 Intervoice, Inc. (a) 478,464 -- 478,464
74,053 -- 74,053 Lawson Softwear, Inc. (a) 496,155 -- 496,155
15,368 -- 15,368 Sonic Solutions (a) 253,572 -- 253,572
19,780 -- 19,780 SPSS Inc. (a) 635,729 -- 635,729
-- 142,663 142,663 Transaction Systems Architects, Inc. (a) -- 5,947,621 5,947,621
------------- ------------- -------------
5,888,020 15,748,894 21,636,914
------------- ------------- -------------
ASSET MANAGEMENT & CUSTODY BANKS--1.06%
-- 45,014 45,014 Affiliated Managers Group, Inc. (a)(b) -- 3,911,266 3,911,266
25,224 -- 25,224 Nuveen Investments-Class A 1,085,893 -- 1,085,893
95,728 -- 95,728 Patriot Capital Funding Inc. 1,062,581 -- 1,062,581
13,408 -- 13,408 SEI Investments Co. 655,383 -- 655,383
7,759 -- 7,759 U.S. Global Investors, Inc.-Class A (a) 164,103 -- 164,103
------------- ------------- -------------
2,967,960 3,911,266 6,879,226
------------- ------------- -------------
AUTO PART EQUIPMENT --0.27%
56,717 -- 56,717 Aftermarket Technology Corp. (a) 1,409,417 -- 1,409,417
12,566 -- 12,566 Tenneco Inc. (a) 326,716 -- 326,716
------------- ------------- -------------
1,736,133 -- 1,736,133
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
AUTOMOBILE MANUFACTURERS--0.09%
11,700 -- 11,700 Thor Industries, Inc. $ 566,865 $ -- $ 566,865
------------- ------------- -------------
AUTOMOTIVE RETAIL--0.90%
28,809 -- 28,809 Group 1 Automotive, Inc. 1,623,099 -- 1,623,099
-- 213,612 213,612 Midas, Inc. (a) -- 3,930,461 3,930,461
10,593 -- 10,593 Sonic Automotive, Inc. 234,953 -- 234,953
------------- ------------- -------------
1,858,052 3,930,461 5,788,513
------------- ------------- -------------
BIOTECHNOLOGY--0.86%
36,645 -- 36,645 Alkermes, Inc. (a) 693,323 -- 693,323
-- 98,640 98,640 Cubist Pharmaceuticals, Inc. (a) -- 2,483,755 2,483,755
-- 74,426 74,426 CV Therapeutics, Inc. (a)(b) -- 1,039,731 1,039,731
25,633 -- 25,633 Enzon Pharmaceuticals, Inc (a) 193,273 -- 193,273
4,347 -- 4,347 Gilead Sciences, Inc. (a) 257,168 -- 257,168
13,879 -- 13,879 ImClone Systems Inc. (a) 536,285 -- 536,285
67,675 -- 67,675 Savient Pharmaceuticals Inc. (a) 355,294 -- 355,294
------------- ------------- -------------
2,035,343 3,523,486 5,558,829
------------- ------------- -------------
BUILDING PRODUCTS--1.51%
-- 271,960 271,960 Goodman Global, Inc. (a) -- 4,128,353 4,128,353
14,836 -- 14,836 Insteel Industries, Inc. 359,031 -- 359,031
-- 68,791 68,791 NCI Building Systems, Inc. (a) -- 3,657,617 3,657,617
14,600 -- 14,600 PW Eagle, Inc. 441,504 -- 441,504
-- 66,492 66,492 Quixote Corp. -- 1,198,186 1,198,186
------------- ------------- -------------
800,535 8,984,156 9,784,691
------------- ------------- -------------
CASINOS & GAMING--0.74%
3,559 -- 3,559 Boyd Gaming Corp. 143,641 -- 143,641
51,558 -- 51,558 Dover Downs Gaming & Entertainment, Inc. 1,012,599 -- 1,012,599
-- 117,626 117,626 Pinnacle Entertainment, Inc. (a) -- 3,605,237 3,605,237
------------- ------------- -------------
1,156,240 3,605,237 4,761,477
------------- ------------- -------------
CATALOG RETAIL--0.74%
41,145 -- 41,145 Blair Corp. 1,224,064 -- 1,224,064
-- 325,591 325,591 PetMed Express, Inc. (a) -- 3,571,733 3,571,733
------------- ------------- -------------
1,224,064 3,571,733 4,795,797
------------- ------------- -------------
COMMERCIAL PRINTING--0.52%
77,470 -- 77,470 Harland (John H.) Co. 3,369,945 -- 3,369,945
------------- ------------- -------------
COMMODITY CHEMICALS--0.53%
81,678 -- 81,678 Lyondell Chemical Co. 1,850,824 -- 1,850,824
53,293 -- 53,293 Westlake Chemical Corp. 1,588,131 -- 1,588,131
------------- ------------- -------------
3,438,955 -- 3,438,955
------------- ------------- -------------
COMMUNICATIONS EQUIPMENT--2.02%
37,067 -- 37,067 Arris Group Inc. (a) 486,319 -- 486,319
-- 89,069 89,069 Black Box Corp. -- 3,414,015 3,414,015
58,319 -- 58,319 CommScope, Inc. (a) 1,832,383 -- 1,832,383
6,679 -- 6,679 Comtech Telecommunications Corp. (a) 195,494 -- 195,494
14,829 -- 14,829 Digi International Inc. (a) 185,807 -- 185,807
57,300 -- 57,300 Ditech Networks, Inc. (a) 499,656 -- 499,656
41,960 -- 41,960 EMS Technologies, Inc. (a) 754,021 -- 754,021
9,867 -- 9,867 Harris Corp. 409,579 -- 409,579
17,101 -- 17,101 Loral Space & Communications Inc. (a) 484,985 -- 484,985
7,833 -- 7,833 NETGEAR, Inc. (a) 169,585 -- 169,585
-- 283,971 283,971 Packeteer, Inc. (a) -- 3,220,231 3,220,231
27,485 -- 27,485 QUALCOMM Inc. 1,101,324 -- 1,101,324
25,637 -- 25,637 RELM Wireless Corp. (a) 159,462 -- 159,462
26,126 -- 26,126 Symmetricom, Inc. (a) 184,711 -- 184,711
------------- ------------- -------------
6,463,326 6,634,246 13,097,572
------------- ------------- -------------
COMPUTER HARDWARE--0.23%
46,354 -- 46,354 Hewlett-Packard Co. 1,468,495 -- 1,468,495
------------- ------------- -------------
COMPUTER STORAGE & PERIPHERALS--0.87%
82,022 -- 82,022 Brocade Communications Systems, Inc. (a) 503,615 -- 503,615
-- 157,378 157,378 Emulex Corp. (a) -- 2,560,540 2,560,540
37,554 -- 37,554 Komag, Inc. (a) 1,734,244 -- 1,734,244
22,742 -- 22,742 Overland Storage, Inc. (a) 152,371 -- 152,371
31,859 -- 31,859 Rimage Corp. (a) 650,561 -- 650,561
------------- ------------- -------------
3,040,791 2,560,540 5,601,331
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
CONSTRUCTION & ENGINEERING--1.50%
-- 236,750 236,750 Infrasource Services Inc. (a) $ -- $ 4,311,217 $ 4,311,217
-- 92,765 92,765 URS Corp. (a) -- 3,896,130 3,896,130
-- 67,413 67,413 Williams Scotsman International Inc. (a) -- 1,472,300 1,472,300
------------- ------------- -------------
-- 9,679,647 9,679,647
------------- ------------- -------------
CONSTRUCTION MATERIALS--0.08%
5,503 -- 5,503 Martin Marietta Materials, Inc. 501,598 -- 501,598
------------- ------------- -------------
CONSTRUCTION & FARM MACHINERY &
HEAVY TRUCKS--1.28%
21,419 -- 21,419 Cummins Inc. 2,618,473 -- 2,618,473
24,656 -- 24,656 Navistar International Corp. (a) 606,784 -- 606,784
13,867 -- 13,867 PACCAR Inc. 1,142,363 -- 1,142,363
-- 87,830 87,830 Manitowoc Co., Inc. (The) -- 3,908,435 3,908,435
------------- ------------- -------------
4,367,620 3,908,435 8,276,055
------------- ------------- -------------
CONSUMER FINANCE--0.79%
8,901 -- 8,901 ASTA Funding, Inc. 333,342 -- 333,342
50,026 -- 50,026 Rewards Network Inc. (a) 408,712 -- 408,712
-- 122,513 122,513 World Acceptance Corp. (a) -- 4,351,662 4,351,662
------------- ------------- -------------
742,054 4,351,662 5,093,716
------------- ------------- -------------
DATA PROCESSING & OUTSOURCED
SERVICES--2.49%
-- 306,281 306,281 BISYS Group, Inc. (The) (a) -- 4,196,050 4,196,050
4,828 -- 4,828 Computer Sciences Corp. (a) 233,868 -- 233,868
11,905 -- 11,905 Gevity HR, Inc. 316,078 -- 316,078
35,448 -- 35,448 Global Payments Inc. 1,721,000 -- 1,721,000
34,831 -- 34,831 Lightbridge, Inc. (a) 451,062 -- 451,062
45,980 -- 45,980 MoneyGram International, Inc. 1,561,021 -- 1,561,021
26,452 -- 26,452 Paychex, Inc. 1,031,099 -- 1,031,099
-- 228,194 228,194 Wright Express Corp. (a) -- 6,558,295 6,558,295
------------- ------------- -------------
5,314,128 10,754,345 16,068,473
------------- ------------- -------------
DEPARTMENT STORES--0.05%
8,401 -- 8,401 Nordstrom, Inc. 306,637 -- 306,637
------------- ------------- -------------
DIVERSIFIED CHEMICALS--1.49%
36,387 -- 36,387 Ashland Inc. 2,427,013 -- 2,427,013
40,403 -- 40,403 Eastman Chemical Co. 2,181,762 -- 2,181,762
-- 74,625 74,625 FMC Corp. -- 4,805,104 4,805,104
12,548 -- 12,548 Olin Corp. 224,986 -- 224,986
------------- ------------- -------------
4,833,761 4,805,104 9,638,865
------------- ------------- -------------
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES--0.51%
11,523 -- 11,523 Advisory Board Co. (The) (a) 554,141 -- 554,141
52,037 -- 52,037 CBIZ, Inc. (a) 385,594 -- 385,594
6,614 -- 6,614 Corporate Executive Board Co. (The) 662,723 -- 662,723
26,485 -- 26,485 GEO Group Inc. (The) 928,299 -- 928,299
27,078 -- 27,078 PHH Corp. (a) 745,728 -- 745,728
------------- ------------- -------------
3,276,485 -- 3,276,485
------------- ------------- -------------
DIVERSIFIED METALS & MINING--0.76%
16,203 -- 16,203 AMCOL International Corp. 426,949 -- 426,949
-- 179,757 179,757 Compass Mineral International, Inc. -- 4,484,937 4,484,937
------------- ------------- -------------
426,949 4,484,937 4,911,886
------------- ------------- -------------
EDUCATION SERVICES--0.11%
19,253 -- 19,253 Bright Horizons Family Solutions, Inc. (a) 725,646 -- 725,646
------------- ------------- -------------
ELECTRIC UTILITIES--0.05%
13,921 -- 13,921 Cleco Corp. 323,663 -- 323,663
------------- ------------- -------------
ELECTRICAL COMPONENTS & EQUIPMENT--1.64%
9,524 -- 9,524 AMETEK, Inc. 451,247 -- 451,247
10,129 83,163 93,292 Genlyte Group Inc. (The) (a) 733,644 6,023,496 6,757,140
-- 71,850 71,850 Hubbell Inc.-Class B -- 3,423,653 3,423,653
------------- ------------- -------------
1,184,891 9,447,149 10,632,040
------------- ------------- -------------
ELECTRONIC EQUIPMENT MANUFACTURERS--0.16%
55,868 -- 55,868 PAR Technology Corp. (a) 713,434 -- 713,434
27,352 -- 27,352 Planar Systems Inc. (a) 329,318 -- 329,318
------------- ------------- -------------
1,042,752 -- 1,042,752
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
ELECTRONIC MANUFACTURING SERVICES--0.75%
-- 165,352 165,352 Park Electrochemical Corp. $ -- $ 4,257,814 $ 4,257,814
16,570 -- 16,570 Plexus Corp. (a) 566,860 -- 566,860
------------- ------------- -------------
566,860 4,257,814 4,824,674
------------- ------------- -------------
ENVIRONMENTAL & FACILITIES SERVICES--1.37%
15,501 -- 15,501 Covanta Holding Corp. (a) 273,593 -- 273,593
-- 215,500 215,500 Rollins, Inc. -- 4,232,420 4,232,420
-- 120,315 120,315 Waste Connections, Inc. (a) -- 4,379,466 4,379,466
------------- ------------- -------------
273,593 8,611,886 8,885,479
------------- ------------- -------------
FOOD DISTRIBUTORS--0.12%
51,365 -- 51,365 Spartan Stores, Inc. (a) 751,470 -- 751,470
------------- ------------- -------------
FOOD RETAIL--0.65%
-- 172,569 172,569 Ruddick Corp. -- 4,229,666 4,229,666
------------- ------------- -------------
FOOTWEAR--0.03%
5,035 -- 5,035 Deckers Outdoor Corp. (a) 194,150 -- 194,150
------------- ------------- -------------
GAS UTILITIES--1.98%
136,677 129,362 266,039 Energen Corp. 5,249,764 4,968,794 10,218,558
93,073 -- 93,073 South Jersey Industries, Inc. 2,549,269 -- 2,549,269
------------- ------------- -------------
7,799,033 4,968,794 12,767,827
------------- ------------- -------------
GENERAL MERCHANDISE STORES--0.15%
36,953 -- 36,953 Conn's, Inc. (a) 981,102 -- 981,102
------------- ------------- -------------
HEALTH CARE DISTRIBUTORS--0.62%
-- 139,826 139,826 Owens & Minor, Inc. -- 3,999,024 3,999,024
------------- ------------- -------------
HEALTH CARE EQUIPMENT--2.76%
30,407 -- 30,407 Abaxis, Inc. (a) 680,204 -- 680,204
13,669 -- 13,669 Biosite Inc. (a) 624,126 -- 624,126
11,908 -- 11,908 Candela Corp. (a) 188,861 -- 188,861
21,137 -- 21,137 Cutera, Inc. (a) 416,822 -- 416,822
7,752 -- 7,752 Datascope Corp. 239,072 -- 239,072
22,819 -- 22,819 Integra LifeSciences Holdings (a) 885,605 -- 885,605
34,527 -- 34,527 Meridian Bioscience, Inc. 861,449 -- 861,449
14,978 -- 14,978 Palomar Medical Technologies, Inc. (a) 683,446 -- 683,446
16,980 -- 16,980 Sirona Dental Systems, Inc. 672,748 -- 672,748
-- 172,705 172,705 STERIS Corp. -- 3,948,036 3,948,036
9,003 -- 9,003 SurModics, Inc. (a) 325,098 -- 325,098
26,525 -- 26,525 Thoratec Corp. (a) 367,902 -- 367,902
-- 95,009 95,009 Vital Signs, Inc. -- 4,705,796 4,705,796
-- 275,000 275,000 Volcano Corp. (a) -- 2,488,750 2,488,750
21,966 -- 21,966 Zoll Medical Corp. (a) 719,606 -- 719,606
------------- ------------- -------------
6,664,939 11,142,582 17,807,521
------------- ------------- -------------
HEALTH CARE FACILITIES--0.83%
27,375 -- 27,375 Odyssey Healthcare, Inc. (a) 480,979 -- 480,979
-- 91,917 91,917 LCA-Vision Inc. -- 4,863,328 4,863,328
------------- ------------- -------------
480,979 4,863,328 5,344,307
------------- ------------- -------------
HEALTH CARE SERVICES--0.89%
-- 129,355 129,355 Amedisys, Inc. (a)(b) -- 4,902,555 4,902,555
8,259 -- 8,259 inVentiv Health Inc. (a) 237,694 -- 237,694
13,480 -- 13,480 Pediatrix Medical Group, Inc. (a) 610,644 -- 610,644
------------- ------------- -------------
848,338 4,902,555 5,750,893
------------- ------------- -------------
HEALTH CARE SUPPLIES--1.69%
-- 134,536 134,536 DJO Inc. (a) -- 4,954,961 4,954,961
-- 96,496 96,496 Haemonetics Corp. (a) -- 4,488,029 4,488,029
40,532 -- 40,532 Immucor, Inc. (a) 779,430 -- 779,430
10,191 -- 10,191 Medical Action Industries Inc. (a) 225,119 -- 225,119
49,279 -- 49,279 OraSure Technologies, Inc. (a) 469,136 -- 469,136
------------- ------------- -------------
1,473,685 9,442,990 10,916,675
------------- ------------- -------------
HEALTH CARE TECHNOLOGY--1.46%
34,818 85,236 120,054 Computer Programs and Systems, Inc. 1,391,327 3,406,031 4,797,358
-- 400,523 400,523 Phase Forward Inc. (a) -- 4,614,025 4,614,025
------------- ------------- -------------
1,391,327 8,020,056 9,411,383
------------- ------------- -------------
HOME FURNISHINGS--0.02%
9,559 -- 9,559 Tempur-Pedic International Inc. (a) 129,142 -- 129,142
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
HOMEBUILDING--0.22%
32,718 -- 32,718 Cavco Industries, Inc. (a) $ 1,453,988 $ - $ 1,453,988
------------- ------------- -------------
HOMEFURNISHING RETAIL--0.08%
11,602 -- 11,602 Haverty Furniture Cos., Inc. 182,035 -- 182,035
15,757 -- 15,757 Select Comfort Corp. (a) 361,938 -- 361,938
------------- ------------- -------------
543,973 -- 543,973
------------- ------------- -------------
HOTELS, RESORTS & CRUISE LINES--0.97%
29,216 -- 29,216 Choice Hotels International, Inc. 1,770,490 -- 1,770,490
-- 413,600 413,600 Red Lion Hotels Corp. (a) -- 4,528,920 4,528,920
------------- ------------- -------------
1,770,490 4,528,920 6,299,410
------------- ------------- -------------
HOUSEHOLD APPLIANCES--0.75%
-- 119,968 119,968 Snap-on Inc. -- 4,849,107 4,849,107
------------- ------------- -------------
HOUSEHOLD PRODUCTS--0.55%
-- 82,937 82,937 Central Garden & Pet Co. (a) -- 3,570,438 3,570,438
------------- ------------- -------------
HUMAN RESOURCE & EMPLOYMENT
SERVICES--1.57%
12,992 -- 12,992 Administaff, Inc. 465,244 -- 465,244
-- 133,956 133,956 Heidrick & Struggles International, Inc. (a) -- 4,533,071 4,533,071
-- 97,986 97,986 Kenexa Corp. (a)(b) -- 3,120,854 3,120,854
24,250 -- 24,250 Labor Ready, Inc. (a) 549,262 -- 549,262
15,176 -- 15,176 Robert Half International Inc. 637,392 -- 637,392
47,191 -- 47,191 Spherion Corp. (a) 430,382 -- 430,382
8,276 -- 8,276 Volt Information Sciences, Inc. (a) 385,662 -- 385,662
------------- ------------- -------------
2,467,942 7,653,925 10,121,867
------------- ------------- -------------
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS--0.33%
35,954 -- 35,954 TXU Corp. 2,149,690 -- 2,149,690
------------- ------------- -------------
INDUSTRIAL CONGLOMERATES--0.25%
20,193 -- 20,193 3M Co. 1,630,989 -- 1,630,989
------------- ------------- -------------
INDUSTRIAL MACHINERY--4.07%
32,112 -- 32,112 Eaton Corp. 2,421,245 -- 2,421,245
3,741 -- 3,741 Ingersoll Rand Co. Ltd.-Class A 160,040 -- 160,040
-- 177,219 177,219 Kadant Inc. (a) -- 4,076,037 4,076,037
9,962 -- 9,962 Kennametal Inc. 620,135 -- 620,135
-- 55,292 55,292 Middleby Corp. (The) (a) -- 4,786,075 4,786,075
50,550 -- 50,550 Nordson Corp. 2,486,049 -- 2,486,049
-- 221,894 221,894 RBC Bearings Inc. (a) -- 5,036,994 5,036,994
13,189 -- 13,189 Tennant Co. 663,143 -- 663,143
81,780 -- 81,780 Timken Co. (The) 2,740,448 -- 2,740,448
-- 71,414 71,414 Valmont Industries, Inc. -- 3,320,037 3,320,037
------------- ------------- -------------
9,091,060 17,219,143 26,310,203
------------- ------------- -------------
INSURANCE BROKERS--0.57%
-- 98,636 98,636 Hilb Rogal and Hobbs Co. -- 3,676,164 3,676,164
------------- ------------- -------------
INTEGRATED OIL & GAS--0.06%
5,930 -- 5,930 ExxonMobil Corp. 363,806 -- 363,806
------------- ------------- -------------
INTEGRATED TELECOMMUNICATION
SERVICES--1.28%
56,788 -- 56,788 CenturyTel, Inc. 2,109,674 -- 2,109,674
205,099 -- 205,099 Cincinnati Bell Inc. (a) 840,906 -- 840,906
-- 366,503 366,503 NTELOS Holdings Corp. (a) -- 5,295,968 5,295,968
------------- ------------- -------------
2,950,580 5,295,968 8,246,548
------------- ------------- -------------
INTERNET SOFTWARE & SERVICES--1.71%
-- 451,940 451,940 CyberSource Corp. (a) -- 5,287,698 5,287,698
-- 89,046 89,046 DealerTrack Holdings Inc. (a) -- 1,968,807 1,968,807
17,650 -- 17,650 Digital River, Inc. (a) 712,884 -- 712,884
121,978 -- 121,978 EarthLink, Inc. (a) 1,056,329 -- 1,056,329
14,957 -- 14,957 j2 Global Communications, Inc. (a) 466,958 -- 466,958
22,403 -- 22,403 Knot, Inc. (The) (a) 468,895 -- 468,895
46,372 -- 46,372 RealNetworks, Inc. (a) 496,180 -- 496,180
47,343 -- 47,343 United Online, Inc. 568,116 -- 568,116
------------- ------------- -------------
3,769,362 7,256,505 11,025,867
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
INVESTMENT BANKING & BROKERAGE--0.66%
-- 44,800 44,800 CMET Finance Holdings, Inc. (Acquired
12/08/03; Cost $4,480,000) (a)(c)(d) $ -- $ 919,744 $ 919,744
21,074 -- 21,074 Lehman Brothers Holdings Inc. 1,372,971 -- 1,372,971
11,697 -- 11,697 SWS Group, Inc. 282,132 -- 282,132
-- 89,501 89,501 Thomas Weisel Partners Group, Inc. (a)(b) -- 1,701,414 1,701,414
------------- ------------- -------------
1,655,103 2,621,158 4,276,261
------------- ------------- -------------
INVESTMENT COMPANIES--0.12%
14,172 -- 14,172 Energy Select Sector SPDR Fund 803,836 -- 803,836
------------- ------------- -------------
IT CONSULTING & OTHER SERVICES--0.39%
68,314 -- 68,314 Acxiom Corp. 1,707,850 -- 1,707,850
52,097 -- 52,097 Sykes Enterprises, Inc. (a) 841,888 -- 841,888
------------- ------------- -------------
120,411 -- 120,411 2,549,738 -- 2,549,738
------------- ------------- -------------
LEISURE PRODUCTS--0.21%
67,416 -- 67,416 JAKKS Pacific, Inc. (a) 1,354,387 -- 1,354,387
------------- ------------- -------------
LIFE & HEALTH INSURANCE--0.37%
69,633 -- 69,633 Penn Treaty American Corp. (a) 513,892 -- 513,892
23,785 -- 23,785 Prudential Financial, Inc. 1,848,095 -- 1,848,095
------------- ------------- -------------
93,418 -- 93,418 2,361,987 -- 2,361,987
------------- ------------- -------------
LIFE SCIENCES TOOLS & SERVICES--1.58%
22,046 -- 22,046 Applera Corp.-Applied Biosystems Group 713,188 -- 713,188
14,633 85,143 99,776 Dionex Corp. (a) 799,840 4,653,916 5,453,756
-- 53,166 53,166 ICON PLC-ADR (United Kingdom) (a) -- 2,940,080 2,940,080
9,125 -- 9,125 Molecular Devices Corp. (a) 278,860 -- 278,860
15,923 -- 15,923 Techne Corp. (a) 810,799 -- 810,799
------------- ------------- -------------
2,602,687 7,593,996 10,196,683
------------- ------------- -------------
MANAGED HEALTH CARE--1.27%
20,869 -- 20,869 Aetna Inc. 833,299 -- 833,299
10,015 -- 10,015 AMERIGROUP Corp. (a) 310,866 -- 310,866
13,797 -- 13,797 CIGNA Corp. 1,359,142 -- 1,359,142
20,441 -- 20,441 Humana Inc. (a) 1,097,682 -- 1,097,682
10,384 -- 10,384 Magellan Health Services, Inc. (a) 470,499 -- 470,499
14,607 -- 14,607 Molina Healthcare Inc. (a) 555,796 -- 555,796
21,992 -- 21,992 Sierra Health Services, Inc. (a) 990,300 -- 990,300
39,828 -- 39,828 UnitedHealth Group Inc. 1,783,498 -- 1,783,498
16,053 -- 16,053 WellCare Health Plans Inc. (a) 787,400 -- 787,400
------------- ------------- -------------
8,188,482 -- 8,188,482
------------- ------------- -------------
MARINE--0.57%
41,243 -- 41,243 Genco Shipping & Trading Ltd.
(United Kingdom) 715,979 -- 715,979
50,387 -- 50,387 Overseas Shipholding Group, Inc. 2,980,391 -- 2,980,391
------------- ------------- -------------
3,696,370 -- 3,696,370
------------- ------------- -------------
METAL & GLASS CONTAINERS--0.67%
-- 87,194 87,194 AptarGroup, Inc. -- 4,325,694 4,325,694
------------- ------------- -------------
MOVIES & ENTERTAINMENT--0.28%
108,207 -- 108,207 Word Wrestling Entertainment, Inc. 1,827,616 -- 1,827,616
------------- ------------- -------------
MULTI-UTILITIES--0.55%
-- 121,631 121,631 Avista Corp. -- 2,776,836 2,776,836
22,206 -- 22,206 MDU Resources Group, Inc. 812,962 -- 812,962
------------- ------------- -------------
812,962 2,776,836 3,589,798
------------- ------------- -------------
OFFICE REIT'S--0.47%
-- 34,346 34,346 Alexandria Real Estate Equities, Inc. -- 3,045,803 3,045,803
------------- ------------- -------------
OFFICE SERVICES & SUPPLIES--1.22%
-- 93,450 93,450 Brady Corp.-Class A -- 3,442,698 3,442,698
-- 332,286 332,286 PeopleSupport Inc. (a) -- 4,472,570 4,472,570
------------- ------------- -------------
-- 7,915,268 7,915,268
------------- ------------- -------------
OIL & GAS EQUIPMENT & SERVICES--2.39%
-- 70,466 70,466 FMC Technologies, Inc. (a) -- 4,753,637 4,753,637
9,509 -- 9,509 Hydril (a) 746,647 -- 746,647
7,796 -- 7,796 NS Group, Inc. (a) 429,404 -- 429,404
-- 158,258 158,258 Oceaneering International, Inc. (a) -- 7,256,129 7,256,129
2,620 -- 2,620 Schlumberger Ltd. 170,588 -- 170,588
9,529 -- 9,529 Tidewater Inc. 468,827 -- 468,827
21,010 -- 21,010 Trico Marine Services, Inc. (a) 714,340 -- 714,340
17,950 -- 17,950 W-H Energy Services, Inc. (a) 912,398 -- 912,398
------------- ------------- -------------
3,442,204 12,009,766 15,451,970
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
OIL & GAS EXPLORATION & PRODUCTION--3.72%
20,131 -- 20,131 Arena Resources, Inc. (a) $ 690,292 $ -- $ 690,292
-- 61,822 61,822 Berry Petroleum Co.-Class A -- 2,049,399 2,049,399
-- 162,523 162,523 Comstock Resources, Inc. (a) -- 4,852,937 4,852,937
26,410 -- 26,410 Exploration Co. of Delaware (The) (a) 281,531 -- 281,531
58,218 -- 58,218 Harvest Natural Resources, Inc. (a) 788,272 -- 788,272
11,298 -- 11,298 Kerr-Mcgee Corp 783,516 -- 783,516
18,560 -- 18,560 Parallel Petroleum Corp. (a) 458,618 -- 458,618
38,196 73,736 111,932 Penn Virginia Corp. 2,669,136 5,152,672 7,821,808
75,275 -- 75,275 VAALCO Energy, Inc. (a) 734,684 -- 734,684
-- 390,452 390,452 Warren Resources Inc. (a)(b) -- 5,606,891 5,606,891
------------- ------------- -------------
6,406,049 17,661,899 24,067,948
------------- ------------- -------------
OIL & GAS REFINING & MARKETING--0.77%
-- 158,195 158,195 Alon USA Energy, Inc. -- 4,978,397 4,978,397
------------- ------------- -------------
OIL & GAS STORAGE & TRANSPORTATION--0.29%
78,224 -- 78,224 OMI Corp. 1,693,550 -- 1,693,550
5,180 -- 5,180 TC Pipelines, L.P. 170,940 -- 170,940
------------- ------------- -------------
1,864,490 -- 1,864,490
------------- ------------- -------------
OTHER DIVERSIFIED FINANCIAL
SERVICES--0.03%
9,824 -- 9,824 Prospect Energy Corp. 166,910 -- 166,910
------------- ------------- -------------
PACKAGED FOODS & MEATS---1.82%
-- 173,885 173,885 Flowers Foods, Inc. -- 4,980,066 4,980,066
54,904 -- 54,904 Premium Standard Farms, Inc. 891,092 -- 891,092
1,322 -- 1,322 Seaboard Corp. 1,692,160 -- 1,692,160
-- 175,769 175,769 TreeHouse Foods, Inc. (a) -- 4,199,122 4,199,122
------------- ------------- -------------
2,583,252 9,179,188 11,762,440
------------- ------------- -------------
PHARMACEUTICALS--1.37%
22,567 -- 22,567 Alpharma Inc.-Class A 542,511 -- 542,511
-- 150,909 150,909 Aspreva Pharmaceuticals Corp. (Canada) (a) -- 4,095,670 4,095,670
48,903 -- 48,903 Bradley Pharmaceuticals, Inc. (a) 498,811 -- 498,811
36,033 -- 36,033 CNS, Inc. 882,809 -- 882,809
19,632 -- 19,632 Matrixx Initiatives, Inc. (a) 305,474 -- 305,474
9,660 -- 9,660 Sciele Pharma, Inc. (a) 224,015 -- 224,015
-- 267,434 267,434 ViroPharma Inc. (a) -- 2,305,281 2,305,281
------------- ------------- -------------
2,453,620 6,400,951 8,854,571
------------- ------------- -------------
PROPERTY & CASUALTY INSURANCE--5.04%
40,542 -- 40,542 21st Century Holding Co. 530,289 -- 530,289
20,000 -- 20,000 American Safety Insurance Holdings, Ltd. (a) 330,000 -- 330,000
46,511 172,845 219,356 Assured Guaranty Ltd. 1,179,984 4,385,078 5,565,062
47,126 -- 47,126 Donegal Group Inc.-Class A 914,716 -- 914,716
44,021 118,550 162,571 FPIC Insurance Group, Inc. (a)(b) 1,705,814 4,593,812 6,299,626
66,517 -- 66,517 Harleysville Group Inc. 2,109,919 -- 2,109,919
54,144 -- 54,144 Infinity Property & Casualty Corp. 2,219,904 -- 2,219,904
-- 156,316 156,316 Ohio Casualty Corp. -- 4,647,275 4,647,275
-- 175,841 175,841 Philadelphia Consolidated Holding Corp. (a) -- 5,338,533 5,338,533
75,156 -- 75,156 Safety Insurance Group, Inc. 3,573,668 -- 3,573,668
37,595 -- 37,595 Seabright Insurance Holdings (a) 605,655 -- 605,655
10,247 -- 10,247 Zenith National Insurance Corp. 406,499 -- 406,499
------------- ------------- -------------
13,576,448 18,964,698 32,541,146
------------- ------------- -------------
PUBLISHING--0.08%
6,767 -- 6,767 McGraw-Hill Cos., Inc. (The) 339,906 -- 339,906
47,658 -- 47,658 Private Media Group, Inc. (a) 212,078 -- 212,078
------------- ------------- -------------
551,984 -- 551,984
------------- ------------- -------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--0.78%
-- 57,661 57,661 Jones Lang LaSalle Inc. -- 5,048,221 5,048,221
------------- ------------- -------------
REGIONAL BANKS--5.35%
12,644 -- 12,644 1st Source Corp. 467,828 -- 467,828
-- 54,113 54,113 Alabama National BanCorp. -- 3,687,801 3,687,801
25,364 87,971 113,335 Columbia Banking System, Inc. 948,106 3,288,356 4,236,462
20,184 -- 20,184 Community Trust Bancorp, Inc. 705,027 -- 705,027
7,207 -- 7,207 Farmers Capital Bank Corp. 236,030 -- 236,030
100,835 -- 100,835 First BanCorp. 937,766 -- 937,766
25,379 -- 25,379 First Community Bancorp 1,499,391 -- 1,499,391
4,394 -- 4,394 FNB Corp. 148,649 -- 148,649
-- 68,204 68,204 Hancock Holding Co. -- 3,819,424 3,819,424
-- 83,077 83,077 MB Financial, Inc. (b) -- 2,937,603 2,937,603
168,464 -- 168,464 R&G Financial Corp.-Class B (Puerto Rico) 1,447,106 -- 1,447,106
-- 101,278 101,278 Signature Bank (a) -- 3,279,382 3,279,382
-- 149,618 149,618 Sterling Bancshares, Inc. -- 2,805,337 2,805,337
-- 96,288 96,288 Sterling Financial Corp. -- 2,937,747 2,937,747
-- 146,682 146,682 United Community Banks, Inc. -- 4,465,000 4,465,000
13,919 -- 13,919 Virginia Financial Group, Inc. 587,660 -- 587,660
22,367 -- 22,367 Wilshire Bancorp, Inc. 403,053 -- 403,053
------------- ------------- -------------
7,380,616 27,220,650 34,601,266
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
REINSURANCE--0.57%
92,594 -- 92,594 Endurance Specialty Holdings Ltd. $ 2,963,008 $ -- $ 2,963,008
20,867 -- 20,867 IPC Holdings, Ltd. 514,580 -- 514,580
9,092 -- 9,092 Max Re Capital Ltd. 198,569 -- 198,569
------------- ------------- -------------
3,676,157 -- 3,676,157
------------- ------------- -------------
RESTAURANTS--2.22%
9,493 -- 9,493 Buffalo Wild Wings Inc. (a) 363,677 -- 363,677
6,741 -- 6,741 IHOP Corp. 324,107 -- 324,107
-- 254,431 254,431 O'Charley's Inc. (a) -- 4,325,327 4,325,327
35,466 124,263 159,729 Papa John's International, Inc. (a) 1,177,471 4,125,532 5,303,003
8,357 -- 8,357 Ruth's Chris Steak House, Inc. (a) 170,650 -- 170,650
-- 215,324 215,324 Steak n Shake Co. (The) (a) -- 3,260,005 3,260,005
36,446 -- 36,446 Triarc Cos., Inc.-Class B 569,651 -- 569,651
------------- ------------- -------------
2,605,556 11,710,864 14,316,420
------------- ------------- -------------
RETAIL REIT'S--0.07%
15,719 -- 15,719 Getty Realty Corp. 447,048 -- 447,048
------------- ------------- -------------
SEMICONDUCTOR EQUIPMENT--1.40%
-- 169,873 169,873 ATMI, Inc. (a) -- 4,182,273 4,182,273
30,278 -- 30,278 Lam Research Corp. (a) 1,411,560 -- 1,411,560
45,681 -- 45,681 Mattson Technology, Inc. (a) 446,303 -- 446,303
-- 185,620 185,620 Nextest Systems Corp. (a)(b) -- 3,008,900 3,008,900
------------- ------------- -------------
1,857,863 7,191,173 9,049,036
------------- ------------- -------------
SEMICONDUCTORS--2.65%
4,715 -- 4,715 Advanced Micro Devices, Inc. (a) 115,140 -- 115,140
-- 161,807 161,807 DSP Group, Inc. (a) -- 4,020,904 4,020,904
5,956 106,806 112,762 Hittite Microwave Corp. (a) 215,369 3,862,105 4,077,474
26,492 -- 26,492 Intel Corp. 502,023 -- 502,023
18,276 -- 18,276 IXYS Corp. (a) 175,450 -- 175,450
40,135 -- 40,135 Linear Technology Corp. 1,344,121 -- 1,344,121
14,106 -- 14,106 Maxim Integrated Products, Inc. 452,944 -- 452,944
-- 351,489 351,489 Micrel, Inc. (a) -- 3,518,405 3,518,405
22,407 -- 22,407 MoSys, Inc. (a) 175,223 -- 175,223
25,721 -- 25,721 National Semiconductor Corp. 613,446 -- 613,446
18,836 -- 18,836 OmniVision Technologies, Inc. (a) 397,816 -- 397,816
-- 120,164 120,164 Semtech Corp. (a) -- 1,736,370 1,736,370
------------- ------------- -------------
3,991,532 13,137,784 17,129,316
------------- ------------- -------------
SPECIALIZED CONSUMER SERVICE--0.34%
71,004 -- 71,004 Jackson Hewitt Tax Service Inc. 2,225,975 -- 2,225,975
------------- ------------- -------------
SPECIALIZED FINANCE--0.79%
40,377 -- 40,377 CIT Group, Inc. 2,111,313 -- 2,111,313
85,217 -- 85,217 Medallion Financial Corp. 1,104,412 -- 1,104,412
34,977 -- 34,977 Moody's Corp. 1,904,848 -- 1,904,848
------------- ------------- -------------
5,120,573 -- 5,120,573
------------- ------------- -------------
SPECIALIZED REIT'S--1.89%
-- 100,300 100,300 Global Signal Inc. -- 4,645,896 4,645,896
-- 104,605 104,605 LaSalle Hotel Properties -- 4,843,211 4,843,211
-- 86,502 86,502 Universal Health Realty Income Trust -- 2,711,838 2,711,838
------------- ------------- -------------
-- 12,200,945 12,200,945
------------- ------------- -------------
SPECIALTY CHEMICALS--0.69%
-- 87,663 87,663 A. Schulman, Inc. -- 2,006,606 2,006,606
-- 56,923 56,923 H.B. Fuller Co. -- 2,480,135 2,480,135
------------- ------------- -------------
-- 4,486,741 4,486,741
------------- ------------- -------------
SPECIALTY STORES--0.00%
100 -- 100 Big 5 Sporting Goods Corp. 1,949 -- 1,949
------------- ------------- -------------
STEEL--1.49%
4,863 -- 4,863 Chaparral Steel Co. (a) 350,233 -- 350,233
134,078 -- 134,078 Commercial Metals Co. 3,445,805 -- 3,445,805
12,456 -- 12,456 Great Northern Iron Ore Properties 1,383,986 -- 1,383,986
84,848 -- 84,848 Mesabi Trust 1,573,930 -- 1,573,930
14,980 -- 14,980 Metal Management, Inc. 458,688 -- 458,688
3,035 -- 3,035 Nucor Corp. 164,649 -- 164,649
23,478 -- 23,478 Olympic Steel, Inc. 830,886 -- 830,886
19,987 -- 19,987 Oregon Steel Mills, Inc. (a) 1,012,541 -- 1,012,541
5,879 -- 5,879 Steel Dynamics, Inc. 386,486 -- 386,486
------------- ------------- -------------
9,607,204 -- 9,607,204
------------- ------------- -------------
TECHNOLOGY DISTRIBUTORS--0.76%
-- 241,697 241,697 Agilysys, Inc. -- 4,350,546 4,350,546
30,659 -- 30,659 SYNNEX Corp. (a) 581,295 -- 581,295
------------- ------------- -------------
581,295 4,350,546 4,931,841
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
THRIFTS & MORTGAGE FINANCE---1.74%
102,451 -- 102,451 Beverly Hills Bancorp Inc. $ 985,579 $ -- $ 985,579
18,155 -- 18,155 Camco Financial Corp. 251,447 -- 251,447
116,492 -- 116,492 Corus Bankshares, Inc. 3,049,761 -- 3,049,761
36,205 -- 36,205 Downey Financial Corp. 2,456,509 -- 2,456,509
114,717 -- 114,717 First Niagara Financial Group, Inc. 1,608,332 -- 1,608,332
57,667 -- 57,667 Fremont General Corp. 1,070,300 -- 1,070,300
23,200 -- 23,200 Harbor Florida Bancshares, Inc. 861,648 -- 861,648
14,080 -- 14,080 Rome Bancorp, Inc. 181,491 -- 181,491
22,433 -- 22,433 TierOne Corp. 757,562 -- 757,562
------------- ------------- -------------
11,222,629 -- 11,222,629
------------- ------------- -------------
TOBACCO--0.75%
20,630 -- 20,630 Loews Corp-Carolina Group 1,059,763 -- 1,059,763
19,388 -- 19,388 Reynolds American Inc. 2,235,436 -- 2,235,436
34,502 34,502 UST Inc. 1,559,145 1,559,145
------------- ------------- -------------
4,854,344 -- 4,854,344
------------- ------------- -------------
TRADING COMPANIES & DISTRIBUTORS---1.78%
-- 89,528 89,528 H&E Equipment Services, Inc. (a) -- 2,636,600 2,636,600
12,895 -- 12,895 MSC Industrial Direct Co., Inc.-Class A 613,415 -- 613,415
-- 226,446 226,446 UAP Holding Corp. -- 4,938,787 4,938,787
7,149 -- 7,149 United Rentals, Inc. (a) 228,625 -- 228,625
-- 46,480 46,480 Watsco, Inc. -- 2,780,433 2,780,433
4,445 -- 4,445 WESCO International, Inc. 306,704 -- 306,704
------------- ------------- -------------
1,148,744 10,355,820 11,504,564
------------- ------------- -------------
TRUCKING--1.70%
25,222 -- 25,222 Con-way Inc. 1,461,109 -- 1,461,109
10,866 -- 10,866 Laidlaw International Inc. (a) 273,822 -- 273,822
-- 99,102 99,102 Landstar System, Inc. -- 4,680,587 4,680,587
-- 209,408 209,408 Marten Transport, Ltd. (a) -- 4,552,530 4,552,530
------------- ------------- -------------
1,734,931 9,233,117 10,968,048
------------- ------------- -------------
Total Common Stocks & Other Equity
Interests (Cost $589,029,517) $ 235,087,628 $ 443,148,585 $ 678,236,213
------------- ------------- -------------
MONEY MARKET FUNDS--3.38%
7,124,178 -- 7,124,178 Liquid Assets Portfolio-Institutional
Class (e) 7,124,178 3,798,827 10,923,005
7,124,178 -- 7,124,178 STIC Prime Portfolio-Institutional
Class (e) 7,124,178 3,798,827 10,923,005
------------- ------------- -------------
Total Money Market Funds
(Cost $21,846,010) 14,248,356 7,597,654 21,846,010
------------- ------------- -------------
Adjustment for Extinguishment of
Debt---8.35% (Cost $50,750,599) (h) (54,000,000)
------------- ------------- -------------
TOTAL INVESTMENTS--99.97% (excluding
investments purchased with cash
collateral from securities loaned)
(Cost $560,124,928) 249,335,984 450,746,239 646,082,223
------------- ------------- -------------
INVESTMENTS PURCHASED WITH CASH
COLLATERAL FROM SECURITIES LOANED
MONEY MARKET FUNDS--2.60%
8,414,559 -- 8,414,559 Liquid Assets Portfolio-Institutional
Class (e)(f) -- 8,414,559 8,414,559
8,414,559 -- 8,414,559 STIC Prime Portfolio- Institutional
Class (e)(f) -- 8,414,559 8,414,559
------------- ------------- -------------
Total Money Market Funds (purchased
with cash collateral from
securities loaned)
(Cost $16,829,118) -- 16,829,118 16,829,118
------------- ------------- -------------
TOTAL INVESTMENTS--102.57%
(Cost $576,954,046) 249,335,984 467,575,357 662,911,341
------------- ------------- -------------
OTHER ASSETS LESS LIABILITIES--(2.57%) (i) (51,060,820) (19,528,510) (16,619,330)
------------- ------------- -------------
NET ASSETS--100.00% $ 198,275,164 $ 448,046,847 $ 646,292,011
------------- ------------- -------------
SECURITIES SOLD SHORT*
SHARES VALUE
- ---------------------------------- -----------------------------------------
COMMON STOCKS--6.95 (G)
AEROSPACE & DEFENSE--0.00%
8,600 -- -- L-3 Communications Holdings, Inc. 648,612 -- --
------------- ------------- -------------
AUTOMOBILE MANUFACTURERS--0.00%
100,700 -- -- Ford Motor Co. 697,851 -- --
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
CATALOG RETAIL--0.00%
46,800 -- -- ValueVision International, Inc.-Class A $ 516,204 $ -- $ --
------------- ------------- -------------
COMMERCIAL PRINTING--0.00%
39,600 -- -- Deluxe Corp. 692,208 -- --
------------- ------------- -------------
CONSTRUCTION & ENGINEERING--0.00%
26,200 -- -- Fluor Corp. 2,434,766 -- --
------------- ------------- -------------
CONSUMER FINANCE--0.00%
42,500 -- -- American Express Co. 2,261,850 -- --
40,100 -- -- SLM Corp. 2,122,092 -- --
11,300 -- Student Loan Corp. (The) 2,282,600 -- --
------------- ------------- -------------
6,666,542 -- --
------------- ------------- -------------
DATA PROCESSING & OUTSOURCED
SERVICES--0.00%
16,700 -- -- Automatic Data Processing, Inc. 757,345 -- --
49,600 -- -- First Data Corp. 2,233,984 -- --
------------- ------------- -------------
2,991,329 -- --
------------- ------------- -------------
CONSTRUCTION & ENGINEERING--0.00%
20,600 -- -- CVS Corp. 632,420 -- --
------------- ------------- -------------
ELECTRIC UTILITIES--0.00%
48,500 -- -- IDACORP, Inc. 1,663,065 -- --
135,400 -- -- Northeast Utilities 2,798,718 -- --
103,449 -- Reliant Energy Inc. 1,239,319 -- --
------------- ------------- -------------
5,701,102 -- --
------------- ------------- -------------
GAS UTILITIES--0.00%
35,400 -- -- Peoples Energy Corp. 1,271,214 -- --
------------- ------------- -------------
HEALTH CARE DISTRIBUTORS--0.00%
64,100 -- -- Patterson Cos. Inc. 2,239,013 -- --
------------- ------------- -------------
HEALTH CARE EQUIPMENT--0.00%
110,800 -- -- Stereotaxis Inc. 1,195,532 -- --
------------- ------------- -------------
HEALTH CARE FACILITIES--0.00%
63,100 -- -- Health Management Associates, Inc.-Class A 1,243,701 -- --
143,600 -- -- Tenet Healthcare Corp. 1,002,328 -- --
------------- ------------- -------------
2,246,029 -- --
------------- ------------- -------------
HEALTH CARE SERVICES--0.00%
22,700 -- -- DaVita, Inc. 1,128,190 -- --
13,404 -- -- Medco Health Solutions, Inc. 767,781 -- --
------------- ------------- -------------
1,895,971 -- --
------------- ------------- -------------
HOMEBUILDING--0.00%
11,300 -- -- Lennar Corp.-Class A 501,381 -- --
102,900 -- -- Levitt Corp.-Class A 1,646,400 -- --
------------- ------------- -------------
2,147,781 -- --
------------- ------------- -------------
HOMEFURNISHING RETAIL--0.00%
136,300 -- -- Cost Plus, Inc. 1,998,158 -- --
------------- ------------- -------------
IT CONSULTING & OTHER SERVICES--0.00%
84,200 -- -- SRA International, Inc.-Class A 2,242,246 -- --
347,200 -- -- Unisys Corp. 2,180,416 -- --
------------- ------------- -------------
4,422,662 -- --
------------- ------------- -------------
MULTI-UTILITIES--0.00%
272,665 -- -- NiSource Inc. 2,360,904 -- --
208,763 -- -- TECO Energy, Inc. 1,008,450 -- --
------------- ------------- -------------
3,369,354 -- --
------------- ------------- -------------
PACKAGED FOODS & MEATS--0.00%
41,300 -- -- Tyson Foods, Inc.-Class A 613,718 -- --
------------- ------------- -------------
SHARES VALUE
- ---------------------------------- -----------------------------------------
AIM SMALL AIM SMALL
AIM CAP EQUITY AIM CAP EQUITY
AIM SMALL CAP FUND PRO AIM SMALL CAP FUND PRO
OPPORTUNITIES EQUITY FORMA OPPORTUNITIES EQUITY FORMA
I FUND FUND COMBINING I FUND FUND COMBINING
- ------------- --------- ---------- ------------- ------------- -------------
SPECIALTY CHEMICALS--0.00%
16,700 -- -- Cytec Industries Inc. $ 896,122 $ -- $ --
------------- ------------- -------------
WIRELESS TELECOMMUNICATION SERVICES--0.00%
48,125 -- -- Crown Castle International Corp. 1,662,238 -- --
------------- ------------- -------------
Total Securities Sold Short
(Proceeds $45,311,526) $ 44,938,826 $ -- $ --
------------- ------------- -------------
Adjustment for liquidation of short sale
positions (Proceeds $(45,311,526)) (j) (44,938,826) -- --
------------- ------------- -------------
Total Securities Sold Short After
Adjustments (Proceeds $0) $ -- $ -- $ --
============= ============= =============
Investment Abbreviations:
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
Notes to Pro Forma Combining Schedule of Investments:
* At June 30, 2006 AIM Opportunities I Fund engaged in short selling
(uncovered short positions) and borrowing for the purposes of making
additional investments; two strategies that the buying fund AIM Small Cap
Equity Fund is restricted from engaging in. Therefore, prior to the closing
of the reorganization AIM Opportunities 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 Opportunities I Fund comply with the
investment objectives, strategies and restrictions of AIM Small Cap Equity
Fund at June 30, 2006.
(a) Non-income producing security.
(b) All or a portion of this security is out on loan at June 30, 2006.
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The value of this security at June 30, 2006 represented 0.14% of the pro
forma combining Net Assets of AIM Small Cap Equity Fund. This security is
considered to be illiquid. AIM Small Cap Equity Fund is limited to
investing 15% of Net Assets in illiquid securities at the time of purchase
(d) Security fair valued in good faith in accordance with the procedures
established by the Board of Trustees. The value of this security at June
30, 2006 represented 0.14% of the pro forma combining Net Assets of AIM
Small Cap Equity Fund. See Note 1A.
(e) Liquid Assets Portfolio and STIC Prime Portfolio are affiliated with AIM
Opportunities I Fund and AIM Small Cap Equity Fund by having the same
investment advisor.
(f) The security has been segregated to satisfy the forward commitment to
return the cash collateral received in securities lending transactions upon
the borrower's return of the securities loaned.
(g) Collateral on short sales was segregated by AIM Opportunities I Fund in the
amount of $46,625,023 which represents 103.75% of the value of its
securities sold short.
(h) At June 30, 2006 AIM Opportunities I Fund had an outstanding loan of
$54,000,000 that will be extinguished prior to the closing of the
reorganization. AIM Opportunities I Fund is expected to sell securities
valued at $54,000,000 and accordingly the value of the AIM Opportunities I
Fund investments and the payable for the loan outstanding have been reduced
by $54,000,000. The AIM Opportunities I Fund cost of securities has been
reduced by $50,750,599 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.
(i) The estimated transaction costs for the reorganization, which includes
legal, accounting, filing, printing, postage and solicitation, are
estimated to be $177,000 or AIM Opportunities I Fund and AIM has agreed to
bear all of these costs. In addition AIM Small Cap Equity Fund will bear
approximately $30,000 with respect to the reorganization and accordingly
the liabilities of AIM Small Cap Equity Fund have been increased by
$30,000.
(j) At June 30, 2006 AIM Opportunities I Fund had open short positions valued
at $44,938,826 with proceeds of $45,311,526 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 OPPORTUNITIES I FUND INTO AIM SMALL CAP EQUITY FUND
JUNE 30, 2006
(Unaudited)
AIM SMALL
AIM AIM CAP EQUITY FUND
OPPORTUNITIES I SMALL CAP PRO FORMA
FUND EQUITY FUND ADJUSTMENTS ** COMBINING
--------------- ------------ ------------ --- ---------------
ASSETS:
Investments, at value * $235,087,628 $443,148,585 $(54,000,000) (a) $624,236,213
(cost $220,084,063 - AIM Opportunities I Fund)
(cost $368,945,454 - AIM Small Cap Equity Fund)
(cost $589,029,517- Pro Forma Combining)
------------ ------------ ------------ ------------
Investments in affiliated money market funds, at value 14,248,356 24,426,772 -- 38,675,128
(cost $14,248,356 - AIM Opportunities I Fund)
(cost $24,426,772 - AIM Small Cap Equity Fund)
(cost $38,675,128 - Pro Forma Combining)
------------ ------------ ------------ ------------
Total Investments 249,335,984 467,575,357 (54,000,000) (a) 662,911,341
(cost $234,332,419 - AIM Opportunities I Fund)
(cost $393,372,226 - AIM Small Cap Equity Fund)
(cost adjustment $(50,750,599) - AIM Opportunities
I Fund)
(cost $576,954,046- Pro Forma Combining)
------------ ------------ ------------ ------------
Cash -- -- 3,208,347 (b) 3,208,347
Receivables for:
Deposits with brokers for securities sold short 48,271,973 -- (48,271,973) (b) --
Investments sold 257,462 1,028,793 -- 1,286,255
Fund shares sold 4,118 504,036 -- 508,154
Dividends and interest 303,146 216,721 -- 519,867
Short stock rebates 174,089 -- (174,089) (b) --
Investment for trustee deferred compensation and
retirement plans 36,011 29,355 -- 65,366
Other assets -- 139,729 -- 139,729
------------ ------------ ------------ ------------
Total assets 298,382,783 469,493,991 (99,237,715) 668,639,059
------------ ------------ ------------ ------------
LIABILITIES:
Payables for:
Investments purchased 331,429 2,668,818 -- 3,000,247
Fund shares reacquired 170,591 1,356,205 -- 1,526,796
Trustee deferred compensation and retirement plans 60,608 51,144 -- 111,752
Collateral upon return of securities loaned -- 16,829,118 -- 16,829,118
Loan outstanding 54,000,000 -- (54,000,000) (a) --
Short stock account dividends 30,599 -- (30,599) (b) --
Securities sold short, at value (proceeds $45,311,526) 44,938,826 -- (44,938,826) (b) --
Accrued interest expense 268,290 -- (268,290) (a) --
Accrued distribution fees 86,307 210,550 -- 296,857
Accrued trustees' and officer's fees and benefits 1,588 618 -- 2,206
Accrued transfer agent fees 114,463 237,419 -- 351,882
Accrued reorganization expenses -- -- 30,000 30,000
Accrued operating expenses 104,918 93,272 -- 198,190
Total liabilities 100,107,619 21,447,144 (99,207,715) 22,347,048
------------ ------------ ------------ ------------
Net assets applicable to shares outstanding $198,275,164 $448,046,847 $ 30,000 $646,292,011
------------ ------------ ------------ ------------
NET ASSETS CONSIST OF:
Shares of beneficial interest $178,727,264 $321,896,310 $ -- $500,623,574
Undistributed net investment income (loss) 444,276 (3,494,369) (30,000) (3,080,093)
Undistributed net realized gain from investment
securities, foreign currencies and securities
sold short 3,727,359 55,441,775 -- 59,169,134
Unrealized appreciation of investment securities and
securities sold short 15,376,265 74,203,131 -- 89,579,396
------------ ------------ ------------ ------------
$198,275,164 $448,046,847 $ (30,000) $646,292,011
------------ ------------ ------------ ------------
NET ASSETS:
Class A $121,945,016 $231,043,151 $ (15,470) $352,972,697
------------ ------------ ------------ ------------
Class B $ 62,265,207 $127,361,911 $ (8,528) $189,618,590
------------ ------------ ------------ ------------
Class C $ 14,064,941 $ 56,538,172 $ (3,786) $ 70,599,327
------------ ------------ ------------ ------------
Class R $ -- $ 22,432,774 $ (1,502) $ 22,431,272
------------ ------------ ------------ ------------
Institutional Class $ -- $ 10,670,839 $ (714) $ 10,670,125
------------ ------------ ------------ ------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 9,649,366 17,242,746 (547,277) 26,344,835
------------ ------------ ------------ ------------
Class B 5,349,072 9,938,635 (488,557) 14,799,150
------------ ------------ ------------ ------------
Class C 1,206,432 4,414,018 (108,306) 5,512,144
------------ ------------ ------------ ------------
Class R -- 1,691,954 -- 1,691,954
------------ ------------ ------------ ------------
Institutional Class -- 789,512 -- 789,512
------------ ------------ ------------ ------------
Class A:
Net asset value per share $ 12.64 $ 13.40 $ 13.40
------------ ------------ ------------
Offering price per share:
(Net asset value of $12.64 / 94.50% - AIM
Opportunities I Fund)
(Net asset value of $13.40 / 94.50% - AIM Small
Cap Equity Fund) $ 13.38 $ 14.18 $ 14.18
------------ ------------ ------------
Class B:
Net asset value and offering price per share $ 11.64 $ 12.81 $ 12.81
------------ ------------ ------------
Class C:
Net asset value and offering price per share $ 11.66 $ 12.81 $ 12.81
------------ ------------ ------------
Class R:
Net asset value and offering price per share $ -- $ 13.26 $ 13.26
------------ ------------ ------------
Institutional Class:
Net asset value and offering price per share $ -- $ 13.52 $ 13.52
------------ ------------ ------------
* At June 30, 2006, securities with an aggregate value of $16,708,194 were on
loan to brokers for AIM Small Cap Equity Fund.
** 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 OPPORTUNITIES I FUND INTO AIM SMALL CAP EQUITY FUND
FOR THE YEAR ENDED JUNE 30, 2006
(Unaudited)
AIM SMALL
AIM AIM CAP EQUITY FUND
OPPORTUNITIES I SMALL CAP PRO FORMA
FUND EQUITY FUND ADJUSTMENTS * COMBINING
--------------- ------------ ------------ --- ---------------
INVESTMENT INCOME:
Dividends $ 4,245,945 $ 3,082,133 $(1,905,140) (c) $ 5,422,938
(net of foreign withholding tax of $5,986 - AIM
Opportunities I Fund)
(net of foreign withholding tax of $0 - AIM Small
Cap Equity Fund)
(net of foreign withholding tax of $5,986 - Pro
Forma Combining)
----------- ----------- ----------- -----------
Dividends from affiliated money market funds 429,443 380,376 -- 809,819
(including securities lending income of $0 - AIM
Opportunities I Fund)
(including securities lending income of $30,534 -
AIM Small Cap Equity Fund)
(including securities lending income of $30,534 -
Pro Forma Combining)
Short stock rebates 2,321,966 -- (2,321,966) (b) --
Interest 1,683 -- -- 1,683
----------- ----------- ----------- -----------
Total investment income 6,999,037 3,462,509 (4,227,106) 6,234,440
----------- ----------- ----------- -----------
EXPENSES:
Advisory fees 726,199 3,787,937 1,364,254 (d) 5,878,390
Administrative services fees 76,565 142,497 (20,000) (e) 199,062
Custodian fees 48,447 43,027 (14,616) (f) 76,858
Distribution fees:
Class A 367,812 570,554 -- 938,366
Class B 805,294 1,353,313 -- 2,158,607
Class C 182,814 578,797 -- 761,611
Class R -- 94,543 -- 94,543
Dividends on short sales 792,489 -- (792,489) (b) --
Interest and line of credit fees 3,078,424 -- (3,078,424) (b) --
Transfer agent fees--A, B, C & R 650,898 1,662,418 (5,033) (g) 2,308,283
Transfer agent fees--Institutional -- 381 -- 381
Trustees' and officer's fees and benefits 21,170 29,074 (13,897) (h) 36,347
Other 242,261 380,215 (61,694) (i) 560,782
----------- ----------- ----------- -----------
Total expenses 6,992,373 8,642,756 (2,621,899) 13,013,230
----------- ----------- ----------- -----------
Less: Fees waived, expenses reimbursed and expense
offset arrangements (15,713) (525,576) (323,866) (d) (865,155)
----------- ----------- ----------- -----------
Net expenses 6,976,660 8,117,180 (2,945,765) 12,148,075
----------- ----------- ----------- -----------
Net investment income (loss) 22,377 (4,654,671) (1,281,341) (5,913,635)
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND SECURITIES
SOLD SHORT:
Net realized gain (loss) from:
Investment securities 8,986,717 67,196,174 (2,336,350) (c) 73,846,541
(includes gains from securites sold to
affiliates of $2,820,435 - AIM Opportunities
I Fund)
(includes gains from securites sold to
affiliates of $31,732 - AIM Small Cap Equity
Fund)
(includes gains from securites sold to
affiliates of $2,852,167 - Pro Forma Combining)
Foreign currencies 25,592 28 -- 25,620
Securities sold short (7,196,500) -- 7,196,500 (b) --
----------- ----------- ----------- -----------
1,815,809 67,196,202 4,860,150 73,872,161
----------- ----------- ----------- -----------
Change in net unrealized appreciation (depreciation)
of:
Investment securities 16,297,099 5,869,126 (4,236,890) (c) 17,929,335
Foreign currencies (55,556) -- -- (55,556)
Securities sold short 885,635 -- (885,635) (b) --
----------- ----------- ----------- -----------
17,127,178 5,869,126 (5,122,525) 17,873,779
----------- ----------- ----------- -----------
Net gain from investment securities, foreign
currencies and securities sold short 18,942,987 73,065,328 (262,375) 91,745,940
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations $18,965,364 $68,410,657 $(1,543,716) $85,832,305
=========== =========== =========== ===========
* See Note 2 Pro Forma 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 OPPORTUNITIES I FUND INTO AIM SMALL CAP EQUITY FUND
JUNE 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 Small Cap Equity Fund ("Buying Fund") and AIM
Opportunities I 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 June 30, 2006,
Selling Fund - Class A shareholders would have received 9,102,089 shares of
Buying Fund - Class A shares, Selling Fund - Class B shareholders would have
received 4,860,515 shares of Buying Fund - Class B shares and Selling Fund -
Class C shareholders would have received 1,098,126 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 June 30,
2006. 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 June
30, 2006, Selling Fund is expected to sell securities valued at $54,000,000 and
accordingly the value of the Selling Fund's investments and the payable for the
loan outstanding have been reduced by $54,000,000. The Selling Fund's cost of
securities has been reduced by $50,750,599 based on the proportion of borrowing
to total investments at June 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 June 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 June 30, 2006 and for the 12 months
ended June 30, 2006, respectively.
(c) During the 12 months ended June 30, 2006, the Selling Fund had average
borrowings of approximately 26% as a percentage of total investments, according
the dividend income, realized gains and the change in unrealized appreciation in
the Pro Forma Combining Statement of Operations have been reduced by 26% 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 June 30,
2006 are $5,878,390. The advisory fees were adjusted to reflect the advisory fee
rates in effect for Buying Fund. Correspondingly, advisory fee waivers have been
adjusted to reflect the contractual agreement by the advisor to waive advisory
fees for the period January 1, 2005 through December 31, 2009 as part of its
settlement with the Attorney General of New York. The advisory fees will not
exceed the following annual rates applied to the average daily net assets of the
Fund: 0.745% of the first $250 million; 0.73% of the next $250 million; 0.715%
of the next $500 million; 0.70% of the next $1.5 billion; 0.685% of the next
$2.5 billion; 0.67% of the next $2.5 billion; 0.655% of the next $2.5 billion
and 0.64% of the excess over $10 billion.
(e) Pursuant to the master administrative services agreement for Buying Fund,
fees paid on pro forma combined assets for the year ended June 30, 2006 are
$199,062. 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 $14,616 to reflect the transaction costs on
the pro forma combined assets for the year ended June 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 $5,033 for Class A, Class B, Class C and Class R and Investor
class shares.
(h) Trustees' and Officer's fees and benefits were reduced by $13,897 to
eliminate the effects of duplicative fixed costs of retainer and meeting fees.
(i) Other Expenses were reduced by $61,694 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 $177,000 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. The reorganization costs related to
Selling Fund are estimated to be $177,000 and AIM has agreed to pay 100% of
these costs. 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.
AIM INVESTMENTS LOGO
AIM OPPORTUNITIES II FUND,
A PORTFOLIO OF AIM SPECIAL OPPORTUNITIES FUNDS
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 Opportunities
II Fund (the "Fund") to AIM Select Equity 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 AIM Special
Opportunities Funds, conducted a review of its 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 combination of your Fund with Buying Fund.
As more fully described in the attached Proxy Statement and Prospectus, AIM
recommended, and your Board of Trustees approved, that another fund also be
consolidated with Buying Fund. The proposed combination of your Fund into Buying
Fund is not contingent on that other transaction occurring.
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 Special
Opportunities Funds has approved the 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,
[YOUR GOALS. OUR SOLUTIONS.] [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
-s- Philip A. Taylor
Philip A. Taylor
President
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM OPPORTUNITIES III FUND,
A PORTFOLIO OF AIM SPECIAL OPPORTUNITIES FUNDS
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 Opportunities
III Fund (the "Fund") to AIM Select Equity 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 AIM Special
Opportunities Funds, conducted a review of its 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 combination of your Fund with Buying Fund.
As more fully described in the attached Proxy Statement and Prospectus, AIM
recommended, and your Board of Trustees approved, that another fund also be
consolidated with Buying Fund. The proposed combination of your Fund into Buying
Fund is not contingent on that other transaction occurring.
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 Special
Opportunities Funds has approved the 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 OPPORTUNITIES II FUND,
A PORTFOLIO OF AIM SPECIAL OPPORTUNITIES FUNDS
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 Opportunities II Fund (the "Fund"), an
investment portfolio of AIM Special Opportunities Funds ("Trust"), will be
transferred to AIM Select Equity Fund ("Buying Fund"), an investment
portfolio of AIM Funds Group ("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
AIM OPPORTUNITIES III FUND,
A PORTFOLIO OF AIM SPECIAL OPPORTUNITIES FUNDS
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 Opportunities III Fund (the "Fund"),
an investment portfolio of AIM Special Opportunities Funds ("Trust"), will
be transferred to AIM Select Equity Fund ("Buying Fund"), an investment
portfolio of AIM Funds Group ("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 OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND,
A PORTFOLIO OF A PORTFOLIO OF
AIM SPECIAL OPPORTUNITIES FUNDS AIM SPECIAL OPPORTUNITIES FUNDS
11 GREENWAY PLAZA, SUITE 100 11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173 HOUSTON, TEXAS 77046-1173
(800) 959-4246 (800) 959-4246
</Table>
AIM SELECT EQUITY FUND,
A PORTFOLIO OF
AIM FUNDS GROUP
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
(800) 959-4246
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 of AIM Opportunities II
Fund, an investment portfolio of AIM Special Opportunities Funds ("Trust"), a
Delaware statutory trust (the "Opportunities II Fund Special Meeting") and the
special meeting of shareholders of AIM Opportunities III Fund, also an
investment portfolio of Trust (the "Opportunities III Fund Special Meeting" and,
together with the Opportunities II Fund Special Meeting, the "Special
Meetings"). The Special Meetings 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 Meetings of Shareholders and the enclosed proxy card on or
about January 31, 2007 to all shareholders entitled to vote at the Special
Meetings.
At the Opportunities II Fund Special Meeting, we are asking shareholders of
AIM Opportunities II Fund ("Opportunities II Fund") to consider and approve an
Agreement and Plan of Reorganization (the "Opportunities II Fund Agreement")
that provides for the reorganization of Opportunities II Fund, an investment
portfolio of Trust, with AIM Select Equity Fund ("Buying Fund"), an investment
portfolio of AIM Funds Group ("Buyer") (the "Opportunities II Fund
Reorganization").
At the Opportunities III Fund Special Meeting, we are asking shareholders
of AIM Opportunities III Fund ("Opportunities III Fund") to consider and approve
an Agreement and Plan of Reorganization (the "Opportunities III Fund Agreement"
and, together with the Opportunities II Fund Agreement, the "Agreements") that
provides for the reorganization of Opportunities III Fund, an investment
portfolio of Trust, with Buying Fund (the "Opportunities III Fund
Reorganization" and, together with the Opportunities II Fund Reorganization, the
"Reorganizations").
This Proxy Statement/Prospectus includes information regarding both
Reorganizations. We have included the request for approval of both
Reorganizations in one Proxy Statement/Prospectus because we are proposing that
each of Opportunities II Fund and Opportunities III Fund (each, a "Selling Fund"
and together, the "Selling Funds") be combined with Buying Fund. Consummation of
the Opportunities II Fund Reorganization is not conditioned on consummation of
the Opportunities III Fund Reorganization. Consummation of the Opportunities III
Fund Reorganization, is not conditioned on consummation of the Opportunities II
Fund Reorganization.
Under the respective Agreements, all of the assets of each Selling Fund
will be transferred to Buying Fund, Buying Fund will assume the liabilities of
each Selling Fund and Buyer will issue shares of each class of Buying Fund to
shareholders of the corresponding class of shares of each Selling Fund, as set
forth on Exhibit A.
The value of each Selling Fund shareholder's account with Buying Fund
immediately after each of the Reorganizations will be the same as the value of
such Selling Fund shareholder's account immediately prior to each of the
Reorganizations. The Reorganizations have been structured as tax-free
transactions. No sales charges will be imposed in connection with the
Reorganizations.
i
The Board of Trustees of Trust (the "Board") has approved the Agreements
and the Reorganizations as being advisable and in the best interests of each of
the Selling Funds.
Trust and Buyer are both registered open-end management investment
companies that issue their shares in separate series. Each Selling 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 each Selling Fund and Buying Fund.
AIM is a wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"), an independent
global investment management company.
Buying Fund and each Selling Fund have identical investment objectives. All
three funds seek to provide long-term growth of capital. See "Comparison of
Investment Objectives and Principal Strategies."
This Proxy Statement/Prospectus sets forth the information that
shareholders of each Selling Fund should know before voting on the Agreements.
It is both the Proxy Statement of each Selling Fund and the Prospectus of Buying
Fund. You should read and retain this Proxy Statement/Prospectus for future
reference.
The Prospectus of Opportunities II Fund dated February 28, 2006, as
supplemented (the "Opportunities II Fund Prospectus"), together with the related
Statement of Additional Information dated February 28, 2006, as supplemented,
and the Prospectus of Opportunities III Fund dated February 28, 2006, as
supplemented (the "Opportunities III Fund Prospectus" and, together with the
Opportunities II Fund Prospectus, the "Selling Fund Prospectuses"), together
with the related Statement of Additional Information dated February 28, 2006, as
supplemented, are on file with the Securities and Exchange Commission (the
"SEC"). The Selling Fund Prospectuses are incorporated by reference into this
Proxy Statement/Prospectus. The Prospectus of Buying Fund dated April 24, 2006,
as supplemented, (the "Buying Fund Prospectus"), the related Statement of
Additional Information dated April 24, 2006, as supplemented, and the Statement
of Additional Information relating to the Reorganizations 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 III to this Proxy Statement/Prospectus. The
Statement of Additional Information relating to the Reorganizations 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 Statements of Additional Information described above,
material incorporated by reference, and other information about Trust and Buying
Fund.
Copies of the Prospectuses of Buying Fund and each Selling 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
each Selling 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 respective Selling 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 Reorganizations................................................... 1
Comparison of Fees and Expenses....................................... 10
Comparison of Performance............................................. 4
Comparison of Investment Objectives and Principal Strategies.......... 1
Comparison of Multiple Class Structures............................... 23
Comparison of Sales Charges........................................... 23
Comparison of Distribution and Purchase and Redemption Procedures..... 24
The Board's Recommendation............................................ 24
RISK FACTORS............................................................ 25
Risks Associated with Buying Fund..................................... 25
Comparison of Risks of Buying Fund and Each Selling Fund.............. 25
INFORMATION ABOUT BUYING FUND........................................... 25
Description of Buying Fund Shares..................................... 25
Management's Discussion of Fund Performance........................... 26
Financial Highlights.................................................. 26
ADDITIONAL INFORMATION ABOUT THE AGREEMENTS............................. 26
Terms of the Reorganizations.......................................... 26
The Reorganizations................................................... 26
Board Considerations.................................................. 27
Other Terms........................................................... 32
Federal Income Tax Consequences....................................... 33
Accounting Treatment.................................................. 33
RIGHTS OF SHAREHOLDERS.................................................. 33
CAPITALIZATION.......................................................... 34
LEGAL MATTERS........................................................... 36
ADDITIONAL INFORMATION ABOUT BUYING FUND AND SELLING FUNDS.............. 36
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION........... 36
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING........................ 37
Proxy Statement/Prospectus............................................ 37
Time and Place of Special Meetings.................................... 37
Voting in Person...................................................... 37
Voting by Proxy....................................................... 37
Vote Necessary to Approve Each Proposal............................... 38
Proxy Solicitation.................................................... 38
Other Matters......................................................... 38
Ownership of Shares................................................... 38
Security Ownership of Management and Trustees......................... 39
</Table>
iii
<Table>
EXHIBIT A... Classes of Shares of Each Selling Fund and Corresponding Classes of
Shares of Buying Fund
EXHIBIT B.. Shares Outstanding of Each Class of Each Selling Fund on Record Date
EXHIBIT C.............................. Ownership of Shares of Each Selling Fund
EXHIBIT D.................................... Ownership of Shares of Buying Fund
APPENDIX I....... Agreement and Plan of Reorganization for Opportunities II Fund
APPENDIX II..... Agreement and Plan of Reorganization for Opportunities III Fund
APPENDIX III.......................................... Prospectus of Buying Fund
APPENDIX IV............................ Discussion of Performance of Buying Fund
APPENDIX V.................................. 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 each Selling Fund will benefit from the proposed
Reorganizations 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
Reorganizations are advisable and in the best interests of each Selling Fund and
that the interests of the shareholders of each Selling Fund will not be diluted
as a result of the Reorganizations. The Selling Funds and Buying Fund have
identical investment objectives and are managed by the same portfolio team. Each
of the Selling Funds and Buying Fund also utilize similar investment strategies,
although, as noted below, Buying Fund does not utilize short selling or leverage
as investment techniques. The Board believes that a larger 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 the current total annual operating expenses of each
Selling Fund. For additional information concerning the factors the Board
considered in approving the Agreements, see "Additional Information About the
Agreements -- Board Considerations."
The following summary discusses some of the key features of the
Reorganizations and highlights certain differences between each Selling 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
Agreements. For more complete information, please read this entire Proxy
Statement/Prospectus.
THE REORGANIZATIONS
The Reorganizations will result in the combination of each Selling Fund
with Buying Fund. Each Selling 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 each Selling Fund approve the Agreements and other
closing conditions are satisfied, all of the assets of each Selling Fund will be
transferred to Buying Fund, Buying Fund will assume the liabilities of each
Selling Fund, and Buyer will issue shares of each class of Buying Fund to
shareholders of the corresponding class of shares of each Selling Fund, as set
forth on Exhibit A. For a description of certain of the closing conditions that
must be satisfied, see "Additional Information About the Agreements -- Other
Terms."
The shares of Buying Fund issued in the Reorganizations will have an
aggregate net asset value equal to the net value of the assets of each Selling
Fund transferred to Buying Fund. The value of Buying Fund shares attributable to
each Shareholder immediately after and as a result of each of the
Reorganizations will be the same as the value of each Selling Fund share
attributable to each Shareholder immediately prior to each of the
Reorganizations. A copy of the Opportunities II Fund Agreement is attached as
Appendix I to this Proxy Statement/Prospectus and a copy of the Opportunities
III Fund Agreement is attached as Appendix II to this Proxy
Statement/Prospectus. See "Additional Information About the Agreements."
Trust and Buyer will receive an opinion of Ballard Spahr Andrews &
Ingersoll, LLP to the effect that the Reorganizations 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 Reorganizations. See
"Additional Information About the Agreements -- Federal Income Tax
Consequences."
No sales charges will be imposed in connection with the Reorganizations.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
The Selling Funds and Buying Fund have identical investment objectives and
invest in similar types of securities, although Buying Fund, unlike the Selling
Funds, is not permitted to sell securities short or to utilize
1
leverage. All three funds seek long-term growth of capital and normally focus
their investments in equity securities. However, Opportunities II Fund invests
in small and medium-sized growth companies and Opportunities III Fund invests in
large-sized growth companies, while Buying Fund may invest without regard to
capitalization.
The chart below provides a summary for comparison purposes of the
investment objectives and principal investment strategies of each Selling Fund
and Buying Fund. You can find more detailed information about the investment
objectives, strategies and other investment policies of each Selling Fund and
Buying Fund in the Selling Fund Prospectuses and the Buying Fund Prospectus,
respectively.
<Table>
<Caption>
AIM OPPORTUNITIES II FUND AIM OPPORTUNITIES III FUND AIM SELECT EQUITY FUND
(SELLING FUND) (SELLING FUND) (BUYING FUND)
------------------------- -------------------------- ----------------------
INVESTMENT OBJECTIVES
- Long-term growth of capital - Long-term growth of capital
- - Long-term growth of capital
INVESTMENT STRATEGIES
- Focuses its investments in - Invests, normally, at least
- - Focuses its investments in equity securities, or 80% of its assets in equity
equity securities, or securities convertible into securities, including
securities convertible into equity securities, of convertible securities, with
equity securities, of companies with market prospects for above-average
companies with market capitalizations, at the time market returns, without
capitalizations, at the time of purchase, within the regard to market
of purchase, within the range of market capitalization.
range of market capitalizations of companies
capitalizations of companies included in the Standard &
included in the Standard & Poor's 500 Index; however,
Poor's MidCap 400 Index; the fund may also invest in
however, the fund may also companies with market
invest in companies with capitalizations below the
market capitalizations above range of those included in
the range of those included the Standard & Poor's 500
in the Standard & Poor's Index.
MidCap 400 Index.
- May sell put and covered - No corresponding strategy.
- - May sell put and covered call options and purchase
call options and purchase put and call options on
put and call options on securities, securities
securities, securities indices and foreign
indices and foreign currencies.
currencies.
- The portfolio managers use a - The fund's portfolio manager
- - The portfolio managers use a multi-step, quantitatively focuses on companies
multi-step, quantitatively oriented process to that:(1) have experienced
oriented process to construct the fund's above-average, long-term
construct the fund's portfolio. They first use growth in earnings;(2) have
portfolio. They first use computer models to screen a excellent prospects for
computer models to screen a large universe of primarily future growth;(3) are
large universe of primarily domestic stocks and identify undervalued relative to the
domestic stocks and identify a group of eligible stocks company's assets, or the
a group of eligible stocks within that universe. The equity markets generally.
within that universe. The quantitative analysis The fund's portfolio manager
quantitative analysis screens for various factors, considers whether to sell a
screens for various factors, including growth/stability particular security when any
including growth/stability of earnings, valuation, of these factors materially
of earnings, valuation, profitability, financial changes. The fund generally
profitability, financial strength and stock price expects to diversify the
strength and stock price volatility. The portfolio strategies that it
volatility. The portfolio
</Table>
2
<Table>
<Caption>
AIM OPPORTUNITIES II FUND AIM OPPORTUNITIES III FUND AIM SELECT EQUITY FUND
(SELLING FUND) (SELLING FUND) (BUYING FUND)
------------------------- -------------------------- ----------------------
managers then perform risk managers then perform risk will employ in seeking to
and transaction cost and transaction cost achieve its objective by
analyses on the stocks that analyses on the stocks that following AIM's growth,
were previously identified. were previously identified. growth at a reasonable price
When selecting stocks for When selecting stocks for (GARP), and value investment
the fund, the portfolio the fund, the portfolio disciplines. The fund
managers seek to neutralize managers seek to neutralize anticipates allocating a
the effects of certain the effects of certain significant portion of its
macroeconomic and market macroeconomic and market assets, generally in
factors in an effort to factors in an effort to approximately equal amounts,
lower the volatility of the lower the volatility of the among those investment
fund's returns. Finally, the fund's returns. Finally, the disciplines.
portfolio managers conduct a portfolio managers conduct a
qualitative analysis of the qualitative analysis of the
stocks selected for the stocks selected for the
fund's portfolio to confirm fund's portfolio to confirm
the results of the the results of the
quantitative analysis. The quantitative analysis. The
portfolio managers consider portfolio managers consider
whether to sell a particular whether to sell a particular
security when the company no security when the company no
longer exhibits longer exhibits
characteristics that drive characteristics that drive
performance or when the performance or when the
stock adds too much marginal stock adds too much marginal
risk to the fund's risk to the fund's
portfolio. The portfolio portfolio. The portfolio
managers consider whether to managers consider whether to
sell a security short when sell a security short when
the company exhibits the company exhibits
characteristics that drive characteristics that drive
poor performance, and when a poor performance, and when a
short position in the short position in the
security would complement security would complement
the risk profile of the the risk profile of the
portfolio. portfolio.
- - The fund is non-diversified, - The fund is non-diversified, - The fund is diversified
therefore, it can invest a therefore, it can invest a
greater percentage of its greater percentage of its
assets in any one issuer assets in any one issuer
than a diversified fund can. than a diversified fund can.
- - The fund may sell securities - The fund may sell securities - No corresponding strategy
short ('short selling"), short ('short selling"),
without holding without holding
corresponding long positions corresponding long positions
- - The fund may utilize bank - The fund may utilize bank - No corresponding strategy
borrowings ('leverage") to borrowings ('leverage") to
purchase securities purchase securities
- - May invest up to 25% of its - May invest up to 25% of its - May invest up to 25% of its
total assets in foreign total assets in foreign total assets in foreign
securities securities securities
</Table>
3
COMPARISON OF PERFORMANCE
Bar charts showing the annual total returns for calendar years ended
December 31, 2005 for Class A shares of each Selling Fund and Buying Fund can be
found below. Also included below are tables showing the average annual total
returns for the periods indicated for each Selling Fund and Buying Fund. For
more information regarding the total return of each Selling Fund, see the
"Financial Highlights" section of the Selling Fund Prospectuses, which have been
made a part of this Proxy Statement/Prospectus by reference. For more
information regarding the total return of Buying Fund, see "Information About
Buying Fund -- Financial Highlights." Past performance cannot guarantee
comparable future results.
OPPORTUNITIES II FUND (SELLING FUND)
The bar chart and table shown below provide an indication of the risks of
investing in Opportunities II Fund. Opportunities II 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 Opportunities
II 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. Opportunities
II Fund's returns include an adjustment for a one time payment to Opportunities
II Fund by AIM. Had this payment to Opportunities II Fund not been made, the
returns would have been lower.
(BAR CHART)
<Table>
<Caption>
YEARS
- -----
1999.................... 125.55%
2000.................... 10.10%
2001.................... -22.27%
2002.................... -19.94%
2003.................... 29.56%
2004.................... 7.29%
2005.................... 10.50%
2006.................... 12.02%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
31.44% (quarter ended December 31, 1999) and the lowest quarterly return was
(19.07)% (quarter ended March 31, 2001).
4
The following performance table compares the Opportunities II Fund's
performance to that of a broad-based securities market index, a style specific
index and a peer group index. The Opportunities II 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.
AVERAGE ANNUAL TOTAL RETURNS(2)
<Table>
<Caption>
SINCE
(FOR THE PERIODS ENDED DECEMBER 31, 2006) 1 YEAR 5 YEARS INCEPTION(1) INCEPTION DATE
- ----------------------------------------- ------ ------- ------------ --------------
CLASS A.................................. 12/30/98
Return Before Taxes.................... 5.86% 5.41% 12.21%
Return After Taxes on Distributions.... 5.86 5.41 11.67
Return After Taxes on Distributions and
Sale of Fund Shares................. 3.81 4.67 10.49
CLASS B.................................. 11/12/99
Return Before Taxes.................... 6.24 5.57 3.56
CLASS C.................................. 11/12/99
Return Before Taxes.................... 10.24 5.89 3.56
S&P 500 Index(2)......................... 15.78 6.19 3.425 12/31/985
S&P MidCap 400 Index(2)(3)............... 10.32 10.89 10.655 12/31/985
Lipper Mid-Cap Core Funds Index(2)(4).... 13.44 10.10 9.695 12/31/985
</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. Opportunities II
Fund's returns include an adjustment for a one time payment to Opportunities II
Fund by AIM. Had this payment to Opportunities II Fund not been made, the
returns would have been lower.
(1) Opportunities II Fund's return during certain periods was positively
impacted by its investments in initial public offerings (IPOs). There can
be no assurance that the Opportunities II Fund will have favorable IPO
investment opportunities in the future.
(2) The Standard & Poor's 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. The Opportunities II Fund has also
included the Standard & Poor's MidCap 400 Index, which the Opportunities
II Fund believes more closely reflects the performance of the securities
in which the Opportunities II Fund invests. In addition, the
Opportunities II Fund has included the Lipper Mid-Cap Core Fund Index
(which may or may not include the Opportunities II Fund) for comparison
to a peer group.
(3) The Standard & Poor's MidCap 400 Index measures the performance of 400
domestic midcap companies and is a benchmark of midcap stock price
movement in the U.S.
(4) The Lipper Mid-Cap Core Fund Index is an equally weighted representation
of the 30 largest funds in the Lipper Mid-Cap Core classification. These
funds, by portfolio practice, invest at least 75% of their equity assets
in companies with market capitalizations (on a three-year weighted basis)
less than 300% of the dollar-weighted median market capitalization of the
middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap
Core funds have more latitude in the companies in which they invest.
These funds typically have an average price-to-earnings ratio, price-to-
book ratio, and three year sales-per-share growth value, compared to the
S&P MidCap 400 Index. In conjunction with the fund's management team
change on May 23, 2005, and the corresponding change in the fund's
investment style from value to core, the Opportunities II Fund has
elected to use the Lipper Mid-Cap Core Fund Index to represent its peer
group rather than the Lipper Mid-Cap Value
5
Fund Index. The Lipper Mid-Cap Core Fund Index more closely reflects the
performance of the types of securities in which the fund invests.
(5) The average annual total return given is since the month-end closest to
the inception date of the Opportunities II Fund class with the longest
performance history.
OPPORTUNITIES III FUND (SELLING FUND)
The bar chart and table shown below provide an indication of the risks of
investing in Opportunities III Fund. Opportunities III 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 Opportunities
III 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.
Opportunities III Fund's returns include an adjustment for a one time payment to
Opportunities III Fund by AIM. Had this payment to Opportunities II Fund not
been made, the returns would have been lower..
(BAR CHART)
<Table>
<Caption>
YEARS
- -----
2000.................... 30.86%
2001.................... -26.61%
2002.................... -25.97%
2003.................... 21.30%
2004.................... 0.96%
2005.................... 4.50%
2006.................... 15.44%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
28.00% (quarter ended March 31, 2000) and the lowest quarterly return was
(17.12%) (quarter ended September 30, 2001).
6
The following performance table compares the Opportunities III Fund's
performance to that of a broad-based securities market index, a style specific
index and a peer group index. The Opportunities III 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.
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
SINCE
(FOR THE PERIODS ENDED DECEMBER 31, 2006) 1 YEAR 5 YEARS INCEPTION INCEPTION DATE
- ----------------------------------------- ------ ------- --------- --------------
CLASS A................................... 12/30/99
Return Before Taxes..................... 9.12% 0.67% (0.10)%
Return After Taxes on Distributions..... 9.12 0.66 (0.24)
Return After Taxes on Distributions and
Sale of Fund Shares.................. 5.93 0.57 (0.15)
CLASS B................................... 03/31/00
Return Before Taxes..................... 9.61 0.72 (3.56)
CLASS C................................... 03/31/00
Return Before Taxes..................... 13.49 1.11 (3.58)
S&P 500 Index(1).......................... 15.78 6.19 1.12(3) 12/31/99(3)
Lipper Large-Cap Core Funds Index(1)(2)... 13.39 5.00 0.43(3) 12/31/99(3)
</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. Opportunities
III Fund's returns include an adjustment for a one time payment to Opportunities
III Fund by AIM. Had this payment to Opportunities II Fund not been made, the
returns would have been lower.
(1) The Standard & Poor's 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. In addition, the Opportunities III Fund
has included the Lipper Large-Cap Core Fund Index (which may or may not
include the Opportunities III Fund) for comparison to a peer group.
(2) The Lipper Large-Cap Core Fund Index is an equally weighted
representation of the 30 largest funds in the Lipper Large-Cap Core
classification. These funds, by portfolio practice, invest at least 75%
of their equity assets in companies with market capitalizations (on a
three-year weighted basis) greater than 300% of the dollar-weighted
median market capitalization of the middle 1,000 securities of the S&P
SuperComposite 1500 Index Large-Cap Core funds have more latitude in the
companies in which they invest. These funds typically have an average
price-to-earnings ratio, price-to-book ratio, and three year sales-per-
share growth value, compared to the S&P 500 Index. In conjunction with
the fund's management team change on May 23, 2005, and the corresponding
change in the fund's investment style from value to core, the fund has
elected to use the Lipper Large-Cap Core Fund Index to represent its peer
group rather than the Lipper Large-Cap Value Fund Index. The Lipper
Large-Cap Core Fund Index more closely reflects the performance of the
types of securities in which the fund invests.
(3) The average annual total return given is since the month-end closest to
the inception date of the Opportunities III Fund class with the longest
performance history.
7
SELECT EQUITY 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.... 18.61%
1997.... 19.54%
1998.... 27.09%
1999.... 41.48%
2000.... -1.77%
2001.... -25.64%
2002.... -29.59%
2003.... 29.49%
2004.... 13.87%
2005.... 5.10%
2006.... 13.75%
</Table>
During the periods shown in the bar chart, the highest quarterly return was
30.49% (quarter ended December 31, 1999) and the lowest quarterly return was
(26.14%) (quarter ended March 31, 2001).
The following performance table compares the Buying Fund Fund's performance
to that of a broad-based securities market index, a style specific index and a
peer group index. The Buying 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.
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
(FOR THE PERIODS ENDED DECEMBER SINCE
31, 2006) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) INCEPTION DATE
- ------------------------------- ------ ------- -------- ------------ --------------
CLASS A........................... 12/04/67
Return Before Taxes............. 7.49% 3.24% 6.30%
Return After Taxes on
Distributions................ 7.49 3.24 5.59
Return After Taxes on
Distributions and Sale of Fund
Shares....................... 4.87 2.78 5.25
CLASS B........................... 09/01/93
Return Before Taxes............. 7.88 3.28 6.24
CLASS C........................... 08/04/97
Return Before Taxes............. 11.90 3.63 4.12%
S&P 500 Index(2).................. 15.78 6.19 8.42
Russell 3000(R) Index(3).......... 15.72 7.17 8.64
Lipper Multi-Cap Core Fund
Index(4)........................ 14.14 7.37 8.34
</Table>
8
- --------
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on an investor's tax situation and may
differ from those shown, and after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts. After-tax returns are shown for
Class A only and after-tax returns for Class B and C will vary.
(1) Since Inception performance is only provided for a class with less than
ten calendar years of performance.
(2) The Standard & Poor's 500 Index 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. Buying Fund has also included the Russell
3000(R) Index, which Buying Fund believes more closely reflects the
performance of the types of securities in which Buying Fund invests. In
addition, the Lipper Multi-Cap Core Fund Index (which may or may not
include Buying Fund) is included for comparison to a peer group.
(3) The Russell 3000(R) Index measures the performance of the 3,000 largest
U.S. companies and is regarded as the standard for measuring U.S. stock
market performance.
(4) The Lipper Multi-Cap Core Fund Index is an equally weighted
representation of the 30 largest funds in the Lipper Multi Cap Core
classification. These funds, by portfolio practice, invest in a variety
of market capitalization ranges without concentrating 75% of their equity
assets in any one market capitalization range over an extended period of
time. Multi-Cap funds typically have between 25% and 75% of their assets
invested in companies with market capitalizations (on a three-year
weighted basis) above 300% of the dollar-weighted median market
capitalization of the middle 1,000 securities of the S&P SuperComposite
1500 Index. Multi-Cap Core funds have more latitude in the companies in
which they invest. These funds typically have an average price-to-
earnings ratio, price-to-book ratio, and three year sales-per-share
growth value, compared to the S&P 500 Index. The S&P SuperComposite 1500
Index is a market cap weighted index made up of 1,500 liquid securities
of companies with market capitalizations of $300 million and above, and
represents the small-,mid-, and large-cap markets.
9
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 each Selling Fund and Class A, Class B and Class C shares
of Buying Fund. Pro Forma Combined Expense Ratios of Buying Fund giving effect
to the Reorganizations are also provided. There is no guarantee that actual
expenses will be the same as those shown in this table.
<Table>
<Caption>
AIM OPPORTUNITIES II FUND AIM OPPORTUNITIES III FUND
SELLING FUND SELLING FUND
(10/31/06 AS RESTATED) (10/31/06 AS RESTATED)
--------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
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
Maximum Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable)...... None(1) 5.00% 1.00% None(1) 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from fund assets)
Management Fees(2)(3).................... 0.77% 0.77% 0.77% 0.95% 0.95% 0.95%
Distribution and/or Service (12b-1) Fees... 0.25% 1.00% 1.00% 0.25% 1.00% 1.00%
Other -- Miscellaneous Expenses(4)(5).... 0.49% 0.49% 0.49% 0.64% 0.64% 0.64%
Other -- Expenses Attributable to
Securities Sold Short(6).............. 0.68% 0.68% 0.68% 0.53% 0.53% 0.53%
Other -- Interest Expenses............... 1.33% 1.33% 1.33% 1.34% 1.34% 1.34%
Total Other Expenses....................... 2.50% 2.50% 2.50% 2.51% 2.51% 2.51%
Total Annual Fund Operating Expenses....... 3.52% 4.27% 4.27% 3.71% 4.46% 4.46%
Fee Waiver(3)(7)........................... 0.12% 0.12% 0.12% 0.14% 0.14% 0.14%
Net Annual Fund Operating Expenses......... 3.40% 4.15% 4.15% 3.57% 4.32% 4.32%
<Caption>
AIM SELECT EQUITY FUND
AIM SELECT EQUITY FUND BUYING FUND
BUYING FUND PRO FORMA COMBINED
(12/31/05) (12/31/05)
--------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
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
Maximum Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable)...... None(1) 5.00% 1.00% None(1) 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from fund assets)
Management Fees(2)(3).................... 0.69% 0.69% 0.69% 0.67% 0.67% 0.67%
Distribution and/or Service (12b-1) Fees... 0.25% 1.00% 1.00% 0.25% 1.00% 1.00%
Other -- Miscellaneous Expenses(4)(5).... 0.46% 0.46% 0.46% 0.44% 0.44% 0.44%
Other -- Expenses Attributable to
Securities Sold Short(6).............. -- -- -- -- -- --
Other -- Interest Expenses............... -- -- -- -- -- --
Total Other Expenses....................... 0.46% 0.46% 0.46% 0.44% 0.44% 0.44%
Total Annual Fund Operating Expenses....... 1.40% 2.15% 2.15% 1.36% 2.11% 2.11%
Fee Waiver(3)(7)........................... -- -- -- -- -- --
Net Annual Fund Operating Expenses......... 1.40% 2.15% 2.15% 1.36% 2.11% 2.11%
</Table>
- --------
(1) A contingent deferred sales charge may apply in some cases.
(2) AIM Opportunities II Fund and AIM Opportunities III 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 AIM
Opportunities II Fund and AIM Opportunities III Fund. The base management
fee for AIM Opportunities II Fund and AIM Opportunities III Fund is
1.50%, annualized, of AIM Opportunities II Fund's and AIM Opportunities
III 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 AIM Opportunities II Fund's and AIM Opportunities
III Fund's average daily net assets during a rolling 12 month performance
period, depending on AIM Opportunities II Fund's and AIM Opportunities
III Fund's performance compared to the performance of the S&P MidCap 400
Index and S&P 500 Index, respectively, during such performance period.
The total management fee payable by AIM Opportunities II Fund and AIM
Opportunities III Fund is not susceptible to estimation because it
depends upon the future relative performance of AIM Opportunities II Fund
and AIM Opportunities III Fund and the S&P MidCap 400 Index, and S&P 500
Index, respectively, as well as changes in AIM Opportunities II Fund's
and AIM Opportunities III Fund's average daily net assets over the
relevant periods, respectively. See the section of this proxy entitled
"Summary -- Comparison of Fees and Expenses -- Advisory Fees" for
additional information about the calculation of AIM Opportunities II Fund
and AIM Opportunities III Fund's management fee.
10
(3) The advisor for AIM Opportunities II Fund and AIM Opportunities III 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 1.00%,
annualized, of AIM Opportunities II Fund's and AIM Opportunities III
Fund's average daily net assets, respectively, during the current month,
subject to a monthly performance adjustment upward or downward of up to
0.50%, annualized, of AIM Opportunities II Fund and AIM Opportunities III
Fund's average daily net assets, respectively, during a rolling 12 month
performance period (depending on AIM Opportunities II Fund's and AIM
Opportunities III Fund's performance compared to the performance of the
S&P MidCap 400 Index and S&P 500 Index, respectively, during such
performance period). In addition, under this agreement the maximum
management fee payable monthly by AIM Opportunities II Fund and AIM
Opportunities III Fund (consisting of the base management fee, as
adjusted by the performance adjustment) will not exceed 1.50% of AIM
Opportunities II Fund's and AIM Opportunities III Fund's average daily
net assets, respectively, 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.
(4) 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.
(5) AIM Opportunities II Fund is estimated to incur $120,000 of expenses in
connection with the reorganization of which AIM will pay 100%. AIM
Opportunities III Fund is estimated to incur $97,000 of expenses in
connection with the reorganization of which AIM will pay 100%. 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) When AIM Opportunities II Fund and AIM Opportunities III Fund borrows a
security to make a short sale, the fund has to pay the lender of the
security the value of any dividends earned on the borrowed security
("dividend-substitute payments"). These dividend-substitute payments are
investment related expenses of the fund.
(7) Effective January 1, 2005 through at least June 30, 2007, the advisor for
Buying Fund has contractually agreed to waive advisory fees to the extent
necessary so that the advisory fees payable by the fund do not exceed a
specified maximum annual advisory fee rate, which fee rate includes
breakpoints and is based upon net asset levels. The fund's maximum annual
advisory fee rate ranges from 0.695% (for average net assets up to $250
million) to 0.52% (for average net assets over $10 billion.)
11
EXPENSE EXAMPLE
This Example is intended to help you compare the costs of investing in
different classes of each Selling Fund and Buying Fund with the cost of
investing in other mutual funds. Pro Forma Combined costs of investing in
different classes of Buying Fund giving effect to the reorganizations of the
Selling Funds 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 OPPORTUNITIES II FUND (SELLING FUND)
Class A....................................... $874 $1,560 $2,266 $4,126
Class B....................................... 917 1,584 2,365 4,267(1)
Class C....................................... 517 1,284 2,165 4,422
AIM OPPORTUNITIES III FUND (SELLING FUND)
Class A....................................... $890 $1,610 $2,349 $4,282
Class B....................................... 933 1,636 2,449 4,422(1)
Class C....................................... 533 1,336 2,249 4,574
AIM SELECT EQUITY FUND (BUYING FUND)
Class A....................................... $685 $ 969 $1,274 $2,137
Class B....................................... 718 973 1,354 2,292(1)
Class C....................................... 318 673 1,154 2,483
AIM SELECT EQUITY FUND (BUYING FUND) -- PRO
FORMA COMBINED
Class A....................................... $681 $ 957 $1,254 $2,095
Class B....................................... 714 961 1,334 2,250(1)
Class C....................................... 314 661 1,134 2,441
</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.
12
You would pay the following expenses if you did not redeem your shares:
<Table>
<Caption>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ------ ------ ------
AIM OPPORTUNITIES II FUND (SELLING FUND)
Class A....................................... $874 $1,560 $2,266 $4,126
Class B....................................... 417 1,284 2,165 4,267(1)
Class C....................................... 417 1,284 2,165 4,422
AIM OPPORTUNITIES III FUND (SELLING FUND)
Class A....................................... $890 $1,610 $2,349 $4,282
Class B....................................... 433 1,336 2,249 4,422(1)
Class C....................................... 433 1,336 2,249 4,574
AIM SELECT EQUITY FUND (BUYING FUND)
Class A....................................... $685 $ 969 $1,274 $2,137
Class B....................................... 218 673 1,154 2,292(1)
Class C....................................... 218 673 1,154 2,483
AIM SELECT EQUITY FUND (BUYING FUND) -- PRO
FORMA COMBINED
Class A....................................... $681 $ 957 $1,254 $2,095
Class B....................................... 214 661 1,134 2,250(1)
Class C....................................... 214 661 1,134 2,441
</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. SELLING
FUNDS' AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND
DOES NOT REPRESENT SELLING FUNDS' 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.
13
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 Opportunities II Fund and Class A, Class B and Class C
shares of Buying Fund. Pro Forma Combined Expense Ratios of Buying Fund giving
effect to the Opportunities II Fund Reorganization are also provided. There is
no guarantee that actual expenses will be the same as those shown in this table.
<Table>
<Caption>
AIM SELECT EQUITY FUND
AIM OPPORTUNITIES II FUND AIM SELECT EQUITY FUND BUYING FUND
SELLING FUND BUYING FUND PRO FORMA COMBINED
(10/31/06 AS RESTATED) (12/31/05) (12/31/05)
---------------------------- ---------------------------- ----------------------------
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% None(1) 5.00% 1.00% None(1) 5.00% 1.00%
ANNUAL FUND OPERATING
EXPENSES (expenses that are
deducted from fund assets)
Management Fees(2)(3)...... 0.77% 0.77% 0.77% 0.69% 0.69% 0.69% 0.67% 0.67% 0.67%
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(4)(5).......... 0.49% 0.49% 0.49% 0.46% 0.46% 0.46% 0.44% 0.44% 0.44%
Other -- Expenses
Attributable to
Securities Sold
Short(6)................ 0.68% 0.68% 0.68% -- -- -- -- -- --
Other -- Interest
Expenses................ 1.33% 1.33% 1.33% -- -- -- -- -- --
Total Other Expenses......... 2.50% 2.50% 2.50% 0.46% 0.46% 0.46% 0.44% 0.44% 0.44%
Total Annual Fund Operating
Expenses................... 3.52% 4.27% 4.27% 1.40% 2.15% 2.15% 1.36% 2.11% 2.11%
Fee Waiver(3)(7)............. 0.12% 0.12% 0.12% -- -- -- -- -- --
Net Annual Fund Operating
Expenses................... 3.40% 4.15% 4.15% 1.40% 2.15% 2.15% 1.36% 2.11% 2.11%
</Table>
- --------
(1) A contingent deferred sales charge may apply in some cases.
(2) AIM Opportunities II 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 AIM Opportunities II Fund . AIM Opportunities
II Fund's base management fee is 1.50%, annualized, of AIM Opportunities
II 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 AIM Opportunities II Fund's average daily net
assets during a rolling 12 month performance period, depending on AIM
Opportunities II Fund's performance compared to the performance of the
S&P MidCap 400 Index during such performance period. The total management
fee payable by AIM Opportunities II Fund is not susceptible to estimation
because it depends upon the future relative performance of AIM
Opportunities II Fund and the S&P MidCap 400 Index, as well as changes in
AIM Opportunities II Fund's average daily net assets 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 AIM Opportunities II Fund's management fee.
(3) The advisor for AIM Opportunities II 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 1.00%, annualized, of the fund 's
average daily net assets during the
14
current month, subject to a monthly performance adjustment upward or
downward of up to 0.50%, annualized, of AIM Opportunities II Fund 's
average daily net assets during a rolling 12 month performance period
(depending on the fund's performance compared to the performance of the
S&P MidCap 400 Index during such performance period). In addition, under
this agreement the maximum management fee payable monthly by AIM
Opportunities II Fund (consisting of the base management fee, as adjusted
by the performance adjustment) will not exceed 1.50% of AIM Opportunities
II 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.
(4) 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.
(5) AIM Opportunities II Fund is estimated to incur $120,000 of expenses in
connection with the reorganization of which AIM will pay 100%. 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) When AIM Opportunities II Fund borrows a security to make a short sale,
the fund has to pay the lender of the security the value of any dividends
earned on the borrowed security ("dividend-substitute payments"). These
dividend-substitute payments are investment related expenses of the fund.
(7) Effective January 1, 2005 through at least June 30, 2007, the advisor for
Buying Fund has contractually agreed to waive advisory fees to the extent
necessary so that the advisory fees payable by the fund do not exceed a
specified maximum annual advisory fee rate, which fee rate includes
breakpoints and is based upon net asset levels. The fund's maximum annual
advisory fee rate ranges from 0.695% (for average net assets up to $250
million) to 0.52% (for average net assets over $10 billion.)
EXPENSE EXAMPLE
This Example is intended to help you compare the costs of investing in
different classes of Opportunities II 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 Opportunities II Fund
Reorganization 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
15
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 OPPORTUNITIES II FUND (SELLING FUND)
Class A....................................... $874 $1,560 $2,266 $4,126
Class B....................................... 917 1,584 2,365 4,267(1)
Class C....................................... 517 1,284 2,165 4,422
AIM SELECT EQUITY FUND (BUYING FUND)
Class A....................................... $685 $ 969 $1,274 $2,137
Class B....................................... 718 973 1,354 2,292(1)
Class C....................................... 318 673 1,154 2,483
AIM SELECT EQUITY FUND (BUYING FUND) -- PRO
FORMA COMBINED
Class A....................................... $681 $ 957 $1,254 $2,095
Class B....................................... 714 961 1,334 2,250(1)
Class C....................................... 314 661 1,134 2,441
</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.
You would pay the following expenses if you did not redeem your shares:
<Table>
<Caption>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ------ ------ ------
AIM OPPORTUNITIES II FUND (SELLING FUND)
Class A....................................... $874 $1,560 $2,266 $4,126
Class B....................................... 417 1,284 2,165 4,267(1)
Class C....................................... 417 1,284 2,165 4,422
AIM SELECT EQUITY FUND (BUYING FUND)
Class A....................................... $685 $ 969 $1,274 $2,137
Class B....................................... 218 673 1,154 2,292(1)
Class C....................................... 218 673 1,154 2,483
AIM SELECT EQUITY FUND (BUYING FUND) -- PRO
FORMA COMBINED
Class A....................................... $681 $ 957 $1,254 $2,095
Class B....................................... 214 661 1,134 2,250(1)
Class C....................................... 214 661 1,134 2,441
</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. SELLING
FUNDS' AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND
DOES NOT REPRESENT SELLING FUNDS' OR BUYING FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
16
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.
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 Opportunities III Fund and Class A, Class B and Class C
shares of Buying Fund. Pro Forma Combined Expense Ratios of Buying Fund giving
effect to the Opportunities III Fund Reorganization are also provided. There is
no guarantee that actual expenses will be the same as those shown in this table.
<Table>
<Caption>
AIM SELECT EQUITY FUND
AIM OPPORTUNITIES III FUND AIM SELECT EQUITY FUND BUYING FUND
SELLING FUND BUYING FUND PRO FORMA COMBINED
(10/31/06 AS RESTATED) (12/31/05) (12/31/05)
---------------------------- ---------------------------- ----------------------------
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% None(1) 5.00% 1.00% None(1) 5.00% 1.00%
ANNUAL FUND OPERATING
EXPENSES (expenses that are
deducted from fund assets)
Management Fees(2,3)......... 0.95% 0.95% 0.95% 0.69% 0.69% 0.69% 0.68% 0.68% 0.68%
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(4,5)........... 0.64% 0.64% 0.64% 0.46% 0.46% 0.46% 0.47% 0.47% 0.47%
Other -- Expenses
Attributable to
Securities Sold
Short(6)................ 0.53% 0.53% 0.53% -- -- -- -- -- --
Other -- Interest
Expenses................ 1.34% 1.34% 1.34% -- -- -- -- -- --
Total Other Expenses......... 2.51% 2.51% 2.51% 0.46% 0.46% 0.46% 0.47% 0.47% 0.47%
Total Annual Fund Operating
Expenses................... 3.71% 4.46% 4.46% 1.40% 2.15% 2.15% 1.40% 2.15% 2.15%
Fee Waiver(3,7).............. 0.14% 0.14% 0.14% -- -- -- -- -- --
Net Annual Fund Operating
Expenses................... 3.57% 4.32% 4.32% 1.40% 2.15% 2.15% 1.40% 2.15% 2.15%
</Table>
- --------
(1) A contingent deferred sales charge may apply in some cases.
(2) AIM Opportunities III 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 AIM Opportunities III Fund. AIM
Opportunities III Fund's base management fee is 1.50%, annualized, of the
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 AIM Opportunities III Fund 's average daily net
assets during a rolling 12 month performance period, depending on the
fund's performance compared to the performance of the S&P 500 Index
during such performance period. The total management fee payable by AIM
Opportunities III Fund is not susceptible to estimation because it
depends upon the future relative performance of AIM Opportunities III
Fund and the S&P 500 Index, as well as changes in AIM Opportunities III
Fund's average daily net assets over the relevant periods. See the
section of this proxy
17
entitled "Summary -- Comparison of Fees and Expenses -- Advisory Fees"
for additional information about the calculation of AIM Opportunities III
Fund's management fee.
(3) The advisor for AIM Opportunities III 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 1.00%, annualized, of AIM
Opportunities III Fund 's average daily net assets during the current
month, subject to a monthly performance adjustment upward or downward of
up to 0.50%, annualized, of AIM Opportunities III Fund 's average daily
net assets during a rolling 12 month performance period (depending on AIM
Opportunities III Fund 's performance compared to the performance of the
S&P 500 Index during such performance period). In addition, under this
agreement the maximum management fee payable monthly by AIM Opportunities
III Fund (consisting of the base management fee, as adjusted by the
performance adjustment) will not exceed 1.50% of AIM Opportunities III
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.
(4) 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.
(5) AIM Opportunities III Fund is estimated to incur $97,000 of expenses in
connection with the reorganization of which AIM will pay 100%. 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) When AIM Opportunities III Fund borrows a security to make a short sale,
the fund has to pay the lender of the security the value of any dividends
earned on the borrowed security ("dividend-substitute payments"). These
dividend-substitute payments are investment related expenses of the fund.
(7) Effective January 1, 2005 through at least June 30, 2007, the advisor for
Buying Fund has contractually agreed to waive advisory fees to the extent
necessary so that the advisory fees payable by the fund do not exceed a
specified maximum annual advisory fee rate, which fee rate includes
breakpoints and is based upon net asset levels. The fund's maximum annual
advisory fee rate ranges from 0.695% (for average net assets up to $250
million) to 0.52% (for average net assets over $10 billion.)
18
EXPENSE EXAMPLE
This Example is intended to help you compare the costs of investing in
different classes of Opportunities III 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 Opportunities III Fund
Reorganization 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 OPPORTUNITIES III FUND (SELLING FUND)
Class A....................................... $890 $1,610 $2,349 $4,282
Class B....................................... 933 1,636 2,449 4,422(1)
Class C....................................... 533 1,336 2,249 4,574
AIM SELECT EQUITY FUND (BUYING FUND)
Class A....................................... $685 $ 969 $1,274 $2,137
Class B....................................... 718 973 1,354 2,292(1)
Class C....................................... 318 673 1,154 2,483
AIM SELECT EQUITY FUND (BUYING FUND) -- PRO
FORMA COMBINED
Class A....................................... $685 $ 969 $1,274 $2,137
Class B....................................... 718 973 1,354 2,292(1)
Class C....................................... 318 673 1,154 2,483
</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.
19
You would pay the following expenses if you did not redeem your shares:
<Table>
<Caption>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ------ ------ ------
AIM OPPORTUNITIES III FUND (SELLING FUND)
Class A....................................... $890 $1,610 $2,349 $4,282
Class B....................................... 433 1,336 2,249 4,422(1)
Class C....................................... 433 1,336 2,249 4,574
AIM SELECT EQUITY FUND (BUYING FUND)
Class A....................................... $685 $ 969 $1,274 $2,137
Class B....................................... 218 673 1,154 2,292(1)
Class C....................................... 218 673 1,154 2,483
AIM SELECT EQUITY FUND (BUYING FUND) -- PRO
FORMA COMBINED
Class A....................................... $685 $ 969 $1,274 $2,137
Class B....................................... 218 673 1,154 2,292(1)
Class C....................................... 218 673 1,154 2,483
</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 operation expenses
from that time on.
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. SELLING
FUNDS' AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND
DOES NOT REPRESENT SELLING FUNDS' 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 (SELLING FUNDS)
For the advisory services it provides to each Selling Fund, AIM is entitled
to receive a performance-based or "fulcrum" advisory fee from such Fund that is
comprised of two components. The first component is a base management fee of
1.50%, annualized, of each Selling 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 each Selling Fund's average daily net assets 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 the applicable Selling Fund for the 12 month period ending on the last day of
the current month (the "First Performance Period") to the investment record of
either the S&P MidCap 400 Index (for Opportunities II Fund) or the S&P 500 Index
(for Opportunities III Fund (as applicable, 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 each Selling 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 such 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,
20
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
applicable Index will be determined by adding together (i) the change in the
level of such Index during the First Performance Period and (ii) the value,
computed consistently with such Index, of cash distributions made by companies
whose securities comprise such Index accumulated to the end of the First
Performance Period, and will be expressed as a percentage of such 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 the applicable Selling
Fund over the First Performance Period exceeds the sum of 2.00% and the
investment record of the applicable 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 applicable Index over the First
Performance Period less 2.00% exceeds the investment performance of the Class A
shares of the applicable Selling 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 applicable Selling Fund 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 the applicable Selling 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 applicable 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 each Selling 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 such Selling 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 applicable Index will be
determined by adding together (i) the change in the level of such Index during
the Second Performance Period and (ii) the value, computed consistently with
such Index, of cash distributions made by companies whose securities comprise
such Index accumulated to the end of the Second Performance Period, and will be
expressed as a percentage of such 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 the applicable Selling Fund over the Second Performance
Period exceeds the sum of 2.00% and the investment record of the applicable
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 applicable Index over the Second Performance Period less 2.00%
exceeds the investment performance of the Class A shares of the applicable
Selling 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 applicable Selling Fund 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
each Selling 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.
With respect to each Selling Fund, 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 1.00%, annualized, of each Selling Fund's average daily net assets during the
current month,
21
subject to a monthly performance adjustment upward or downward of up to 0.50%,
annualized, of such Selling Fund's average daily net assets during a rolling 12
month performance period (depending on such Selling Fund's performance compared
to the performance of the applicable Index during such performance period).
These waiver agreements provide that in determining the performance adjustment
for each Selling Fund, the base management fee is adjusted in increments of
0.10%, on a pro rata basis, upward or downward instead of increments of 0.20% as
provided in the Selling Funds' advisory agreement. In addition, under these
waiver agreements the maximum management fee payable monthly by each Selling
Fund (consisting of the base management fee, as adjusted by the performance
adjustment) will not exceed 1.50% of such Selling Fund's average daily net
assets during the fiscal year. In determining the performance adjustments
required pursuant to these waiver agreements, 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
- ----------- ----------
0.80%.................................................... First $150 million
0.625%................................................... Over $150 million
</Table>
AIM has contractually agreed to waive its advisory fees through June 30,
2007, for Buying Fund. Thus, for the period January 1, 2005 to June 30, 2007,
the following advisory fee rates will apply to Buying Fund after the waiver:
<Table>
<Caption>
ANNUAL RATE NET ASSETS
- ----------- ----------
0.695%................................................... First $250 million
0.67%.................................................... Next $250 million
0.645%................................................... Next $500 million
0.62%.................................................... Next $1.5 billion
0.595%................................................... Next $2.5 billion
0.57%.................................................... Next $2.5 billion
0.545%................................................... Next $2.5 billion
0.52%.................................................... Over $10 billion
</Table>
Buying Fund's advisory fee will be applicable to the combined fund if
shareholders approve the Reorganizations. 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 Opportunities II Fund and
Opportunities III Fund relative to the S&P MidCap 400 Index and the S&P 500
Index, respectively, and changes in each Selling Fund's average daily net assets
over the relevant performance periods, the application of Buying Fund's advisory
fee to the combined fund could result in Opportunities II Fund's and/or
Opportunities III Fund's shareholders at times paying a higher advisory fee
after the Reorganizations. For example, if Opportunities II Fund underperformed
S&P MidCap 400 Index by more than 5% or if Opportunities III Fund underperformed
S&P 500 Index by more than 5%, the performance-based reduction of either Selling
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 each Selling Fund is not susceptible to estimation because it
depends upon the future relative performance of such Selling Fund and the
applicable Index, as well as changes in such Selling Fund's average daily net
assets over the relevant performance periods.
Opportunities II Fund and Opportunities III Fund have each recently
underperformed the S&P MidCap 400 Index and the S&P 500 Index, respectively,
resulting in downward monthly Fee Adjustments and lower total management fees
payable by each Selling Fund. Because the Fee Adjustment is based upon a rolling
12-month performance period, each Selling Fund's recent underperformance will
impact the amounts of future Fee Adjustments so long as the relevant rolling 12-
month performance period includes these recent periods over which each Selling
Fund has underperformed.
22
As shown in the "Comparison of Fees and Expenses -- Fee Tables", based on
the performance of Opportunities II Fund and the advisory fee waiver agreement
in place for Opportunities II Fund the gross effective advisory fees, restated
to reflect the methodology currently used by AIM to calculate the performance-
based advisory fee payable by Opportunities II Fund, are 0.77% before waivers
and 0.65% after waivers of 0.12%. Based on the performance of Opportunities III
Fund and the advisory fee waiver agreement in place for Opportunities III Fund
the gross effective advisory fees, restated to reflect the methodology currently
used by AIM to calculate the performance-based advisory fee payable by
Opportunities III Fund, are 0.95% before waivers and 0.81% after waivers of
0.14%. The effective advisory fee rate of the Buying Fund is 0.69% before the
reorganization and 0.67% after giving pro forma effect to the Reorganizations.
Because the investment advisory fee schedule applicable to the combined
fund after the Reorganizations may be higher than the investment advisory fee
applicable to each Selling Fund under certain circumstances, as discussed above,
the advisory agreement of the combined fund could be viewed as being materially
different from that of the Selling Funds. Therefore, shareholders of each
Selling Fund must approve the Reorganizations by a "1940 Act Majority." The 1940
Act Majority requirements are explained more fully below under "Vote Necessary
to Approve the Agreement."
The SEC has expressed concern over the termination of a fund's performance-
based advisory fee arrangements during a period of underperformance by the fund
because it may be to the advantage of the fund's advisor to terminate or
renegotiate such arrangements. AIM believes that this concern is not applicable
in a situation in which a merger transaction is presented to and approved by
shareholders, as is the case with the Reorganizations.
While Buying Fund's advisory fee may be higher under certain circumstances
after the Reorganizations, the pro forma net total Expense Ratio of the combined
fund is expected to be lower than each Selling Fund's current expenses.
COMPARISON OF MULTIPLE CLASS STRUCTURES
A comparison of the share classes of each Selling Fund that are currently
available to investors and the corresponding share class of Buying Fund that
shareholders of each Selling Fund will receive in the Reorganizations can be
found at Exhibit A. For information regarding the features of each of the share
classes of each Selling Fund and Buying Fund, see the Selling Fund Prospectuses
and the Buying Fund Prospectus, respectively.
COMPARISON OF SALES CHARGES
No sales charges are applicable to shares of Buying Fund received by
holders of each Selling Fund's shares in connection with the Reorganizations. No
redemption of either Selling Fund's shares that could cause the imposition of a
contingent deferred sales charge ("CDSC") will result in connection with the
Reorganizations. The holding period for purposes of determining whether to
charge a CDSC upon redemption of shares of Buying Fund received in connection
with the Reorganizations will be the same as the holding period of your shares
immediately prior to the Reorganizations.
23
The chart below provides a summary for comparison purposes of the initial
sales charges and CDSCs applicable to each class of shares of each Selling Fund
and Buying Fund. The fee tables contained in "Comparison of Fees and Expenses"
include comparative information about maximum initial sales charges on purchases
of Class A shares of either Selling Fund and Buying Fund and the maximum CDSC on
redemptions of certain classes of shares of either Selling 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 Prospectuses and the Buying Fund Prospectus and the related
Statements of Additional Information.
<Table>
<Caption>
CLASS A CLASS B CLASS C
------- ------- -------
- - 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 - subject to a CDSC on - subject to a CDSC on
on redemptions made within certain redemptions certain redemptions
12 or 18 months from the
date of certain purchases
<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 - not subject to a CDSC - not subject to a CDSC
on redemptions made within
12 months from the date of
certain purchases
</Table>
- --------
* Each Selling 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 each Selling Fund and Buying Fund are distributed by A I M
Distributors, Inc. ("AIM Distributors"), a registered broker-dealer and wholly
owned subsidiary of AIM.
Each Selling 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
in "Comparison of Fees and Expenses" include comparative information about the
distribution and service fees payable by each class of shares of each Selling
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 either Selling Fund.
The purchase and redemption procedures of each Selling Fund and Buying Fund
are substantially the same. For information regarding the purchase and
redemption procedures of each Selling Fund and Buying Fund, see the Selling Fund
Prospectuses and the Buying Fund Prospectus, respectively.
THE BOARD'S RECOMMENDATION
The Board, including the independent trustees of each Selling Fund,
unanimously recommends that you vote "FOR" this Proposal. For information
concerning the factors the Board considered in approving the Agreements, see
"Additional Information About the Agreements -- Board Considerations," on page
28 of this Proxy Statement/Prospectus.
24
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.
This is especially true with respect to equity securities of smaller companies,
whose prices may go up and down more than equity securities of larger, more-
established companies. Also, since equity securities of smaller companies may
not be traded as often as equity securities of larger, more-established
companies, it may be difficult or impossible for the fund to sell securities at
a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in 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 EACH SELLING FUND
The risks associated with an investment in either Selling Fund are similar
to those described above for Buying Fund because the three funds have identical
investment objectives and similar investment strategies.
Each Selling Fund may sell put and covered call options, and purchase put
and call options, on securities, securities indices and foreign currencies. Each
Selling Fund may also sell securities short and borrow money to purchase
securities. If either Selling Fund purchases a put or call option that expires
without value, the fund will have incurred an expense in the amount of the cost
of the option. If either Selling Fund sells a put option that is exercised,
either Selling Fund will have to purchase the security at a price greater than
its market value. If the fund sells a call option that is exercised, the fund
will have to sell the security at a price lower than its market value.
If either Selling Fund sells a security short and the security increases in
value, the 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, each
Selling Fund's exposure is unlimited. The more each Selling 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. Each Selling Fund will also incur
transaction costs to engage in this practice. If either Selling 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 each Selling Fund's shares will decrease
faster than if either Selling Fund had not used leverage. To repay borrowings,
each Selling Fund may have to sell securities at a time and at a price that is
unfavorable. Interest on borrowings is an expense each Selling Fund would not
otherwise incur.
After the Reorganizations, you will no longer encounter these risks because
Buying 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
25
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 IV of this Proxy Statement/Prospectus.
FINANCIAL HIGHLIGHTS
For more information about Buying Fund's financial performance, see the
financial highlights for Buying Fund in Appendix V 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 AGREEMENTS
TERMS OF THE REORGANIZATIONS
The terms and conditions under which the Reorganizations may be consummated
are set forth in the respective Agreements. Significant provisions of the
Agreements are summarized below; however, this summary is qualified in its
entirety by reference to the Agreements, copies of which are attached as
Appendix I and II to this Proxy Statement/Prospectus.
THE REORGANIZATIONS
Consummation of the Reorganizations (the "Closing") is expected to occur on
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 each Selling Fund will be delivered to Trust's custodian for the
account of Buying Fund in exchange for the assumption by Buying Fund of the
liabilities of each Selling Fund and delivery by Trust directly to the holders
of record as of the Effective Time of the issued and outstanding shares of each
class of each Selling 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 a Selling Fund so transferred, assigned and delivered, all determined
and adjusted as provided in the applicable Agreements. 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 each Selling Fund for
treatment as a "regulated investment company" for tax purposes and to eliminate
any tax liability of each Selling 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 each Selling Fund a dividend
or dividends that, together with all previous such dividends, shall have the
effect of distributing (a) all of each Selling Fund's investment company taxable
income (determined without regard to any deductions for dividends paid) for the
taxable year ended October 31, 2006 and for the short taxable year beginning on
November 1, 2006 and ending on the Closing and (b) all of each Selling Fund's
net capital gain recognized in its taxable year ended October 31, 2006 and in
such short taxable year (after reduction for any capital loss carryover).
Buying Fund will proceed with each of the Reorganizations if the
shareholders of the respective Selling Fund approve the applicable Agreements
Following receipt of the requisite shareholder vote and as soon as
reasonably practicable after the Closing, Trust will redeem the outstanding
shares of each Selling Fund from shareholders in accordance with the applicable
Agreement and Declaration of Trust, Bylaws and the Delaware Statutory Trust Act.
26
BOARD CONSIDERATIONS
AIM proposed that the Board consider the Reorganizations at an in-person
meeting of the Boards held on November 6-8, 2006, at which discussions of the
Reorganizations took place. After careful consideration and after weighing the
pros and cons of the Reorganizations, the Board of each Selling Fund determined
that the Reorganizations are advisable and in the best interests of each Selling
Fund and will not dilute the interests of each Selling Fund's shareholders, and
approved the Agreements and the Reorganizations.
The Board received from AIM written materials that contained information
concerning each Selling Fund and Buying Fund, including comparative total return
and fee and expense information, a comparison of investment objectives and
strategies of each Selling Fund and Buying Fund, and pro forma expense ratios
for Buying Fund giving effect to the Reorganizations. AIM also provided the
Board with written materials concerning the structure of the proposed
Reorganizations and the Federal tax consequences of the Reorganizations.
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 Reorganizations that shows the
actual cost and expenses of the Reorganizations.
In evaluating the Reorganizations, the Board considered a number of
factors, including:
- The investment objective and principal investment strategies of each
Selling Fund and Buying Fund.
- The comparative performance of each Selling Fund and Buying Fund.
- The comparative expenses of each Selling Fund and Buying Fund and the pro
forma expenses of Buying Fund after giving effect to the Reorganizations.
- The comparative sizes of each Selling Fund and Buying Fund.
- The consequences of the Reorganizations for Federal income tax purposes,
including the treatment of any unrealized capital gains and capital loss
carryforwards available to offset future capital gains of each Selling
Fund and Buying Fund.
- Any fees and expenses that will be borne directly or indirectly by each
Selling Fund or Buying Fund in connection with the Reorganizations.
- The projected financial impact to AIM and its affiliates of the
Reorganizations
Based on the foregoing and the information presented at the Board meeting
discussed below, the Board determined that the Reorganizations are advisable and
in the best interests of each Selling Fund and will not dilute the interests of
each Selling Fund's shareholders. Therefore, the Board recommended the approval
of the Agreements by the shareholders of each Selling Fund at the Special
Meetings.
OPPORTUNITIES II FUND REORGANIZATION
The Board approved the Opportunities II Fund Agreement and the
Opportunities II Fund 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
Opportunities II Fund's net assets have declined substantially as a
result of net redemptions, which raises questions about Opportunities II
Fund's continued viability as a stand-alone investment option, and, as a
result, Opportunities II Fund may not be able to achieve economies of
scale unless it is combined with another fund.
- Opportunities II Fund has undergone various investment process and
portfolio management changes in recent years. While Buying Fund does not
utilize short selling or leverage as investment techniques, Buying Fund
has had a more enduring and stable investment process that , as of
September 30, 2006, has outperformed Opportunities II Fund in the short-
term.
27
- The total annual operating expenses of the combined fund are expected to
be lower than Opportunities II Fund's current total annual operating
expenses.
AIM proposed the Opportunities II Fund Reorganization as part of an effort
to consolidate the AIM Funds' mid cap core/blend product offerings. In
considering the Opportunities II Fund Reorganization, the Board noted that the
funds have the same portfolio management team, identical investment objectives
and utilize reasonably similar investment strategies, although shareholders in
Opportunities II Fund will lose about 20% small-cap exposure and 13% mid-cap
exposure. The Board did note that Opportunities II 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 Opportunities II Fund will incur certain expenses in covering its short
positions and raising cash to return its borrowings (leverage).
The Board considered AIM's recommendation that Buying Fund be the surviving
fund in the Opportunities II Fund 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 Opportunities II Fund 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
Opportunities II Fund Reorganization. The Board also considered the relative
sizes of the two funds, noting that Buying Fund has a larger asset base. As of
June 30, 2006, Buying Fund had net assets of approximately $353 million,
compared to net assets for Opportunities II Fund of approximately $105 million.
The Board considered the performance of Buying Fund in relation to the
performance of Opportunities II Fund, as of June 30, 2006, and September 30,
2006. The Board noted that Buying Fund had provided better one-year returns than
Opportunities II Fund as of September 30, 2006, while the short-term performance
of Buying Fund trailed Opportunities II Fund as of June 30, 2006 performance
numbers. The board noted that the differences in performance numbers may be due,
in part, to Opportunities II Fund's weighted exposure to mid-cap investments, as
compared to Buying Fund, which have outperformed large-cap investments for the
first half of 2006.
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 2006
<Table>
<Caption>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION INCEPTION DATE
------ ----- ----- --------- --------------
Opportunities II Fund.......... 10.05% 3.77% N/A 12.89% December 30, 1998
Buying Fund.................... 7.98% 0.17% 6.91% 8.52% December 4, 1967
</Table>
AVERAGE ANNUAL TOTAL RETURNS AS OF SEPTEMBER 30, 2006
<Table>
<Caption>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION INCEPTION DATE
----- ----- ----- --------- --------------
Opportunities II Fund.......... 2.96% 6.80% N/A 11.85% December 30, 1998
Buying Fund.................... 9.06% 5.96% 6.53% 8.57% December 4, 1967
</Table>
In addition, the Board noted that Buying Fund's performance relative to its
Lipper peer group was better than Opportunities II Fund, relative to its Lipper
peer group, for the 1-year, 3-year, and 5-year periods, and that such
performance more accurately reflects the investment process that the combined
fund will apply.
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 Opportunities II Fund Reorganization,
are lower than the total annual operating expenses of Opportunities II Fund.
The Board noted that Opportunities II Fund utilizes a performance-based
advisory fee, as more fully described above under "Summary -- Comparison of Fees
and Expenses -- Advisory Fees (Selling Funds)," 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. The Board noted that where Opportunities II
28
Fund's performance equals or exceeds the performance of the S&P MidCap 400
Index, Opportunities II Fund's advisory fee would be higher than Buying Fund's,
assuming that there are no changes in Opportunities II Fund's average daily net
assets over the relevant performance periods. However, the Board also noted that
in circumstances where Opportunities II Fund underperforms the S&P MidCap 400
Index, Opportunities II Fund's performance-based fee could be lower than Buying
Fund's advisory fee depending on changes in Opportunities II Fund's average
daily net assets over the relevant performance periods. As a result,
shareholders of Opportunities II 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 also considered, based upon historical data at a specified date,
the effect of the Opportunities II Fund Reorganization on the anticipated tax
benefits to shareholders from the utilization of the capital loss carryforwards
of Opportunities II Fund and of Buying Fund as offsets to future realized
capital gains. As of June 30, 2006, Opportunities II Fund's capital loss
carryforwards were estimated to be $142 million. Although approximately 91% of
the capital loss carryforwards of Opportunities II Fund are estimated to be
disallowed as a consequence of the Opportunities II Fund Reorganization, Buying
Fund would still retain capital loss carryforwards after the Opportunities II
Fund Reorganization. Such retained capital loss carryforwards, however, are
estimated to be substantially less than those of Opportunities II Fund. The
capital loss carryforwards are expected, at June 30, 2006, to exceed the net
unrealized built-in gain in the assets that Buying Fund is expected to hold
immediately after consummation of the Opportunities II Fund Reorganization by
approximately 8% of the net asset value of Buying Fund. 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 Opportunities II Fund in connection
with the Opportunities II Fund Reorganization are expected to be approximately
$120,000. The Board noted that AIM had agreed to pay 100% of Opportunities II
Fund's expenses in connection with the Opportunities II Fund Reorganization.
Buying Fund is expected to incur approximately $30,000 of expenses in connection
with the Opportunities II Fund 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 Opportunities II Fund Reorganization, AIM estimated the
amount of mailing, printing, solicitation, and legal and accounting fees to be
incurred by both Buying Fund and Opportunities II Fund. AIM then performed a
qualitative analysis that took into account, among other things, the expected
benefits to be enjoyed by Opportunities II Fund's shareholders through reduced
expenses on a pro forma basis, the amount of time estimated for Opportunities II
Fund's shareholders to recoup expenses incurred in the Opportunities II Fund
Reorganization in light of such expected benefits, the effect incurring such
expenses would have on the net asset value of Opportunities II Fund, whether
there was a financial impact to AIM's profit and loss (positive or negative) and
the relative performance of Opportunities II Fund and Buying Fund.
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
Opportunities II Fund in connection with the Opportunities II Fund
Reorganization.
29
Based on the foregoing and the information presented at the Board meeting
discussed above, the Board determined that the Opportunities II Fund
Reorganization is advisable and in the best interests of Opportunities II Fund
and will not dilute the interests of Opportunities II Fund's shareholders.
Therefore, the Board recommended the approval of the Agreement by the
shareholders of Opportunities II Fund at the Opportunities II Fund Special
Meeting.
OPPORTUNITIES III FUND REORGANIZATION
The Board approved the Opportunities III Fund Agreement and the
Opportunities III Fund 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
Opportunities III Fund's net assets have declined substantially as a
result of net redemptions, which raises questions about Opportunities III
Fund's continued viability as a stand-alone investment option, and, as a
result, Opportunities III Fund may not be able to achieve economies of
scale unless it is combined with another fund.
- Opportunities III Fund has undergone various investment process and
portfolio management changes in recent years. While Buying Fund does not
utilize short selling or leverage as investment techniques, Buying Fund
has had a more enduring and stable investment process that has
outperformed Opportunities III Fund in the short-term.
- The total annual operating expenses of the combined fund are expected to
be lower than Opportunities III Fund's current total annual operating
expenses.
AIM proposed the Opportunities III Fund Reorganization as part of an effort
to consolidate the AIM Funds' mid cap core/blend product offerings. In
considering the Opportunities III Fund Reorganization, the Board noted that the
funds have the same portfolio management team, identical investment objectives
and utilize reasonably similar investment strategies. The Board did note that
Opportunities III 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 Opportunities III Fund
will incur certain expenses in covering its short positions and raising cash to
return its borrowings (leverage).
The Board considered AIM's recommendation that Buying Fund be the surviving
fund in the Opportunities III Fund 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 Opportunities III Fund 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 Opportunities III Fund 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 $353 million, compared to net assets for Opportunities III Fund of
approximately $66 million.
The Board considered the performance of Buying Fund in relation to the
performance of Opportunities III Fund, noting that Buying Fund has provided
better returns to its shareholders than Opportunities III Fund. As of June 30,
2006, and September 30, 2006, the relative performance of Class A shares of
Opportunities III 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 FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION INCEPTION DATE
----- ----- ----- --------- --------------
Opportunities III Fund......... 3.59% (3.27)% N/A (1.24)% December 30, 1999
Buying Fund.................... 7.98% 0.17% 6.91% 8.52% December 4, 1967
</Table>
30
AVERAGE ANNUAL TOTAL RETURNS AS OF SEPTEMBER 30, 2006
<Table>
<Caption>
ONE FIVE TEN SINCE
YEAR YEARS YEARS INCEPTION INCEPTION DATE
----- ----- ----- --------- --------------
Opportunities III Fund......... 6.22% 1.05% N/A (0.74)% December 30, 1999
Buying Fund.................... 9.06% 5.96% 6.53% 8.57% December 4, 1967
</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 Opportunities III Fund Reorganization,
are lower than the total annual operating expenses of Opportunities III Fund.
The Board noted that Opportunities III Fund utilizes a performance-based
advisory fee, as more fully described above under "Summary -- Comparison of Fees
and Expenses -- Advisory Fees (Selling Funds)," 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. The Board noted that where Opportunities III Fund's performance equals or
exceeds the performance of the S&P 500 Index, Opportunities III Fund's advisory
fee would be higher than Buying Fund's, assuming that there are no changes in
Opportunities III Fund's average daily net assets over the relevant performance
periods. However, the Board also noted that in circumstances where Opportunities
III Fund underperforms the S&P 500 Index, Opportunities III Fund's performance-
based fee could be lower than Buying Fund's advisory fee depending on changes in
Opportunities III Fund's average daily net assets over the relevant performance
periods. As a result, shareholders of Opportunities III 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 interest expense is a type of expense not currently incurred by Buying
Fund and not expected to be incurred by the combined fund. The Board noted that,
excluding 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 also considered, based upon historical data at a specified date,
the effect of the Opportunities III Fund Reorganization on the anticipated tax
benefits to shareholders from the utilization of the capital loss carryforwards
of Opportunities III Fund and of Buying Fund as offsets to future realized
capital gains. As of June 30, 2006, Opportunities III Fund's capital loss
carryforwards were estimated to be $266 million. Although approximately 95% of
the capital loss carryforwards of Opportunities III Fund are estimated to be
disallowed as a consequence of the Opportunities III Fund Reorganization, Buying
Fund would still retain capital loss carryforwards after the Opportunities III
Fund Reorganization. Such retained capital loss carryforwards, however, are
estimated, to be substantially less than those of Opportunities III Fund. The
capital loss carryforward of Buying Fund is expected, as of June 30, 2006, to
exceed the net unrealized built-in gain in the assets that Buying Fund is
expected to hold immediately after consummation of the Opportunities III Fund
Reorganization by approximately 9% of the net asset value of Buying Fund. 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 Opportunities III Fund in connection
with the Opportunities III Fund Reorganization are expected to be approximately
$97,000. The Board noted that AIM had agreed to pay 100% of Opportunities III
Fund's expenses in connection with the Opportunities III Fund Reorganization.
Buying
31
Fund is expected to incur approximately $30,000 of expenses in connection with
the Opportunities III Fund 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 Opportunities III Fund Reorganization, AIM estimated the
amount of mailing, printing, solicitation, and legal and accounting fees to be
incurred by both Buying Fund and Opportunities III Fund. AIM then performed a
qualitative analysis that took into account, among other things, the expected
benefits to be enjoyed by Opportunities III Fund's shareholders through reduced
expenses on a pro forma basis, the amount of time estimated for Opportunities
III Fund's shareholders to recoup expenses incurred in the Opportunities III
Fund Reorganization in light of such expected benefits, the effect incurring
such expenses would have on the net asset value of Opportunities III Fund,
whether there was a financial impact to AIM's profit and loss (positive or
negative) and the relative performance of Opportunities III Fund and Buying
Fund.
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
Opportunities III Fund in connection with the Opportunities III Fund
Reorganization.
Based on the foregoing and the information presented at the Board meeting
discussed above, the Board determined that the Opportunities III Fund
Reorganization is advisable and in the best interests of Opportunities III Fund
and will not dilute the interests of Opportunities III Fund's shareholders.
Therefore, the Board recommended the approval of the Agreement by the
shareholders of Opportunities III Fund at the Opportunities III Fund Special
Meeting.
OTHER TERMS
If any amendment is made to the Agreements following the mailing of this
Proxy Statement/Prospectus and prior to the Closing which 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 which would
not have a material adverse effect on shareholders, the Agreements may be
amended without shareholder approval by mutual agreement of the parties.
Trust and Buyer have made representations and warranties in the Agreements
that are customary in matters such as the Reorganizations. The obligations of
Trust and Buyer pursuant to the Agreements are subject to various conditions,
including the following mutual conditions:
- the assets of each 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 each
Selling Fund immediately prior to the Reorganizations;
- Buyer's Registration Statement on Form N-14 under the Securities Act of
1933 (the "1933 Act") shall have been filed with the SEC and such
Registration Statement shall have become effective, and no stop-order
suspending the effectiveness of the Registration Statement shall have
been issued, and no proceeding for that purpose shall have been initiated
or threatened by the SEC (and not withdrawn or terminated);
- the shareholders of each Selling Fund shall have approved their
respective Agreements; and
- Trust and Buyer shall have received an opinion from Ballard Spahr Andrews
& Ingersoll, LLP that the consummation of the transactions contemplated
by the Agreements will not result in the recognition of gain or loss for
Federal income tax purposes for each Selling Fund, Buying Fund or their
shareholders.
The Board 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 Agreements
for the shareholders of each Selling Fund. The Agreements may be terminated and
the Reorganizations may be abandoned at any time by mutual agreement of the
parties, or by either party if the shareholders of each Selling Fund do not
approve their respective Agreements or if the Closing does not occur on or
before September 30, 2007.
32
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of each 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 each Reorganization, under currently applicable law, are
as follows:
- each Reorganization will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code;
- no gain or loss will be recognized by a Selling 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 such Selling Fund or
on the distribution of those shares to such Selling Fund's shareholders;
- no gain or loss will be recognized by Buying Fund on its receipt of
assets of a Selling Fund in exchange for shares of Buying Fund issued
directly to such Selling Fund's shareholders;
- no gain or loss will be recognized by any shareholder of each Selling
Fund upon the exchange of shares of such Selling Fund for shares of
Buying Fund;
- the tax basis of the shares of Buying Fund to be received by a
shareholder of each Selling Fund will be the same as the shareholder's
tax basis of the shares of such Selling Fund surrendered in exchange
therefor;
- the holding period of the shares of Buying Fund to be received by a
shareholder of each Selling Fund will include the period for which such
shareholder held the shares of such Selling Fund exchanged therefor,
provided that such shares of each Selling 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 each Selling 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 Reorganizations. 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 Reorganizations, 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
REORGANIZATIONS IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF EACH SELLING FUND. EACH SELLING FUND'S SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM
OF THEIR REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Reorganizations will each be accounted for on a tax-free combined
basis. Accordingly, the book cost basis to Buying Fund of the assets of each
Selling Fund will be the same as the book cost basis of such assets to such
Selling 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 Agreements and
Declaration of Trust of Trust and the rights of shareholders under the
Agreements and Declaration of Trust of Buyer.
33
CAPITALIZATION
The following table sets forth, as of June 30, 2006, (i) the capitalization
of each class of shares of Opportunities II Fund and Opportunities III Fund;
(ii) the capitalization of each class of shares of Buying Fund; and (iii) the
pro forma capitalization of each class of shares of Buying Fund as adjusted to
give effect to the transactions contemplated by the Agreements.
<Table>
<Caption>
OPPORTUNITIES II OPPORTUNITIES III PRO FORMA
FUND FUND BUYING FUND PRO FORMA BUYING FUND
CLASS A SHARES CLASS A SHARES CLASS A SHARES ADJUSTMENTS CLASS A SHARES
---------------- ----------------- -------------- ----------- --------------
Net Assets................. $57,155,666 $29,616,998 $244,452,193 $ (20,792)(1) $331,204,065
Shares Outstanding......... 2,547,340 3,316,047 12,903,253 (1,284,355)(2) 17,482,285
Net Asset Value Per Share.. $ 22.44 $ 8.93 $ 18.95 $ 18.95
</Table>
<Table>
<Caption>
OPPORTUNITIES II OPPORTUNITIES III PRO FORMA
FUND FUND BUYING FUND PRO FORMA BUYING FUND
CLASS B SHARES CLASS B SHARES CLASS B SHARES ADJUSTMENTS CLASS B SHARES
---------------- ----------------- -------------- ----------- --------------
Net Assets................. $34,517,066 $28,556,443 $88,772,775 $ (7,551)(1) $151,838,733
Shares Outstanding......... 1,611,361 3,332,021 5,301,748 (1,175,550)(2) 9,069,580
Net Asset Value Per Share.. $ 21.42 $ 8.57 $ 16.74 $ 16.74
</Table>
<Table>
<Caption>
OPPORTUNITIES II OPPORTUNITIES III PRO FORMA
FUND FUND BUYING FUND PRO FORMA BUYING FUND
CLASS C SHARES CLASS C SHARES CLASS C SHARES ADJUSTMENTS CLASS C SHARES
---------------- ----------------- -------------- ----------- --------------
Net Assets................... $12,862,764 $8,283,014 $19,484,163 $ (1,657)(1) $40,628,284
Shares Outstanding........... 600,423 966,692 1,165,415 (302,415) 2,430,115
Net Asset Value Per Share.... $ 21.42 $ 8.57 $ 16.72 $ 16.72
</Table>
- --------
(1) AIM will bear 100% of each Selling Fund's Reorganization expenses,
therefore Net Assets have not been adjusted for any expenses expected to
be incurred by each Selling Fund in connection with the Reorganizations.
The Buying Fund will incur approximately $30,000 in connection with the
Reorganizations which was allocated to Buying Fund Class A, Class B and
Class 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 each Selling Fund's shareholder accounts based on the
relative value of each Selling Fund's and Buying Fund's Net asset Value
Per Share assuming the Reorganizations would have taken place on June 30,
2006.
The following table sets forth, as of June 30, 2006, (i) the capitalization
of each class of shares of Opportunities II Fund; (ii) the capitalization of
each class of shares of Buying Fund; and (iii) the pro forma capitalization of
each class of shares of Buying Fund as adjusted to give effect to the
transactions contemplated by the Agreements.
<Table>
<Caption>
OPPORTUNITIES II PRO FORMA
FUND BUYING FUND PRO FORMA BUYING FUND
CLASS A SHARES CLASS A SHARES ADJUSTMENTS CLASS A SHARES
---------------- -------------- ----------- --------------
Net Assets............................ $57,155,666 $244,452,193 $(20,792)(1) $301,587,067
Shares Outstanding.................... 2,547,340 12,903,253 469,141(2) 15,919,734
Net Asset Value Per Share............. $ 22.44 $ 18.95 $ 18.94
</Table>
<Table>
<Caption>
OPPORTUNITIES II PRO FORMA
FUND BUYING FUND PRO FORMA BUYING FUND
CLASS B SHARES CLASS B SHARES ADJUSTMENTS CLASS B SHARES
---------------- -------------- ----------- --------------
Net Assets............................ $34,517,066 $88,772,775 $ (7,551)(1) $123,282,290
Shares Outstanding.................... 1,611,361 5,301,748 450,488(2) 7,363,597
Net Asset Value Per Share............. $ 21.42 $ 16.74 $ 16.74
</Table>
34
<Table>
<Caption>
OPPORTUNITIES II PRO FORMA
FUND BUYING FUND PRO FORMA BUYING FUND
CLASS C SHARES CLASS C SHARES ADJUSTMENTS CLASS C SHARES
---------------- -------------- ----------- --------------
Net Assets............................. $12,862,764 $19,484,163 $ (1,657)(1) $32,345,270
Shares Outstanding..................... 600,423 1,165,415 168,779 1,934,617
Net Asset Value Per Share.............. $ 21.42 $ 16.72 $ 16.72
</Table>
- --------
(1) AIM will bear 100% of Opportunities II Fund's Reorganization expenses,
therefore Net Assets have not been adjusted for any expenses expected to
be incurred by Opportunities II Fund in connection with the Opportunities
II Fund Reorganization. The Buying Fund will incur approximately $30,000
in connection with the Opportunities II Fund Reorganization which was
allocated to Buying Fund Class A, Class B and Class 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 Opportunities II Fund's shareholder accounts based on
the relative value of Opportunities II Fund's and Buying Fund's Net asset
Value Per Share assuming the Opportunities II Fund Reorganization would
have taken place on June 30, 2006.
The following table sets forth, as of June 30, 2006, (i) the capitalization
of each class of shares of Opportunities III Fund; (ii) the capitalization of
each class of shares of Buying Fund; and (iii) the pro forma capitalization of
each class of shares of Buying Fund as adjusted to give effect to the
transactions contemplated by the Agreements.
<Table>
<Caption>
OPPORTUNITIES III PRO FORMA
FUND BUYING FUND PRO FORMA BUYING FUND
CLASS A SHARES CLASS A SHARES ADJUSTMENTS CLASS A SHARES
----------------- -------------- ----------- --------------
Net Assets........................... $29,616,998 $244,452,193 $ (20,792)(1) $274,048,399
Shares Outstanding................... 3,316,047 12,903,253 (1,753,393)(2) 14,465,907
Net Asset Value Per Share............ $ 8.93 $ 18.95 $ 18.94
</Table>
<Table>
<Caption>
OPPORTUNITIES III PRO FORMA
FUND BUYING FUND PRO FORMA BUYING FUND
CLASS B SHARES CLASS B SHARES ADJUSTMENTS CLASS B SHARES
----------------- -------------- ----------- --------------
Net Assets........................... $28,556,443 $88,772,775 $ (7,551)(1) $117,321,667
Shares Outstanding................... 3,332,021 5,301,748 (1,626,201)(2) 7,007,568
Net Asset Value Per Share............ $ 8.57 $ 16.74 $ 16.74
</Table>
<Table>
<Caption>
OPPORTUNITIES III PRO FORMA
FUND BUYING FUND PRO FORMA BUYING FUND
CLASS C SHARES CLASS C SHARES ADJUSTMENTS CLASS C SHARES
----------------- -------------- ----------- --------------
Net Assets............................ $8,283,014 $19,484,163 $ (1,657)(1) $27,765,520
Shares Outstanding.................... 966,692 1,165,415 (471,205) 1,660,902
Net Asset Value Per Share............. $ 8.57 $ 16.72 $ 16.72
</Table>
- --------
(1) AIM will bear 100% of Opportunities III Fund's Reorganization expenses,
therefore Net Assets have not been adjusted for any expenses expected to
be incurred by Opportunities III Fund in connection with the
Opportunities III Fund Reorganization. The Buying Fund will incur
approximately $30,000 in connection with the Opportunities III Fund
Reorganization which was allocated to Buying Fund Class A, Class B and
Class 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 Opportunities III Fund's shareholder accounts based
on the relative value of Opportunities III Fund's and Buying Fund's Net
asset Value Per Share assuming the Opportunities III Fund Reorganization
would have taken place on June 30, 2006.
35
LEGAL MATTERS
Certain legal matters concerning the tax consequences of the
Reorganizations will be passed upon by Ballard Spahr Andrews & Ingersoll, LLP,
1735 Market Street, Philadelphia, PA 19103-7599.
ADDITIONAL INFORMATION ABOUT
BUYING FUND AND SELLING FUNDS
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 III: (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 each Selling Fund concerning the
following topics, please refer to the following sections of the Selling Fund
Prospectuses, which have been made a part of this Proxy Statement/ Prospectus by
reference: (i) see "Fund Performance" for more information about the performance
of each Selling Fund; (ii) see "Fund Management" and "Portfolio Managers" for
more information about the management of each Selling Fund; (iii) see "Share
Price" for more information about the pricing of shares of each Selling Fund;
(iv) see "Taxes" for more information about tax consequences to shareholders of
various transactions in shares of each Selling Fund; and (v) see "Dividends And
Capital Gain Distributions" for more information about each Selling 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 has 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 Opportunities II Fund Prospectus
and related Statement of Additional Information and the Opportunities III Fund
Prospectus and related Statement of Additional Information, is Registration No.
811-08697. 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. 811-01540. 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.
36
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 Meetings
and at any adjournments of the Special Meetings. This Proxy Statement/Prospectus
gives you information about the business to be conducted at the Special
Meetings. However, you do not need to attend the Special Meetings to vote your
shares. Instead, you may simply complete, sign and return the enclosed proxy
card or vote by telephone or through a website established for that purpose.
Trust intends to mail this Proxy Statement/Prospectus, the enclosed Notice
of Special Meetings of Shareholders and the enclosed proxy card on or about
January 31, 2007 to all shareholders entitled to vote. Shareholders of record of
each Selling Fund as of the close of business on January 22, 2007 (the "Record
Date") are entitled to vote at the Special Meetings. The number of shares
outstanding of each class of shares of each Selling Fund on the Record Date can
be found at Exhibit B. Each share is entitled to one vote for each full share
held, and a fractional vote for a fractional share held.
TIME AND PLACE OF SPECIAL MEETINGS
We are holding both of the Special Meetings 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 Meetings 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 Meetings 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 Meetings and vote.
If you properly fill in and sign your proxy card and send it to us in time
to vote at the Special Meetings, 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 Agreements, 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 Meetings.
If you authorize a proxy, you may revoke it at any time before it is
exercised by sending in another proxy card with a later date or by notifying the
Secretary of Trust in writing to the address of Trust set forth on the cover
page of this Proxy Statement/Prospectus before the Special Meetings that you
have revoked your proxy. In addition, although merely attending the Special
Meetings will not revoke your proxy, if you are present at the Special Meetings
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 Meetings 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.
37
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 each Selling Fund on the Record Date are present at the
Special Meetings in person or by proxy.
Under the rules applicable to broker-dealers, if your broker holds your
shares in its name, the broker will not be entitled to vote your shares if it
has not received instructions from you. A "broker non-vote" occurs when a broker
has not received voting instructions from a shareholder and is barred from
voting the shares without shareholder instructions because the proposal is non-
routine.
Abstentions and broker non-votes will count as shares present at the
Special Meetings for purposes of establishing a quorum.
If a quorum is not present at the Special Meetings or a quorum is present
but sufficient votes to approve the Agreements are not received, the persons
named as proxies may propose one or more adjournments of the Special Meetings to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of the votes cast at the Special Meetings in
person or by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote FOR the Reorganizations in favor of such an
adjournment and will vote those proxies required to be voted AGAINST the
Reorganizations against such adjournment. A shareholder vote may be taken on the
Reorganizations prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
VOTE NECESSARY TO APPROVE EACH PROPOSAL
Approval of the Agreements and, in connection therewith, the sale of all of
each Selling Fund's assets and the termination of each Selling 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
each Selling Fund present or represented by proxy at the Special Meeting, if the
holders of more than 50% of the outstanding voting securities of each Selling
Fund are present or represented by proxy, or (b) the affirmative vote of more
than 50% of the outstanding voting securities of each Selling 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 Agreements because approval of the Agreements 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. AIM will bear
100% of each Selling Fund's costs and expenses incurred in connection with the
reorganization, including solicitation costs. Solicitation costs are expected to
be approximately $12,000 per Selling Fund.
OTHER MATTERS
Management does not know of any matters to be presented at the Special
Meetings other than those discussed in this Proxy Statement/Prospectus. If any
other matters properly come before the Special Meetings, the shares represented
by proxies will be voted with respect thereto in accordance with management's
recommendation.
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 each Selling Fund can be found at Exhibit C.
38
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 Buying Fund can be found at Exhibit D.
SECURITY OWNERSHIP OF MANAGEMENT AND TRUSTEES
Information regarding the ownership of each class of each Selling 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.
39
EXHIBIT A
CLASSES OF SHARES OF EACH SELLING FUND AND CORRESPONDING CLASSES OF SHARES
OF BUYING FUND
<Table>
<Caption>
Classes of Shares of Classes of Shares of Corresponding Classes of
Opportunities II Fund Opportunities III Fund Shares of Buying Fund
--------------------- ---------------------- ------------------------
Class A Class A Class A
Class B Class B Class B
Class C Class C Class C
</Table>
40
EXHIBIT B
SHARES OUTSTANDING OF EACH CLASS OF EACH SELLING FUND ON RECORD DATE
As of January 22, 2007, there were the following number of shares
outstanding of each class of each Selling Fund:
OPPORTUNITIES II FUND
- ---------------------
Class A Shares:
Class B Shares:
Class C Shares:
OPPORTUNITIES III FUND
- ----------------------
Class A Shares:
Class B Shares:
Class C Shares:
41
EXHIBIT C
OWNERSHIP OF SHARES OF EACH SELLING 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 each Selling Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of each Selling Fund is
presumed to "control" that Selling Fund as defined in the 1940 Act. Such control
may affect the voting rights of other shareholders.
AIM OPPORTUNITIES II FUND
<Table>
<Caption>
NUMBER OF PERCENT OWNED
NAME AND ADDRESS CLASS OF 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.
AIM OPPORTUNITIES III FUND
<Table>
<Caption>
NUMBER OF PERCENT OWNED
NAME AND ADDRESS CLASS OF 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.
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.
42
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 Trust 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>
- --------
* Trust 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.
43
APPENDIX I
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
AIM OPPORTUNITIES II FUND,
A SEPARATE PORTFOLIO OF
AIM SPECIAL OPPORTUNITIES FUNDS
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...................................... 6
SECTION 3.8. No Breaches or Defaults................................. 6
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............................................... 7
SECTION 3.13. Properties and Assets................................... 7
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....................................... 8
SECTION 3.20. Prospectus and Statement of Additional Information...... 8
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..... 9
SECTION 4.5. Registration of Buying Fund Shares...................... 10
SECTION 4.6. Accountants............................................. 10
SECTION 4.7. Binding Obligation...................................... 10
</Table>
i
<Table>
<Caption>
PAGE
----
SECTION 4.8. No Breaches or Defaults................................. 10
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................................................. 11
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.......................................................... 12
SECTION 5.1. Conduct of Business..................................... 12
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................. 13
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.............................................. 16
SECTION 8.6. Enforcement............................................. 16
SECTION 8.7. Interpretation.......................................... 16
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................... 17
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 Special Opportunities Funds, a Delaware statutory
trust ("Seller"), acting on behalf of AIM Opportunities II Fund ("Selling
Fund"), a separate series of Seller, AIM Funds Group, a Delaware statutory trust
("Buyer"), acting on behalf of AIM Select Equity 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 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 Funds Group, 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 Select Equity 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 December 31, 2005 and
the Buying Fund Semiannual Report to Shareholders dated June 30, 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 Special Opportunities Funds, 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. 811-08697.
"Selling Fund" means AIM Opportunities II Fund, a separate series of
Seller.
"Selling Fund Auditors" means PricewaterhouseCoopers LLP.
"Selling Fund Financial Statements" means the audited financial
statements of Selling Fund for the fiscal year ended October 31, 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) 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.
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
6
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.
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.
7
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 October
31, 2006 and for the short taxable year beginning on November 1, 2006 and ending
on the Closing Date and (B) all of Selling Fund's net capital gain recognized in
its taxable year ended October 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.
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.
8
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.
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.
9
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 December 31,
2005, 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 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.
10
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, 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.
11
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, except
to the extent that Buying Fund is required by the Investment Company Act to
redeem any of its shares presented for redemption at net asset value in the
ordinary course of its business as an open-end, management investment company.
(b) Buying Fund has no plan or intention to sell or otherwise dispose of
any of the assets of Selling Fund acquired in the Reorganization, other than in
the ordinary course of its business and to the extent necessary to maintain its
status as a "regulated investment company" under the Code; provided, however,
that this Section 4.14(b) shall not preclude any of the 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. There is no
plan or intention by Buying Fund to redeem, or by any person related to Buying
Fund to acquire any of the Buying Fund Shares issued in the Reorganization
either directly or through any transaction, agreement, or arrangement with any
other person, other than redemptions in the ordinary course of Buying Fund's
business as an open-end investment company as required by the Investment Company
Act.
SECTION 4.15. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Buying Fund as of
the date on which it was issued does not contain, and as supplemented by any
supplement thereto dated prior to or on the Closing Date does not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 4.16. Value of Shares. The fair market value of the shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal, 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.
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
12
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 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.
13
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.
(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
14
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
(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.
15
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 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.
16
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 Special Opportunities Funds
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 Funds Group
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
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
17
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 SPECIAL OPPORTUNITIES FUNDS, acting
on
behalf of AIM OPPORTUNITIES II FUND
By: /s/ PHILIP A. TAYLOR
------------------------------------
Name: Philip A. Taylor
Title: Principal Executive Officer
AIM FUNDS GROUP, acting on behalf of AIM
SELECT EQUITY 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 Opportunities II Fund AIM Select Equity 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 III Fund into AIM Select Equity Fund
AIM Advantage Health Sciences Fund into AIM Global Health Care 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
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
AIM OPPORTUNITIES III FUND,
A SEPARATE PORTFOLIO OF
AIM SPECIAL OPPORTUNITIES FUNDS
NOVEMBER 8, 2006
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE 1 DEFINITIONS........................................................ 1
SECTION 1.1. Definitions............................................. 1
4
ARTICLE 2 TRANSFER OF ASSETS.................................................
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
5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER...........................
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
9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............................
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
13
ARTICLE 5 COVENANTS..........................................................
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
14
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION.........................
SECTION 6.1. Conditions Precedent of Buyer........................... 14
SECTION 6.2. Mutual Conditions....................................... 14
SECTION 6.3. Conditions Precedent of Seller.......................... 15
15
ARTICLE 7 TERMINATION OF AGREEMENT...........................................
SECTION 7.1. Termination............................................. 15
SECTION 7.2. Survival After Termination.............................. 16
16
ARTICLE 8 MISCELLANEOUS......................................................
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
EXHIBIT A Excluded Liabilities of Selling Fund
SCHEDULE 2.1 Classes of Shares of Selling Fund and Corresponding
Classes of Shares of Buying Fund
SCHEDULE 3.4 Certain Contingent Liabilities of Selling Fund
SCHEDULE 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 Special Opportunities Funds, a Delaware statutory
trust ("Seller"), acting on behalf of AIM Opportunities III Fund ("Selling
Fund"), a separate series of Seller, AIM Funds Group, a Delaware statutory trust
("Buyer"), acting on behalf of AIM Select Equity 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 Funds Group, 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 Select Equity 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 December 31, 2005 and
the Buying Fund Semiannual Report to Shareholders dated June 30, 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 Special Opportunities Funds, 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. 811-08697.
"Selling Fund" means AIM Opportunities III Fund, a separate series of
Seller.
"Selling Fund Auditors" means PricewaterhouseCoopers LLP.
"Selling Fund Financial Statements" means the audited financial
statements of Selling Fund for the fiscal year ended October 31, 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 October
31, 2006 and for the short taxable year beginning on November 1, 2006 and ending
on the Closing Date and (B) all of Selling Fund's net capital gain recognized in
its taxable year ended October 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 December 31,
2005, 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.
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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 Special Opportunities Funds
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
17
(b) If to Buyer:
AIM Funds Group
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
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 SPECIAL OPPORTUNITIES FUNDS, acting
on
behalf of AIM OPPORTUNITIES III FUND
By: /s/ PHILIP A. TAYLOR
------------------------------------
Name: Philip A. Taylor
Title: Principal Executive Officer
AIM FUNDS GROUP, acting on behalf of AIM
SELECT EQUITY 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 Opportunities III Fund AIM Select Equity 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 Advantage Health Sciences Fund into AIM Global Health Care 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 III
AIM COUNSELOR SERIES TRUST
AIM Floating Rate Fund - Class A, C and R
Supplement dated September 20, 2006 to the
Prospectus dated April 14, 2006
as supplemented May 8, 2006 and July 5, 2006
AIM Multi-Sector Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated December 20, 2005
as supplemented January 17, 2006, April 13, 2006,
April 21, 2006, May 8, 2006 and July 5, 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 September 20, 2006 to the
Prospectuses dated March 31, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 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 September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
AIM FUNDS GROUP
AIM Basic Balanced Fund - Class A, B, C, R and Investor
Supplement dated September 20, 2006 to the
Prospectus dated April 24, 2006
as supplemented May 1, 2006, May 8, 2006
and July 5, 2006
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 September 20, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006 and July 5, 2006
AIM GROWTH SERIES
AIM Basic Value Fund - Class A, B, C and R
AIM Global Equity Fund - Class A, B, C and R
AIM International Allocation Fund - Class A, B, C and R
AIM Small Cap Growth Fund - Class A, B, C, R and Investor
Supplement dated September 20, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006 and July 5, 2006
AIM Conservative Allocation 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 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
Supplement dated September 20, 2006 to the
Prospectuses dated April 24, 2006
as supplemented May 8, 2006, July 5, 2006
and August 23, 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 September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 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 September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 1, 2006,
May 8, 2006 and July 5, 2006
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A, B and C
AIM Trimark Endeavor Fund - Class A, B, C and R
AIM Trimark Fund - Class A, B, C and R
Supplement dated September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
AIM Trimark Small Companies Fund - Class A, B, C and R
Supplement dated September 20, 2006 to the
Prospectus dated February 28, 2006
as supplemented March 24, 2006, April 21, 2006,
May 8, 2006 and July 5, 2006
AIM China Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated March 31, 2006
as supplemented April 21, 2006, May 8, 2006,
June 27, 2006 and July 5, 2006
AIM Enhanced Short Bond Fund - Class A, C and R
Supplement dated September 20, 2006 to the
Prospectus dated March 31, 2006
as supplemented April 21, 2006 and May 8, 2006
AIM International Bond Fund - Class A, B and C
AIM Japan Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectuses dated March 31, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
1
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 September 20, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, April 21, 2006,
May 8, 2006 and July 5, 206
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 September 20, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006,
April 21, 2006, May 8, 2006 and July 5, 2006
AIM Total Return Bond Fund - Class A, B, C and R
Supplement dated September 20, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006,
April 21, 2006, May 1, 2006, May 8, 2006 and July 5, 2006
AIM Limited Maturity Treasury Fund - Class A and A3
Supplement dated September 20, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006,
April 21, 2006 and May 8, 2006
AIM Short Term Bond Fund - Class A, C and R
Supplement dated September 20, 2006 to the
Prospectus dated October 25, 2005
as revised June 9, 2006
AIM SECTOR FUNDS
AIM Energy Fund - Class A, B, C and Investor
AIM Financial Services 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 September 20, 2006 to the
Prospectuses dated July 31, 2006
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Opportunities I Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006,
June 2, 2006 and July 5, 2006
AIM Opportunities II Fund - Class A, B and C
AIM Opportunities III Fund - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006,
June 2, 2006, June 30, 2006 and July 5, 2006
AIM STOCK FUNDS
AIM Dynamics Fund - Class A, B, C, R and Investor
Supplement dated September 20, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2006, April 21, 2006,
May 8, 2006 and July 5, 2006
AIM S&P 500 Index Fund - Investor Class
Supplement dated September 20, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2005, January 31, 2006,
April 21, 2006 and May 8, 2006
AIM SUMMIT FUND - Class A, B and C
Supplement dated September 20, 2006 to the
Prospectus dated February 28, 2006
as supplemented April 21, 2006, May 8, 2006
and July 5, 2006
AIM TAX-EXEMPT FUNDS
AIM High Income Municipal Fund - Class A, B and C
AIM Tax-Exempt Cash Fund - Class A and Investor
AIM Tax-Free Intermediate Fund - Class A and A3
Supplement dated September 20, 2006 to the
Prospectuses dated July 31, 2006
AIM TREASURER'S SERIES TRUST
Premier Portfolio - Investor Class
Premier Tax-Exempt Portfolio - Investor Class
Premier U.S. Government Money Portfolio - Investor Class
Supplement dated September 20, 2006 to the
Prospectus dated December 20, 2005
as supplemented April 21, 2006 and May 8, 2006
Effective December 29, 2006, shareholders of AIM Advantage Health Sciences Fund,
AIM Global Health Care Fund and AIM Gold & Precious Metals 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 Advantage Health Sciences Fund, AIM Global
Health Care Fund and AIM Gold & Precious Metals Fund are added to the list of
funds appearing immediately under the heading "SHAREHOLDER INFORMATION -
REDEEMING SHARES - REDEMPTION FEE" in the prospectus.
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 Advantage Health Sciences Fund - Class A,
B and C Supplement dated May 8, 2006 to
the Prospectus dated December 20, 2005
as supplemented January 17, 2006 and April 21, 2006
AIM Floating Rate Fund-Class A, B1, C and R
Supplement dated May 8, 2006 to the
Prospectus dated April 14, 2006
AIM Multi-Sector Fund - Class A, B and C
Supplement dated May 8, 2006 to the
Prospectus dated December 20, 2005
as supplemented January 17, 2006, April 13, 2006
and April 21, 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 May 8, 2006 to the
Prospectuses dated March 31, 2006 as
supplemented April 21, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 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 May 8, 2006 to the
Prospectuses dated April 24, 2006
AIM Basic Balanced Fund - Class A, B, C, R
and Investor Supplement dated May 8, 2006 to the
Prospectus dated April 24, 2006
as supplemented May 1, 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 May 8, 2006 to the
Prospectuses dated April 24, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006 and May 1, 2006
AIM INVESTMENT FUNDS
AIM China Fund - Class A, B and C
AIM Enhanced Short Bond Fund - Class A, C and R
AIM International Bond Fund - Class A, B and C
AIM Japan Fund - Class A, B and C
Supplement dated May 8, 2006 to the
Prospectuses dated March 31, 2006
as supplemented April 21, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006
AIM Trimark Small Companies Fund - Class A, B, C and R
Supplement dated May 8, 2006 to the
Prospectus dated February 28, 2006
as supplemented March 24, 2006 and April 21, 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 May 8, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005
and April 21, 2006
AIM High Yield Fund - Class A, B, C and Investor
AIM Intermediate Government Fund -
Class A, B, C, R and Investor
AIM Limited Maturity Treasury Fund - Class A and A3
AIM Municipal Bond Fund - Class A, B, C and Investor
Supplement dated May 8, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006
and April 21, 2006
AIM Income Fund - Class A, B, C, R and Investor
AIM Total Return Bond Fund - Class A, B, C and R
Supplement dated May 8, 2006 to the
Prospectuses dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006, April 21,
2006 and May 1, 2006
1
AIM Short Term Bond Fund - Class A, C and R
Supplement dated May 8, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2005, February 3, 2006,
March 31, 2006 and April 21, 2006
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 May 8, 2006 to the
Prospectus dated October 25, 2005
as supplemented December 8, 2005, March 31, 2006
April 13, 2006 and April 21, 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 May 8, 2006 to the
Prospectuses dated February 28, 2006
as supplemented April 21, 2006
AIM STOCK FUNDS
AIM Dynamics Fund - Class A, B, C, R and
Investor Supplement dated May 8, 2006 to the
Prospectus dated October 25, 2005
as 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
AIM SUMMIT FUND - Class A, B and C
Supplement dated May 8, 2006 to the
Prospectus dated February 28, 2006
as supplemented April 21, 2006
AIM TAX-EXEMPT FUNDS
AIM High Income Municipal Fund - Class A, B and C
Supplement dated May 8, 2006 to the
Prospectus dated July 29, 2005
as revised April 13, 2006 and
as supplemented April 21, 2006
AIM Tax-Exempt Cash Fund - Class A and Investor
Supplement dated May 8, 2006 to the
Prospectus dated July 29, 2005
as supplemented December 8, 2005,
December 23, 2005 and April 21, 2006
AIM Tax-Free Intermediate Fund - Class A and A3
Supplement dated May 8, 2006 to the
Prospectus dated July 29, 2005
as supplemented December 8, 2005, December 23, 2005,
March 31, 2006 and April 21, 2006
AIM TREASURER'S SERIES TRUST
Premier Portfolio - Investor Class
Premier Tax-Exempt Portfolio - Investor Class
Premier U.S. Government Money Portfolio - Investor Class
Supplement dated May 8, 2006 to the
Prospectus dated December 20, 2005
as supplemented 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 SELECT EQUITY FUND
PROSPECTUS
APRIL 24, 2006
AIM Select Equity Fund seeks to achieve long-term growth of capital.
- --------------------------------------------------------------------------------
This prospectus contains important information about the Class A, B and C shares
of the fund. Please read it before investing and keep it for future reference.
As with all other mutual fund securities, the Securities and Exchange Commission
has not approved or disapproved these securities or determined whether the
information in this prospectus is adequate or accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- - is not FDIC insured;
- - may lose value; and
- - is not guaranteed by a bank.
--------------------------
AIM SELECT EQUITY FUND
--------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<Table>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- ------------------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- ------------------------------------------------------
PERFORMANCE INFORMATION 2
- ------------------------------------------------------
Annual Total Returns 2
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- ------------------------------------------------------
Fee Table 4
Expense Example 4
HYPOTHETICAL INVESTMENT AND EXPENSE
INFORMATION 5
- ------------------------------------------------------
DISCLOSURE OF PORTFOLIO HOLDINGS 6
- ------------------------------------------------------
FUND MANAGEMENT 7
- ------------------------------------------------------
The Advisor 7
Advisor Compensation 7
Portfolio Manager(s) 7
OTHER INFORMATION 8
- ------------------------------------------------------
Sales Charges 8
Dividends and Distributions 8
FINANCIAL HIGHLIGHTS 9
- ------------------------------------------------------
SHAREHOLDER INFORMATION A-1
- ------------------------------------------------------
Choosing a Share Class A-1
Excessive Short-Term Trading Activity
Disclosures A-5
Purchasing Shares A-8
Redeeming Shares A-10
Exchanging Shares A-13
Pricing of Shares A-16
Taxes A-17
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 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 representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
--------------------------
AIM SELECT EQUITY FUND
--------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to achieve long-term growth of capital. The
investment objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of
its assets in equity securities, including convertible securities, with
prospects for above-average market returns, without regard to market
capitalization. In complying with this 80% investment requirement, the fund's
investments may include synthetic instruments. Synthetic instruments are
investments that have economic characteristics similar to the fund's direct
investments, and may include warrants, futures, options, exchange-traded funds
and American Depositary Receipts. The fund may invest up to 25% of its total
assets in foreign securities. 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.
The fund's portfolio manager focuses on companies that: (1) have experienced
above-average, long-term growth in earnings; (2) have excellent prospects for
future growth; or (3) are undervalued relative to the company's assets, or the
equity markets generally. The fund's portfolio manager considers whether to sell
a particular security when any of these factors materially changes.
The fund generally expects to diversify the strategies that it will employ
in seeking to achieve its objective by following AIM's growth, growth at a
reasonable price (GARP), and value investment disciplines. The fund anticipates
allocating a significant portion of its assets, generally in approximately equal
amounts, among those investment disciplines.
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.
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.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
--------------------------
AIM SELECT EQUITY 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.
<Table>
<Caption>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
1996................................................................... 18.61%
1997................................................................... 19.54%
1998................................................................... 27.09%
1999................................................................... 41.48%
2000................................................................... -1.77%
2001................................................................... -25.64%
2002................................................................... -29.59%
2003................................................................... 29.49%
2004................................................................... 13.87%
2005................................................................... 5.10%
</Table>
The Class A shares' year-to-date total return as of March 31, 2006 was
5.82%.
During the periods shown in the bar chart, the highest quarterly return was
30.49% (quarter ended December 31, 1999) and the lowest quarterly return was
- -26.14% (quarter ended March 31, 2001).
2
--------------------------
AIM SELECT EQUITY FUND
--------------------------
PERFORMANCE INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
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 SINCE INCEPTION
December 31, 2005) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
- ---------------------------------------------------------------------------------------
Class A 12/04/67
Return Before Taxes (0.70)% (5.17)% 6.74% --
Return After Taxes on
Distributions (0.70) (5.18) 5.89 --
Return After Taxes on
Distributions and Sale of
Fund Shares (0.45) (4.32) 5.60 --
Class B 09/01/93
Return Before Taxes (0.69) (5.19) 6.67
Class C 08/04/97
Return Before Taxes 3.32 (4.82) -- 3.12%
- ---------------------------------------------------------------------------------------
S&P 500(2) 4.91 0.54 9.07 -- --
Russell 3000(R) Index(2,3) 6.12 1.58 9.20 -- --
Lipper Multi-Cap Core Fund
Index(2,4) 8.22 2.21 8.92 -- --
- ---------------------------------------------------------------------------------------
</Table>
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns depend on an investor's tax situation and may
differ from those shown, and after-tax returns shown are not relevant to
investors who hold their fund shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts. After-tax returns are shown for
Class A only and after-tax returns for Class B and C will vary.
(1) Since Inception performance is only provided for a class with less than ten
calendar years of performance.
(2) The Standard & Poor's 500 Index 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. The fund has also included the Russell
3000--Registered Trademark-- Index, which the fund believes more closely
reflects the performance of the types of securities in which the fund
invests. In addition, the Lipper Multi-Cap Core Fund Index (which may or may
not include the fund) is included for comparison to a peer group.
(3) The Russell 3000--Registered Trademark-- Index measures the performance of
the 3,000 largest U.S. companies and is regarded as the standard for
measuring U.S. stock market performance.
(4) The Lipper Multi-Cap Core Fund Index is an equally weighted representation
of the 30 largest funds in the Lipper Multi Cap Core classification. These
funds, by portfolio practice, invest in a variety of market capitalization
ranges without concentrating 75% of their equity assets in any one market
capitalization range over an extended period of time. Multi-Cap funds
typically have between 25% and 75% of their assets invested in companies
with market capitalizations (on a three-year weighted basis) above 300% of
the dollar-weighted median market capitalization of the middle 1,000
securities of the S&P SuperComposite 1500 Index. Multi-Cap Core funds have
more latitude in the companies in which they invest. These funds typically
have an average price-to-earnings ratio, price-to-book ratio, and three year
sales-per-share growth value, compared to the S&P 500 Index. The S&P
SuperComposite 1500 Index is a market cap weighted index made up of 1,500
liquid securities of companies with market capitalizations of $300 million
and above, and represents the small-, mid-, and large-cap markets.
3
--------------------------
AIM SELECT EQUITY 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
your investment) CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of offering price) 5.50% 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%
- --------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
ANNUAL FUND OPERATING EXPENSES(2)
- --------------------------------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Management Fees 0.69% 0.69% 0.69%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.45 0.45 0.45
Total Annual Fund Operating Expenses(3) 1.39 2.14 2.14
- --------------------------------------------------------------------------------
</Table>
(1) A contingent deferred sales charge may apply in some cases. See "Shareholder
Information--Choosing a Share Class--Sales Charges."
(2) There is no guarantee that actual expenses will be the same as those shown
in the table.
(3) Effective January 1, 2005 through at least June 30, 2006, the advisor has
contractually agreed to waive advisory fees to the extent necessary so that
the advisory fees payable by the fund do not exceed a specified maximum
annual advisory fee rate, which fee rate includes breakpoints and is based
upon net asset levels. The fund's maximum annual advisory fee rate ranges
from 0.695% (for average net assets up to $250 million) to 0.52% (for
average net assets over $10 billion.)
If a financial institution is managing your account you may also be charged a
transaction or other fee by such financial institution.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, that the
fund's operating expenses remain the same and includes the effect of contractual
fee waivers and/or expense reimbursements, if any. To the extent fees are waived
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 $684 $966 $1,269 $2,127
Class B 717 970 1,349 2,282
Class C 317 670 1,149 2,472
- --------------------------------------------------------------------------------
</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 $684 $966 $1,269 $2,127
Class B 217 670 1,149 2,282
Class C 217 670 1,149 2,472
- --------------------------------------------------------------------------------
</Table>
4
--------------------------
AIM SELECT EQUITY 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;
- - The fund's current annual expense ratio includes any applicable contractual
fee waiver or expense reimbursement for the period committed;
- - 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 a 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 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) 1.39% 1.39% 1.39% 1.39% 1.39%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses (1.89)% 1.65% 5.32% 9.12% 13.06%
End of Year Balance $ 9,791.15 $10,144.61 $10,510.83 $10,890.27 $11,283.41
Estimated Annual Expenses $ 683.73 $ 138.55 $ 143.56 $ 148.74 $ 154.11
- -----------------------------------------------------------------------------------------------
<Caption>
CLASS A (INCLUDES MAXIMUM
SALES CHARGE) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.39% 1.39% 1.39% 1.39% 1.39%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 17.14% 21.37% 25.75% 30.29% 35.00%
End of Year Balance $11,690.74 $12,112.77 $12,550.04 $13,003.10 $13,472.51
Estimated Annual Expenses $ 159.67 $ 165.43 $ 171.41 $ 177.59 $ 184.01
- -----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS A (WITHOUT MAXIMUM SALES
CHARGE) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.39% 1.39% 1.39% 1.39% 1.39%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.61% 7.35% 11.23% 15.24% 19.40%
End of Year Balance $10,361.00 $10,735.03 $11,122.57 $11,524.09 $11,940.11
Estimated Annual Expenses $ 141.51 $ 146.62 $ 151.91 $ 157.39 $ 163.08
- -----------------------------------------------------------------------------------------------
<Caption>
CLASS A (WITHOUT MAXIMUM SALES
CHARGE) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.39% 1.39% 1.39% 1.39% 1.39%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 23.71% 28.18% 32.80% 37.60% 42.57%
End of Year Balance $12,371.15 $12,817.75 $13,280.47 $13,759.89 $14,256.63
Estimated Annual Expenses $ 168.96 $ 175.06 $ 181.38 $ 187.93 $ 194.71
- -----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS B(2) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.14% 2.14% 2.14% 2.14% 2.14%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 2.86% 5.80% 8.83% 11.94% 15.14%
End of Year Balance $10,286.00 $10,580.18 $10,882.77 $11,194.02 $11,514.17
Estimated Annual Expenses $ 217.06 $ 223.27 $ 229.65 $ 236.22 $ 242.98
- -----------------------------------------------------------------------------------------------
<Caption>
CLASS B(2) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.14% 2.14% 2.14% 1.39% 1.39%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 18.43% 21.82% 25.31% 29.83% 34.52%
End of Year Balance $11,843.47 $12,182.20 $12,530.61 $12,982.96 $13,451.65
Estimated Annual Expenses $ 249.93 $ 257.07 $ 264.43 $ 177.32 $ 183.72
- -----------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
CLASS C(2) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.14% 2.14% 2.14% 2.14% 2.14%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 2.86% 5.80% 8.83% 11.94% 15.14%
End of Year Balance $10,286.00 $10,580.18 $10,882.77 $11,194.02 $11,514.17
Estimated Annual Expenses $ 217.06 $ 223.27 $ 229.65 $ 236.22 $ 242.98
- -----------------------------------------------------------------------------------------------
<Caption>
CLASS C(2) YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- -----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 2.14% 2.14% 2.14% 2.14% 2.14%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 18.43% 21.82% 25.31% 28.89% 32.58%
End of Year Balance $11,843.47 $12,182.20 $12,530.61 $12,888.98 $13,257.61
Estimated Annual Expenses $ 249.93 $ 257.07 $ 264.43 $ 271.99 $ 279.77
- -----------------------------------------------------------------------------------------------
</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.
5
--------------------------
AIM SELECT EQUITY FUND
--------------------------
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.
6
--------------------------
AIM SELECT EQUITY 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 an investment advisor since its organization in
1976. Today, the advisor, together with its subsidiaries, advises or manages
over 200 investment portfolios, including the fund, encompassing a broad range
of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment
advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the
distributor of the retail AIM funds) reached final settlements with certain
regulators, including the SEC, the New York Attorney General and the Colorado
Attorney general, to resolve civil enforcement actions and/or investigations
related to market timing and related activity in the AIM funds, including those
formerly advised by IFG. As part of the settlements, a $325 million fair fund
($110 million of which is civil penalties) has been created to compensate
shareholders harmed by market timing and related activity in funds formerly
advised by IFG. 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 have harmed applicable AIM funds. These two fair funds will be
distributed in accordance with a methodology to be determined by AIM's
independent distribution consultant, in consultation with AIM and the
independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action
and shareholder derivative suits, have been filed against certain 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
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 December 31, 2005, the advisor received
compensation of 0.69% 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 the shareholders for the twelve-month period ended December 31, 2005.
PORTFOLIO MANAGER(S)
Duy Nguyen (lead manager), Portfolio Manager, is primarily responsible for the
day-to-day management of the fund's portfolio. He has been responsible for the
fund since 2002 and has been associated with the advisor and/or its affiliates
since 2000. From 1997 to 2000, he served as vice president and director of
quantitative services of FactSet Research Systems, Inc. As the lead manager, Mr.
Nguyen generally has the final authority over all aspects of the fund's
investment portfolio, including but not limited to, purchases and sales of
individual securities, portfolio construction techniques, portfolio risk
assessment, and the management of daily cash flows, in accordance with portfolio
holdings. The degree to which Mr. Nguyen may perform these functions, and the
nature of these functions, may change from time to time.
Derek S. Izuel, Senior Portfolio Manager, who has been responsible for the
fund since 2005 and has been associated with the advisor and/or its affiliates
since 1997.
They are assisted by the Global Quantitative Strategies Team which may 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 team, including biographies of
other members of the team, may be found on the advisor's website
(http//www.aiminvestments.com). The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional
information about the portfolio managers' investments in the fund, a description
of their compensation structure, and information regarding other accounts they
manage.
7
--------------------------
AIM SELECT EQUITY FUND
--------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Select Equity Fund are subject to the maximum
5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Certain purchases of Class A shares at net asset value may be
subject to the contingent deferred sales charge listed in that section.
Purchases of Class B and Class C shares are subject to the contingent deferred
sales charges listed in that section.
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.
8
--------------------------
AIM SELECT EQUITY 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 DECEMBER 31,
---------------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 17.65 $ 15.50 $ 11.97 $ 17.00 $ 22.88
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.06)(a)(b) (0.09)(a) (0.06)(a) (0.08)(a)
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.94 2.21 3.62 (4.97) (5.79)
===================================================================================================================
Total from investment operations 0.90 2.15 3.53 (5.03) (5.87)
===================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.01)
===================================================================================================================
Net asset value, end of period $ 18.55 $ 17.65 $ 15.50 $ 11.97 $ 17.00
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(c) 5.10% 13.87% 29.49% (29.59)% (25.64)%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $259,946 $292,681 $288,976 $250,666 $396,779
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets 1.39%(d) 1.38%(e) 1.47% 1.32% 1.24%
===================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.21)%(d) (0.40)%(b) (0.65)% (0.45)% (0.45)%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 91% 38% 69% 86% 117%
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend received
of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment income
(loss) to average net assets excluding the special dividend are $(0.08) and
(0.51)%, respectively, for the year ended December 31, 2004.
(c) 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.
(d) Ratios are based on average daily net assets of $268,799,905.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.40%, for the year ended December 31, 2004.
9
--------------------------
AIM SELECT EQUITY FUND
--------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
CLASS B
---------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
2005 2004 2003 2002
-------- -------- -------- -------- 2001
Net asset value, beginning of period $ 15.78 $ 13.96 $ 10.86 $ 15.54 $ 21.07
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.17)(a)(b) (0.17)(a) (0.16)(a) (0.20)(a)
- -------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.83 1.99 3.27 (4.52) (5.32)
===================================================================================================================
Total from investment operations 0.68 1.82 3.10 (4.68) (5.52)
===================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.01)
===================================================================================================================
Net asset value, end of period $ 16.46 $ 15.78 $ 13.96 $ 10.86 $ 15.54
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(c) 4.31% 13.04% 28.55% (30.12)% (26.19)%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $106,097 $148,300 $198,148 $214,709 $432,002
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets 2.14%(d) 2.13%(e) 2.22% 2.07% 2.00%
===================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.96)%(d) (1.15)%(b) (1.40)% (1.20)% (1.21)%
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate 91% 38% 69% 86% 117%
___________________________________________________________________________________________________________________
===================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend received
of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment income
(loss) to average net assets excluding the special dividend are $(0.19) and
(1.26)%, respectively, for the year ended December 31, 2004.
(c) 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.
(d) Ratios are based on average daily net assets of $122,289,507.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.15%, for the year ended December 31, 2004.
10
--------------------------
AIM SELECT EQUITY FUND
--------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
CLASS C
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
Net asset value, beginning of period $ 15.75 $ 13.94 $ 10.84 $ 15.52 $ 21.05
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.17)(a)(b) (0.17)(a) (0.16)(a) (0.20)(a)
- --------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.83 1.98 3.27 (4.52) (5.32)
==============================================================================================================
Total from investment operations 0.68 1.81 3.10 (4.68) (5.52)
==============================================================================================================
Less distributions from net realized gains -- -- -- -- (0.01)
==============================================================================================================
Net asset value, end of period $ 16.43 $ 15.75 $ 13.94 $ 10.84 $ 15.52
______________________________________________________________________________________________________________
==============================================================================================================
Total return(c) 4.32% 12.98% 28.60% (30.15)% (26.21)%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $22,860 $29,710 $33,585 $32,558 $59,112
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net assets 2.14%(d) 2.13%(e) 2.22% 2.07% 2.00%
==============================================================================================================
Ratio of net investment income (loss) to
average net assets (0.96)%(d) (1.15)%(b) (1.40)% (1.20)% (1.21)%
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate 91% 38% 69% 86% 117%
______________________________________________________________________________________________________________
==============================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend received
of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment income
(loss) to average net assets excluding the special dividend are $(0.19) and
(1.26)%, respectively, for the year ended December 31, 2004.
(c) 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.
(d) Ratios are based on average daily net assets of $25,499,374.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.15%, for the year ended December 31, 2004.
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
All 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%(8) 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(10) the
orders limited "Purchasing
to amount less Shares -- Grandfathered
than Investors"
$1,000,000(9) 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. Class B1 shares of AIM Floating
Rate Fund are not available for purchase by either current Class B1 shareholders
or by new investors and are not discussed in the chart above. For information on
Class B1 shares, consult the fund's prospectus.
(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 Enhanced Short Bond Fund or AIM Short Term Bond Fund
unless you exchange Class C shares of another fund that are subject to a
CDSC into AIM Enhanced Short Bond Fund or AIM Short Term Bond Fund.
(8) Class C shares of AIM Floating Rate Fund have a Rule 12b-1 fee of 0.75%.
MCF--04/06
A-1
-------------
THE AIM FUNDS
-------------
(9) 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.
(10) 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.
- --------------------------------------------------------------------------------
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 Enhanced Short Bond Fund, AIM Floating Rate Fund and 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 ENHANCED SHORT BOND FUND, AIM FLOATING RATE FUND AND
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.
MCF--04/06
A-2
-------------
THE AIM FUNDS
-------------
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.
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, 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.
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 ENHANCED SHORT BOND FUND AND 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 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.
MCF--04/06
A-3
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THE AIM FUNDS
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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:
<Table>
<Caption>
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
- -------------------------------------------------------------------------
</Table>
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.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If ADI pays
a concession to the dealer of record, however, the Class R shares are subject to
a 0.75% CDSC at the time of redemption if all retirement plan assets are
redeemed within 12 months from the date of the retirement plan's initial
purchase.
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you are redeeming shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial advisor must notify
the transfer agent at the time of purchase that your purchase qualifies for such
treatment. Certain individuals and employer-sponsored retirement plans may link
accounts for the purpose of qualifying for lower initial sales charges. You or
your financial consultant must provide other account numbers to be considered
for Rights of Accumulation, or mark the Letter of Intent section on the account
application, or provide other relevant documentation, so that the transfer agent
can verify your eligibility for the reduction or exception. Consult the fund's
Statement of Additional Information for details.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash
Reserve Shares of AIM Money Market Fund and 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, 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.
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 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;
MCF--04/06
A-4
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THE AIM FUNDS
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- - if you are a participant in a retirement plan and your plan redeems, after
having held them for more than one year from the date of the plan's initial
purchase, all of the Class A, C or Class R shares held through such plan that
would otherwise be subject to a CDSC;
- - if you are a participant in a qualified retirement plan and redeem Class A,
Class C or Class R shares in order to fund a distribution;
- - if you participate in the Systematic Redemption Plan and withdraw up to 12% of
the value of your shares that are subject to a CDSC in any twelve-month
period;
- - if you redeem shares to pay account fees;
- - for redemptions following the death or post-purchase disability of a
shareholder or beneficial owner;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
ADDITIONAL PAYMENTS TO FINANCIAL ADVISORS
The financial advisor through which you purchase your shares may receive all or
a portion of the sales charges and Rule 12b-1 distribution fees discussed above.
In addition to those payments, ADI or one or more of its corporate affiliates
(collectively, ADI Affiliates) may make additional cash payments to financial
advisors in connection with the promotion and sale of shares of the funds. These
additional cash payments may include cash revenue sharing payments and other
payments for certain administrative services, transaction processing services
and certain other marketing support services. ADI Affiliates make these payments
from their own resources, from ADI's retention of underwriting concessions and
from payments to ADI under Rule 12b-1 plans. In this context, "financial
advisors" include any broker, dealer, bank (including bank trust departments),
registered investment advisor, financial planner, retirement plan administrator
and any other financial intermediary having a selling, administration or similar
agreement with ADI Affiliates.
ADI Affiliates make revenue sharing payments as incentives to certain
financial advisors to promote and sell shares of the funds. The benefits ADI
Affiliates receive when they make these payments include, among other things,
placing the funds on the financial advisor's funds sales system, placing the
funds on the financial advisor's preferred or recommended fund list, and access
(in some cases on a preferential basis over other competitors) to individual
members of the financial advisor's sales force or to the financial advisor's
management. Revenue sharing payments are sometimes referred to as "shelf space"
payments because the payments compensate the financial advisor for including the
funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate
financial advisors differently depending typically on the level and/or type of
considerations provided by the financial advisor. The revenue sharing payments
ADI Affiliates make may be calculated on sales of shares of the funds
(Sales-Based Payments), in which case the total amount of such payments shall
not exceed 0.25% of the public offering price of all shares sold by the
financial advisor during the particular period. Such payments also may be
calculated on the average daily net assets of the applicable AIM funds
attributable to that particular financial advisor (Asset-Based Payments), in
which case the total amount of such cash payments shall not exceed 0.25% per
annum of those assets during a defined period. Sales-Based Payments primarily
create incentives to make new sales of shares of the funds and Asset-Based
Payments primarily create incentives to retain previously sold shares of the
funds in investor accounts. ADI Affiliates may pay a financial advisor either or
both Sales-Based Payments and Asset-Based Payments.
ADI Affiliates also may make other payments to certain financial advisors
for processing certain transactions or account maintenance activities (such as
processing purchases, redemptions or exchanges or producing customer account
statements) or for providing certain other marketing support services (such as
financial assistance for conferences, seminars or sales or training programs at
which ADI Affiliates personnel may make presentations on the funds to the
financial advisor's sales force). Financial advisors may earn profits on these
payments for these services, since the amount of the payment may exceed the cost
of providing the service. Certain of these payments are subject to limitations
under applicable law.
ADI Affiliates are motivated to make the payments described above since they
promote the sale of fund shares and the retention of those investments by
clients of financial advisors. To the extent financial advisors sell more shares
of the funds or retain shares of the funds in their clients' accounts, ADI
Affiliates benefit from the incremental management and other fees paid to ADI
Affiliates by the funds with respect to those assets.
You can find further details in the fund's Statement of Additional
Information about these payments and the services provided by financial
advisors. In certain cases these payments could be significant to the financial
advisor. Your financial advisor may charge you 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
MCF--04/06
A-5
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THE AIM FUNDS
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short-term trading activity seeks to take advantage of arbitrage opportunities
from stale prices for portfolio securities, the value of fund shares held by
long-term investors may be diluted. The Boards of Trustees have adopted policies
and procedures designed to discourage excessive or short-term trading of fund
shares for all funds except the money market funds. However, there is the risk
that these funds' policies and procedures will prove ineffective in whole or in
part to detect or prevent excessive or short-term trading. These funds may alter
their policies at any time without prior notice to shareholders if the advisor
believes the change would be in the best interests of long-term shareholders.
AIM and its affiliates (collectively, AIM Affiliates) currently use the
following tools designed to discourage excessive short-term trading in the
retail funds:
(1) trade activity monitoring;
(2) trading guidelines;
(3) redemption fee on trades in certain funds; and
(4) use of fair value pricing consistent with procedures approved by the Boards
of Trustees of the funds.
Each of these tools is described in more detail below. Although these tools are
designed to discourage excessive short-term trading, you should understand that
none of these tools alone nor all of them taken together eliminate the
possibility that excessive short-term trading activity in the funds will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with long-term shareholder
interests.
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 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 below. 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.
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.
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 reserve the
discretion to accept exchanges in excess of these guidelines on a case-by-case
basis if they believe that granting such exceptions would be consistent with the
best interests of shareholders. An exchange is the purchase of shares in one
fund which is paid for with the proceeds from a redemption of shares of another
fund effectuated on the same day. The movement out of one fund (redemption) and
into one or more other funds (purchase) on the same day shall be counted as one
exchange. Exchanges effected as part of programs that have been determined by an
AIM Affiliate to be non-discretionary, such as dollar cost averaging, portfolio
rebalancing, or other automatic non-discretionary programs that involve
MCF--04/06
A-6
-------------
THE AIM FUNDS
-------------
exchanges, generally will not be counted toward the trading guidelines
limitation of four exchanges out of a fund per calendar year.
The ability of the AIM Affiliates to monitor exchanges made by the
underlying shareholders of omnibus accounts maintained by brokers, retirement
plan accounts and approved fee-based program accounts is severely limited or
non-existent in those instances in which the broker, retirement plan
administrator or fee-based program sponsor maintains the underlying shareholder
accounts and is unwilling or unable to implement these trading guidelines and
may be further limited by systems limitations applicable to those types of
accounts.
Some investments in the funds are made indirectly through vehicles such as
qualified tuition plans, variable annuity and insurance contracts, and funds of
funds which use the funds as underlying investments (each a conduit investment
vehicle). If shares of the funds are held in the name of a conduit investment
vehicle and not in the names of the individual investors who have invested in
the funds through the conduit investment vehicle, the conduit investment vehicle
may be considered an individual shareholder of the funds. To the extent that a
conduit investment vehicle is considered an individual shareholder of the funds,
the funds are likely to be limited in their ability to impose exchange
limitations on individual transactions initiated by investors who have invested
in the funds through the conduit investment vehicle.
REDEMPTION FEE
You may be charged a 2% redemption fee if you redeem, including redeeming by
exchange, shares of certain funds within 30 days of purchase. See "Redeeming
Shares -- Redemption Fee" for more information.
The ability of a fund to assess a redemption fee on the underlying
shareholders of omnibus accounts maintained by brokers, retirement plan accounts
and approved fee-based program accounts is severely limited or non-existent in
those instances in which the broker, retirement plan administrator or fee-based
program sponsor maintains the underlying shareholder accounts and is unwilling
or unable to assess such fees and may be further limited by systems limitations
applicable to these types of accounts.
For additional discussion of the applicability of redemption fees on shares
of the fund held through omnibus accounts, retirement plan accounts, approved
fee-based program accounts and conduit investment vehicles, see "Redeeming
Shares -- Redemption Fee".
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of Trustees of
the fund. Fair value pricing may reduce the ability of frequent traders to take
advantage of arbitrage opportunities resulting from potentially "stale" prices
of portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares -- Determination of Net Asset Value" for more
information.
MCF--04/06
A-7
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THE AIM FUNDS
-------------
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 check Mail your check and the remittance slip
to the transfer agent, AIM Investment from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, TX transfer agent.
77210-4739.
By Wire Mail completed account application to the Call the transfer agent to receive a
transfer agent. Call the transfer agent at reference number. Then, use the wire
(800) 959-4246 to receive a reference number. instructions at left.
Then, use the following wire instructions:
Beneficiary Bank ABA/Routing #: 021000021
Beneficiary Account Number: 00100366807
Beneficiary Account Name: AIM Investment
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account using one of the methods Select the AIM Bank
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 methods Access your account at
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>
MCF--04/06
A-8
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GRANDFATHERED INVESTORS
Investor Class shares of a fund may be purchased only by: (1) persons or
entities who had established an account, prior to April 1, 2002, in Investor
Class shares of any of the funds currently distributed by ADI (the Grandfathered
Funds) and have continuously maintained such account in Investor Class shares
since April 1, 2002; (2) any person or entity listed in the account registration
for any Grandfathered Funds, which account was established prior to April 1,
2002 and continuously maintained since April 1, 2002, such as joint owners,
trustees, custodians and designated beneficiaries; (3) customers of certain
financial institutions, wrap accounts or other fee-based advisory programs, or
insurance company separate accounts, which have had relationships with ADI
and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously
maintained such relationships since April 1, 2002; (4) defined benefit, defined
contribution and deferred compensation plans; and (5) fund trustees, employees
of AMVESCAP PLC and its subsidiaries, AMVESCAP directors, and their immediate
families.
SPECIAL PLANS
SYSTEMATIC PURCHASE PLAN
You can arrange for periodic investments in any of the funds by authorizing the
transfer agent to withdraw the amount of your investment from your bank account
on a day or dates you specify and in an amount of at least $50. You may stop the
Systematic Purchase Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one fund account to one or more other fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the day of the month you specify, in the
amount you specify. Dollar Cost Averaging cannot be set up for the 29th through
the 31st of the month. The minimum amount you can exchange to another fund is
$50. You may participate in a dollar cost averaging program hosted by your
dealer of record, your financial advisor or another financial intermediary. If
such program is the same or similar to AIM's Dollar Cost Averaging program and
is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same fund. You may invest
your dividends and distributions per the rules listed in the "Permitted
Exchanges" section.
You must comply with the following requirements to be eligible to invest
your dividends and distributions in shares of another fund:
(1) Your account balance (a) in the fund paying the dividend must be at least
$5,000; and (b) in the fund receiving the dividend must be at least $500;
and
(2) Both accounts must have identical registration information.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your fund holdings should be rebalanced, on a percentage basis,
between two and ten of your funds on a quarterly, semiannual or annual basis.
Your portfolio will be rebalanced through the exchange of shares in one or more
of your funds for shares of the same class of one or more other funds in your
portfolio. Rebalancing will NOT occur if your portfolio is within 2% of your
stated allocation. If you wish to participate in the Program, make changes or
cancel the Program, the transfer agent must receive your request to participate,
changes, or cancellation in good order at least five business days prior to the
next rebalancing date, which is normally the 28th day of the last month of the
period you choose. You may realize taxable gains from these exchanges. We may
modify, suspend or terminate the Program at any time on 60 days prior written
notice. You may participate in a portfolio rebalancing program hosted by your
dealer of record, your financial advisor or another financial intermediary. If
such program is the same or similar to AIM's Portfolio Rebalancing Program and
is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
RETIREMENT PLANS
Shares of most of the funds can be purchased through tax-sheltered retirement
plans made available to corporations, individuals and employees of non-profit
organizations and public schools. A plan document must be adopted to establish a
retirement plan. You may use ADI sponsored retirement plans, which include IRAs,
Roth IRAs, SIMPLE IRA plans, SEP/SARSEP plans, 403(b) plans, Solo 401(k) plans
and Money Purchase/Profit Sharing plans, or another sponsor's retirement plan.
AIM Investment Services, Inc. assesses certain fees associated with the
maintenance of certain types of retirement plan accounts and the provision of
specialized recordkeeping services for those plan accounts. ADI 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.
MCF--04/06
A-9
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THE AIM FUNDS
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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 China Fund AIM High Yield Fund
AIM Developing Markets Fund AIM International Allocation Fund
AIM European Growth Fund AIM International Bond Fund
AIM European Small Company AIM International Core Equity Fund
Fund AIM International Growth Fund
AIM Floating Rate Fund AIM International Small Company Fund
AIM Global Aggressive Growth AIM Japan Fund
Fund AIM S&P 500 Index Fund
AIM Global Equity Fund AIM Trimark Fund
AIM Global Growth Fund
AIM Global Real Estate 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 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,
MCF--04/06
A-10
-------------
THE AIM FUNDS
-------------
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, AIM Enhanced or II Fund, AIM Enhanced Short within 18 months of initial
Short Bond Fund, AIM Bond Fund, AIM Floating Rate purchase of Category I or II
Floating Rate Fund or AIM Fund or AIM Short Term Bond Fund, AIM Enhanced Short Bond
Short Term Bond Fund Fund Fund, AIM Floating Rate Fund
- Class A shares of Category III or AIM Short Term Bond Fund
Fund(2) 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, AIM Enhanced Short within 18 months of initial
Bond Fund, AIM Floating Rate purchase of Category III Fund
Fund or AIM Short Term Bond shares
Fund
- - 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) 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.
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 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.
MCF--04/06
A-11
-------------
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 day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
MCF--04/06
A-12
-------------
THE AIM FUNDS
-------------
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 B1, 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, 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 Fund
and AIM Tax-Free Intermediate Fund cannot be X
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,
Institutional or Investor Class Shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class B1 Class A. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class B1 Class B, A3, C, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class Shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class C Class C. X
- ------------------------------------------------------------------------------------------------------------------------------------
Class C Class A, A3, B, B1, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
MCF--04/06
A-13
-------------
THE AIM FUNDS
-------------
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED
- ------------------------------------------------------------------------------------------------------------------------------------
Class R Class R X
- ------------------------------------------------------------------------------------------------------------------------------------
Class R Class A, A3, B, B1, 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 B1, P or Institutional Class shares. X
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Class Institutional Class X
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Class Class A, A3, B, B1, 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. X
- 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
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, B1, 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 B1 shares for Class A shares;
(4) Class C shares for other Class C shares;
(5) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II funds (i) subject to an initial sales
charge or (ii) purchased at net asset value and subject to a contingent
deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III funds purchased at net asset value for Class
A shares of a Category I or II fund, Class A shares of AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund or Class A shares of AIM Short Term Bond
Fund;
MCF--04/06
A-14
-------------
THE AIM FUNDS
-------------
(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 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.
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 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.
- --------------------------------------------------------------------------------
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.
MCF--04/06
A-15
-------------
THE AIM FUNDS
-------------
- --------------------------------------------------------------------------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each fund's shares is the fund's net asset value per share. The
funds value portfolio securities for which market quotations are readily
available at market value. The funds value all other securities and assets for
which market quotations are unavailable or unreliable at their fair value in
good faith using procedures approved by the Boards of Trustees of the funds.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or 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:
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, tranche type, industry, company
performance, spread, individual trading characteristics, institution-size
trading in similar groups of securities and other market data.
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.
MCF--04/06
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 this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year. 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>
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, ARE ALSO
AVAILABLE AT http://www.aiminvestments.com.
You also can 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 Select Equity Fund
SEC 1940 Act file number: 811-01540
- ----------------------------------------
AIMinvestments.com SEQ-PRO-1
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
Appendix IV
AIM SELECT EQUITY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE We seek to generate superior
risk-adjusted returns by:
PERFORMANCE SUMMARY
======================================== o Applying a series of quantitative
For the period ending June 30, 2006, AIM FUND VS. INDEXES measurements to rank stocks based on
Select Equity Fund produced a positive factors specific to the growth,
total return but underperformed the S&P CUMULATIVE TOTAL RETURNS blend/core and value investment
500 Index and its style-specific 12/31/05-6/30/06, EXCLUDING SALES disciplines.
benchmark, the Russell 3000 Index. A CHARGES. IF SALES CHARGES WERE INCLUDED,
slight underweight position in RETURNS WOULD BE LOWER. o Scrutinizing the highest ranked stocks
information technology, a moderate through fundamental analysis, our goal
overweight position in materials as well Class A Shares 2.16% is to validate the results of our
as strong stock selection in both quantitative models as well as avoid
sectors benefited relative performance Class B Shares 1.70 eccentric risks that our model cannot
versus the style-specific benchmark. predict.
However, health care and Class C Shares 1.76
telecommunication services detracted o Using risk analysis to identify the
from relative performance versus the S&P 500 Index best mix of highest-ranked stocks from
Russell 3000 Index because of stock (Broad Market Index) 2.71 each investment discipline.
selection and sector weighting
decisions. The Fund underperformed the Russell 3000 Index The portfolio generally includes 150
broad market, as measured by the S&P 500 (Style-Specific Index) 3.23 to 200 stocks allocated equally across
Index, because of an underweight investment disciplines and market
position in energy, Lipper Multi-Cap Core Fund Index capitalizations. We also use
(Peer Group Index) 2.90 quantitative tools that help us to
detect "red flags" in companies that
SOURCE: LIPPER INC. would trigger a decision to sell a
particular stock. A stock is considered
======================================== for sale in any of the following
circumstances:
one of the best-performing market sectors
for the period. o Analysis indicates a deterioration in
company fundamentals.
Your Fund's long-term performance
appears on page 5. o Analysis indicates there are more
attractive opportunities.
================================================================================
o A stock adversely affects the desired
HOW WE INVEST We select stocks based on analysis of risk level of the Fund.
individual companies. We use our
We manage your Fund to provide exposure proprietary quantitative models to build MARKET CONDITIONS AND YOUR FUND
to a variety of investment styles and a portfolio diversified across
market capitalizations so that the Fund investment styles (growth, blend/core The reporting period started off on a
can be used as a core portfolio. We and value) as well as market positive note with most major market
believe the Fund can serve as a capitalization (large-, mid- and indexes posting respectable gains, but
long-term strategic allocation around small-cap). We believe this the market turned in May as investors
which you can make tactical adjustments diversification positions the Fund to became concerned about higher
using a combination of style and potentially perform well in a variety of
market-cap specific investment market environments.
strategies.
(continued)
======================================== ======================================== ========================================
PORTFOLIO COMPOSITION TOP 5 INDUSTRIES* TOP 10 EQUITY HOLDINGS*
By sector
[PIE CHART] 1. Pharmaceuticals 6.7% 1. Exxon Mobil Corp. 3.5%
Health Care 18.2% 2. Other Diversified Financial 2. Bank of America Corp. 2.7
Consumer Discretionary 17.8% Services 5.1 3. Citigroup Inc. 2.4
Information Technology 11.4% 3. Investment Banking & 4. Merck & Co. Inc. 1.9
Industrials 10.4% Brokerage 4.4 5. Cisco Systems, Inc. 1.7
Energy 7.8% 4. Integrated Oil & Gas 4.3 6. Johnson & Johnson 1.7
Materials 5.6% 5. Property & Casualty 7. Aetna Inc. 1.6
Consumer Staples 2.7% Insurance 4.3 8. IPSCO, Inc. (Canada) 1.6
Telecommunications Services 0.7% 9. Sherwin-Williams Co. (The) 1.5
Money Market Funds and 10. Yum! Brands, Inc. 1.5
Other Assets Less Liabilities 2.3% TOTAL NET ASSETS $352.7 MILLION
Financials 23.1%
TOTAL NUMBER OF HOLDINGS* 171
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.
======================================== ======================================== ========================================
3
AIM SELECT EQUITY FUND
interest rates and inflation pressures. computer and server markets. This loss THE VIEWS AND OPINIONS EXPRESSED IN
During the reporting period, the U.S. of market share contributed to a MANAGEMENT'S DISCUSSION OF FUND
Federal Reserve Board (the Fed) continued reduction in revenue and a decline in PERFORMANCE ARE THOSE OF A I M ADVISORS,
its tightening policy, raising the key gross profit margins which had investors INC. THESE VIEWS AND OPINIONS ARE
federal funds target rate to 5.25% as questioning the firm's future prospects. SUBJECT TO CHANGE AT ANY TIME BASED ON
Ben Bernanke settled into his new role FACTORS SUCH AS MARKET AND ECONOMIC
as Fed Chairman. The Fed continued to Health care was an overweight CONDITIONS. THESE VIEWS AND OPINIONS MAY
raise interest rates in part due to position in the portfolio during the NOT BE RELIED UPON AS INVESTMENT ADVICE
inflation concerns. The consumer price period and stock specific issues with OR RECOMMENDATIONS, OR AS AN OFFER FOR A
index rose 5.2% on a seasonally adjusted holdings such as UNITEDHEALTH GROUP PARTICULAR SECURITY. THE INFORMATION IS
annualized rate for the first five detracted from the Fund's performance. NOT A COMPLETE ANALYSIS OF EVERY ASPECT
months of 2006 compared to 3.4% for all During the period, the stock was OF ANY MARKET, COUNTRY, INDUSTRY,
of 2005. Home sales also showed signs of negatively affected by publicity SECURITY OR THE FUND. STATEMENTS OF FACT
weakening during the period due to the relating to investigations into the ARE FROM SOURCES CONSIDERED RELIABLE,
effects of higher interest rates. company's options granting practices as BUT A I M ADVISORS, INC. MAKES NO
well as an antitrust lawsuit filed by REPRESENTATION OR WARRANTY AS TO THEIR
Energy was one of the best performing Omnicare. However, company fundamentals COMPLETENESS OR ACCURACY. ALTHOUGH
sectors during the reporting period as remained strong and, in our opinion, its HISTORICAL PERFORMANCE IS NO GUARANTEE
global demand for fuel continued to be stock continued to be attractively OF FUTURE RESULTS, THESE INSIGHTS MAY
strong. Information technology was a valued. HELP YOU UNDERSTAND OUR INVESTMENT
positive contributor to Fund performance MANAGEMENT PHILOSOPHY.
relative to the style-specific index. At the end of the reporting period,
However, it was one of the worst the impact of market movements and See important Fund and index
performing market sectors during the allocation decisions resulted in the disclosures on the inside front cover.
reporting period. Some of the strong portfolio being primarily overweight in
performance witnessed in the fourth the health care and consumer
quarter of 2005 and early 2006 was discretionary sectors. During the DUY NGUYEN, Chartered
diminished over concerns of slowing reporting period, exposure to [NGUYEN Financial Analyst, is
personal computer sales and overall traditionally more defensive sectors PHOTO] lead manager of AIM
valuations of information technology such as materials and industrials was Select Equity Fund.
stocks. Small- and mid-cap stocks increased. The largest underweight Mr. Nguyen joined AIM
generally outperformed large-cap stocks exposures were utilities and information in 2000. Prior to joining AIM, he held
and value stocks generally performed technology. From a market capitalization the positions of vice president,
better than growth stocks across market perspective, the Fund increased its assistant vice president and
capitalizations. large-cap exposure while decreasing quantitative equity analyst for two
small- and mid-cap stock weightings. other financial services firms. Mr.
Holdings that benefited the Fund However, the Fund still was underweight Nguyen earned a B.B.A. at The University
included traditionally defensive stocks in large cap stocks versus the Russell of Texas and an M.S. in Finance from the
in the materials sector, RELIANCE STEEL 3000 Index. University of Houston.
& ALUMINUM and NUCOR. Both firms were
the beneficiaries of the commodities IN CLOSING DEREK S. IZUEL,
bull market as inflation pressures [IZUEL Chartered Financial
increased the prices of most natural We continually strive to provide a Fund PHOTO] Analyst and Portfolio
resources. During the period, Reliance that provides exposure to a variety of Manager, is manager of
Steel & Aluminum benefited from the investment styles and market AIM Select Equity
completion of strategic acquisitions and capitalizations as part of a core Fund. Mr. Izuel began his investment
earnings announcements above industry allocation within your overall career in 1997 as an equity analyst for
analysts' expectations. We subsequently portfolio. We remain committed to our another investment firm. He earned a
sold the stock. Nucor is engaged in the quantitative stock selection process and Bachelor of Arts degree in computer
manufacture and sale of steel and steel our focus on investing in high-quality science from the University of
products and raised earnings guidance companies regardless of economic or California-Berkeley and a Master of
during the period based on strong orders sector trends. Business Administration from the
and improving pricing capability. University of Michigan.
Thank you for investing in AIM Select
Strong security selection within the Equity Fund. Assisted by the Global Quantitative
information technology sector generally Strategies Team
helped Fund performance relative to its
style-specific index. However, the Fund
was negatively affected by holdings such
as INTEL, a key player in the [RIGHT ARROW GRAPHIC]
semiconductor industry. Intel has
suffered as a result of increased FOR A PRESENTATION OF YOUR FUND'S
competition and loss of market share in LONG-TERM PERFORMANCE, PLEASE SEE
the personal PAGE 5.
4
Appendix V
NOTE 14 -- FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------------------------------
2006 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 18.55 $ 17.65 $ 15.50 $ 11.97 $ 17.00 $ 22.88
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.00) (0.04)(a) (0.06)(a)(b) (0.09)(a) (0.06)(a) (0.08)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.40 0.94 2.21 3.62 (4.97) (5.79)
=================================================================================================================================
Total from investment
operations 0.40 0.90 2.15 3.53 (5.03) (5.87)
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- -- (0.01)
=================================================================================================================================
Net asset value, end of
period $ 18.95 $ 18.55 $ 17.65 $ 15.50 $ 11.97 $ 17.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 2.16% 5.10% 13.87% 29.49% (29.59)% (25.64)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $244,452 $259,946 $292,681 $288,976 $250,666 $396,779
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets 1.42%(d)(e) 1.39% 1.38%(e) 1.47% 1.32% 1.24%
=================================================================================================================================
Ratio of net investment
income (loss) to average
net assets (0.00)%(d) (0.21)% (0.40)%(b) (0.65)% (0.45)% (0.45)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 35% 91% 38% 69% 86% 117%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.08) and (0.51)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$258,060,258.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.43% (annualized) and 1.40% for the six months ended June 30, 2006
and the year ended December 31, 2004, respectively.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------------------------------
2006 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 16.46 $ 15.78 $ 13.96 $ 10.86 $ 15.54 $ 21.07
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.07) (0.15)(a) (0.17)(a)(b) (0.17)(a) (0.16)(a) (0.20)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.35 0.83 1.99 3.27 (4.52) (5.32)
=================================================================================================================================
Total from investment
operations 0.28 0.68 1.82 3.10 (4.68) (5.52)
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- -- (0.01)
=================================================================================================================================
Net asset value, end of period $ 16.74 $ 16.46 $ 15.78 $ 13.96 $ 10.86 $ 15.54
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.70% 4.31% 13.04% 28.55% (30.12)% (26.19)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $88,773 $106,097 $148,300 $198,148 $214,709 $432,002
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets 2.17%(d)(e) 2.14% 2.13%(e) 2.22% 2.07% 2.00%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.75)%(d) (0.96)% (1.15)%(b) (1.40)% (1.20)% (1.21)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 35% 91% 38% 69% 86% 117%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.19) and (1.26)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$100,572,409.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.18% (annualized) and 2.15% for the six months ended June 30, 2006
and the year ended December 31, 2004, respectively.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS C
--------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------
2006 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 16.43 $ 15.75 $ 13.94 $ 10.84 $ 15.52 $ 21.05
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.15)(a) (0.17)(a)(b) (0.17)(a) (0.16)(a) (0.20)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.36 0.83 1.98 3.27 (4.52) (5.32)
=================================================================================================================================
Total from investment
operations 0.29 0.68 1.81 3.10 (4.68) (5.52)
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- -- (0.01)
=================================================================================================================================
Net asset value, end of period $ 16.72 $ 16.43 $ 15.75 $ 13.94 $ 10.84 $ 15.52
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.76% 4.32% 12.98% 28.60% (30.15)% (26.21)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $19,484 $22,860 $29,710 $33,585 $32,558 $59,112
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 2.17%(d)(e) 2.14% 2.13%(e) 2.22% 2.07% 2.00%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.75)%(d) (0.96)% (1.15)%(b) (1.40)% (1.20)% (1.21)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 35% 91% 38% 69% 86% 117%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.19) and (1.26)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$21,832,111.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.18% (annualized) and 2.15% for the six months ended June 30, 2006
and the year ended December 31, 2004, respectively.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
AIM SELECT EQUITY FUND
A PORTFOLIO OF AIM FUNDS GROUP
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 959-4246
AIM OPPORTUNITIES II FUND
AND AIM OPPORTUNITIES III FUND
PORTFOLIOS OF AIM SPECIAL OPPORTUNITIES FUNDS
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 Opportunities II Fund and AIM Opportunities III 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 Opportunities II Fund and AIM Opportunities III 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 1 800-959-4246. 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 April 24, 2006, as
supplemented May 1, 2006, June 30, 2006, August 1, 2006, September 20, 2006 and
December 13, 2006 (the "Statement of Additional Information") for AIM Funds
Group (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 - Unaudited semiannual financial statements of the Fund
Appendix III - Pro forma financial statements of the Fund
S-2
THE TRUST
This Statement of Additional Information relates to AIM Funds Group
(the "Trust") and its investment portfolio, AIM Select Equity 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 audited financial statements of the Fund, and the report thereon by
PricewaterhouseCoopers LLP, are set forth under the heading "Financial
Statements" in the Trust's Statement of Additional Information attached hereto
as Appendix I.
The unaudited semiannual financial statements of the Fund are attached
hereto as Appendix II.
The pro forma financial statements of the Fund are attached hereto as
Appendix III.
S-4
APPENDIX I
RETAIL CLASSES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
Supplement dated December 13, 2006
to the Statement of Additional Information dated April 24, 2006,
as supplemented May 1, 2006, June 30, 2006, August 1, 2006,
September 20, 2006 and October 30, 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 pages 11 and 12
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 page 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
RETAIL CLASSES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
Supplement dated October 30, 2006 to
the Statement of Additional Information dated April 24, 2006
as supplemented May 1, 2006, June 30, 2006, August 1, 2006 and
September 20, 2006
Effective November 1, 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 MID CAP BASIC VALUE FUND" on page
H-2 of the Statement of Additional Information. The following table reflects
information as of December 31, 2005 (except as noted):
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS INVESTMENT VEHICLES OTHER ACCOUNTS
(ASSETS IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2)
DOLLAR RANGE OF -------------------- -------------------- -----------------------
INVESTMENTS IN EACH NUMBER OF NUMBER OF NUMBER OF
PORTFOLIO MANAGER FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ----------------- ------------------- --------- --------- --------- ------ --------- ------
AIM MID CAP BASIC VALUE FUND
R. Canon Coleman II* $10,001-$50,000 7 $ 9,746.7 1 $16.7 3137 $977.7
Michael Chapman(3) $100,001-$500,000 None None None None None None
Michael Simon** $100,001-$500,000 11 $11,030.4 1 $16.7 3137 $977.7
Bret Stanley** $500,001-$1,000,000 10 $18,831.0 1 $16.7 3137 $977.7
* As of October 20, 2006, the dollar range of investments for Mr. Coleman in
AIM Mid Cap Basic Value Fund is $500,001-$1,000,000.
** As of September 30, 2006, the dollar range of investments for Mr. Simon and
Mr. Stanley in AIM Mid Cap Basic Value Fund is $100,001-$500,000 and
$500,001-$1,000,000, respectively.
- ----------
(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) Mr. Chapman will begin serving as portfolio manager on AIM Mid Cap Basic
Value Fund on November 1, 2006. The information provided for Mr. Chapman is
as of September 30, 2006.
AIM FUNDS GROUP
RETAIL CLASSES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
Supplement dated September 20, 2006
to the Statement of Additional Information dated April 24, 2006,
as supplemented May 1, 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:
TRUSTEE
AND/OR
"NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- ------------------------------------------- --------------------
INTERESTED PERSONS
Philip A. Taylor* - 1954 2006 Director, Chief Executive Officer and President, None"
Trustee, President and A I M Management Group Inc., AIM Mutual Fund Dealer
Principal Executive Officer 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.; Trustee, President
and Principal Executive Officer, The AIM Family of
Funds(R) (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(R) (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(R) (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 Septmber 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 FUNDS GROUP
RETAIL CLASSES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
Supplement dated August 1, 2006
to the Statement of Additional Information dated April 24, 2006,
as supplemented May 1, 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:
TRUSTEE
AND/OR
"NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- ------------------------------------------- --------------------
INTERESTED PERSONS
Robert H. Graham(1) - 1946 1992 Director and Chairman, A I M Management Group Inc. None"
Trustee and Vice Chair (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(R)
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(R)
- ----------
(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
"OTHER OFFICERS
Philip A. Taylor(2) - 1954 2006 Director, Chief Executive Officer and President, None"
President and Principal A I M Management Group Inc., AIM Mutual Fund Dealer
Executive Officer 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(R)
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 FUNDS GROUP
RETAIL CLASS SHARES OF
AIM BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
Supplement dated June 30, 2006 to the
Statement of Additional Information dated April 24, 2006
as supplemented May 1, 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 39 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 BASIC BALANCED FUND
AIM EUROPEAN SMALL COMPANY FUND
AIM GLOBAL VALUE FUND
AIM INTERNATIONAL SMALL COMPANY FUND
AIM MID CAP BASIC VALUE FUND
AIM SELECT EQUITY FUND
AIM SMALL CAP EQUITY FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
Supplement dated May 1, 2006
to the Statement of Additional Information dated April 24, 2006
The following information replaces in its entirety the information appearing
under the heading "PORTFOLIO MANAGERS - PORTFOLIO MANAGER FUND HOLDINGS AND
INFORMATION ON OTHER MANAGED ACCOUNTS - AIM BASIC BALANCED FUND" on page H-1 of
the Statement of Additional Information:
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS INVESTMENT VEHICLES OTHER ACCOUNTS
(ASSETS IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2)
DOLLAR RANGE OF --------------------- -------------------- -----------------------
"PORTFOLIO INVESTMENTS IN NUMBER OF NUMBER OF NUMBER OF
MANAGER EACH FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
---------- --------------- --------- --------- --------- ------ --------- ------
AIM BASIC BALANCED FUND
R. Canon Coleman II $1-$10,000 7 $ 8,048.6 1 $ 16.7 3137 $977.7
Jan H. Friedli None 5 $ 1,276.2 2 $748.1 None None
Brendan D. Gau(3) $10,001-$50,000 None None None None None None
Scot W. Johnson $10,001-$50,000 8 $ 3,042.5 2 $748.1 None None
Matthew Seinsheimer $10,001-$50,000 7 $ 8,048.6 1 $ 16.7 3137 $977.7
Michael Simon None 11 $ 9,332.3 1 $ 16.7 3137 $977.7
Bret Stanley None 10 $17,132.9 1 $ 16.7 3137 $977.7
- ----------
(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) Mr. Gau began serving as portfolio manager on May 1, 2006. Ownership
information has been provided as of March 31, 2006."
STATEMENT OF
ADDITIONAL INFORMATION
AIM FUNDS GROUP
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 FUNDS GROUP 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 APRIL 24, 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 BASIC BALANCED FUND APRIL 24, 2006
AIM EUROPEAN SMALL COMPANY FUND APRIL 24, 2006
AIM GLOBAL VALUE FUND APRIL 24, 2006
AIM INTERNATIONAL SMALL COMPANY FUND APRIL 24, 2006
AIM MID CAP BASIC VALUE FUND APRIL 24, 2006
AIM SELECT EQUITY FUND APRIL 24, 2006
AIM SMALL CAP EQUITY FUND APRIL 24, 2006
AIM FUNDS GROUP
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
----
GENERAL INFORMATION ABOUT THE TRUST ..................................... 1
Fund History ......................................................... 1
Shares of Beneficial Interest ........................................ 1
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS ................ 3
Classification ....................................................... 3
Investment Strategies and Risks ...................................... 3
Equity Investments ................................................ 7
Foreign Investments ............................................... 7
Debt Investments .................................................. 9
Other Investments ................................................. 11
Investment Techniques ............................................. 12
Derivatives ....................................................... 18
Additional Securities or Investment Techniques .................... 24
Fund Policies ........................................................ 24
Temporary Defensive Positions ........................................ 27
Portfolio Turnover ................................................... 27
Policies and Procedures for Disclosure of Fund Holdings .............. 27
MANAGEMENT OF THE TRUST ................................................. 30
Board of Trustees .................................................... 30
Management Information ............................................... 30
Trustee Ownership of Fund Shares .................................. 33
Compensation ......................................................... 33
Retirement Plan For Trustees ...................................... 33
Deferred Compensation Agreements .................................. 34
Purchase of Class A Shares of the Funds at Net Asset Value ........ 34
Code of Ethics ....................................................... 34
Proxy Voting Policies ................................................ 34
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES ..................... 35
INVESTMENT ADVISORY AND OTHER SERVICES .................................. 35
Investment Advisor ................................................... 35
Expense Limitation ................................................... 37
Portfolio Managers ................................................ 38
Securities Lending Arrangements ................................... 38
Service Agreements ................................................... 38
Other Service Providers .............................................. 39
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
PURCHASE, REDEMPTION AND PRICING OF SHARES .............................. 44
Transactions through Financial Intermediaries ........................ 44
Purchase and Redemption of Shares .................................... 44
i
Offering Price ....................................................... 64
Redemptions In Kind .................................................. 65
Backup Withholding ................................................... 66
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS ................................ 67
Dividends and Distributions .......................................... 67
Tax Matters .......................................................... 67
DISTRIBUTION OF SECURITIES .............................................. 75
Distribution Plans ................................................... 75
Distributor .......................................................... 77
FINANCIAL STATEMENTS .................................................... 78
PENDING LITIGATION ...................................................... 79
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 Funds Group (the "Trust") is a Delaware statutory trust which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company. The Trust currently
consists of seven separate portfolios: AIM Basic Balanced Fund, AIM European
Small Company Fund, AIM Global Value Fund, AIM International Small Company Fund,
AIM Mid Cap Basic Value Fund, AIM Select Equity Fund and AIM Small Cap Equity
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 30, 1984 as a Massachusetts
business trust. The Trust reorganized as a Delaware business trust on October
15, 1993. The following Funds were included in the reorganization: AIM Select
Equity Fund and AIM Premier Equity Fund. In addition, on October 15, 1993, AIM
Balanced Fund acquired all the assets and assumed all of the liabilities of AIM
Convertible Securities Fund, Inc., a Maryland corporation. All historical
financial and other information contained in this Statement of Additional
Information for periods prior to October 15, 1993 relating to these Funds (or a
class thereof) is that of the predecessor funds (or the corresponding class
thereof). Prior to July 13, 2001, AIM Select Equity Fund was known as AIM Select
Growth Fund and prior to May 1, 1998, such Fund was known as AIM Growth Fund.
Each of the other Funds commenced operations as a series of the Trust. Prior to
July 1, 2002, AIM Premier Equity Fund was known as AIM Value Fund. Prior to
April 30, 2003, AIM Global Value Fund was known as AIM Worldwide Spectrum Fund.
Prior to December 30, 2004, AIM International Small Company Fund was known as
AIM International Emerging Growth Fund. On July 18, 2005, AIM Basic Balanced
Fund acquired the assets of AIM Balanced Fund, and AIM Total Return Fund. On
April 10, 2006, AIM Charter Fund acquired the assets of AIM Premier Equity Fund.
SHARES OF BENEFICIAL INTEREST
Shares of beneficial interest of the Trust are redeemable at their net
asset value (subject, in certain circumstances, to a contingent deferred sales
charge 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 Basic Balanced Fund X X X X X X
AIM European Small Company Fund X X X
1
INSTITUTIONAL INVESTOR
FUND CLASS A CLASS B CLASS C CLASS R CLASS CLASS
---- ------- ------- ------- ------- ------------- --------
AIM Global Value Fund X X X X
AIM International Small Company Fund X X X X
AIM Mid Cap Basic Value Fund X X X X X
AIM Select Equity Fund X X X
AIM Small Cap Equity X X X X X
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 or subscription
rights, and are freely transferable. Other than the automatic conversion of
Class B shares to Class A shares, there are no conversion rights. Shares do not
have cumulative voting rights, which means that in situations in which
shareholders elect trustees, holders of more than 50% of the shares voting for
the election of trustees can elect all of the trustees of the Trust, and the
holders of less than 50% of the shares voting for the election of trustees will
not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations. There is a remote possibility; however, that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. The Trust
2
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the trustees
to all parties, and each party thereto must expressly waive all rights of action
directly against shareholders of the Trust. The Trust Agreement provides for
indemnification out of the property of a Fund for all losses and expenses of any
shareholder of such Fund held liable on account of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial loss due to
shareholder liability is limited to circumstances in which a Fund is unable to
meet its obligations and the complaining party is not held to be bound by the
disclaimer.
The trustees and officers of the Trust will not be liable for any act,
omission or obligation of the Trust or any trustee or officer; however, a
trustee or officer is not protected against any liability to the Trust or to the
shareholders to which a trustee or officer would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his or her office with the Trust
("Disabling Conduct"). The Trust's Bylaws generally provide for indemnification
by the Trust of the trustees, the officers and employee's 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 settlements 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 European Small Company Fund and AIM International Small Company
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(R). The
table has been marked to indicate those securities and investment techniques
that AIM may use to manage a Fund. A Fund may not use all of these techniques at
any one time. A Fund's transactions in a particular security or use of a
particular technique is subject to limitations imposed by a Fund's investment
objective, policies and restrictions described in that Fund's Prospectus and/or
this Statement of Additional Information, as well as federal securities laws.
The Funds' investment objectives, policies, strategies and practices are
non-fundamental unless otherwise indicated. A more detailed description of the
securities and investment techniques, as well as the risks associated with those
securities and investment techniques that the Funds utilize, follows the table.
The descriptions of the securities and investment techniques in this section
supplement the discussion of principal investment strategies contained in each
Fund's Prospectus; where a particular type of security or investment technique
is not discussed in a Fund's Prospectus, that security or investment technique
is not a principal investment strategy.
3
AIM FUNDS GROUP
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
-------------------------------------------------------------------------------------
AIM
AIM EUROPEAN AIM AIM
BASIC SMALL GLOBAL INTERNATIONAL AIM MID CAP AIM SMALL
SECURITY/ BALANCED COMPANY VALUE SMALL COMPANY BASIC VALUE AIM SELECT CAP EQUITY
INVESTMENT TECHNIQUE FUND FUND FUND FUND FUND EQUITY FUND FUND
- -------------------- -------- -------- ------ ------------- ----------- ----------- ----------
EQUITY INVESTMENTS
Common Stock X X X X X X X
Preferred Stock X X X X X X X
Convertible Securities X X X X X X X
Alternative
Entity Securities X X X X X X X
FOREIGN INVESTMENTS
Foreign Securities X X X X X X X
Foreign Government
Obligations X X X X X X X
Foreign Exchange
Transactions X X X X X X X
DEBT INVESTMENTS
U.S. Government
Obligations X X X X X X X
Mortgage-Backed and
Asset-Backed
Securities X
Collateralized
Mortgage Obligations
Investment Grade
Corporate Debt
Obligations X X X X X X X
Junk Bonds X
Liquid Assets X X X X X X X
OTHER INVESTMENTS
REITs X X X X X X X
Other Investment
Companies X X X X X X X
Defaulted Securities
Municipal Forward
Contracts
Variable or Floating
Rate Instruments
4
AIM FUNDS GROUP
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
-------------------------------------------------------------------------------------
AIM
AIM EUROPEAN AIM AIM
BASIC SMALL GLOBAL INTERNATIONAL AIM MID CAP AIM SMALL
SECURITY/ BALANCED COMPANY VALUE SMALL COMPANY BASIC VALUE AIM SELECT CAP EQUITY
INVESTMENT TECHNIQUE FUND FUND FUND FUND FUND EQUITY FUND FUND
- -------------------- -------- -------- ------ ------------- ----------- ----------- ----------
Indexed Securities
Zero-Coupon and
Pay-in-Kind Securities
Synthetic Municipal
Instruments
INVESTMENT TECHNIQUES
Delayed Delivery
Transactions X X X X X X X
When-Issued Securities X X X X X X X
Short Sales X X X X X X X
Margin Transactions
Swap Agreements X X X X X X X
Interfund Loans X X X X X X X
Borrowing X X X X X X X
Lending Portfolio
Securities X X X X X X X
Repurchase Agreements X X X X X X X
Reverse Repurchase
Agreements X X X X X X X
Dollar Rolls X
Illiquid Securities X X X X X X X
Rule 144A Securities X X X X X X X
Unseasoned Issuers X X X X X X X
Portfolio Transactions
Sale of Money Market
Securities
Standby Commitments
DERIVATIVES
Equity-Linked
Derivatives X X X X X X X
Put Options X X X X X X X
5
AIM FUNDS GROUP
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
-------------------------------------------------------------------------------------
AIM
AIM EUROPEAN AIM AIM
BASIC SMALL GLOBAL INTERNATIONAL AIM MID CAP AIM SMALL
SECURITY/ BALANCED COMPANY VALUE SMALL COMPANY BASIC VALUE AIM SELECT CAP EQUITY
INVESTMENT TECHNIQUE FUND FUND FUND FUND FUND EQUITY FUND FUND
- -------------------- -------- -------- ------ ------------- ----------- ----------- ----------
Call Options X X X X X X X
Straddles X X X X X X X
Warrants X X X X X X X
Futures Contracts and
Options on Futures
Contracts X X X X X X X
Forward Currency
Contracts X X X X X X X
Cover X X X X X X X
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Investments in
Entities with
Relationships with
the Funds/Advisor X X X X X X X
6
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 a Fund.
The Funds will invest in a convertible debt security based primarily on the
characteristics of the equity security into which it converts, and without
regard to the credit rating of the convertible security (even if the credit
rating is below investment grade). To the extent that a Fund invests in
convertible debt securities with credit ratings below investment grade, such
securities may have a higher likelihood of default, although this may be
somewhat offset by the convertibility feature.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited
partnerships, limited liability companies, business trusts or other
non-corporate entities may issue equity securities that are similar to common or
preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities issued
by issuers outside the United States, and include securities in the form of
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or
other securities representing underlying securities of foreign issuers.
Depositary Receipts are typically issued by a bank or trust company and evidence
ownership of underlying securities issued by foreign corporations.
Each Fund may invest up to 25% of its total assets (at least 80% of total
assets for AIM International Small Company Fund, at least 80% of net assets for
AIM European Small Company Fund and up to 80% of total assets for AIM Global
Value Fund) in foreign securities.
7
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 European Small Company Fund and AIM
International Small Company Fund may each invest up to 35%, AIM Global Value
Fund may invest up to 20%, and AIM Basic Balanced Fund, AIM Mid Cap Basic Value
Fund, AIM Select Equity Fund and AIM Small Cap Equity Fund may each invest up to
5% of their total assets in securities of companies located in developing
countries. Developing countries are those countries which are not included in
the MSCI World Index. The Funds consider various factors when determining
whether a company is in a developing country, including whether (1) it is
organized under the laws of a developing country; (2) it has a principal office
in a developing country; (3) it derives 50% or more of its total revenues from
business in a developing country; or (4) its securities are traded principally
on a stock exchange, or in an over-the-counter market, in a developing country.
Investments in developing countries present risks greater than, and in addition
to, those presented by investments in foreign issuers in general. A number of
developing countries restrict, to varying degrees, foreign investment in stocks.
Repatriation of investment income, capital, and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. A number of the currencies of developing countries have
experienced significant declines against the U.S. dollar in recent years, and
devaluation may occur subsequent to investments in these currencies by a Fund.
Inflation and rapid fluctuations in inflation rates have had and may continue to
have negative effects on the economies and securities markets of certain
emerging market countries. Many of the developing securities markets are
relatively small or less diverse, have low trading volumes, suffer periods of
relative illiquidity, and are characterized by significant price volatility.
There is a risk in developing countries that a future economic or political
crisis could lead to price controls, forced mergers of companies, expropriation
or confiscatory taxation, seizure, nationalization, or creation of government
monopolies, any of which may have a detrimental effect on a Fund's investments.
8
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign
governments are often, but not always, supported by the full faith and credit of
the foreign governments, or their subdivisions, agencies or instrumentalities,
that issue them. These securities involve the risks discussed above with respect
to foreign securities. Additionally, the issuer of the debt or the governmental
authorities that control repayment of the debt may be unwilling or unable to pay
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 governments of developing countries. Foreign government
obligations of developing countries, and some structures of emerging market debt
securities, both of which are generally below investment grade, are sometimes
referred to as "Brady Bonds".
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct
purchases of futures contracts with respect to foreign currency, and contractual
agreements to purchase or sell a specified currency at a specified future date
(up to one year) at a price set at the time of the contract. Such contractual
commitments may be forward contracts entered into directly with another party or
exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies of
the different countries in which it will invest as a hedge against possible
variations in the foreign exchange rates between those currencies. A Fund may
commit the same percentage of its assets to foreign exchange hedges as it can
invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging")
or portfolio positions ("position hedging") to hedge foreign currency exposure
through foreign exchange transactions. Transaction hedging is the purchase or
sale of foreign currency with respect to specific receivables or payables of a
Fund accruing in connection with the purchase or sale of its portfolio
securities, the sale and redemption of shares of the Fund, or the payment of
dividends and distributions by the Fund. Position hedging is the purchase or
sale of foreign currency with respect to portfolio security positions (or
underlying portfolio security positions, such as in an ADR) denominated or
quoted in a foreign currency. Additionally, foreign exchange transactions may
involve some of the risks of investments in foreign securities.
Debt Investments
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities include bills, notes and bonds
issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S.
Treasury obligations representing future interest or principal payments on U.S.
Treasury notes or bonds. Stripped securities are sold at a discount to their
"face value," and may exhibit greater price volatility than interest-bearing
securities since investors receive no payment until maturity. Obligations of
certain agencies and instrumentalities of the U.S. Government, such as the
Government National Mortgage Association ("GNMA"), are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the Federal
National Mortgage Association ("FNMA"), are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the 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
investments from the U.S. Government.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES - Mortgage-backed securities
are mortgage-related securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, or issued by nongovernment entities.
Mortgage-related securities represent pools of mortgage loans
9
assembled for sale to investors by various government agencies such as GNMA and
government-related organizations such as FNMA and the Federal Home Loan Mortgage
Corporation ("FHLMC"), as well as by nongovernment issuers such as commercial
banks, savings and loan institutions, mortgage bankers and private mortgage
insurance companies. Although certain mortgage-related securities are guaranteed
by a third party or otherwise similarly secured, the market value of the
security, which may fluctuate, is not so secured.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities they issue. Mortgage-related securities issued by GNMA
include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes")
which are guaranteed as to the timely payment of principal and interest. That
guarantee is backed by the full faith and credit of the U.S. Treasury. GNMA is a
corporation wholly owned by the U.S. Government within the Department of Housing
and Urban Development. Mortgage-related securities issued by FNMA include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") and
are guaranteed as to payment of principal and interest by FNMA itself and backed
by a line of credit with the U.S. Treasury. FNMA is a government-sponsored
entity wholly owned by public stockholders. Mortgage-related securities issued
by FHLMC include FHLMC Mortgage Participation Certificates (also known as
"Freddie Macs") guaranteed as to payment of principal and interest by FHLMC
itself and backed by a line of credit with the U.S. Treasury. FHLMC is a
government-sponsored entity wholly owned by public stockholders.
Other asset-backed securities are structured like mortgage-backed
securities, but instead of mortgage loans or interests in mortgage loans, the
underlying assets may include such items as motor vehicle installment sales or
installment loan contracts, leases of various types of real and personal
property, and receivables from credit card agreements. Regular payments received
in respect of such securities include both interest and principal. Asset-backed
securities typically have no U.S. Government backing. Additionally, the ability
of an issuer of asset-backed securities to enforce its security interest in the
underlying assets may be limited.
If a Fund purchases a mortgage-backed or other asset-backed security at a
premium, that portion may be lost if there is a decline in the market value of
the security whether resulting from changes in interest rates or prepayments in
the underlying collateral. As with other interest-bearing securities, the prices
of such securities are inversely affected by changes in interest rates. However,
though the value of a mortgage-backed or other asset-backed security may decline
when interest rates rise, the converse is not necessarily true, since in periods
of declining interest rates the mortgages and loans underlying the securities
are prone to prepayment, thereby shortening the average life of the security and
shortening the period of time over which income at the higher rate is received.
When interest rates are rising, though, the rate of prepayment tends to
decrease, thereby lengthening the period of time over which income at the lower
rate is received. For these and other reasons, a mortgage-backed or other
asset-backed security's average maturity may be shortened or lengthened as a
result of interest rate fluctuations and, therefore, it is not possible to
predict accurately the security's return.
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S.
dollar-denominated debt obligations issued or guaranteed by U.S. corporations or
U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers
and debt obligations of foreign issuers denominated in foreign currencies. Such
debt obligations include, among others, bonds, notes, debentures and variable
rate demand notes. In choosing corporate debt securities on behalf of a Fund,
its investment adviser may consider (i) general economic and financial
conditions; (ii) the specific issuer's (a) business and management, (b) cash
flow, (c) earnings coverage of interest and dividends, (d) ability to operate
under adverse economic conditions, (e) fair market value of assets, and (f) in
the case of foreign issuers, unique political, economic or social conditions
applicable to such issuer's country; and, (iii) other considerations deemed
appropriate.
Description of debt securities ratings are found in Appendix A.
10
JUNK BONDS. AIM Global Value Fund may invest up to 5% of its assets 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.
LIQUID ASSETS. Cash equivalents include money market instruments (such as
certificates of deposit, time deposits, bankers' acceptances from U.S. or
foreign banks, and repurchase agreements), shares of affiliated money market
funds or high-quality debt obligations (such as U.S. Government obligations,
commercial paper, master notes and other short-term corporate instruments, and
municipal obligations).
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITS"). REITs are trusts that sell equity
or debt securities to investors and use the proceeds to invest in real estate or
interests therein. A REIT may focus on particular projects, such as apartment
complexes, or geographic regions, such as the southeastern United States, or
both.
To the extent consistent with their respective investment objectives and
policies, each Fund may invest up to 15% of its total assets in equity and/or
debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the Fund
could conceivably own real estate directly as a result of a default on the
securities it owns. A Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic conditions, adverse changes in the climate
for real estate, environmental liability risks, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
limitations on rents, changes in neighborhood values, the appeal of properties
to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by
any changes in the value of the underlying property owned by the trusts, while
mortgage REITs may be affected by the quality of any credit extended. Equity and
mortgage REITs are dependent upon management skill, are not diversified, and are
therefore subject to the risk of financing single or a limited number of
projects. Such trusts are also subject to heavy cash flow dependency, defaults
by borrowers, self-liquidation, and the possibility of failing to maintain an
exemption from the 1940 Act. Changes in interest rates may also affect the value
of debt securities held by a Fund. By investing in REITs indirectly through a
Fund, a shareholder will bear not only his/her proportionate share of the
expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of
another investment company, including Affiliated Money Market Funds (defined
below), the Fund will indirectly bear its proportionate share of the advisory
fees and other operating expenses of such investment company. The Funds have
obtained an exemptive order from the SEC allowing them to invest in money
11
market funds that have AIM or an affiliate of AIM as an investment advisor (the
"Affiliated Money Market Funds"), provided that investments in Affiliated Money
Market Funds do not exceed 25% of the total assets of the investing Fund.
The following restrictions apply to investments in other investment
companies other than Affiliated Money Market Funds: (i) a Fund may not purchase
more than 3% of the total outstanding voting stock of another investment
company; (ii) a Fund may not invest more than 5% of its total assets in
securities issued by another investment company; and (iii) a Fund may not invest
more than 10% of its total assets in securities issued by other investment
companies.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also referred
to as forward commitments, involve commitments by a Fund to dealers or issuers
to acquire or sell securities at a specified future date beyond the customary
settlement for such securities. These commitments may fix the payment price and
interest rate to be received or paid on the investment. A Fund may purchase
securities on a delayed delivery basis to the extent it can anticipate having
available cash on settlement date. Delayed delivery agreements will not be used
as a speculative or leverage technique.
Investment in securities on a delayed delivery basis may increase a Fund's
exposure to market fluctuation and may increase the possibility that the Fund
will incur short-term gains subject to federal taxation or short-term losses if
the Fund must engage in portfolio transactions in order to honor a delayed
delivery commitment. Until the settlement date, a Fund will segregate liquid
assets of a dollar value sufficient at all times to make payment for the delayed
delivery transactions. Such segregated liquid assets will be marked-to-market
daily, and the amount segregated will be increased if necessary to maintain
adequate coverage of the delayed delivery commitments. No additional delayed
delivery agreements or when-issued commitments (as described below) will be made
by a Fund if, as a result, more than 25% of the Fund's total assets would become
so committed.
The delayed delivery securities, which will not begin to accrue interest or
dividends until the settlement date, will be recorded as an asset of a Fund and
will be subject to the risk of market fluctuation. The purchase price of the
delayed delivery securities is a liability of a Fund until settlement. Absent
extraordinary circumstances, a Fund will not sell or otherwise transfer the
delayed delivery basis securities prior to settlement.
A Fund may enter into buy/sell back transactions (a form of delayed
delivery agreement). In a buy/sell back transaction, a Fund enters a trade to
sell securities at one price and simultaneously enters a trade to buy the same
securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis
means that the date for delivery of and payment for the securities is not fixed
at the date of purchase, but is set after the securities are issued. The payment
obligation and, if applicable, the interest rate that will be received on the
securities are fixed at the time the buyer enters into the commitment. A Fund
will only make commitments to purchase such securities with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in a
Fund's portfolio are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and, if applicable, changes in
the level of interest rates. Therefore, if a Fund is to remain substantially
fully invested at the same time that it has purchased securities on a
when-issued basis, there will be a possibility that the market value of the
Fund's assets will fluctuate to a greater degree. Furthermore, when the time
comes for the Fund to meet its obligations under when-issued commitments, the
Fund will do so by using then available cash flow, by sale of the segregated
liquid assets, by sale of other securities or, although it would not normally
expect to do so, by directing the sale of the when-issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation).
12
Investment in securities on a when-issued basis may increase a Fund's
exposure to market fluctuation and may increase the possibility that the Fund
will incur short-term gains subject to federal taxation or short-term losses if
the Fund must sell another security in order to honor a when-issued commitment.
If a Fund purchases a when-issued security, the Fund's 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. Each Fund may engage in 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, a Fund will segregate with its
custodian an equal amount of the securities sold short or securities convertible
into or exchangeable for such securities. A Fund will not sell a security short
against the box, 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.
A Fund will make a short sale, as a hedge, when it believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund or a security convertible into or exchangeable for such security, or
when the Fund does not want to sell the security it owns, because it wishes to
defer recognition of gain or loss for federal income tax purposes. In such case,
any future losses in a Fund's long position should be reduced by a gain in the
short position. Conversely, any gain in the long position should be reduced by a
loss in the short position. The extent to which such gains or losses are reduced
will depend upon the amount of the security sold short relative to the amount a
Fund owns, either directly or indirectly, and, in the case where the Fund owns
convertible securities, changes in the conversion premium. In determining the
number of shares to be sold short against a Fund's position in a convertible
security, the anticipated fluctuation in the conversion premium is considered.
Short sales against the box may be subject to special tax treatment as
"constructive sales" and require a 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."
AIM Global Value Fund is permitted and intends from time to time to effect
short sales that are not "against the box." In a short sale that is not "against
the box", AIM Global Value Fund does not own the security borrowed. To secure
its obligation to deliver to such broker-dealer the securities sold short, AIM
Global Value Fund must segregate an amount of cash or liquid securities equal to
the difference between the current market value of the securities sold short and
any cash or liquid securities deposited as collateral with the broker in
connection with the short sale (including the proceeds of the short sale). As a
result of these requirements, AIM Global Value Fund will not gain any leverage
merely by selling short, except to the extent that it earns interest on the
immobilized cash or liquid securities.
The amounts deposited with the broker or segregated, as described above, do
not have the effect of limiting the amount of money that the Funds may lose on a
short sale. In a short sale that is not "against the box", AIM Global Value Fund
will normally close out a short position by purchasing on the open market and
delivering to the broker-dealer an equal amount of the securities sold short.
In a short sale that is not "against the box", AIM Global Value Fund will
realize a gain if the price of a security declines between the date of the short
sale and the date on which the Fund replaces the borrowed security. On the other
hand, the Fund will incur a loss if the price of the security increases between
those dates. The amount of any gain will be decreased and the amount of any loss
increased by any premium or interest that the Fund may be required to pay in
connection with a short sale. It should be noted that possible losses from short
sales that are not "against the box" differ from those that could
13
arise from a cash investment in a security in that losses from short sales that
are not "against the box" may be limitless, while the losses from a cash
investment in a security cannot exceed the total amount of the Fund's investment
in the security. For example, if the Fund purchases a $10 security, potential
loss is limited to $10; however, if the Fund sells a $10 security short, it may
have to purchase the security for return to the broker-dealer when the market
value of that security is $50, thereby incurring a loss of $40.
In addition to enabling the Funds to hedge against market risk, short sales
may afford the Funds an opportunity to earn additional current income to the
extent the Funds are able to enter into arrangements with broker-dealers through
which the short sales are executed to receive income with respect to the
proceeds of the short sales during the period the Funds' short positions remain
open. There is no assurance that the Funds will be able to enter into such
arrangements.
MARGIN TRANSACTIONS. None of the Funds will purchase any security on
margin, except that each Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of portfolio securities. The
payment by a Fund of initial or variation margin in connection with futures or
related options transactions will not be considered the purchase of a security
on margin.
SWAP AGREEMENTS. Each Fund may enter into interest rate, index and currency
exchange rate swap agreements for purposes of attempting to obtain a particular
desired return at a lower cost to the Fund than if it had invested directly in
an instrument that yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods ranging
from a few weeks to more than one year. In a standard "swap" transaction, two
parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments. The
gross returns to be exchanged or "swapped" between the parties are calculated
with respect to a "notional amount," i.e., the return on or increase in value of
a particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index. Commonly used swap agreements include: (i) interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates exceed a specified rate, or "cap"; (ii)
interest rate floors, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified level, or "floor"; and (iii) interest rate collars, under which a
party sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels.
The "notional amount" of the swap agreement is only a fictitious basis on
which to calculate the obligations that the parties to a swap agreement have
agreed to exchange. 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 obligations or rights will be the
net amount owned 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.
CREDIT DEFAULT SWAPS. AIM Basic Balanced Fund may enter into Credit Default
Swaps ("CDS"). A CDS is an agreement between two parties pursuant to which one
party agrees to make one or more payments to the other, while the other party
would assume the risk of a referenced debt obligation in the event of default.
CDS may be direct ("unfunded swaps") or indirect in the form of a structured
note ("funded swaps"). Unfunded and funded credit default swaps may be on a
single security or on a basket of securities. AIM Basic Balanced Fund may buy a
CDS ("buy credit protection") in which it pays a fixed payment over the life of
the swap in exchange for a counterparty taking on the risk of default of a
referenced debt obligation ("Reference Entity"). Alternatively, AIM Basic
Balanced Fund may sell a CDS ("sell protection") in which it will receive a
fixed payment in exchange for taking on the credit risk of the Reference Entity.
An investment in a CDS may cause the portfolio performance to be more or less
volatile.
14
CDS agreements are typically individually negotiated and structured. CDS
agreements may be entered into for investment or hedging purposes. AIM Basic
Balanced Fund may enter into CDS to create direct or synthetic long or short
exposure to domestic or foreign corporate debt securities or sovereign debt
securities
As a buyer of a CDS, AIM Basic Balanced Fund would pay a fixed spread over
the life of the agreement to the seller of the CDS. If an event of default
occurs, the fixed payment stream would cease, AIM Basic Balanced Fund would
deliver defaulted bonds to the seller and the seller would pay the full notional
value, or the "par value", of the reference obligation to AIM Basic Balanced
Fund. AIM Basic Balanced Fund may already own the reference bonds or may
purchase a deliverable bond in the market. Alternatively, the two counterparties
may agree to cash settlement. If no event of default occurs, AIM Basic Balanced
Fund pays the fixed stream of cash flows to the seller, and no other exchange
occurs.
As a seller of CDS, AIM Basic Balanced Fund would receive a fixed payment
stream. If an event of default occurs, the fixed payment stream stops, AIM Basic
Balanced Fund would pay the buyer par, and, in return, AIM Basic Balanced Fund
would receive deliverable bonds. Alternatively, if cash settlement is elected,
AIM Basic Balanced Fund would pay the buyer par less the market value of the
referenced bonds. If no event of default occurs, AIM Basic Balanced Fund
receives the cash flow payment over the life of the agreement.
Risks of CDS include the risk that a counterparty may default on amounts
owed to AIM Basic Balanced Fund, basis risk (risk that the price of a derivative
used to hedge or reflect an underlying bond behaves differently than the price
of that bond), liquidity risk and market risk.
Credit Derivatives may create covered or uncovered exposure to AIM Basic
Balanced Fund. AIM Basic Balanced Fund generally will employ a strategy of
setting aside liquid assets to cover any potential obligation. This strategy
would be employed to avoid multiplying AIM Basic Balanced Fund's economic
exposure and would limit risks of leveraging. For example, AIM Basic Balanced
Fund may sell protection on a Reference Entity bearing the risk of delivering
par to the counterparty. AIM Basic Balanced Fund would set aside liquid assets,
marked to the market daily, to cover this potential obligation.
CDS agreements are generally governed by a single master agreement for each
counterparty, and the agreements allow for netting of counterparties'
obligations on specific transactions. AIM Basic Balanced Fund's obligation or
rights will be the net amount owed to or by the counterparty. AIM Basic Balanced
Fund's current obligations under a swap agreement will be accrued daily (on a
net basis), and AIM Basic Balanced Fund will maintain liquid assets in an amount
equal to amounts owed to a swap counterparty less the value of any collateral
posted. AIM Basic Balanced Fund will not enter into a transaction with any
single counterparty if the net amount owed or to be received under existing
transactions under swap agreements with that counterparty would exceed 5% of AIM
Basic Balanced Fund's net assets determined on the date the CDS is entered into.
CDS Options. AIM Basic Balanced Fund may additionally enter into CDS option
transactions which grant the holder the right, but not the obligation, to enter
into a credit default swap at a specified future date and under specified terms
in exchange for a purchase price ("premium"). The writer of the option bears the
risk of any unfavorable move in the value of the CDS relative to the market
value on the exercise date, while the purchaser may allow the option to expire
unexercised.
For a discussion of the tax considerations relating to swap agreements, See
"Dividends, Distributions and Tax Matters - Swap Agreements."
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
15
Funds. The ability of a Fund to lend its securities to other AIM Funds is
subject to certain other terms and conditions.
BORROWING. Each Fund may borrow money to a limited extent for temporary or
emergency purposes. If there are unusually heavy redemptions because of changes
in interest rates or for any other reason, a Fund may have to sell a portion of
its investment portfolio at a time when it may be disadvantageous to do so.
Selling fund securities under these circumstances may result in a lower net
asset value per share or decreased dividend income, or both. The Trust believes
that, in the event of abnormally heavy redemption requests, a Fund's borrowing
ability would help to mitigate any such effects and could make the forced sale
of their portfolio securities less likely.
LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio
securities (principally to broker-dealers) where such loans are callable at any
time and are continuously secured by segregated collateral equal to no less than
the market value, determined daily, of the loaned securities. Such collateral
will be cash, letters of credit, or debt securities issued or guaranteed by the
U.S. Government or any of its agencies. Each Fund may lend portfolio securities
to the extent of one-third of its total assets.
A Fund will not have the right to vote securities while they are being
lent, but it can call a loan in anticipation of an important vote. The Fund
would receive income in lieu of dividends on loaned securities and would, at the
same time, earn interest on the loan collateral or on the investment of any cash
collateral. Lending securities entails a risk of loss to the Fund if and to the
extent that the market value of the loaned securities increases and the
collateral is not increased accordingly, or in the event of a default by the
borrower. The Fund could also experience delays and costs in gaining access to
the collateral.
Any cash received as collateral for loaned securities will be invested, in
accordance with a Fund's investment guidelines, in short-term money market
instruments or Affiliated Money Market Funds. For purposes of determining
whether a Fund is complying with its investment policies, strategies and
restrictions, the Fund will consider the loaned securities as assets of the
Fund, but will not consider any collateral received as a Fund asset.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a
Fund acquires ownership of a security from a broker-dealer or bank that agrees
to repurchase the security at a mutually agreed upon time and price (which is
higher than the purchase price), thereby determining the yield during 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
16
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, the
Fund will not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale will be invested in short-term
instruments, and the income from these investments, together with any additional
fee income received on the sale, could generate income for a Fund exceeding the
yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities under a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of
the securities may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the Fund's obligation to repurchase
the securities. At the time the Fund enters into a dollar roll, it will
segregate liquid assets having a dollar value equal to the repurchase price, and
will monitor the account to ensure that such equivalent value is maintained. The
Funds typically enters into dollar roll transactions to enhance their return
either on an income or total return basis or to manage pre-payment risk. Dollar
rolls are considered borrowings by a Fund under the 1940 Act.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
disposed of within seven days in the normal course of business at the price at
which they are valued. Illiquid securities may include securities that are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in
certain circumstances, be resold pursuant to Rule 144A under the 1933 Act, and
thus may or may not constitute illiquid securities.
Each Fund may invest up to 15% of its net assets in securities that are
illiquid. Limitations on the resale of restricted securities may have an adverse
effect on their marketability, which may prevent a Fund from disposing of them
promptly at reasonable prices. A Fund may have to bear the expense of
registering such securities for resale, and the risk of substantial delays in
effecting such registrations.
RULE 144A SECURITIES. Rule 144A securities are securities which, while
privately placed, are eligible for purchase and resale pursuant to Rule 144A
under the 1933 Act. This Rule permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Board, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the Funds' restriction on investment in illiquid
securities. Determination of whether a Rule 144A security is liquid or not is a
question of fact. In making this determination AIM will consider the trading
markets for the specific security taking into account the unregistered nature of
a Rule 144A security. In addition, AIM could consider the (i) frequency of
trades and quotes, (ii) number of dealers and potential purchasers, (iii) dealer
undertakings to make a market, and (iv) nature of the security and of market
place trades (for example, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). AIM will also
monitor the liquidity of Rule 144A securities and, if as a result of changed
17
conditions, AIM determines that a Rule 144A security is no longer liquid, AIM
will review a Fund's holdings of illiquid securities to determine what, if any,
action is required to assure that such Fund complies with its restriction on
investment in illiquid securities. Investing in Rule 144A securities could
increase the amount of each Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
UNSEASONED ISSUERS. Investments in the equity securities of companies
having less than three years' continuous operations (including operations of any
predecessor) involve more risk than investments in the securities of more
established companies because unseasoned issuers have only a brief operating
history and may have more limited markets and financial resources. As a result,
securities of unseasoned issuers tend to be more volatile than securities of
more established companies.
Derivatives
The Funds may each invest in forward currency contracts, futures contracts,
options on securities, options on indices, options on currencies, and options on
futures contracts to attempt to hedge against the overall level of investment
and currency risk normally associated with each Fund's investments. The Funds
may also invest in equity-linked derivative products designed to replicate the
composition and performance of particular indices. These instruments are often
referred to as "derivatives," which may be defined as financial instruments
whose performance is derived, at least in part, from the performance of another
asset (such as a security, currency or an index of securities).
EQUITY-LINKED DERIVATIVES. Equity-Linked Derivatives are interests in a
securities portfolio designed to replicate the composition and performance of a
particular index. Equity-Linked Derivatives are exchange traded. The performance
results of Equity-Linked Derivatives will not replicate exactly the performance
of the pertinent index due to transaction and other expenses, including fees to
service providers, borne by the Equity-Linked Derivatives. Examples of such
products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial
Average Instruments ("DIAMONDS") and Optimised Portfolios As Listed Securities
("OPALS"). Investments in Equity-Linked Derivatives involve the same risks
associated with a direct investment in the types of securities included in the
indices such products are designed to track. There can be no assurance that the
trading price of the Equity-Linked Derivatives will equal the underlying value
of the basket of securities purchased to replicate a particular index or that
such basket will replicate the index. Investments in Equity-Linked Derivatives
may constitute investments in other investment companies and, therefore, a Fund
may be subject to the same investment restrictions with Equity-Linked
Derivatives as with other investment companies. See "Other Investment
Companies."
PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy
the underlying security, contract or foreign currency at the stated exercise
price at any time prior to the expiration of the option (or on a specified date
if the option is a European style option), regardless of the market price or
exchange rate of the security, contract or foreign currency, as the case may be
at the time of exercise. If the purchaser exercises the call option, the writer
of a call option is obligated to sell the underlying security, contract or
foreign currency. A put option gives the purchaser the right to sell the
underlying security, contract or foreign currency at the stated exercise price
at any time prior to the expiration date of the option (or on a specified date
if the option is a European style option), regardless of the market price or
exchange rate of the security, contract or foreign currency, as the case may be
at the time of exercise. If the purchaser exercises the put option, the writer
of a put option is obligated to buy the underlying security, contract or foreign
currency. The premium paid to the writer is consideration for undertaking the
obligations under the option contract. Until an option expires or is offset, the
option is said to be "open." When an option expires or is offset, the option is
said to be "closed."
A Fund will not write (sell) options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
the time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
18
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 or
any further consideration, for securities of the same issue as, and equal in
amount to, the securities subject to the call option. In return for the premium
received for writing a call option, the Fund foregoes the opportunity for profit
from a price increase in the underlying security, contract, or foreign currency
above the exercise price so long as the option remains open, but retains the
risk of loss should the price of the security, contract, or foreign currency
decline.
A Fund may write a put option without owning the underlying security if it
covers the option as described below in the section "Cover." A Fund may only
write a put option on a security as part of an investment strategy, and not for
speculative purposes. In return for the premium received for writing a put
option, the Fund assumes the risk that the price of the underlying security,
contract, or foreign currency will decline below the exercise price, in which
case the put would be exercised and the Fund would suffer a loss.
If an option that a Fund has written expires, it will realize a gain in the
amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security, contract or currency during the option
period. If the call option is exercised, a Fund will realize a gain or loss from
the sale of the underlying security, contract or currency, which will be
increased or offset by the premium received. A Fund would write a put option at
an exercise price that, reduced by the premium received on the option, reflects
the price it is willing to pay for the underlying security, contract or
currency. The obligation imposed upon the writer of an option is terminated upon
the expiration of the option, or such earlier time at which a Fund effects a
closing purchase transaction by purchasing an option (put or call as the case
may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. Closing transactions may be effected in order
to realize a profit on an outstanding call option, to prevent an underlying
security, contract or currency from being called or to permit the sale of the
underlying security, contract or currency. Furthermore, effecting a closing
transaction will permit a Fund to write another call option on the underlying
security, contract or currency with either a different exercise price or
expiration date, or both.
Purchasing Options. A Fund may purchase a call option for the purpose of
acquiring the underlying security, contract or currency for its portfolio. The
Fund is not required to own the underlying security in order to purchase a call
option, and may only cover this transaction with cash, liquid assets and/or
short-term debt securities. Utilized in this fashion, the purchase of call
options would enable a Fund to acquire the security, contract or currency at the
exercise price of the call option plus the premium paid. So long as it holds
such a call option, rather than the underlying security or currency itself, the
Fund is partially protected from any unexpected increase in the market price of
the underlying security, contract or currency. If the market price does not
exceed the exercise price, the Fund could purchase the security on the open
market and could allow the call option to expire, incurring a loss only to the
extent of the premium paid for the option. Each of the Funds may also purchase
call options on underlying securities, contracts or currencies against which it
has written other call options. For example, where a Fund has written a call
option on an underlying security, rather than entering a closing transaction of
the written option, it may purchase a call option with a different exercise
strike and/or expiration date that would eliminate some or all of the risk
associated with the written call. Used in combinations, these strategies are
commonly referred to as "call spreads."
19
A Fund may only purchase a put option on an underlying security, contract
or currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security, contract or currency. Such
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit
realized when the security, contract or currency is delivered upon the exercise
of the put option. Conversely, if the underlying security, contract or currency
does not decline in value, the option may expire worthless and the premium paid
for the protective put would be lost. A Fund may also purchase put options on
underlying securities, contracts or currencies against which it has written
other put options. For example, where a Fund has written a put option on an
underlying security, rather than entering a closing transaction of the written
option, it may purchase a put option with a different exercise price and/or
expiration date that would eliminate some or all of the risk associated with the
written put. Used in combinations, these strategies are commonly referred to as
"put spreads." Likewise, a Fund may write call options on underlying securities,
contracts or currencies against which it has purchased protective put options.
This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or
traded in over-the-counter ("OTC") markets. Listed options are third-party
contracts (i.e., performance of the obligations of the purchaser and seller is
guaranteed by the exchange or clearing corporation) and have standardized strike
prices and expiration dates. OTC options are two-party contracts with negotiated
strike prices and expiration dates. A Fund will not purchase an OTC option
unless it believes that daily valuations for such options are readily
obtainable. OTC options differ from exchange-traded options in that OTC options
are transacted with dealers directly and not through a clearing corporation
(which guarantees performance). Consequently, there is a risk of non-performance
by the dealer. Since no exchange is involved, OTC options are valued on the
basis of an average of the last bid prices obtained from dealers, unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. In the case of OTC options, there can be no assurance that a
liquid secondary market will exist for any particular option at any specific
time. Because purchased OTC options in certain cases may be difficult to dispose
of in a timely manner, the Fund may be required to treat some or all of these
options (i.e., the market value) as illiquid securities. Although a Fund will
enter into OTC options only with dealers that are expected to be capable of
entering into closing transactions with it, there is no assurance that the Fund
will in fact be able to close out an OTC option position at a favorable price
prior to expiration. In the event of insolvency of the dealer, a Fund might be
unable to close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are similar
in many respects to options on securities, except that an index option gives the
holder the right to receive, upon exercise, cash instead of securities, if the
closing level of the securities index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. The amount of cash is equal to the difference between the
closing price of the index and the exercise price of the call or put times a
specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes
index options it may be required to set aside assets to reduce the risks
associated with writing those options. This process is described in more detail
below in the section "Cover."
STRADDLES. The Funds, for hedging purposes, may write straddles
(combinations of put and call options on the same underlying security) to adjust
the risk and return characteristics of the Fund's overall
20
position. A possible combined position would involve writing a covered call
option at one strike price and buying a call option at a lower price, in order
to reduce the risk of the written covered call option in the event of a
substantial price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out.
WARRANTS. Warrants are, in effect, longer-term call options. They give the
holder the right to purchase a given number of shares of a particular company at
specified prices within certain periods of time. The purchaser of a warrant
expects that the market price of the security will exceed the purchase price of
the warrant plus the exercise price of the warrant, thus giving him a profit.
Since the market price may never exceed the exercise price before the expiration
date of the warrant, the purchaser of the warrant risks the loss of the entire
purchase price of the warrant. Warrants generally trade in the open market and
may be sold rather than exercised. Warrants are sometimes sold in unit form with
other securities of an issuer. Units of warrants and common stock may be
employed in financing young, unseasoned companies. The purchase price of a
warrant varies with the exercise price of the warrant, the current market value
of the underlying security, the life of the warrant and various other investment
factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is a
two party agreement to buy or sell a specified amount of a specified security or
currency (or delivery of a cash settlement price, in the case of an index
future) for a specified price at a designated date, time and place
(collectively, "Futures Contracts"). A stock index Futures Contract provides for
the delivery, at a designated date, time and place, of an amount of cash equal
to a specified dollar amount times the difference between the stock index value
at the close of trading on the contract and the price agreed upon in the Futures
Contract; no physical delivery of stocks comprising the index is made. Brokerage
fees are incurred when a Futures Contract is bought or sold, and margin deposits
must be maintained at all times when a Futures Contract is outstanding.
A Fund will enter into Futures Contracts for hedging purposes only; that
is, Futures Contracts will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures Contracts will be
purchased to protect the Fund against an increase in the price of securities or
currencies it has committed to purchase or expects to purchase. A Fund's hedging
may include sales of Futures Contracts as an offset against the effect of
expected increases in interest rates, and decreases in currency exchange rates
and stock prices, and purchases of Futures Contracts as an offset against the
effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
The Funds currently may not invest in any security (including futures
contracts or options thereon) that is secured by physical commodities.
The Funds will only enter into Futures Contracts that are traded (either
domestically or internationally) on futures exchanges and are standardized as to
maturity date and underlying financial instrument. Futures exchanges and trading
thereon in the United States are regulated under the Commodity Exchange Act and
by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges
and trading thereon are not regulated by the CFTC and are not subject to the
same regulatory controls. For a further discussion of the risks associated with
investments in foreign securities, see "Foreign Investments" in this Statement
of Additional Information.
Closing out an open Futures Contract is effected by entering into an
offsetting Futures Contract for the same aggregate amount of the identical
financial instrument or currency and the same delivery date. There can be no
assurance, however, that a Fund will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular time.
If a Fund is not able to enter into an offsetting transaction, it will continue
to be required to maintain the margin deposits on the Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that must
be deposited by a Fund in order to initiate Futures Contracts trading and
maintain its open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered ("initial margin") is intended to ensure the
21
Fund's performance under the Futures Contract. The margin required for a
particular Futures Contract is set by the exchange on which the Futures Contract
is traded and may be significantly modified from time to time by the exchange
during the term of the Futures Contract.
Subsequent payments, called "variation margin," received from or paid to
the futures commission merchant through which a Fund entered into the Futures
Contract will be made on a daily basis as the price of the underlying security,
currency or index fluctuates making the Futures Contract more or less valuable,
a process known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a
Futures Contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to maintain the
position being hedged by the Futures Contract or option or to maintain cash or
securities in a segregated account.
Options on Futures Contracts. Options on Futures Contracts are similar to
options on securities or currencies except that options on Futures Contracts
give the purchaser the right, in return for the premium paid, to assume a
position in a Futures Contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the delivery of
the Futures Contract position by the writer of the option to the holder of the
option will be accompanied by delivery of the accumulated balance in the
writer's Futures Contract margin account. The Funds currently may not invest in
any security (including futures contracts or options thereon) that is secured by
physical commodities.
Limitations on Futures Contracts and Options on Futures Contracts and on
Certain Options on Currencies. To the extent that a Fund enters into Futures
Contracts, options on Futures Contracts and options on foreign currencies traded
on a CFTC-regulated exchange, in each case other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the total assets of the Fund, after taking
into account unrealized profits and unrealized losses on any contracts it has
entered into. This guideline may be modified by the Board, without a shareholder
vote. This limitation does not limit the percentage of the Fund's assets at risk
to 5%.
Pursuant to federal securities rules and regulations, a Fund's use of
Futures Contracts and options on Futures Contracts may require that Fund to set
aside assets to reduce the risks associated with using Futures Contracts and
options on Futures Contracts. This process is described in more detail below in
the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation,
usually arranged with a commercial bank or other currency dealer, to purchase or
sell a currency against another currency at a future date and price as agreed
upon by the parties. A Fund either may accept or make delivery of the currency
at the maturity of the forward currency contract. A Fund may also, if its contra
party agrees prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract. Forward currency contracts are
traded over-the-counter, and not on organized commodities or securities
exchanges. As a result, it may be more difficult to value such contracts, and it
may be difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward currency contracts with respect to a specific
purchase or sale of a security, or with respect to its portfolio positions
generally. When a Fund purchases a security denominated in a foreign currency
for settlement in the near future, it may immediately purchase in the forward
market the currency needed to pay for and settle the purchase. By entering into
a forward currency contract with respect to the specific purchase or sale of a
security denominated in a foreign currency, the Fund can secure an exchange rate
between the trade and settlement dates for that purchase or sale transaction.
This practice is sometimes referred to as
22
"transaction hedging." Position hedging is the purchase or sale of foreign
currency with respect to portfolio security positions denominated or quoted in a
foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of forward currency contracts does not eliminate fluctuations in the
prices of the underlying securities a Fund owns or intends to acquire, but it
does establish a rate of exchange in advance. In addition, while forward
currency contract sales limit the risk of loss due to a decline in the value of
the hedged currencies, they also limit any potential gain that might result
should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of
forward currency contracts may require that Fund to set aside assets to reduce
the risks associated with using forward currency contracts. This process is
described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts and
options (other than options purchased by a Fund) expose a Fund to an obligation
to another party. A Fund will not enter into any such transactions unless, in
addition to complying with all the restrictions noted in the disclosure above,
it owns either (1) an offsetting ("covered") position in securities, currencies,
or other options, forward currency contracts or futures contracts or (2) cash,
liquid assets and/or short-term debt securities with a value sufficient at all
times to cover its potential obligations not covered as provided in (1) above.
Each Fund will comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash or liquid securities. To the
extent that a futures contract, forward currency contract or option is deemed to
be illiquid, the assets used to "cover" the Fund's obligation will also be
treated as illiquid for purposes of determining the Fund's maximum allowable
investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an
obligation to another party, but rather provide the Funds with a right to
exercise, the Funds intend to "cover" the cost of any such exercise. To the
extent that a purchased option is deemed illiquid, the 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.
23
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any
particular option, futures contract or option thereon or, forward currency
contract at any particular time.
(5) As described above, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties. If a Fund were
unable to close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair a Fund's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For
example, if a Fund determines that the cost of hedging will exceed the potential
benefit to the Fund, the Fund will not enter into such transaction.
Additional Securities or Investment Techniques
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.
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 European Small Company Fund and AIM International Small
Company Fund are not subject to restriction (1). Fundamental restrictions may be
changed only by a vote of the lesser of (i) 67% or more of the Fund's shares
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or represented by proxy, or (ii) more than 50% of the
Fund's outstanding shares. Any investment restriction that involves a maximum or
minimum percentage of securities or assets (other than with respect to
borrowing) shall not be considered to be violated unless an excess over or a
deficiency under the percentage occurs immediately after, and is caused by, an
acquisition or disposition of securities or utilization of assets by the Fund.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the Fund
would fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as such statute, rules and
regulations are amended from time to time or are interpreted from time to time
by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or
except to the extent that the Fund may be permitted to do so by exemptive order
or similar relief (collectively, with the 1940 Act Laws and Interpretations, the
"1940 Act Laws, Interpretations and Exemptions"). In complying with this
restriction, however, the Fund may purchase securities of other investment
companies to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions.
(2) The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions.
24
(3) The Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions involving
the acquisition, disposition or resale of its portfolio securities, regardless
of whether the Fund may be considered to be an underwriter under the 1933 Act.
(4) The Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act Laws,
Interpretations and Exemptions) of its investments in the securities of issuers
primarily engaged in the same industry. This restriction does not limit the
Fund's investments in (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or (ii) tax-exempt obligations
issued by governments or political subdivisions of governments. In complying
with this restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that invest,
deal, or otherwise engage in transactions in real estate or interests therein,
or investing in securities that are secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities.
(7) The Fund may not make personal loans or loans of its assets to persons
who control or are under common control with the Fund, except to the extent
permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction
does not prevent the Fund from, among other things, purchasing debt obligations,
entering into repurchase agreements, loaning its assets to broker-dealers or
institutional investors, or investing in loans, including assignments and
participation interests.
(8) The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and restrictions as the Fund.
The investment restrictions set forth above provide each of the Funds with
the ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though each of the Funds has this flexibility, the Board has
adopted non-fundamental restrictions for each of the Funds relating to certain
of these restrictions which AIM must follow in managing the Funds. Any changes
to these non-fundamental restrictions, which are set forth below, require the
approval of the Board.
NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment
restrictions apply to each of the Funds, except AIM European Small Company Fund
and AIM International Small Company Fund are not subject to restriction (1).
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
25
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 European Small Company Fund normally invests at least 80% of its
assets in securities of European small companies. For purposes of the foregoing
sentence, "assets" means net assets, plus the amount of any borrowings for
investment purposes. The Fund will provide written notice to its shareholders
prior to any change to this policy, as required by the 1940 Act Laws,
Interpretations and Exemptions.
(2) AIM Small Cap Equity Fund normally invests at least 80% of its assets
in equity securities, including convertible securities, of small-capitalization
companies. For purposes of the foregoing sentence, "assets" means net assets,
plus the amount of any borrowings for investment purposes. The Fund will provide
written notice to its shareholders prior to any change to this policy, as
required by the 1940 Act Laws, Interpretations and Exemptions.
(3) AIM Mid Cap Basic Value Fund normally invests at least 80% of its
assets in securities of mid-capitalization companies that offer potential for
capital growth. 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.
(4) AIM Select Equity Fund normally invests at least 80% of its assets in
equity securities, including convertible securities, with prospects for
above-average market returns, without regard to market capitalization. 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.
26
(5) AIM International Small Company Fund normally invests at least 80% of
its assets in securities of small international companies. For purposes of the
foregoing sentence, "assets" means net assets, plus the amount of any borrowings
for investment purposes. The Fund will provide written notice to its
shareholders prior to any change to this policy, as required by the 1940 Act
Laws, Interpretations and Exemptions.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market or other conditions, or
atypical circumstances such as unusually large cash inflows or redemptions, the
Funds may temporarily hold all or a portion of their assets in cash, cash
equivalents or high-quality debt instruments. Each of the funds may also invest
up to 25% of its total assets in Affiliated Money Market Funds for these
purposes.
PORTFOLIO TURNOVER
AIM European Small Company Fund's portfolio turnover rate decreased from
130% in 2003 to 71% in 2004. This variation can be attributed to the Fund's high
fluctuation in flows during the 2003 period. Since then flows have steadied and
the fund is now at its normal level.
AIM Global Value Fund's portfolio turnover rate decreased from 129% in 2004
to 51% in 2005. This variation can be attributed to the change in the lead
manager of the fund on February 28, 2005 to Glen Hilton. Although the fund's
investment strategy and process remained the same, the current lead manager has
a longer term investment perspective than what was previously utilized. AIM
Global Value Fund's portfolio turnover rate decreased from 372% in 2003 to 129%
in 2004. This variation can be attributed to the realignment of the Fund's
portfolio to fit the investment process of the current management team of the
Fund in early 2002. This would have increased the turnover for 2003.
AIM Select Equity Fund's portfolio turnover rate increased from 38% in 2004
to 91% in 2005. This variation can be attributed to the change in mandate to
allow investment in securities outside the AIM complex that added to the
increase in turnover. AIM Select Equity Fund's portfolio turnover rate decreased
from 69% in 2003 to 38% in 2004. This variation can be attributed to the
realignment of the Fund's portfolio in 2003 by the Fund's current management
team.
AIM Small Cap Equity Fund's portfolio turnover rate decreased from 124% in
2004 to 52% in 2005. This variation can be attributed to the lower turnover
strategy utilized by the new management team that took over September 1, 2004.
POLICIES AND PROCEDURES FOR DISCLOSURE OF FUND HOLDINGS
The Board has adopted policies and procedures with respect to the
disclosure of the Funds' portfolio holdings (the "Holdings Disclosure Policy").
AIM and the Board may amend the Holdings Disclosure Policy at any time without
prior notice. Details of the Holdings Disclosure Policy and a description of the
basis on which employees of AIM and its affiliates may release information about
portfolio securities in certain contexts are provided below.
PUBLIC RELEASE OF PORTFOLIO HOLDINGS. The Funds disclose the following
portfolio holdings information on http://www.aiminvestments.com(1):
- ----------
(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
INFORMATION APPROXIMATE DATE OF WEBSITE POSTING INFORMATION REMAINS POSTED ON WEBSITE
----------- ----------------------------------- -------------------------------------
Top ten holdings as of month-end 15 days after month-end Until replaced with the following
month's top ten holdings
Select holdings included in the Fund's Quarterly 29 days after calendar quarter-end Until replaced with the following
Performance Update quarter's Quarterly Performance Update
Complete portfolio holdings as of calendar 30 days after calendar quarter-end For one year
quarter-end
Complete portfolio holdings as of fiscal 60-70 days after fiscal quarter-end For one year
quarter-end
These holdings are listed along with the percentage of the Fund's net
assets they represent. Generally, employees of AIM and its affiliates may not
disclose such portfolio holdings until one day after they have been posted on
http://www.aiminvestments.com. You may also obtain the publicly available
portfolio holdings information described above by contacting us at
1-800-959-4246.
SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS PURSUANT TO NON-DISCLOSURE
AGREEMENT. Employees of AIM and its affiliates may disclose non-public full
portfolio holdings on a selective basis only if the Internal Compliance Controls
Committee (the "ICCC") of A I M Management Group Inc. ("AIM Management")
approves the parties to whom disclosure of non-public full portfolio holdings
will be made. The ICCC must determine that the proposed selective disclosure
will be made for legitimate business purposes of the applicable Fund and address
any perceived conflicts of interest between shareholders of such Fund and AIM or
its affiliates as part of granting its approval.
The Board exercises continuing oversight of the disclosure of Fund
portfolio holdings by (1) overseeing the implementation and enforcement of the
Holdings Disclosure Policy and the AIM Funds Code of Ethics by the Chief
Compliance Officer (or her designee) of AIM and the AIM Funds and (2)
considering reports and recommendations by the Chief Compliance Officer
concerning any material compliance matters (as defined in Rule 38a-1 under the
1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940, as
amended) that may arise in connection with the Holdings Disclosure Policy.
Pursuant to the Holdings Disclosure Policy, the Board reviews the types of
situations in which AIM provides 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);
- 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
28
portfolio holdings will maintain the confidentiality of such portfolio holdings
and will not trade on such information ("Non-disclosure Agreements"). Please
refer to Appendix B for a list of examples of persons to whom AIM provides
non-public portfolio holdings on an ongoing basis.
AIM will also disclose non-public portfolio holdings information if such
disclosure is required by applicable laws, rules or regulations, or by
regulatory authorities having jurisdiction over AIM and its affiliates or the
Funds.
The Holdings Disclosure Policy provides that AIM will not request, receive
or accept any compensation (including compensation in the form of the
maintenance of assets in any Fund or other mutual fund or account managed by AIM
or one of its affiliates) for the selective disclosure of portfolio holdings
information.
DISCLOSURE OF CERTAIN PORTFOLIO HOLDINGS AND RELATED INFORMATION WITHOUT
NON-DISCLOSURE AGREEMENT. AIM and its affiliates that provide services to the
Funds, and the Funds' subadvisors, if applicable, and each of their employees
may receive or have access to portfolio holdings as part of the day to day
operations of the Funds.
From time to time, employees of AIM and its affiliates may express their
views orally or in writing on one or more of the Funds' portfolio securities or
may state that a Fund has recently purchased or sold, or continues to own, one
or more securities. The securities subject to these views and statements may be
ones that were purchased or sold since a Fund's most recent quarter-end and
therefore may not be reflected on the list of the Fund's most recent quarter-end
portfolio holdings disclosed on the website. Such views and statements may be
made to various persons, including members of the press, brokers and other
financial intermediaries that sell shares of the Funds, shareholders in the
applicable Fund, persons considering investing in the applicable Fund or
representatives of such shareholders or potential shareholders, such as
fiduciaries of a 401(k) plan or a trust and their advisers, and other entities
for which AIM or its affiliates provides or may provide investment advisory
services. The nature and content of the views and statements provided to each of
these persons may differ.
From time to time, employees of AIM and its affiliates also may provide
oral or written information ("portfolio commentary") about a Fund, including,
but not limited to, how the Fund's investments are divided among various
sectors, industries, countries, investment styles and capitalization sizes, and
among stocks, bonds, currencies and cash, security types, bond maturities, bond
coupons and bond credit quality ratings. This portfolio commentary may also
include information on how these various weightings and factors contributed to
Fund performance. AIM may also provide oral or written information ("statistical
information") about various financial characteristics of a Fund or its
underlying portfolio securities including, but not limited to, alpha, beta,
R-squared, coefficient of determination, duration, maturity, information ratio,
sharpe ratio, earnings growth, payout ratio, price/book value, projected
earnings growth, return on equity, standard deviation, tracking error, weighted
average quality, market capitalization, percent debt to equity, price to cash
flow, dividend yield or growth, default rate, portfolio turnover, and risk and
style characteristics. This portfolio commentary and statistical information
about a Fund may be based on the Fund's portfolio as of the most recent
quarter-end or the end of some other interim period, such as month-end. The
portfolio commentary and statistical information may be provided to various
persons, including those described in the preceding paragraph. The nature and
content of the information provided to each of these persons may differ.
DISCLOSURE OF PORTFOLIO HOLDINGS BY TRADERS. Additionally, employees of AIM
and its affiliates may disclose one or more of the portfolio securities of a
Fund when purchasing and selling securities through broker-dealers, requesting
bids on securities, obtaining price quotations on securities, or in connection
with litigation involving the Funds' portfolio securities. AIM does not enter
into formal Non-disclosure Agreements in connection with these situations;
however, the Funds would not continue to conduct business with a person who AIM
believed was misusing the disclosed information.
DISCLOSURE OF PORTFOLIO HOLDINGS OF OTHER AIM-MANAGED PRODUCTS. AIM and its
affiliates manage products sponsored by companies other than AIM, including
investment companies, offshore
29
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 business and affairs of the Trust are managed by or under the direction
of 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 general oversight by 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, Lewis F. Pennock,
Raymond Stickel, Jr. (Chair), Dr. Larry Soll, Dr. Prema Mathai-Davis and Ruth H.
Quigley (Vice Chair). The Audit Committee's primary purposes are to: (i) assist
the Board in oversight of the independent registered public accountant's
qualifications, independence and performance; (ii) appoint independent
registered public accountants for the Funds; (iii) to the extent required by
Section 10A(h) and (i) of the Exchange Act, to pre-approve all permissible
non-audit services that are provided to Funds by their independent registered
public accountants; (iv) pre-approve, in accordance with Rule 2-01(c)(7)(ii) of
Regulation S-X, certain non-audit services provided by the Funds' independent
registered public accountants to the Funds' investment adviser and certain other
affiliated entities; (v) to oversee the financial reporting process for the
Funds; (vi) the extent required by Regulation 14A under the Exchange Act, to
prepare an audit committee report for inclusion in any proxy statement issued by
a Fund; (vii) assist the Board's oversight of the performance of the Funds'
internal audit function to the extent an internal audit function exists; (viii)
assist the Board's oversight of the integrity of the Funds' financial
statements; and (ix) assist
30
the Board's oversight of the Funds' compliance with legal and regulatory
requirements. During the fiscal year ended December 31, 2005, the Audit
Committee held seven meetings.
The members of the Compliance Committee are Frank S. Bayley, Bruce L.
Crockett (Chair), Albert R. Dowden (Vice Chair) and Mr. Stickel. 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 December 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.
The Governance Committee will consider nominees recommended by a
shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Governance Committee or the Board, as applicable, shall make the
final determination of persons to be nominated. During the fiscal year ended
December 31, 2005, the Governance Committee held seven meetings.
31
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, Fields, Carl Frischling, Robert H.
Graham, Pennock, Soll, Stickel and Mark H. Williamson and 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 December 31, 2005,
the investments committee held seven 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 each of the foregoing areas, making regular reports to the Board.
During the fiscal year ended December 31, 2005, the Valuation Committee held
three meetings.
The members of the Special Market Timing Litigation Committee are Messrs.
Bayley, Bunch (Chair), Crockett and Dowden (Vice Chair). The Special Market
Timing Litigation Committee is responsible: (i) for receiving reports from time
to time from management, counsel for management, counsel for the 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
32
filed against 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
December 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 trustee of other AIM Funds. Each such trustee receives a fee,
allocated among the AIM Funds for which he or she serves as a 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 from 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.
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 benefit will equal 75% of the trustee's
annual retainer paid to or accrued by any Covered Fund with respect to such
trustee during the twelve-month period prior to retirement, including the amount
of any retainer deferred under a separate deferred compensation agreement
between the Covered Fund and the trustee. The amount of the annual retirement
benefit does not include additional compensation paid for Board meeting fees or
compensation paid and Vice
33
Chairs of certain Board committees, whether such amounts are paid directly to
the trustee or deferred. The annual retirement benefit is 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 commence payment of retirement benefits upon retirement
from the Board before age 72; in such a case, the annual retirement benefit is
subject to a reduction for early payment.
Deferred Compensation Agreements
Messrs. Crockett, Dunn, Fields, Frischling, Sklar and Drs. Mathai-Davis and
Soll (for purposes of this paragraph only, the "Deferring Trustees") have each
executed a Deferred Compensation Agreement (collectively, the "Compensation
Agreements"). Pursuant to the Compensation Agreements, the Deferring Trustees
have the option to elect to defer receipt of up to 100% of their compensation
payable by the Trust, and such amounts are placed into a deferral account and
deemed to be invested in one or more AIM Funds selected by the Deferring
Trustees. 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."
CODE OF ETHICS
AIM, the Trust and AIM Distributors have adopted a Code of Ethics governing
personal trading activities of all employees of AIM and its subsidiaries. The
Code of Ethics is 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. Personal trading, including personal trading
involving securities that may be purchased or held by a fund within the AIM
Family of Funds, is permitted under the Code 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.
PROXY VOTING POLICIES
The Board has delegated responsibility for decisions regarding proxy voting
for securities held by each Fund to AIM, the Fund's investment advisor. AIM will
vote such proxies in accordance with its proxy policies and procedures, which
have been reviewed and approved by the Board, and which are found in Appendix 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.
34
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.
AIM is also responsible for furnishing to the Funds, at AIM's expense, the
services of persons believed to be competent to perform all supervisory and
administrative services required by the Funds, in the judgment of the trustees,
to conduct their respective businesses effectively, as well as the offices,
equipment and other facilities necessary for their operations. Such functions
include the maintenance of each Fund's accounts and records, and the preparation
of all requisite corporate documents such as tax returns and reports to the SEC
and shareholders.
The Advisory Agreement provides that each Fund will pay or cause to be paid
all expenses of such Fund not assumed by AIM, including, without limitation:
brokerage commissions, taxes, legal, auditing or governmental fees, custodian,
transfer and shareholder service agent costs, expenses of issue, sale,
redemption, and repurchase of shares, expenses of registering and qualifying
shares for sale, expenses relating to trustee and shareholder meetings, the cost
of preparing and distributing reports and notices to shareholders, the fees and
other expenses incurred by the Trust on behalf of each Fund in connection with
membership in investment company organizations, and the cost of printing copies
of prospectuses and statements of additional information distributed to the
Funds' shareholders.
AIM, at its own expense, furnishes to the Trust office space and
facilities. AIM furnishes to the Trust all personnel for managing the affairs of
the Trust and each of its series of shares.
Pursuant to its Advisory Agreement with the Trust, AIM receives a monthly
fee from each Fund calculated at the following 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.
35
MAXIMUM
ADVISORY FEE
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATES COMMITTED
FUND NAME PER ADVISORY AGREEMENT RATE AFTER JANUARY 1, 2005 UNTIL DATE
--------- --------------------------------- --------------------------------- -----------------
AIM Basic Balanced Fund 0.65% of the first $1 billion 0.62% of the first $250 million December 31, 2009
0.60% of the next $4 billion 0.605% of the next $250 million
0.55% of amount over $5 billion 0.59% of the next $500 million
0.575% of the next $1.5 billion
0.56% of the next $2.5 billion
0.545% of the next $2.5 billion
0.53% of the next $2.5 billion
0.515% of amount over $10 billion
AIM European Small Company Fund 0.95% of average daily net assets 0.935% of the first $250 million June 30, 2006
0.91% of the next $250 million
0.885% of the next $500 million
0.86% of the next $1.5 billion
0.835% of the next $2.5 billion
0.81% of the next $2.5 billion
0.785% of the next $2.5 billion
0.76% of amount over $10 billion
AIM Global Value Fund 0.85% of the first $1 billion 0.80% of the first $250 million June 30, 2006
0.80% of amount over $1 billion 0.78% of the next $250 million
0.76% of the next $500 million
0.74% of the next $1.5 billion
0.72% of the next $2.5 billion
0.70% of the next $2.5 billion
0.68% of the next $2.5 billion
0.66% of amount over $10 billion
AIM International Small Company Fund 0.95% of average daily net assets 0.935% of the first $250 million December 31, 2009
0.91% of the next $250 million
0.885% of the next $500 million
0.86% of the next $1.5 billion
0.835% of the next $2.5 billion
0.81% of the next $2.5 billion
0.785% of the next $2.5 billion
0.76% of amount over $10 billion
AIM Mid Cap Basic Value Fund 0.80% of the first $1 billion 0.745% of the first $250 million December 31, 2009
0.75% of the next $4 billion 0.73% of the next $250 million
0.70% of amount over $5 billion 0.715% of the next $500 million
0.70% of the next $1.5 billion
0.685% of the next $2.5 billion
0.67% of the next $2.5 billion
0.655% of the next $2.5 billion
0.64% of amount over $10 billion
AIM Select Equity Fund 0.80% of the first $150 million 0.695% of the first $250 million June 30, 2006
0.625% of amount over $150 0.67% of the next $250 million
million (1) 0.645% of the next $500 million
0.62% of the next $1.5 billion
0.595% of the next $2.5 billion
0.57% of the next $2.5 billion
0.545% of the next $2.5 billion
0.52% of amount over $10 billion
36
MAXIMUM
ADVISORY FEE
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE RATES COMMITTED
FUND NAME PER ADVISORY AGREEMENT RATE AFTER JANUARY 1, 2005 UNTIL DATE
--------- --------------------------------- --------------------------------- -----------------
AIM Small Cap Equity Fund 0.85% of all assets 0.745% of the first $250 million December 31, 2009
0.73% of the next $250 million
0.715% of the next $500 million
0.70% of the next $1.5 billion
0.685% of the next $2.5 billion
0.67% of the next $2.5 billion
0.655% of the next $2.5 billion
0.64% of amount over $10 billion
(1) AIM has voluntarily agreed to waive advisory fees payable by the Fund in an
amount equal to 0.025% for each $5 billion increment in net assets over $5
billion, up to a maximum waiver of 0.175% on net assets in excess of $35
billion.
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 December 31, 2006, to limit Total
Annual Fund Operating Expenses (excluding (i) interest; (ii) taxes; (iii)
dividend expense on short sales; (iv) extraordinary items (these are expenses
that are not anticipated to arise from each Fund's day-to-day operations), or
items designated as such by each fund's Board; (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:
EXPENSE
FUND LIMITATION
---- ----------
AIM European Small Company Fund
Class A Shares 1.90%
Class B Shares 2.65%
Class C Shares 2.65%
AIM Global Value Fund
Class A Shares 1.90%
Class B Shares 2.65%
Class C Shares 2.65%
AIM International Small Company Fund
Class A Shares 1.90%
Class B Shares 2.65%
Class C Shares 2.65%
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.
37
The management fees payable by each Fund, the amounts waived by AIM and the
net fees paid by each Fund for the last three fiscal years ended December 31 are
found in Appendix G.
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
Trust's Board of Trustees, including the independent trustees, by votes cast in
person at a meeting called for such purpose. Under the Administrative Services
Agreement, AIM is entitled to receive from the Funds reimbursement of its costs
or such reasonable compensation as may be approved by the Board of Trustees.
Currently, AIM is reimbursed for the services of the Trust's principal financial
officer and her staff, and any expenses related to fund accounting services.
Administrative services fees paid to AIM by each Fund for the last three
fiscal years ended December 31 are found in Appendix I.
38
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment Services, Inc. ("AIS"), 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. 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
BROKERAGE TRANSACTIONS
AIM makes decisions to buy and sell securities for each Fund, selects
broker-dealers (each, a "Broker"), effects the Funds' investment portfolio
transactions, allocates brokerage fees in such
39
transactions and, where applicable, negotiates commissions and spreads on
transactions. AIM's primary consideration in effecting a security transaction is
to obtain best execution, which AIM defines as prompt and efficient execution of
the transaction at the best obtainable price with payment of commissions,
mark-ups or mark-downs which are reasonable in relation to the value of the
brokerage services provided by the Broker. While AIM seeks reasonably
competitive commission rates, the Funds may not pay the lowest commission or
spread available. See "Broker Selection" below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. Portfolio transactions placed in such markets may be
effected on a principal basis at net prices without commissions, but which
include compensation to the Broker in the form of a mark-up or mark-down, or on
an agency basis, which involves the payment of negotiated brokerage commissions
to the Broker, including electronic communication networks. Purchases of
underwritten issues include a commission or concession paid by the issuer (not
the Funds) to the underwriter. Purchases of money market instruments may be made
directly from issuers without the payment of commissions.
Traditionally, commission rates have not been negotiated on stock markets
outside the United States. Although in recent years many overseas stock markets
have adopted a system of negotiated rates, a number of markets maintain an
established schedule of minimum commission rates.
Brokerage commissions paid by each of the Funds for the last three fiscal
years ended December 31 are found in Appendix J.
COMMISSIONS
During the last three fiscal years ended December 31, none of the Funds
paid brokerage commissions to Brokers affiliated with the Funds, AIM, AIM
Distributors, or any affiliates of such entities.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of an AIM Fund, provided the conditions of an exemptive order
received by the AIM Funds from the SEC are met. In addition, a Fund may purchase
or sell a security from or to certain other AIM Funds or 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
40
[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.
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.
41
AIM and AIM Capital attempt to reduce or eliminate the potential conflicts
of interest concerning the use of Soft Dollar Products by directing client
trades for Soft Dollar Products only if AIM and AIM Capital conclude that the
Broker supplying the product is capable of providing best execution.
Certain Soft Dollar Products may be available directly from a vendor on a
hard dollar basis; other Soft Dollar Products are available only through Brokers
in exchange for soft dollars. AIM uses soft dollars to purchase two types of
Soft Dollar Products:
- 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
42
projections and interest rate sensitivity analyses, which are relevant
to fixed income securities.
- Other Specialized Tools - other specialized products, such as
consulting analyses, access to industry experts, and distinct
investment expertise such as forensic accounting or custom built
investment-analysis software.
If AIM determines that any service or product has a mixed use (i.e., it
also serves functions that do not assist the investment decision-making or
trading process), AIM will allocate the costs of such service or product
accordingly in its reasonable discretion. AIM will allocate brokerage
commissions to Brokers only for the portion of the service or product that AIM
determines assists it in the investment decision-making or trading process and
will pay for the remaining value of the product or service in cash.
Outside research assistance is useful to AIM since the Brokers used by AIM
tend to provide more in-depth analysis of a broader universe of securities and
other matters than AIM's staff follows. In addition, such services provide AIM
with a diverse perspective on financial markets. Some Brokers may indicate that
the provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Funds. However, the Funds are not under any obligation to deal
with any Broker in the execution of transactions in portfolio securities. In
some cases, Soft Dollar Products are available only from the Broker providing
them. In other cases, Soft Dollar Products may be obtainable from alternative
sources in return for cash payments. AIM believes that because Broker research
supplements rather than replaces AIM's research, the receipt of such research
tends to improve the quality of AIM's investment advice. The advisory fee paid
by the Funds is not reduced because AIM receives such services. To the extent
the Funds' portfolio transactions are used to obtain Soft Dollar Products, the
brokerage commissions obtained by the Funds might exceed those that might
otherwise have been paid.
AIM may determine target levels of brokerage business with various Brokers on
behalf of its clients (including the Funds) over a certain time period. The
target levels will be based upon the following factors, among others: (1) the
execution services provided by the Broker; and (2) the research services
provided by the Broker. Portfolio transactions may be effected through Brokers
that recommend the Funds to their clients, or that act as agent in the purchase
of a Fund's shares for their clients, provided that AIM believes such Brokers
provide best execution and such transactions are executed in compliance with
AIM's policy against using directed brokerage to compensate Brokers for
promoting or selling AIM Fund shares. AIM will not enter into a binding
commitment with Brokers to place trades with such Brokers involving brokerage
commissions in precise amounts.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during the
last fiscal year ended December 31, 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 December 31, 2005
is found in Appendix K.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous AIM Funds and other accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more other accounts. However, the
position of each account in the same security and the length of time that each
account may hold its investment in the same security may vary. The timing and
amount of purchase by each account will also be determined by its cash position.
If the purchase or sale of securities is consistent with the investment policies
of the Fund(s) and one or more other accounts, and is considered at or about the
same time, AIM
43
will allocate transactions in such securities among the Fund(s) and these
accounts on a pro rata basis based on order size or in such other manner
believed by AIM to be fair and equitable. AIM may combine such transactions, in
accordance with applicable laws and regulations, to obtain the most favorable
execution. Simultaneous transactions could, however, adversely affect a Fund's
ability to obtain or dispose of the full amount of a security which it seeks to
purchase or sell.
ALLOCATION OF 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 capital/liquidity suitability and sector/style suitability of the
investment with the AIM Fund's or account's investment objective, policies and
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.
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.
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
44
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
Enhanced Short Bond Fund, AIM Floating Rate Fund and AIM Short Term Bond Fund
are subject to an initial sales charge of 2.50%. The sales charge is used to
compensate AIM Distributors and participating dealers for their expenses
incurred in connection with the distribution of the Funds' shares. You may also
be charged a transaction or other fee by the financial institution managing your
account.
Class A Shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve
Shares of AIM Money Market Fund are sold without an initial sales charge.
CATEGORY I FUNDS
AIM Advantage Health Sciences Fund
AIM Asia Pacific Growth Fund
AIM Basic Balanced Fund
AIM Basic Value Fund
AIM Capital Development Fund
AIM Charter Fund
AIM China 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 Metal 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 Japan 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 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 Real Estate Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund
AIM Structured Core Fund
AIM Structured Growth Fund
AIM Structured Value Fund
AIM Summit Fund
AIM Technology Fund
AIM Trimark Endeavor Fund
AIM Trimark Fund
AIM Trimark Small Companies Fund
AIM Utilities Fund
Investor's Sales Charge Dealer
-------------------------- 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
45
CATEGORY II FUNDS
AIM High Income Municipal Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM International Bond Fund
AIM Municipal Bond Fund
AIM Total Return Bond Fund
Investor's Sales Charge Dealer
-------------------------- 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
Investor's Sales Charge Dealer
-------------------------- Concession
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- -------------
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
AIM ENHANCED SHORT BOND FUND, AIM FLOATING RATE FUND AND AIM SHORT TERM
BOND FUND
Investor's Sales Charge Dealer
-------------------------- 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
46
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 Category I, II or III Fund and Class A shares of AIM
Enhanced Short Bond Fund, AIM Floating Rate Fund and 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 Enhanced
Short Bond Fund, AIM Floating Rate Fund and 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 Enhanced Short Bond
Fund, AIM Floating Rate Fund and AIM Short Term Bond Fund, each share 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 Enhanced Short Bond Fund, AIM Floating
Rate Fund 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 PURCHASES
1% of the first $2 million
plus 0.80% of the next $1 million
plus 0.50% of the next $17 million
plus 0.25% of amounts in excess of $20 million
If (i) the amount of any single purchase order plus (ii) the public
offering price of all other shares owned by the same customer submitting the
purchase order on the day on which the purchase order is received equals or
exceeds $1,000,000, the purchase will be considered a "jumbo accumulation
purchase." With regard to any individual jumbo accumulation purchase, AIM
Distributors may make payment to the dealer of record based on the cumulative
total of jumbo accumulation purchases made by the same customer over the life of
his or her account(s).
If an investor made a Large Purchase of Class A shares of a Category III
Fund or AIM Short Term Bond Fund on and after November 15, 2001 and through
October 30, 2002 and exchanges those shares for Class A shares of a Category I
or II Fund, AIM Distributors will pay an additional dealer concession of 0.75%
upon exchange.
If an investor makes a Large Purchase of Class 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 Enhanced Short Bond Fund, AIM Floating Rate
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, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund or
AIM Short Term Bond
47
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. For
purchases 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, AIM Distributors may
make the following payments to investment dealers or other financial service
firms for sales of such shares at net asset value ("NAV") to certain retirement
plans provided that the applicable dealer of record is able to establish that
the retirement plan's purchase of Class A shares is a new investment (as defined
below):
PERCENT OF PURCHASE
0.50% of the first $20 million
plus 0.25% of amounts in excess of $20 million
This payment schedule will be applicable to purchases of Class A shares at
NAV by the following types of retirement plans: (i) all plans maintained
pursuant to Sections 401 and 457 of the Code, and (ii) plans maintained pursuant
to Section 403 of the Code if the employer or plan sponsor is a tax-exempt
organization operated pursuant to Section 501(c)(3) of the Code.
A "new investment" means a purchase paid for with money that does not
represent (i) the proceeds of one or more redemptions of AIM Fund shares, (ii)
an exchange of AIM Fund shares, (iii) the repayment of one or more retirement
plan loans that were funded through the redemption of AIM Fund shares, or (iv)
money returned from another fund family. If AIM Distributors pays a dealer
concession in connection with a plan's purchase of Class A shares at NAV, such
shares may be subject to a CDSC of 1.00% of net assets for 12 months, commencing
on the date the plan first invests in Class A shares of an AIM Fund. If the
applicable dealer of record is unable to establish that a plan's purchase of
Class A shares at NAV is a new investment, AIM Distributors will not pay a
dealer concession in connection with such purchase and such shares will not be
subject to a CDSC.
With regard to any individual jumbo accumulation purchase, AIM Distributors
may make payment to the dealer of record based on the cumulative total of jumbo
accumulation purchases made by the same plan over the life of the plan's
account(s).
PURCHASERS QUALIFYING FOR REDUCTIONS IN INITIAL SALES CHARGES. As shown in
the tables above, purchases of certain amounts of AIM Fund shares may reduce the
initial sales charges. These reductions are available to purchasers that meet
the qualifications listed below. We will refer to purchasers that meet these
qualifications as "Qualified Purchasers."
DEFINITIONS
As used herein, the terms below shall be defined as follows:
- "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;
48
- "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 Sections 401, 403 (only if
the employer or plan sponsor is a tax-exempt organization operated
pursuant to Section 501(c)(3) of the Code), 408 (includes SEP, SARSEP
and SIMPLE IRA plans) or 457 of the Code, if:
a. the employer or plan sponsor submits all contributions for all
participating employees in a single contribution transmittal (the
AIM Funds will not accept separate contributions submitted with
respect to individual participants);
b. each transmittal is accompanied by a single check or wire
transfer; and
c. if the AIM Funds are expected to carry separate accounts in the
names of each of the plan participants, (i) the employer or plan
sponsor notifies AIM Distributors in writing that the separate
accounts of all plan participants should be linked, and (ii) all
new participant accounts are established by submitting an
appropriate Account Application on behalf of each new participant
with the contribution transmittal.
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.
49
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 anytime 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.
- 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
50
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, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund and AIM Short
Term Bond Fund are subject to an 18-month, 1% CDSC.
RIGHTS OF ACCUMULATION
A Qualified Purchaser may also qualify for reduced initial sales charges
based upon his, her or its existing investment in shares of any of the AIM Funds
at the time of the proposed purchase. To determine whether or not a reduced
initial sales charge applies to a proposed purchase, AIM Distributors takes into
account not only the money which is invested upon such proposed purchase, but
also the value of all shares of the AIM Funds owned by such purchaser,
calculated at their then current public offering price.
If a purchaser qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money being invested, even if only a
portion of that amount exceeds the breakpoint for the reduced sales charge. For
example, if a purchaser already owns qualifying shares of any AIM Fund with a
value of $20,000 and wishes to invest an additional $20,000 in a fund with a
maximum initial sales charge of 5.50%, the reduced initial sales charge of 5.25%
will apply to the full $20,000 purchase and not just to the $15,000 in excess of
the $25,000 breakpoint.
To qualify for obtaining the discount applicable to a particular purchase,
the purchaser or his dealer must furnish the Transfer Agent with a list of the
account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
Rights of Accumulation are also available to holders of the Connecticut
General Guaranteed Account, established for tax-qualified group annuities, for
contracts purchased on or before June 30, 1992.
51
If an investor's new purchase of 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
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 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
purchasers responsibilities 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, trustee or employee (and
members of their Immediate Family) of AIM Management, its affiliates
or The AIM Family of Funds,(R) and any foundation, trust, employee
benefit plan or deferred compensation plan established exclusively for
the benefit of, or by, such persons;
- Any current or retired officer, director, or employee (and members of
their Immediate Family), of DST Systems, Inc. or Personix, a division
of Fiserv Solutions, Inc.;
- Sales representatives and employees (and members of their Immediate
Family) of selling group members of financial institutions that have
arrangements with such selling group members;
- Purchases through approved fee-based programs;
- Employer-sponsored retirement plans that are Qualified Purchasers, as
defined above, provided that:
a. a plan's assets are at least $1 million;
52
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 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 former 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;
- - 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;
53
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 AIM Investment Services, Inc. ("AIS");
- - 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 make these payments from their own
resources, from AIM Distributors' retention of underwriting concessions and from
payments to AIM Distributors under Rule 12b-1 plans. These additional cash
payments are described below. The categories described below are not mutually
exclusive. The same financial advisor may receive payments under more than one
or all categories. Most financial advisors that sell shares of AIM funds receive
one or more types of these cash payments. Financial advisors negotiate the cash
payments to be paid on an individual basis. Where services are provided, the
costs of providing the services and the overall package of services provided may
vary from one financial advisor to another. ADI Affiliates do not make an
independent assessment of the cost of providing such services.
In this context, "financial advisors" include any broker, dealer, bank
(including bank trust departments), transfer agent, registered investment
advisor, financial planner, retirement plan administrator and any other
financial intermediary having a selling, administration or similar agreement
with ADI Affiliates. 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 H. 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
54
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 for
entertainment events it deems appropriate, subject to ADI Affiliates guidelines
and applicable law. These payments may vary depending upon the nature of the
event or the relationship.
ADI Affiliates 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,
55
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 this prospectus. You can ask your financial
advisor about any payments it receives from ADI Affiliates or the AIM funds, as
well as about fees and/or commissions it charges.
Purchases of Class B Shares
Class B shares are sold at net asset value, and are not subject to an
initial sales charge. Instead, investors may pay a CDSC if they redeem their
shares within six years after purchase. See the Prospectus for additional
information regarding contingent deferred sales charges. AIM Distributors may
pay sales commissions to dealers and institutions who sell Class B shares of the
AIM Funds at the time of such sales. Payments will equal 4.00% of the purchase
price and will consist of a sales commission equal to 3.75% plus an advance of
the first year service fee of 0.25%.
Class B1 Shares
Class B1 shares are held by certain shareholders who held Class B shares of
AIM Floating Rate Fund's predecessor, closed-end AIM Floating Rate Fund. Class
B1 shares are not available for purchase by either current Class B1 shareholders
or new investors. See the Prospectus for additional information, including
information regarding contingent deferred sales charges.
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 Enhanced Short Bond Fund or AIM Short Term Bond Fund unless you exchange
shares of another AIM Fund that are subject to a CDSC into AIM Enhanced Short
Bond Fund or 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
with respect to Funds other than AIM Enhanced Short Bond Fund or AIM Floating
Rate Fund 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%.
Payments with respect to AIM Floating Rate Fund will equal 0.75% of the purchase
price and will consist of a sales commission of 0.50% 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 Enhanced Short Bond Fund or 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.
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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.
Purchase and Redemption of Class P Shares
Class P shares of the 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, each
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 the 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 the 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 the 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, AIM Enhanced Short Bond Fund, AIM Floating Rate Fund
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 service fee of 0.25% of average daily net assets and such
payments will commence immediately.
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Purchases of Institutional Class Shares
Institutional Class shares are sold at net asset value, and are not subject
to an initial sales charge or to a CDSC.
Exchanges
TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to be
acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such purchases may be delayed for
up to five business days if it is determined that a fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange. If a
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such
shareholder will not begin to accrue dividends until the sixth business day
after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with certain
dealers and investment advisory firms to accept telephone instructions to
exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AIS at (800) 959-4246. If a
shareholder is unable to reach AIS by telephone, he may also request exchanges
by fax, telegraph or use overnight courier services to expedite exchanges by
mail, which will be effective on the business day received by AIS as long as
such request is received 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.
58
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints AIS as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by AIS in the designated account(s),
present or future, with full power of substitution in the premises. AIS and AIM
Distributors are thereby authorized and directed to accept and act upon any
telephone redemptions of shares held in any of the account(s) listed, from any
person who requests the redemption. An investor acknowledges by signing the form
that he understands and agrees that AIS and AIM Distributors may not be liable
for any loss, expense or cost arising out of any telephone redemption requests
effected in accordance with the authorization set forth in these instructions if
they reasonably believe such request to be genuine, but may in certain cases be
liable for losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. AIS reserves the right to cease
to act as attorney-in-fact subject to this appointment, and AIM Distributors
reserves the right to modify or terminate the telephone redemption privilege at
any time without notice. An investor may elect not to have this privilege by
marking the appropriate box on the application. Then any redemptions must be
effected in writing by the investor.
SYSTEMATIC REDEMPTION PLAN. A Systematic Redemption Plan permits a
shareholder of an AIM Fund to withdraw on a regular basis at least $50 per
withdrawal. Under a Systematic Redemption Plan, all shares are to be held by
AIS. 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, AIM Enhanced Short Bond Fund, AIM Floating
Rate Fund and AIM Short Term Bond Fund, upon the redemption of Class B shares or
Class C shares (no CDSC applies to Class C shares of AIM Enhanced Short Bond
Fund or AIM Short Term Bond Fund unless you exchange shares of another AIM Fund
that are subject to a CDSC into AIM Enhanced Short Bond Fund or 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, AIM Enhanced Short Bond Fund, AIM Floating Rate 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, AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund 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 a Fund for at least 12
months, or (ii) the redemption is not a complete redemption of shares
held by the plan;
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- 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, AIM Cash Reserve
Shares of AIM Money Market Fund, and shares of AIM Enhanced Short Bond
Fund, AIM Floating Rate Fund or AIM Short Term Bond acquired by
exchange from 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,
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 exchanges of
Category I or II Fund, AIM Enhanced Short Bond Fund, AIM Floating Rate
Fund or AIM Short Term Bond Fund shares;
- Redemptions of shares of Category III Funds, shares of AIM Tax-Exempt
Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund acquired
by exchange from Class A shares of a Category III Fund purchased prior
to November 15, 2001;
- Redemptions of shares of Category I or II Funds, AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund 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, AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund or AIM Short Term Bond Fund, unless
the Category I or II Fund, AIM Enhanced Short Bond Fund, AIM Floating
Rate 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, AIM Enhanced Short Bond Fund, AIM Floating
Rate Fund or AIM Short Term Bond Fund shares;
- Redemptions of Category I or II Funds, AIM Enhanced Short Bond Fund,
AIM Floating Rate Fund 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, AIM Enhanced Short
Bond Fund, AIM Floating Rate Fund or AIM Short Term Bond Fund held by
an Investor Class shareholder.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS B, B1 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;
60
- Redemptions made in connection with participant-directed exchanges
between options in an employer-sponsored benefit plan;
- Redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan;
- Redemptions made in connection with a distribution from any retirement
plan or account that is permitted in accordance with the provisions of
Section 72(t)(2) of the Code, and the regulations promulgated
thereunder;
- Redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of
the Code upon hardship of the covered employee (determined pursuant to
Treasury Regulation Section 1.401(k)-1(d)(2)); and
- Redemptions made by or for the benefit of certain states, counties or
cities, or any instrumentalities, departments or authorities thereof
where such entities are prohibited or limited by applicable law from
paying a sales charge or commission.
CDSCs will not apply to the following redemptions of Class B, Class B1 or
Class C shares, as applicable:
- Additional purchases of Class C shares of AIM International Core
Equity Fund and AIM Real Estate Fund by shareholders of record on
April 30, 1995, of AIM International Value Fund, predecessor to AIM
International Core Equity Fund, and AIM Real Estate Fund, except that
shareholders whose broker-dealers maintain a single omnibus account
with AIS on behalf of those shareholders, perform sub-accounting
functions with respect to those shareholders, and are unable to
segregate shareholders of record prior to April 30, 1995, from
shareholders whose accounts were opened after that date will be
subject to a CDSC on all purchases made after March 1, 1996;
- 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 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 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.
61
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 notifies 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 Enhanced Short
Bond Fund or AIM Short Term Bond Fund if you received such Class C
shares by exchanging Class C shares of AIM Enhanced Short Bond Fund or
AIM Short Term Bond Fund; and
- Redemptions of Class C shares of AIM Enhanced Short Bond Fund or AIM
Short Term Bond Fund if you received such Class C shares by exchanging
Class C shares of another Fund and the original purchase was subject
to a CDSC.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS R SHARES AND FORMER CLASS
K SHAREHOLDERS THAT ACQUIRED CLASS A SHARES.
CDSCs will not apply to redemptions of Class A shares acquired as a result
of conversion of Class K shares into Class A shares where the retirement plan's
dealer of record notified the distributor prior to the time of purchase that the
dealer waived the upfront payment otherwise payable to him.
CDSCs will not apply to the following redemptions of Class R shares:
- 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 an 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. The
Fund will be deemed to have received the purchase or redemption order when the
Fund's authorized agent or its designee accepts the order. The order will be
priced at the net asset value next determined after the order is accepted by the
Fund's authorized agent.
62
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 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
63
mailing of confirmations promptly after the transactions. The investor also
acknowledges that the ability to effect internet transactions may be terminated
at any time by the AIM Funds.
ABANDONED PROPERTY. It is the responsibility of the investor to ensure that
AIS maintains a correct address for his account(s). An incorrect address may
cause an investor's account statements and other mailings to be returned to AIS.
Upon receiving returned mail, AIS will attempt to locate the investor or
rightful owner of the account. If unsuccessful, AIS will retain a shareholder
locator service with a national information database to conduct periodic
searches for the investor. If the search firm is unable to locate the investor,
the search firm will determine whether the investor's account has legally been
abandoned. AIS is legally obligated to escheat (or transfer) abandoned property
to the appropriate state's unclaimed property administrator in accordance with
statutory requirements. The investor's last known address of record determines
which state has jurisdiction.
OFFERING PRICE
The following formula may be used to determine the public offering price
per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price) = Offering
Price.
For example, at the close of business on December 30, 2005, AIM Global
Value Fund - Class A shares had a net asset value per share of $13.98. The
offering price, assuming an initial sales charge of 5.50%, therefore was $14.79.
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 statements due to adjustments
required by generally accepted accounting principles made to the net assets of
the Fund at period end.
Each equity security (excluding convertible bonds) held by a Fund is valued
at its last sales price on the exchange where the security is principally traded
or, lacking any sales on a particular day, the security is valued at the closing
bid price on that day. Each equity security traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) is valued on the basis of prices furnished by independent pricing
vendors or market makers. Each security reported on the NASDAQ National Market
System is valued at the NASDAQ Official Closing Price ("NOCP") or absent a NOCP,
at the closing bid price on that day. Debt securities (including convertible
bonds) are fair valued using an evaluated quote on the basis of prices provided
by an independent pricing vendor. Evaluated quotes provided by the pricing
vendors may be determined without exclusive reliance on quoted prices, and may
reflect appropriate factors such as institution-size trading in similar groups
of securities,
64
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 available, including situations where market
quotations are unreliable, are valued at fair value as determined in good faith
by or under the supervision of the Trust's officers in accordance with
procedures approved by the Board. Short-term investments are valued at amortized
cost when the security has 60 days or less to maturity.
Generally, trading in corporate bonds, U.S. Government securities and money
market instruments is substantially completed each day at various times prior to
the close of the customary trading session of the NYSE. The values of such
securities used in computing the net asset value of a Fund's shares are
determined at such times. Occasionally, events affecting the values of such
securities may occur between the times at which such values are determined and
the close of the customary trading session of the NYSE. If AIM believes a
development/event has actually caused a closing price to no longer reflect
current market value, the closing prices may be adjusted to reflect the fair
value of the affected security as of the close of the NYSE as determined in good
faith using procedures approved by the Board.
Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Trading in certain foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value of
each Fund's shares are determined as of the close of the respective markets.
Events affecting the values of such 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 which are not business days of the Fund. Because the net asset
value per share of each Fund is determined only on business days of the Fund,
the 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,
65
on behalf of the Fund, is obligated to redeem for cash all shares presented to
such Fund for redemption by any one shareholder in an amount up to the lesser of
$250,000 or 1% of that Fund's net assets in any 90-day period. The Rule 18f-1
Election is irrevocable while Rule 18f-1 under the 1940 Act is in effect unless
the SEC by order permits withdrawal of such Rule 18f-1 Election.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying
the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, generally must withhold 28% of redemption
payments and reportable dividends (whether paid or accrued) in the case of any
shareholder who fails to provide the Fund with a taxpayer identification number
("TIN") and a certification that he is not subject to backup withholding.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
2. the IRS notifies the Fund that the investor furnished an incorrect
TIN;
3. the investor or the Fund is notified by the IRS that the investor is
subject to backup withholding because the investor failed to report
all of the interest and dividends on such investor's tax return (for
reportable interest and dividends only);
4. the investor fails to certify to the Fund that the investor is not
subject to backup withholding under (3) above (for reportable interest
and dividend accounts opened after 1983 only); or
5. the investor does not certify his TIN. This applies only to non-exempt
mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1), (2) or (5) above
applies.
Certain payees and payments are exempt from backup withholding and
information reporting. AIM or AIS will not provide Form 1099 to those payees.
Investors should contact the IRS if they have any questions concerning
withholding.
IRS PENALTIES - Investors who do not supply the AIM Funds with a correct
TIN will be subject to a $50 penalty imposed by the IRS unless such failure is
due to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
generally remains in effect for a period starting on the date the Form is signed
and ending on the last day of the third succeeding calendar year. Such
shareholders may, however, be subject to federal income tax withholding at a 30%
rate on ordinary income dividends and other distributions. Under applicable
treaty law, residents of treaty countries may qualify for a reduced rate of
withholding or a withholding exemption.
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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, except for AIM Basic
Balanced Fund. 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 losses, if any, carried
forward from previous fiscal periods. All dividends and distributions will be
automatically reinvested in additional shares of the same class of each Fund
unless the shareholder has requested in writing to receive such dividends and
distributions in cash or that they be invested in shares of another AIM Fund,
subject to the terms and conditions set forth in the Prospectus under the
caption "Special Plans - Automatic Dividend Investment." Such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. If a shareholder's account does not have any shares in it
on a dividend or capital gain distribution payment date, the dividend or
distribution will be paid in cash whether or not the shareholder has elected to
have such dividends or distributions reinvested.
It is the present policy of the AIM Basic Balanced Fund to declare and pay
quarterly net investment income dividends and declare and pay annually capital
gain distributions.
Dividends on Class B, Class C and Class R shares are expected to be lower
than those for Class A and Investor Class 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 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 Internal Revenue Code of 1986, as amended
(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.
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Each Fund may use "equalization accounting" in determining the portion of
its net investment income and capital gain net income that has been distributed.
A Fund that elects to use equalization accounting will allocate a portion of its
realized investment income and capital gain to redemptions of Fund shares and
will reduce the amount of such income and gain that it distributes in cash.
However, each Fund intends to make cash distributions for each taxable year in
an aggregate amount that is sufficient to satisfy the Distribution Requirement
without taking into account its use of equalization accounting. The Internal
Revenue Service has not published any guidance concerning the methods to be used
in allocating investment income and capital gain to redemptions of shares. In
the event that the Internal Revenue Service determines that a Fund is using an
improper method of allocation and has underdistributed its net investment income
and capital gain net income for any taxable year, such Fund may be liable for
additional federal income tax.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock, securities or foreign currencies (to the extent
such currency gain is directly related to the regulated investment company's
principal business of investing in stock or securities), other income
(including, but not limited to, gains from options, futures or forward
contracts) derived from its business of investing in such stock, securities or
currencies and net income derived from certain publicly traded partnerships (the
"Income Requirement"). Under certain circumstances, a fund may be required to
sell portfolio holdings to meet this requirement.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company (the "Asset Diversification Test"). Under this test, at the
close of each quarter of each Fund's taxable year, at least 50% of the value of
the Fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers, as to which the Fund has not invested more than 5% of the
value of the Fund's total assets in securities of such issuer and as to which
the Fund does not hold more than 10% of the outstanding voting securities of
such issuer, and no more than 25% of the value of its total assets may be
invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), of two or
more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses or, collectively, of 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 Test where the
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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 a capital gain or loss.
Certain hedging transactions that may be engaged in by certain of the Funds
(such as short sales) may be subject to special tax treatment as "constructive
sales" under Section 1259 of the Code if a Fund holds certain "appreciated
financial positions" (defined generally as any interest (including a futures or
forward contract, short sale or option) with respect to stock, certain debt
instruments, or partnership interests if there would be a gain were such
interest sold, assigned, or otherwise terminated at its fair market value). Upon
entering into a constructive sales transaction with respect to an appreciated
financial position, a Fund will generally be deemed to have constructively sold
such appreciated financial position and will recognize gain as if such position
were sold, assigned, or otherwise terminated at its fair market value on the
date of such constructive sale (and will take into account any gain for the
taxable year which includes such date).
Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds may enter into will be subject to
special tax treatment as "Section 1256 contracts." Section 1256 contracts that a
Fund holds are treated as if they are sold for their fair market value on the
last business day of the taxable year, regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date. Any
gain or loss recognized as a consequence of the year-end deemed disposition of
Section 1256 contracts is combined with any other gain or loss that was
previously recognized upon the termination of Section 1256 contracts during that
taxable year. The net amount of such gain or loss for the entire taxable year
(including gain or loss arising as a consequence of the year-end deemed sale of
such contracts) is deemed to be 60% long-term and 40% short-term gain or loss.
However, in the case of Section 1256 contracts that are forward foreign currency
exchange contracts, the net gain or loss is separately determined and (as
discussed above) generally treated as ordinary income or loss. If such a future
or option is held as an offsetting position and can be considered a straddle
under Section 1092 of the Code, such a straddle will constitute a mixed
straddle. A mixed straddle will be subject to both Section 1256 and Section 1092
unless certain elections are made by the Fund.
Other hedging transactions in which the Funds may engage may result in
"straddles" or "conversion transactions" for U.S. federal income tax purposes.
The straddle and conversion transaction rules may affect the character of gains
(or in the case of the straddle rules, losses) realized by the Funds. In
addition, losses realized by the Funds on positions that are part of a straddle
may be deferred under
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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 a 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 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 Internal Revenue Service determines that a
70
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
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.
Ordinary income dividends paid by a Fund to individuals and other
noncorporate taxpayers will be treated as qualified dividend income that is
subject to tax at a maximum rate of 15% to the extent of the amount of
qualifying dividends received by the Fund from domestic corporations and from
foreign corporations that are either incorporated in a possession of the United
States, or are eligible for benefits under certain income tax treaties with the
United States that include an exchange of information program. In addition,
qualifying dividends include dividends paid with respect to stock of a foreign
corporation that is readily tradable on an established securities market in the
United States. 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
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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 from earnings and profits will be
treated as a return of capital to the extent of (and in reduction of) the
shareholder's tax basis in his shares; any excess will be treated as gain from
the sale of his shares.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the ex-dividend date.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the IRS.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by a Fund, such distribution generally will be taxable
even though it represents a return of invested capital. Investors should be
careful to consider the tax implications of buying shares of a Fund just prior
to a distribution. The price of shares purchased at this time may reflect the
amounts 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
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acquisition of the shares subsequently acquired. The wash sale rules may also
limit the amount of loss that may be taken into account on disposition after
such adjustment.
BACKUP WITHHOLDING. The Funds may be required to withhold 28% of taxable
distributions and/or redemption payments. For more information refer to
"Purchase, Redemption and Pricing of Shares - Backup Withholding."
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United
States, is a nonresident alien individual, foreign trust or estate, foreign
corporation, or foreign partnership ("foreign shareholder"), depends on whether
the income from a Fund is "effectively connected" with a U.S. trade or business
carried on by such shareholder. If the income from a Fund is not effectively
connected with a U.S. trade or business carried on by a foreign shareholder,
distributions (other than distributions of long-term and short-term capital gain
and of certain types of interest income) will be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) upon the gross amount of the
distribution. Such a foreign shareholder would generally be exempt from U.S.
federal income tax on gain realized on the redemption of shares of a Fund,
capital gain dividends and amounts retained by a Fund that are designated as
undistributed net capital gain.
As a consequence of the enactment of the American Jobs Creation Act of
2004, such a foreign shareholder will also generally be exempt from U.S. federal
income tax on distributions that a Fund designates as "short-term capital gain
dividends" or as "interest-related dividends" for Fund taxable years beginning
after December 31, 2004 and before January 1, 2008. The aggregate amount that
may be designated as short-term capital gain dividends for a Fund's taxable year
is 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 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, 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
73
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 non-resident alien shareholder'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 taxes paid by the Fund that are attributable to any
distributions they receive; and (ii) either to deduct their pro-rata share of
foreign tax in computing their taxable income, or to use it (subject to various
Code limitations) as a foreign tax credit against Federal income tax (but not
both). No deduction for foreign tax may be claimed by a non-corporate
shareholder who does not itemize deductions or who is subject to alternative
minimum tax.
Unless certain requirements are met, a credit for foreign tax is subject to
the limitation that it may not exceed the shareholder's U.S. tax (determined
without regard to the availability of the credit) attributable to the
shareholder's foreign source taxable income. In determining the source and
character of distributions received from a Fund for this purpose, shareholders
will be required to allocate Fund distributions according to the source of the
income realized by the Fund. Each Fund's gain from the sale of stock and
securities and certain currency fluctuation gain and loss will generally be
treated as derived from U.S. sources. In addition, the limitation on the foreign
tax credit is applied separately to foreign source "passive" income, such as
dividend income, and the portion of foreign source income consisting of
qualified dividend income is reduced by approximately 57% to account for the tax
rate differential. Individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign tax included on Form 1099 and
whose foreign source income is all "qualified passive income" may elect each
year to be exempt from the foreign tax credit limitation and will be able to
claim a foreign tax credit without filing Form 1116 with its corresponding
requirement to report income and tax by country. Moreover, no foreign tax credit
will be allowable to any shareholder who has not held his shares of the Fund for
at least 16 days during the 30-day period beginning 15 days before the day such
shares become ex-dividend with respect to any Fund distribution to which foreign
income taxes are attributed (taking into account certain holding period
reduction requirements of the Code). Because of these limitations, shareholders
may be unable to claim a credit for the full amount of their proportionate
shares of the foreign income tax paid by a Fund.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing
general discussion of U.S. federal income tax consequences is based on the Code
and the regulations issued thereunder as in effect on April 7, 2006. Future
legislative or administrative changes or court decisions may significantly
74
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income, qualified dividend
income and capital gain dividends may differ from the rules for U.S. federal
income taxation described above. Distributions may also be subject to additional
state, local and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ
significantly from those summarized above. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in the Funds.
DISTRIBUTION OF SECURITIES
DISTRIBUTION PLANS
The Trust has adopted distribution plans pursuant to Rule 12b-1 under the
1940 Act with respect to each Fund's Class A shares, Class B shares, Class C
shares and, if applicable, Class R and Investor Class shares (collectively the
"Plans"). Each Fund, pursuant to the Plans, except the Investor Class Plan, pays
AIM Distributors compensation at the annual rate, shown immediately below, of
the Fund's average daily net assets of the applicable class.
FUND CLASS A CLASS B CLASS C CLASS R
- ---- ------- ------- ------- -------
AIM Basic Balanced Fund 0.25% 1.00 1.00 0.50
AIM European Small Company Fund 0.25 1.00 1.00 N/A
AIM Global Value Fund 0.25 1.00 1.00 N/A
AIM International Small Company Fund 0.25 1.00 1.00 N/A
AIM Mid Cap Basic Value Fund 0.25 1.00 1.00 0.50
AIM Select Equity Fund 0.25 1.00 1.00 N/A
AIM Small Cap Equity Fund 0.25 1.00 1.00 0.50
AIM Basic Balanced Fund, pursuant to its Investor Class plan, pays AIM
Distributors an amount necessary to reimburse AIM Distributors for its actual
allocated share of expenses incurred pursuant to the Investor Class Plan for the
period, up to a maximum annual rate of 0.25% of the average daily net assets of
the Investor Class shares of the Fund.
All of the Plans compensate or reimburse AIM Distributors, as applicable,
for the purpose of financing any activity which is primarily intended to result
in the sale of shares of the Funds. Such activities include, but are not limited
to, the following: printing of prospectuses and statements of additional
information and reports for other than existing shareholders; overhead;
preparation and distribution of advertising material and sales literature;
expenses of organizing and conducting sales seminars; supplemental payments to
dealers and other institutions such as asset-based sales charges or as payments
of service fees under shareholder service arrangements; and costs of
administering each Plan.
Amounts payable by a Fund under the Class A, Class B, Class C and Class R
Plans need not be directly related to the expenses actually incurred by AIM
Distributors on behalf of each Fund. 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 allocated share of expenses exceeds the fee
payable to AIM Distributors at any given time, under these Plans the Funds will
not be obligated to pay more than that fee. If AIM Distributors' actual
allocated share of expenses is less than the fee it receives, under these Plans
AIM Distributors will retain the full amount of the fee.
Amounts payable by AIM Basic Balanced Fund under its Investor Class Plan
are directly related to the expenses incurred by AIM Distributors on behalf of
the Fund, as this Plan obligates the Fund to
75
reimburse AIM Distributors for its actual allocated share of expenses incurred
pursuant to the Investor Class Plan for the period, up to a maximum annual rate
of 0.25% of the average daily net assets of the Investor Class shares of the
Fund. If AIM Distributors' actual allocated share of expenses incurred pursuant
to the Investor Class Plan for the period exceeds the 0.25% annual cap, under
this Plan AIM Basic Balanced Fund will not be obligated to pay more than the
0.25% annual cap. If AIM Distributors' actual allocated share of expenses
incurred pursuant to the Investor Class Plan for the period is less than the
0.25% annual cap, under this Plan AIM Distributors is entitled to be reimbursed
only for its actual allocated share of expenses.
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 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 or 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. 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.
76
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 December 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 December 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 to curb sharp fluctuations in rates of
redemptions and sales, thereby reducing the chance that an unanticipated
increase in net redemptions could adversely affect the performance of each Fund.
Unless terminated earlier in accordance with their terms, the Plans
continue from year to year as long as such continuance is specifically approved,
in person, at least annually by the Board, including a majority of the Rule
12b-1 Trustees. A Plan may be terminated as to any Fund or class by the vote of
a majority of the Rule 12b-1 Trustees or, with respect to a particular class, by
the vote of a majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
the Plans may be amended by the trustees, including a majority of the Rule 12b-1
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Independent Trustees is committed to the discretion of the
Independent Trustees.
The Class B Plan obligates Class B shares to continue to make payments to
AIM Distributors following termination of the Class B shares Distribution
Agreement with respect to Class B shares sold by or attributable to the
distribution efforts of AIM Distributors or its predecessors, unless there has
been a complete termination of the Class B Plan (as defined in such Plan) and
the Class B Plan expressly authorizes AIM Distributors to assign, transfer or
pledge its rights to payments pursuant to the Class B Plan.
DISTRIBUTOR
The Trust has entered into master distribution agreements, as amended,
relating to the Funds (the "Distribution Agreements") with AIM Distributors, a
registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which
AIM Distributors acts as the distributor of shares of the Funds. The address of
AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees
and officers of the Trust are affiliated with AIM Distributors. See "Management
of the Trust."
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds on a continuous basis directly and
through other broker-dealers with whom AIM Distributors has entered into
selected dealer agreements. AIM Distributors has not undertaken to sell any
specified number of shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own resources to
dealers and institutions who sell Class B, Class C and Class R shares of the
Funds at the time of such sales.
77
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 December 31 are found in Appendix O.
FINANCIAL STATEMENTS
Each Fund's Financial Statements for the period ended December 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.
78
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 continue to
serve as your Fund's investment advisor. There is not 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.
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;
79
rescission of certain Funds' advisory agreements; interest; and attorneys' and
experts' fees. A list identifying such lawsuits (excluding those lawsuits that
have been recently transferred as mentioned herein) 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 (excluding the Berdat excessive fees consolidated lawsuit that has
been conditionally transferred to 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. 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.
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
80
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.
81
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.
A-1
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor
senior financial obligations and contracts. Such obligations generally have an
original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior
ability for repayment of senior short-term obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong
ability to repay senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Note: In addition, in certain countries the prime rating may be modified by
the issuer's or guarantor's senior unsecured long-term debt rating.
Moody's municipal ratings are as follows:
MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS
Municipal Ratings are opinions of the investment quality of issuers and
issues in the US municipal and tax-exempt markets. As such, these ratings
incorporate Moody's assessment of the default probability and loss severity of
these issuers and issues.
Municipal Ratings are based upon the analysis of four primary factors relating
to municipal finance: economy, debt, finances, and administration/management
strategies. Each of the factors is evaluated individually and for its effect on
the other factors in the context of the municipality's ability to repay its
debt.
A-2
AAA: Issuers or issues rated Aaa demonstrate the strongest creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
AA: Issuers or issues rated Aa demonstrate very strong creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
A: Issuers or issues rated A present above-average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
BAA: Issuers or issues rated Baa represent average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
BA: Issuers or issues rated Ba demonstrate below-average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
B: Issuers or issues rated B demonstrate weak creditworthiness relative to
other US municipal or tax-exempt issuers or issues.
CAA: Issuers or issues rated Caa demonstrate very weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
CA: Issuers or issues rated Ca demonstrate extremely weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
C: Issuers or issues rated C demonstrate the weakest creditworthiness
relative to other US municipal or tax-exempt issuers or issues.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa to Caa. The modifier 1 indicates that the issue
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic category.
MOODY'S MIG/VMIG US SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for
short-term obligations that are considered investment grade. These ratings are
designated as Moody's Investment Grade (MIG) and are divided into three levels -
MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality
are designated SG, or speculative grade.
In the case of variable rate demand obligations (VRDOs), a two-component
rating is assigned. The first element represents Moody's evaluation of the
degree of risk associated with scheduled principal and interest payments. The
second element represents Moody's evaluation of the degree of risk associated
with the demand feature, using the MIG rating scale.
The short-term rating assigned to the demand feature of VRDOs is designated
as VMIG. When either the long- or short-term aspect of a VRDO is not rated, that
piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG ratings expire at note maturity. By contrast, VMIG rating expirations
will be a function of each issue's specific structural or credit features.
Gradations of investment quality are indicated by rating symbols, with each
symbol representing a group in which the quality characteristics are broadly the
same.
A-3
MIG 1/VMIG 1: This designation denotes superior credit quality. Excellent
protection is afforded by established cash flows, highly reliable liquidity
support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of
protection are ample although not as large as in the preceding group.
MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and
cash flow protection may be narrow and market access for refinancing is likely
to be less well established.
SG: This designation denotes speculative-grade credit quality. Debt instruments
in this category may lack sufficient margins of protection.
STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS
Issue credit ratings are based in varying degrees, on the following
considerations: likelihood of payment - capacity and willingness of the obligor
to meet its financial commitment on an obligation in accordance with the terms
of the obligation; nature of and provisions of the obligation; and protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above.
S&P describes its ratings for corporate and municipal bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in a small degree.
A: Debt rated A has a strong capacity to meet its financial commitments although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions.
NR: Not Rated.
A-4
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or
demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, AAA/A-1+). With short-term demand debt, the note rating symbols are
used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
These categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated 'B' are regarded as having only speculative capacity for timely
payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless Standard & Poor's believes
such payments will be made during such grace period.
S&P SHORT-TERM MUNICIPAL RATINGS
An S&P note rating reflect the liquidity factors and market-access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note); and source of payment
(the more dependant the issue is on the market for its refinancing, the more
likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
A-5
SP-3: Speculative capacity to pay principal and interest.
FITCH LONG-TERM CREDIT RATINGS
Fitch Ratings provides an opinion on the ability of an entity or of a
securities issue to meet financial commitments, such as interest, preferred
dividends, or repayment of principal, on a timely basis. These credit ratings
apply to a variety of entities and issues, including but not limited to
sovereigns, governments, structured financings, and corporations; debt,
preferred/preference stock, bank loans, and counterparties; as well as the
financial strength of insurance companies and financial guarantors.
Credit ratings are used by investors as indications of the likelihood of
getting their money back in accordance with the terms on which they invested.
Thus, the use of credit ratings defines their function: "investment grade"
ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' -
'F3') indicate a relatively low probability of default, while those in the
"speculative" or "non-investment grade" categories (international Long-term 'BB'
- - 'D'; Short-term 'B' - 'D') either signal a higher probability of default or
that a default has already occurred. Ratings imply no specific prediction of
default probability. However, for example, it is relevant to note that over the
long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than
0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and
for 'B' rated bonds, 3.0%.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Entities or issues carrying the same rating are of similar but not
necessarily identical credit quality since the rating categories do not fully
reflect small differences in the degrees of credit risk.
Fitch credit and research are not recommendations to buy, sell or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
of taxability of payments of any security.
The ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch Ratings believes to be
reliable. Fitch Ratings does not audit or verify the truth or accuracy of such
information. Ratings may be changed or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
Our program ratings relate only to standard issues made under the program
concerned; it should not be assumed that these ratings apply to every issue made
under the program. In particular, in the case of non-standard issues, i.e.,
those that are linked to the credit of a third party or linked to the
performance of an index, ratings of these issues may deviate from the applicable
program rating.
Credit ratings do not directly address any risk other than credit risk. In
particular, these ratings do not deal with the risk of loss due to changes in
market interest rates and other market considerations.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong capacity for timely payment of financial
commitments, which is unlikely to be affected by foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor has a very strong capacity for timely payment of financial commitments
which is not significantly vulnerable to foreseeable events.
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
A-6
BBB: Bonds considered to be investment grade and of good credit quality. The
obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances are more
likely to impair this capacity.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of
information available to be inadequate for ratings purposes.
RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is
a reasonable possibility of a rating change and the likely direction of such
change. These are designated as "Positive," indicating a potential upgrade,
"Negative," for potential downgrade, or "Evolving," if ratings may be raised,
lowered or maintained. RatingWatch is typically resolved over a relatively short
period.
FITCH SPECULATIVE GRADE BOND RATINGS
BB: Bonds are considered speculative. There is a possibility of credit risk
developing, particularly as the result of adverse economic changes over time.
However, business and financial alternatives may be available to allow financial
commitments to be met.
B: Bonds are considered highly speculative. Significant credit risk is present
but a limited margin of safety remains. While bonds in this class are currently
meeting financial commitments, the capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC: Default is a real possibility. Capacity for meeting financial commitments
is solely reliant upon sustained, favorable business or economic developments.
CC: Default of some kind appears probable.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and are valued on the basis of their prospects
for achieving partial or full recovery value in liquidation or reorganization of
the obligor. "DDD" represents the highest potential for recovery on these bonds,
and "D" represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in categories below CCC.
FITCH SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings. A Short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
A-7
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as in
the case of the higher ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
A-8
APPENDIX B
PERSONS TO WHOM AIM PROVIDES
NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS
(AS OF APRIL 15, 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)
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 Trading Analytics Analyst
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 Chase 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)
Lehman Brothers, Inc. Broker (for certain AIM funds)
B-1
SERVICE PROVIDER DISCLOSURE CATEGORY
- ----------------------------------------------------- ---------------------------------------------------------------------
Lipper, Inc. 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)
MS Securities Services, Inc. and Morgan Stanley & Co. Securities Lender (for certain AIM funds)
Incorporated
McDonald Investments Inc. Broker (for certain AIM funds)
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)
Page International Financial Printer
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
Protective Securities Broker (for certain AIM funds)
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);
Securiti es 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 March 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 predecessor entities, if any.
TRUSTEE
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
INTERESTED PERSONS
Robert H. Graham(1) -- 1946 1992 Director and Chairman, A I M Management Group Inc. None
Trustee, Vice Chair, President (financial services holding company); Director and
and Principal Executive Officer Vice Chairman, AMVESCAP PLC; Chairman, AMVESCAP
PLC - AIM Division (parent of AIM and a global
investment management firm); and Trustee, Vice
Chair, President and Principal Executive Officer
of the AIM Family of Funds
Formerly: President and Chief Executive Officer,
A I M Management Group Inc.; Director, Chairman
and President, A I M Advisors, Inc. (registered
investment advisor); Director and Chairman, A I M
Capital Management, Inc. (registered investment
advisor), A I M Distributors, Inc. (registered
broker dealer), AIM Investment Services, Inc.,
(registered transfer agent), and Fund Management
Company (registered broker dealer); and Chief
Executive Officer, AMVESCAP PLC - Managed Products
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, None
Trustee and Executive Vice A I M Management Group Inc. (financial services
President holding company); Director, 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);
Chief Executive Officer, AMVESCAP PLC - AIM
Division (parent of AIM and a global investment
management firm); and Trustee and Executive Vice
President of the AIM Family of Funds
Formerly: Director, Chairman, President and Chief
Executive Officer, INVESCO Funds Group, Inc.; and
President and Chief Executive Officer, INVESCO
Distributors, Inc.; and 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
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
INDEPENDENT TRUSTEES
Bruce L. Crockett -- 1944 1987 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 2001 Retired Badgley Funds, Inc.
Trustee (registered
Formerly: Partner, law firm of Baker & McKenzie investment company)
(2 portfolios)
James T. Bunch - 1942 2003 Founder, Green, Manning & Bunch, Ltd. (investment None
Trustee banking firm); and Director, Policy Studies, Inc.
and Van Gilder Insurance Corporation
Albert R. Dowden -- 1941 2000 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
Jack M. Fields -- 1952 1997 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 1993 Partner, law firm of Kramer Levin Naftalis and Cortland Trust, Inc.
Trustee Frankel LLP (registered
investment company)
(3 portfolios)
Prema Mathai-Davis -- 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
Lewis F. Pennock -- 1942 1992 Partner, law firm of Pennock & Cooper None
Trustee
C-2
TRUSTEE
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
Ruth H. Quigley -- 1935 2001 Retired None
Trustee
Larry Soll, Ph.D. - 1942 2003 Retired None
Trustee
Raymond Stickel, Jr. - 1944 2005 Retired Director, Mainstay
Trustee VP Series Funds,
Formerly; Partner, Deloitte & Touche Inc. (21 portfolios)
OTHER OFFICERS
Russell C. Burk - 1958 2005 Senior Vice President and Senior Officer of the N/A
Senior Vice President and AIM Family of Funds
Senior Officer
Formerly: Director of Compliance and Assistant
General Counsel, ICON Advisers, Inc.; Financial
Consultants, Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual Funds, Inc.
John M. Zerr(3) - 1962 2006 Director, Senior Vice President, Secretary and N/A
Senior Vice President, Chief General Counsel, A I M Management Group Inc.
Legal Officer and Secretary (financial services holding company) and A I M
Advisors, Inc.; Director and Vice President,
INVESCO Distributors, Inc.; Vice President, A I M
Capital Management, Inc., 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)
- ----------
(3) Mr. Zerr was elected Senior Vice President, Chief Legal Officer and
Secretary effective March 29, 2006.
C-3
TRUSTEE
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
Lisa O. Brinkley - 1959 2004 Global Compliance Director, AMVESCAP PLC; and Vice N/A
Vice President 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, Chief Legal Officer
and Secretary of the AIM Family of Funds; and
Senior Vice President and General Counsel, Liberty
Financial Companies, Inc. and Liberty Funds Group,
LLC
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M Advisors, N/A
Vice President,Treasurer and Inc.; and Vice President, Treasurer and Principal
Principal Financial Officer Financial Officer of the AIM Family of Funds
Formerly: Senior Vice President, AIM Investment
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;
Executive Vice President, A I M Management Group
Inc.; and Vice President of the AIM Family of
Funds
Formerly: Senior Vice President, AIM Private Asset
Management, Inc.; and Chief Equity Officer and
Senior Investment Officer, A I M Capital
Management, Inc.
C-4
TRUSTEE
AND/OR
NAME, YEAR OF BIRTH AND OFFICER OTHER TRUSTEESHIP(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
- ------------------------------- ------- -------------------------------------------------- --------------------
Karen Dunn Kelley - 1960 1992 Director of Cash Management, Managing Director and N/A
Vice President Chief Cash Management Officer, A I M Capital
Management, Inc.; Director and President, Fund
Management Company; Vice President, A I M
Advisors, Inc. and the AIM Family of Funds
Todd L. Spillane(4) - 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
- ----------
(4) Mr. Spillane was elected Chief Compliance Officer effective March 29, 2006.
C-5
TRUSTEE OWNERSHIP OF PORTFOLIO SHARES AS OF DECEMBER 31, 2005
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
DOLLAR RANGE OF EQUITY SECURITIES INVESTMENT COMPANIES OVERSEEN BY
NAME OF TRUSTEE PER PORTFOLIO TRUSTEE IN THE AIM FAMILY OF FUNDS(R)
--------------- ------------------------------------------------ -------------------------------------
Robert H. Graham Basic Balanced Over $100,000 Over $100,000
Premier Equity $50,001 - $100,000
Small Cap Equity Over $100,000
Mark H. Williamson European Small Company $50,001 - $100,000 Over $100,000
International Small Company Over $100,000
Bob R. Baker European Small Company $50,001 - $100,000 Over $100,000
International Small Company Over $100,000
Frank S. Bayley European Small Company $10,001 - $50,000 Over $100,000
James T. Bunch -0- Over $100,000(5)
Bruce L. Crockett International Small Company $10,001 - $50,000 Over $100,000(5)
Mid Cap Basic Value $10,001 - $50,000
Premier Equity $1 - $10,000
Select Equity $1 - $10,000
Small Cap Equity $10,001 - $50,000
Albert R. Dowden Small Cap Equity $10,001 - $50,000 Over $100,000
Edward K. Dunn, Jr.(6) European Small Company $10,001 - $50,000 Over $100,000(5)
International Small Company $10,001 - $50,000
Jack M. Fields Premier Equity Over $100,000 Over $100,000(5)
Carl Frischling European Small Company Over $100,000 Over $100,000(5)
International Small Company Over $100,000
Premier Equity $50,001 - $100,000
Select Equity Over $100,000
Prema Mathai-Davis European Small Company $10,001 - $50,000 Over $100,000(5)
Lewis F. Pennock Basic Balanced $10,001 - $50,000 Over $100,000
Global Value $10,001 - $50,000
Select Equity $1 - $10,000
Ruth H. Quigley European Small Company $1 - $10,000 $50,001 - $100,000
International Small Company $1 - $10,000
Larry Soll Basic Balanced $10,001 - $50,000 Over $100,000(5)
International Small Company $10,001 - $50,000
Raymond Stickel, Jr.(7) -0- Over $100,000
- ----------
(5) Includes the total amount of compensation deferred by the trustee at his or
her election pursuant to a deferred compensation plan. Such deferred
compensation is placed in a deferral account and deemed to be invested in
one or more of the AIM Funds.
(6) Mr. Dunn retired as a trustee of the Trust effective March 31, 2006.
(7) Mr. Stickel was elected as a trustee of the Trust effective October 1,
2005.
C-6
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 ESTIMATED
BENEFITS ANNUAL BENEFITS TOTAL
AGGREGATE ACCRUED UPON RETIREMENT COMPENSATION
COMPENSATION FROM BY ALL FROM ALL AIM FROM ALL
TRUSTEE THE TRUST(1) AIM FUNDS(2) FUNDS(3) AIM FUNDS(4)
------- ----------------- ------------ --------------- ------------
Bob R. Baker $17,533 $200,136 $162,613 $213,750
Frank S. Bayley 18,786 132,526 120,000 229,000
James T. Bunch 16,280 162,930 120,000 198,500
Bruce L. Crockett 29,445 83,764 120,000 359,000
Albert R. Dowden 18,786 112,024 120,000 229,000
Edward K. Dunn, Jr. (5) 18,786 141,485 120,000 229,000
Jack M. Fields 15,174 59,915 120,000 185,000
Carl Frischling(6) 16,020 59,042 120,000 195,250
Gerald J. Lewis(5) 16,280 162,930 114,375 198,500
Prema Mathai-Davis 17,533 69,131 120,000 213,750
Lewis F. Pennock 16,280 86,670 120,000 198,500
Ruth H. Quigley 17,533 154,658 120,000 213,750
Larry Soll 16,280 201,483 138,990 198,500
Raymond Stickel, Jr.(7) 4,288 -- 120,000 54,000
(1) Amounts shown are based on the fiscal year ended December 31, 2005. The
total amount of compensation deferred by all trustees of the Trust during
the fiscal year ended December 31, 2005, including earnings, was $60,727.
(2) During the fiscal year ended December 31, 2005, the total amount of
expenses allocated to the Trust in respect of such retirement benefits was
$152,755.
(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) Mr. Dunn and Mr. Lewis retired as trustees effective March 31, 2006 and
December 31, 2005, respectively.
(6) During the fiscal year ended December 31, 2005 the Trust paid $37,533 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.
(7) Mr. Stickel was elected as a 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.
E-3
4. All communications regarding proxy issues between the proxy committee
and companies or their agents, or with fellow shareholders shall be
for the sole purpose of expressing and discussing AIM's concerns for
its advisory clients' interests and not for an attempt to influence or
control management.
C. BUSINESS/DISASTER RECOVERY
If the proxy committee is unable to meet due to a temporary business
interruption, such as a power outage, a sub-committee of the proxy
committee, even if such subcommittee does not constitute a quorum of the
proxy committee, may vote proxies in accordance with the policies stated
herein. If the sub-committee of the proxy committee is not able to vote
proxies, the sub-committee shall authorize ISS to vote proxies by default
in accordance with ISS' proxy policies and procedures, which may vary
slightly from AIM's.
D. RESTRICTIONS AFFECTING VOTING
If a country's laws allow a company in that country to block the sale of
the company's shares by a shareholder in advance of a shareholder meeting,
AIM will not vote in shareholder meetings held in that country, unless the
company represents that it will not block the sale of its shares in
connection with the meeting. Administrative or other procedures, such as
securities lending, may also cause AIM to refrain from voting. Although AIM
considers proxy voting to be an important shareholder right, the proxy
committee will not impede a portfolio manager's ability to trade in a stock
in order to vote at a shareholder meeting.
E. CONFLICTS OF INTEREST
The proxy committee reviews each proxy to assess the extent to which there
may be a material conflict between AIM's interests and those of advisory
clients. A potential conflict of interest situation may include where AIM
or an affiliate manages assets for, administers an employee benefit plan
for, provides other financial products or services to, or otherwise has a
material business relationship with, a company whose management is
soliciting proxies, and failure to vote proxies in favor of management of
the company may harm AIM's relationship with the company. In order to avoid
even the appearance of impropriety, the proxy committee will not take AIM's
relationship with the company into account, and will vote the company's
proxies in the best interest of the advisory clients, in accordance with
these proxy policies and procedures.
If AIM's proxy policies and voting record do not guide the proxy
committee's vote in a situation where a conflict of interest exists, the
proxy committee will vote the proxy in the best interest of the advisory
clients, and will provide information regarding the issue to the Funds'
Board of Trustees in the next quarterly report.
If a committee member has any conflict of interest with respect to a
company or an issue presented, that committee member should inform the
proxy committee of such conflict and abstain from voting on that company or
issue.
F. FUND OF FUNDS
When an AIM Fund (an "Investing Fund") that invests in another AIM Fund(s)
(an "Underlying Fund") has the right to vote on the proxy of the Underlying
Fund, the Investing Fund will echo the votes of the other shareholders of
the Underlying AIM Fund.
G. CONFLICT IN THESE POLICIES
If following any of the policies listed herein would lead to a vote that
the proxy committee deems to be not in the best interest of AIM's advisory
clients, the proxy committee will vote the proxy in the manner that they
deem to be the best interest of AIM's advisory clients and will inform the
Funds' Board of Trustees of such vote and the circumstances surrounding it
promptly thereafter.
E-4
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 April 6, 2006.
AIM BASIC BALANCED FUND
CLASS A CLASS B CLASS C CLASS R INVESTOR INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
- ------------------- ---------- ---------- ---------- ---------- ------------ -------------
AIM Advisors Inc.
Attn: Corporate Controller
11 E Greenway Plaza., Ste. 1919
Houston, TX 77046-1103 -- -- -- -- -- 24.96%*
AMVESCAP National Trust
Company FBO AIM Management Group
Non Qualified Deferred Comp Plan
P.O. Box 105779
Atlanta, GA 30348-5779 62.15%
Counsel Trust FBO Crittenden
Health Systems 401k Savings Plan
235 St. Charles Way, Suite 100
York, PA 17402-4658 -- -- -- 8.36% -- --
F-1
CLASS A CLASS B CLASS C CLASS R INVESTOR INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
- ------------------- ---------- ---------- ---------- ---------- ------------ -------------
INVESCO Funds Group Inc.
ATTN: Corporate Controller
11 E Greenway Plz., Ste. 1919
Houston, TX 77046-1103 -- -- -- -- -- 12.89%
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East, 2nd Floor
Jacksonville, FL 32246-6484 6.47% 5.54% 10.18% -- -- --
MG Trust Co. CUST
Fresh Meadow Mechanical Corp.
700 17th St. Ste. 300
Denver, CO 80202-3531 -- -- -- 7.09% -- --
Reliance Trust Co. CUST FBO
Tahoe Regional Planning Agency
P.O. Box 48529
Atlanta, GA 30362-1529 -- -- -- 8.65% -- --
Charles Schwab & Co Inc
Special Custody Acct for the
Exclusive Benefit of Customers
Attn: Mutual Funds 101 Montgomery
St. San Francisco, CA 94104-4122 14.93%
F-2
CLASS A CLASS B CLASS C CLASS R INVESTOR INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
- ------------------- ---------- ---------- ---------- ---------- ------------ -------------
Symetra Investment Services Inc.
P.O. Box 34443
Seattle, WA 98124-1443 -- -- -- 20.50% -- --
* Owned of record and beneficially.
AIM EUROPEAN SMALL COMPANY FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
- ------------------- ------------------- ------------------- -------------------
Citigroup Global Markets
ATTN: Cindy Tempesta 7th Fl
333 34th St. New York,
NY 10001-2402 -- 6.09% 5.00%
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East 2nd Fl
Jacksonville, FL 32246-6484 7.61% -- 17.01%
Morgan Stanley DW
ATTN: Mutual Fund Operations
3 Harborside Pl. Fl 6
Jersey City, NJ 07311-3907 -- -- 5.20%
F-3
AIM GLOBAL VALUE FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ----------------
AIM International Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plaza, Suite 100
Houston, TX 77046-1113 -- -- -- 99.92%
Charles Schwab & CO. Inc.
Special Custody FBO Customers (SIM)
ATTN: Mutual Funds
101 Montgomery St.
San Francisco, CA 94014-4122 12.61% -- -- --
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East, 2nd Fl
Jacksonville, FL 32246-6484 7.82% 8.61% 14.12% --
AIM INTERNATIONAL SMALL COMPANY FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ----------------
AIM International Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plaza, Suite 100
Houston, TX 77046-1113 -- -- -- 99.70%
Citigroup Global Markets
ATTN: Cindy Tempesta 7th Fl
333 34th St.
New York, NY 10001-2402 -- 10.28% 11.71% --
F-4
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ----------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East
2nd Fl
Jacksonville, FL 32246-6484 15.53% 6.86% 20.45% --
Morgan Stanley DW
Attn: Mutual Fund Operations
3 Harborside Pl. Fl 6
Jersey City, NJ 07311-3907 -- 8.19% 6.55% --
AIM MID CAP BASIC VALUE FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ---------------- ----------------
AIM Advisors Inc.
Attn: Corporate Controller
11 E Greenway Plaza., Ste. 1919
Houston, TX 77046-1103 -- -- -- 6.02% --
AIM Moderate Asset Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plz., Ste. 100
Houston, TX 77046-1113 -- -- -- -- 78.58%
AIM Moderate Growth Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plz., Ste. 100
Houston, TX 77046-1113 -- -- -- -- 17.46%
F-5
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ---------------- ----------------
American Congress on Surveying
Curtis Wayne Sumner
3155 Kinross Cir.
Herndon, VA 20171-4042 -- -- -- 8.45% --
Diamond Speed Products Inc.
Gene Jenke
1631 S. Michigan Ave Apt. 201
Chicago, IL 60616-1252 -- -- -- 11.17% --
Doy Tech Inc.
Jun Yuan Deng
38594 Whitman Ter.
Fremont, CA 94536-6055 -- -- -- 9.76% --
Donna M. Lambert
Donna M. Lambert -- -- -- 5.00% --
660 Cardinal St.
Plantation, FL 33324-8213
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East,
2nd Fl
Jacksonville, FL 32246-6484 -- -- 6.09% 13.60% --
New Foundations Consulting
Richard M. Tapply
78 Old Lake Shore Rd.
Gilford, NH 03249-6522 -- -- -- 11.13% --
Spin Vision Inc.
Scott M Spicer
A1 Country Club Road
East Rochester, NY 14445-2257 -- -- -- 5.39% --
F-6
AIM SELECT EQUITY FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ----------------
Citigroup Global Markets
ATTN: Cindy Tempesta 7th Fl
333 34th St.
New York, NY 10001-2402 5.57% -- 5.74%
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East, 2nd Fl
Jacksonville, FL 32246-6484 5.29% -- 6.20%
AIM SMALL CAP EQUITY FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ---------------- ----------------
AIM Moderate Growth Allocation
Fund Omnibus Account
c/o AIM Advisors
11 E. Greenway Plz., Ste. 100
Houston, TX 77046-1113 -- -- -- -- 99.85%
Hartford Life Insurance Co.
Separate Account 401k
P.O. Box 2999
Hartford, CT 06104-2999 -- -- -- 11.78% --
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr., East
2nd Fl
Jacksonville, FL 32246-6484 6.70% -- 13.07% -- --
F-7
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
- ------------------- ---------------- ---------------- ---------------- ---------------- ----------------
MG Trustco Ttee
Godwin Pappas Langley Ronquillo LL
700 17th Street, Suite 300
Denver, CO 80202-3531 -- -- -- 7.91% --
Reliance Trust Co.
FBO Knightsbridge Solutions 401k -- -- -- 5.20% --
P.O. Box 48529
Atlanta, GA 30362-1529
Symetra Investments Inc.
P.O. Box 34443
Seattle, WA 98124-1443 -- -- -- 10.26% --
MANAGEMENT OWNERSHIP
As of April 6, 2006, the trustees and officers as a group owned less than
1% of the outstanding shares of each class of each Portfolio.
F-8
APPENDIX G
MANAGEMENT FEES
For the last three fiscal years ended December 31, the management fees payable
by each Fund, the amounts waived by AIM and the net fees paid by each Fund were
as follows:
2005 2004 2003
---------------------------------- ---------------------------------- ----------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT NET
FEE FEE MANAGEMENT FEE FEE MANAGEMENT FEE FEE MANAGEMENT
FUND NAME PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID
--------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AIM Basic Balanced
Fund $5,363,006 $ 27,926 $5,335,080 $1,094,829 $ 292 $1,094,537 $ 762,772 $ 87,087 $ 675,685
AIM European Small
Company Fund 3,641,450 95,494 3,545,956 898,035 908 897,127 329,310 235,934 93,376
AIM Global Value Fund 1,048,456 66,341 982,115 310,539 49,124 261,415 119,494 119,494 -0-
AIM International
Small Company Fund 4,891,684 153,257 4,738,427 1,828,269 1,642 1,826,627 433,171 158,359 274,812
AIM Mid Cap Basic
Value Fund 1,852,909 129,266 1,723,643 1,259,409 1,532 1,257,877 585,948 87,608 498,340
AIM Select Equity Fund 2,866,180 15,623 2,850,557 3,284,662 3,147 3,281,515 3,333,532 4,384 3,329,148
AIM Small Cap Equity
Fund 3,735,906 491,753 3,244,153 4,233,084 3,093 4,229,991 3,062,023 3,786 3,058,237
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 December 31, 2005:
DOLLAR OTHER REGISTERED MUTUAL OTHER POOLED INVESTMENT OTHER ACCOUNTS
RANGE FUNDS (ASSETS IN MILLIONS) VEHICLES (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2)
OF -------------------------- ----------------------------- -----------------------
INVESTMENTS NUMBER NUMBER NUMBER
IN EACH OF OF OF
PORTFOLIO MANAGER FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ------------------ ----------- -------- --------- -------- -------- -------- --------
AIM BASIC BALANCED FUND
R. Canon
Coleman II $1-$10,000 7 $ 8,048.6 1 $ 16.7 3137 $977.7
Jan H. Friedli None 5 $ 1,276.2 2 $ 748.1 None None
Scot W. Johnson $10,001-
$50,000 8 $ 3,042.5 2 $ 748.1 None None
Matthew
Seinsheimer $10,001-
$50,000 7 $ 8,048.6 1 $ 16.7 3137 $977.7
Michael Simon None 11 $ 9,332.3 1 $ 16.7 3137 $977.7
Bret Stanley None 10 $17,132.9 1 $ 16.7 3137 $977.7
AIM EUROPEAN SMALL COMPANY FUND
Borge Endresen $10,001-
$50,000 4 $ 2,885.6 3 $ 125.2 None None
Jason T. Holzer over
$1,000,000 8 $ 5,456.5 10 $2,574.4 692 $289.6
AIM GLOBAL VALUE FUND
Glen Hilton None None None 3 $1,262.3 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 models.
H-1
DOLLAR OTHER REGISTERED MUTUAL OTHER POOLED INVESTMENT OTHER ACCOUNTS
RANGE FUNDS (ASSETS IN MILLIONS) VEHICLES (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)(2)
OF -------------------------- ----------------------------- -----------------------
INVESTMENTS NUMBER NUMBER NUMBER
IN EACH OF OF OF
PORTFOLIO MANAGER FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
- ------------------ ----------- -------- --------- -------- -------- -------- --------
AIM INTERNATIONAL SMALL COMPANY
Shuxin Cao $50,001-
$100,000 8 $ 4,520.1 1 $ 30.6 692 $ 289.6
Borge Edresen $10,001-
$50,000 4 $ 2,649.8 3 $ 125.2 None None
Jason T. Holzer $500,001-
$1,000,000 8 $ 5,220.7 10 $2,574.4 692 $ 289.6
Richard Nield $10,001-
$50,000 1 $ 955.1 7 $2,475.5 None None
AIM MID CAP BASIC VALUE FUND
R. Canon
Coleman III $10,001-
$50,000 7 $ 9,746.7 1 $ 16.7 3137 $ 977.7
Matthew W. $100,001-
Seinsheimer $500,000 7 $ 9,746.7 1 $ 16.7 3137 $ 977.7
Michael Simon $100,001-
$500,000 11 $11,030.4 1 $ 16.7 3137 $ 977.7
Bret Stanley $500,001-
$1,000,000 10 $18,831.0 1 $ 16.7 3137 $ 977.7
AIM PREMIER EQUITY FUND
Lanny H.
Sachnowitz None 14 $13,508.7 1 $ 68.4 212 $ 30.6
Ronald S. Sloan None 9 $ 9,967.8 1 $ 11.1 9451 $2,220.0
Bret W. Stanley None 10 $13,920.6 1 $ 16.7 3137 $ 977.7
AIM SELECT EQUITY FUND
Derek Izuel None 4 $ 884.8 6 $ 901.9 None None
Duy Nguyen $10,001-
$50,000 4 $ 884.8 6 $ 901.9 None None
AIM SMALL CAP EQUITY FUND
Juliet Ellis $100,001-
$500,000 8 $ 2,585.8 None None None None
Juan Hartsfield(3) None 7 $ 2,542.5 None None None None
POTENTIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager
has day-to-day management responsibilities with respect to more than one Fund or
other account. More specifically, portfolio managers who manage multiple Funds
and /or other accounts may be presented with one or more of the following
potential conflicts:
- ----------
(3) Mr. Hartsfield began serving as a portfolio manager on AIM Small Cap Equity
Fund on May 1, 2006.
H-2
- - 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.
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.
DESCRIPTION OF COMPENSATION STRUCTURE
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.
H-3
High fund performance (against applicable peer group) would deliver
compensation generally associated with top pay in the industry (determined
by reference to the third-party provided compensation survey information)
and poor fund performance (versus applicable peer group) could result in no
bonus. The amount of fund assets under management typically has an impact
on the bonus potential (for example, managing more assets increases the
bonus potential); however, this factor typically carries less weight than
relative performance. 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.
H-4
APPENDIX I
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the
last three fiscal years ended December 31:
FUND NAME 2005 2004 2003
--------- -------- -------- --------
AIM Basic Balanced Fund $280,598 $ 50,000 $ 50,000
AIM European Small Company Fund 108,161 50,000 50,000
AIM Global Value Fund 50,000 50,000 50,000
AIM International Small Company Fund 140,293 50,000 50,000
AIM Mid Cap Basic Value Fund 93,271 50,000 50,000
AIM Select Equity Fund 115,815 131,215 133,014
AIM Small Cap Equity Fund 137,856 144,542 112,855
I-1
APPENDIX J
BROKERAGE COMMISSIONS
Brokerage commissions(1) paid by each of the Funds listed below during the
last three fiscal years ended December 31 were as follows:
FUND 2005 2004 2003
- --------------------------------------- ---------- ---------- ----------
AIM Basic Balanced Fund(2) $ 256,812 $ 69,379 $ 64,027
AIM European Small Company Fund(3) 1,084,123 422,682 196,726
AIM Global Value Fund(4) 367,969 263,911 229,443
AIM International Small Company Fund(5) 1,791,061 1,276,368 408,813
AIM Mid Cap Basic Value Fund 161,856 180,373 143,936
AIM Select Equity Fund(6) 518,323 637,302 1,367,378
AIM Small Cap Equity Fund(7) 727,084 2,275,749 1,690,283
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 commissions paid by AIM Basic Balanced Fund for
the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 can be attributed to higher turnover. The
turnover ratio increased from 64% for the fiscal year ended December 31,
2004 to 90% for the fiscal year ended December 31, 2005.
3 The variation in brokerage commissions paid by European Small Company Fund
for the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 can be attributed to an increase in new net
flows seen by the Fund during the period. The variation in brokerage
commissions paid by AIM European Small Company Fund for the fiscal year
ended December 31, 2004 as compared to the prior fiscal year ended December
31, 2003 can be attributed to the Fund's high fluctuation in flows during
the 2003 period.
4 The variation in brokerage commissions paid by AIM Global Value Fund for
the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 was due to an increase in new net flows seen
by the Fund during the period.
5 The variation in brokerage commissions paid by AIM International Small
Company Fund for fiscal year ended December 31, 2005 as compared to the
prior fiscal year ended December 31, 2004 was due to an increase in new net
flows seen by the Fund during the period. The variation in brokerage
commissions paid by AIM International Small Company Fund for fiscal year
ended December 31, 2004 as compared to the fiscal year ended December 31,
2003 was predominantly due to the significant increase in new net flows as
seen by the Fund toward the end of 2004.
6 The variation in brokerage commissions paid by AIM Select Equity Fund for
the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 was due to an increase in the use of program
trades, which generally involve lower commissions than agency trades. The
variation of brokerage commissions paid by AIM Select Equity Fund for the
fiscal year end December 31, 2004 as compared to the prior fiscal year
ended December 31, 2003 can be attributed to the realignment of the Fund's
portfolio in 2003 by the Fund's current management team.
7 The variation in brokerage commissions paid by AIM Small Cap Equity Fund
for the fiscal year ended December 31, 2005 as compared to the prior fiscal
year ended December 31, 2004 was due to the lower turnover from 124% to 52%
resulting in lower trading costs. The variation in brokerage commissions
paid by AIM Small Cap Equity Fund for the fiscal year ended December 31,
2004 as compared to the prior fiscal year ended December 31, 2003 was due
to an increase in transactions executed with commissions as a result of the
realignment of the Fund's portfolio to fit the investment process of the
current management team that assumed management of the Fund in September of
2004.
J-1
APPENDIX K
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended December 31, 2005, each Fund allocated
the following amount of transactions to broker-dealers that provided AIM with
certain research, statistics and other information:
Related Brokerage
Fund Transactions(1) Commissions(1)
- ------------------------------------ --------------- -----------------
AIM Basic Balanced Fund $373,253,135 $ 528,596
AIM European Small Company Fund 519,391,105 1,177,387
AIM Global Value Fund 167,541,130 370,555
AIM International Small Company Fund 658,123,550 2,296,851
AIM Mid Cap Basic Value Fund 106,427,318 169,572
AIM Select Equity Fund 684,812,547 478,909
AIM Small Cap Equity Fund 308,656,464 1,687,445
(1) Amount is inclusive of commission paid to and brokerage transactions placed
with certain brokers that provide execution, research and other services.
During the last fiscal year ended December 31, 2005, the Funds purchased
securities issued by the following companies, which are "regular" brokers or
dealers of one or more of the Funds identified below:
Market Value (as of
Fund/Issuer Security December 31, 2005)
- -------------------------------------- ----------------------- -------------------
AIM Basic Balanced Fund
Bank of New York Co., Inc. (The) Common Stock $24,624,509
JPMorgan Chase & Co. Common Stock 43,735,125
Merrill Lynch & Co., Inc. Common Stock 24,659,816
Morgan Stanley Common Stock 26,324,523
ABN AMRO Preferred Stock, 5,900,000
UBS Preferred Funding Trust I Preferred Stock 1,368,248
Bank of America Mortgage Securities Asset-Backed Securities 1,373,187
Credit Suisse First Boston Mortgage
Securities Corp. Asset-Backed Securities 6,067,942
Morgan Stanley Mortgage Loan Trust Asset-Backed Securities 1,848,569
Lehman Brothers Inc. Bonds & Notes 1,062,001
AIM Select Equity Fund
Bank of America Corp. Common Stock $12,802,010
Goldman Sachs Group, Inc. (The) Common Stock 1,979,505
Lehman Brothers Holdings Inc. Common Stock 3,704,113
Merrill Lynch & Co., Inc. Common Stock 2,282,501
Morgan Stanley Common Stock 2,184,490
State Street Corp. Common Stock 698,544
K-1
APPENDIX L
CERTAIN FINANCIAL ADVISORS THAT RECEIVE ONE OR MORE TYPES OF PAYMENTS
1st 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
Legg 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 Fianancial Corporation
Signator Investors, Inc.
Spelman & Company, Inc.
State Farm VP Management Corp
Stifel Nicolaus & Company, Inc.
SunAmerica Securities, 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 December 31, 2005 follows:
INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS
FUND SHARES SHARES SHARES SHARES SHARES
- ------------------------------------ ---------- ---------- ---------- ------- --------
AIM Basic Balanced Fund(1) $1,166,814 $2,918,775 $1,054,623 $14,866 $431,604
AIM European Small Company Fund 773,147 453,236 549,167 N/A N/A
AIM Global Value Fund 193,365 387,057 172,371 N/A N/A
AIM International Small Company Fund 979,597 656,745 819,334 N/A N/A
AIM Mid Cap Basic Value Fund 362,707 656,543 286,200 395 N/A
AIM Select Equity Fund 672,000 1,222,895 254,994 N/A N/A
AIM Small Cap Equity Fund 678,339 1,383,549 589,989 75,527 N/A
(1) Investor Class shares of AIM Basic Balanced Fund commenced sales 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 December 31, 2005 follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $4,264 $465 $ 731 $-0- $1,142,269 $18,305 $ 780
AIM European Small Company Fund 8,202 683 2,343 -0- 728,962 30,897 2,060
AIM Global Value Fund 3,124 352 435 -0- 174,572 14,339 543
AIM International Small Company Fund 7,387 743 1,617 -0- 936,522 31,540 1,788
AIM Mid Cap Basic Value Fund 7,323 814 1,507 -0- 319,010 32,848 1,205
AIM Select Equity Fund -0- -0- -0- -0- 672,000 -0- -0-
AIM Small Cap Equity Fund 4,338 466 832 -0- 653,299 18,572 832
An estimate by category of the allocation of actual fees paid by Class B
shares of the Funds during the year ended December 31, 2005, follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $3,919 $415 $ 768 $2,189,081 $707,530 $16,239 $ 823
AIM European Small Company Fund 5,040 531 1,311 339,927 86,765 18,679 983
AIM Global Value Fund 1,481 188 418 290,293 88,205 6,472 -0-
AIM International Small Company Fund 7,056 738 1,641 492,558 126,856 26,665 1,231
AIM Mid Cap Basic Value Fund 2,351 293 406 492,407 152,754 8,126 203
AIM Select Equity Fund 2,032 201 418 917,171 293,448 9,067 558
AIM Small Cap Equity Fund 2,030 212 354 1,037,662 333,973 8,847 472
An estimate by category of the allocation of actual fees paid by Class C
shares of the Funds during the year ended December 31, 2005, follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $ 2,411 $ 255 $ 584 $ 53,766 $987,020 $10,170 $ 417
AIM European Small Company Fund 12,805 1,050 3,646 282,192 195,515 50,313 3,646
AIM Global Value Fund 2,276 276 511 58,204 99,105 11,488 511
AIM International Small Company Fund 16,502 1,471 4,493 377,433 346,318 68,624 4,493
AIM Mid Cap Basic Value Fund 3,375 293 815 74,589 192,862 13,858 408
AIM Select Equity Fund 455 -0- -0- 17,059 233,613 3,867 -0-
AIM Small Cap Equity Fund 2,006 273 380 38,745 541,178 7,217 190
An estimate by category of the allocation of actual fees paid by Class R
shares of the Funds during the year ended December 31, 2005, follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $ 218 $ 22 $ 60 $ 2,154 $11,574 $ 778 $ 60
AIM Mid Cap Basic Value Fund 9 2 3 132 161 85 3
AIM Small Cap Equity Fund 1,402 153 283 14,424 53,608 5,374 283
An estimate by category of the allocation of actual fees paid by Investor
Class shares of the Funds during the year ended December 31, 2005, follows:
PRINTING UNDERWRITERS DEALERS
ADVERTISING & MAILING SEMINARS COMPENSATION COMPENSATION PERSONNEL TRAVEL
----------- --------- -------- ------------ ------------ --------- ------
AIM Basic Balanced Fund $-0- $-0- $-0- $-0- $431,604 $-0- $-0-
N-1
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 ended December 31:
2005 2004 2003
--------------------- --------------------- ---------------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT
FUND CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
- ------------------------------------ ---------- -------- ---------- -------- ---------- --------
AIM Basic Balanced Fund $ 421,957 $ 77,055 $ 249,452 $ 44,826 $ 293,619 $ 54,699
AIM European Small Company Fund 1,347,942 219,114 581,044 90,095 74,772 11,964
AIM Global Value Fund 539,372 86,739 219,891 35,815 50,688 8,617
AIM International Small Company Fund 1,023,499 172,425 1,046,746 164,316 155,527 25,330
AIM Mid Cap Basic Value Fund 441,097 72,594 609,599 99,857 242,365 37,836
AIM Select Equity Fund 193,630 33,228 263,703 47,026 243,262 40,200
AIM Small Cap Equity Fund 429,372 82,687 415,868 69,295 1,037,324 161,868
The following chart reflects the contingent deferred sales charges paid by
Class A, Class B and Class C and Class R shareholders and retained by AIM
Distributors for the last three fiscal years ended December 31:
FUND 2005 2004 2003
- ------------------------------------ -------- -------- -------
AIM Basic Balanced Fund $112,301 $ 11,417 $ 3,417
AIM European Small Company Fund 242,494 56,226 11,872
AIM Global Value Fund 22,214 1,174 402
AIM International Small Company Fund 106,955 105,085 2,977
AIM Mid Cap Basic Value Fund 31,442 24,965 13,288
AIM Select Equity Fund 41,765 21,252 3,017
AIM Small Cap Equity Fund 45,119 44,636 11,190
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.
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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
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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.
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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
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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
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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 March 1, 2006, the MDL Court entered orders on Defendants' Motions to
dismiss in the derivative (Essenmacher) and class action (Lepera) lawsuits. The
MDL Court dismissed all derivative causes of action in the Essenmacher lawsuit
but two: (i) the excessive fee claim under Section 36(b) of the Investment
Company Act of 1940 (the "1940 Act"); and (ii) the "control person liability"
claim under Section 48 of the 1940 Act. The MDL Court dismissed all claims
asserted in the Lepera class action lawsuit 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 "control person liability" claim under Section
48 of the 1940 Act. Based on the MDL Court's March 1, 2006 orders, all claims
asserted against the Funds that have been transferred to the MDL Court have been
dismissed, although certain Funds remain nominal defendants in the derivative
(Essenmacher) lawsuit.
On February 27, 2006, Judge Motz for the MDL Court issued a memorandum
opinion on the AMVESCAP defendants' motion to dismiss the ERISA (Calderon)
lawsuit. Judge Motz granted the motion in part and denied the motion in part,
holding that: (i) plaintiff has both constitutional and statutory standing to
pursue her claims under ERISA Section 502(a)(2); (ii) plaintiff lacks standing
under ERISA Section 502(a)(3) to obtain equitable relief; (iii) the motion is
granted as to the claims alleged under ERISA Section 404 for failure to
prudently and loyally manage plan assets against certain AMVESCAP defendants;
(iv) the motion is denied as to the claims alleged under ERISA Section 404 for
failure to prudently and loyally manage plan assets against AMVESCAP and certain
other AMVESCAP defendants. The opinion also: (i) confirmed plaintiff's
abandonment of her claims that defendants engaged in prohibited transactions
and/or misrepresentation; (ii) postponed consideration of the duty to monitor
and co-fiduciary duty claims until after any possible amendments to the
complaints; (iii) stated that plaintiff may seek leave to amend her complaint
within 40 days of the date of filing of the memorandum opinion. Judge Motz
requested that the parties submit proposed orders within 30 days of the opinion
implementing his rulings.
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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. The parties are briefing
this issue for the MDL Court's consideration and final decision.
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
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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
SCHEDULE OF INVESTMENTS
June 30, 2006
(Unaudited)
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-97.67%
ADVERTISING-0.27%
Harte-Hanks, Inc. 37,280 $ 955,859
=======================================================================
AEROSPACE & DEFENSE-3.31%
Boeing Co. (The) 30,750 2,518,733
- -----------------------------------------------------------------------
General Dynamics Corp. 36,600 2,395,836
- -----------------------------------------------------------------------
Lockheed Martin Corp. 35,410 2,540,313
- -----------------------------------------------------------------------
Raytheon Co. 17,470 778,638
- -----------------------------------------------------------------------
Rockwell Collins, Inc. 41,700 2,329,779
- -----------------------------------------------------------------------
United Industrial Corp.(a) 12,397 560,964
- -----------------------------------------------------------------------
United Technologies Corp. 8,680 550,486
=======================================================================
11,674,749
=======================================================================
AIR FREIGHT & LOGISTICS-0.24%
Hub Group, Inc.-Class A(b) 33,800 829,114
=======================================================================
AIRLINES-0.27%
Mesa Air Group, Inc.(b) 51,900 511,215
- -----------------------------------------------------------------------
World Air Holdings, Inc.(b) 52,900 454,411
=======================================================================
965,626
=======================================================================
APPAREL RETAIL-1.20%
Dress Barn, Inc. (The)(b) 26,600 674,310
- -----------------------------------------------------------------------
Gap, Inc. (The) 84,320 1,467,168
- -----------------------------------------------------------------------
Payless ShoeSource, Inc.(b) 76,400 2,075,788
=======================================================================
4,217,266
=======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.60%
Polo Ralph Lauren Corp. 22,900 1,257,210
- -----------------------------------------------------------------------
VF Corp. 64,400 4,374,048
=======================================================================
5,631,258
=======================================================================
APPLICATION SOFTWARE-0.52%
Amdocs Ltd.(b) 21,400 783,240
- -----------------------------------------------------------------------
FactSet Research Systems Inc. 22,390 1,059,047
=======================================================================
1,842,287
=======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.30%
Affiliated Managers Group, Inc.(a)(b) 32,150 2,793,513
- -----------------------------------------------------------------------
Ameriprise Financial, Inc. 9,540 426,152
- -----------------------------------------------------------------------
Bank of New York Co., Inc. (The) 111,900 3,603,180
- -----------------------------------------------------------------------
Franklin Resources, Inc. 14,700 1,276,107
=======================================================================
8,098,952
=======================================================================
AUTOMOBILE MANUFACTURERS-0.29%
Thor Industries, Inc. 21,200 1,027,140
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
BIOTECHNOLOGY-0.40%
Amgen Inc.(b) 12,700 $ 828,421
- -----------------------------------------------------------------------
Biogen Idec Inc.(b) 12,280 568,932
=======================================================================
1,397,353
=======================================================================
BUILDING PRODUCTS-0.81%
Masco Corp. 86,100 2,552,004
- -----------------------------------------------------------------------
USG Corp.(a)(b) 4,200 306,306
=======================================================================
2,858,310
=======================================================================
CASINOS & GAMING-0.29%
Monarch Casino & Resort, Inc.(b) 35,870 1,008,664
=======================================================================
COMMERCIAL PRINTING-0.27%
Harland (John H.) Co. 21,700 943,950
=======================================================================
COMMUNICATIONS EQUIPMENT-2.11%
Cisco Systems, Inc.(b) 311,400 6,081,642
- -----------------------------------------------------------------------
Motorola, Inc. 66,800 1,346,020
=======================================================================
7,427,662
=======================================================================
COMPUTER HARDWARE-1.85%
Dell Inc.(b) 19,530 476,727
- -----------------------------------------------------------------------
Hewlett-Packard Co. 46,170 1,462,666
- -----------------------------------------------------------------------
International Business Machines Corp. 59,846 4,597,370
=======================================================================
6,536,763
=======================================================================
COMPUTER STORAGE & PERIPHERALS-0.97%
Komag, Inc.(a)(b) 20,500 946,690
- -----------------------------------------------------------------------
Lexmark International, Inc.-Class A(b) 44,570 2,488,343
=======================================================================
3,435,033
=======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-1.55%
Cummins Inc. 29,600 3,618,600
- -----------------------------------------------------------------------
Oshkosh Truck Corp. 38,800 1,843,776
=======================================================================
5,462,376
=======================================================================
CONSTRUCTION MATERIALS-1.16%
Cemex S.A. de C.V.-ADR (Mexico)(b) 14,705 837,744
- -----------------------------------------------------------------------
Eagle Materials Inc. 68,517 3,254,557
=======================================================================
4,092,301
=======================================================================
CONSUMER ELECTRONICS-0.49%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Netherlands) 56,007 1,744,058
=======================================================================
CONSUMER FINANCE-0.66%
ASTA Funding, Inc.(a) 30,600 1,145,970
- -----------------------------------------------------------------------
First Cash Financial Services, Inc.(b) 60,400 1,192,900
=======================================================================
2,338,870
=======================================================================
</Table>
F-1
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
DATA PROCESSING & OUTSOURCED SERVICES-1.21%
Fiserv, Inc.(b) 67,580 $ 3,065,429
- -----------------------------------------------------------------------
Global Payments Inc. 12,270 595,708
- -----------------------------------------------------------------------
Paychex, Inc. 15,300 596,394
=======================================================================
4,257,531
=======================================================================
DEPARTMENT STORES-1.07%
Nordstrom, Inc. 103,700 3,785,050
=======================================================================
DIVERSIFIED BANKS-1.56%
U.S. Bancorp 154,770 4,779,298
- -----------------------------------------------------------------------
Unibanco-Uniao de Bancos Brasileiros S.A.-ADR
(Brazil) 10,800 717,012
=======================================================================
5,496,310
=======================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-0.76%
Cendant Corp.(b) 163,600 2,665,044
=======================================================================
DIVERSIFIED METALS & MINING-0.17%
Freeport-McMoRan Copper & Gold, Inc.-Class B 10,900 603,969
=======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.43%
Amphenol Corp.-Class A 50,400 2,820,384
- -----------------------------------------------------------------------
Mettler-Toledo International Inc.(b) 36,700 2,222,919
=======================================================================
5,043,303
=======================================================================
ELECTRONIC MANUFACTURING SERVICES-0.34%
Trimble Navigation Ltd.(b) 27,100 1,209,744
=======================================================================
FOOD RETAIL-0.15%
Kroger Co. (The) 23,500 513,710
=======================================================================
FOOTWEAR-0.95%
Deckers Outdoor Corp.(b) 18,600 717,216
- -----------------------------------------------------------------------
NIKE, Inc.-Class B 32,500 2,632,500
=======================================================================
3,349,716
=======================================================================
HEALTH CARE DISTRIBUTORS-1.02%
AmerisourceBergen Corp. 37,800 1,584,576
- -----------------------------------------------------------------------
McKesson Corp. 42,930 2,029,730
=======================================================================
3,614,306
=======================================================================
HEALTH CARE EQUIPMENT-1.25%
Bard (C.R.), Inc. 16,100 1,179,486
- -----------------------------------------------------------------------
Becton, Dickinson and Co. 38,000 2,322,940
- -----------------------------------------------------------------------
IDEXX Laboratories, Inc.(b) 12,200 916,586
=======================================================================
4,419,012
=======================================================================
HEALTH CARE FACILITIES-1.46%
AmSurg Corp.(b) 47,500 1,080,625
- -----------------------------------------------------------------------
Community Health Systems Inc.(b) 22,000 808,500
- -----------------------------------------------------------------------
Universal Health Services, Inc.-Class B 10,200 512,652
- -----------------------------------------------------------------------
VCA Antech, Inc.(b) 86,500 2,761,945
=======================================================================
5,163,722
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
HEALTH CARE SERVICES-2.18%
Caremark Rx, Inc. 51,500 $ 2,568,305
- -----------------------------------------------------------------------
Laboratory Corp. of America Holdings(b) 23,410 1,456,804
- -----------------------------------------------------------------------
Pediatrix Medical Group, Inc.(b) 56,766 2,571,500
- -----------------------------------------------------------------------
Quest Diagnostics Inc. 18,400 1,102,528
=======================================================================
7,699,137
=======================================================================
HEALTH CARE TECHNOLOGY-0.25%
Computer Programs and Systems, Inc. 22,010 879,520
=======================================================================
HOME FURNISHINGS-1.21%
Ethan Allen Interiors Inc. 89,100 3,256,605
- -----------------------------------------------------------------------
Furniture Brands International, Inc.(a) 47,800 996,152
=======================================================================
4,252,757
=======================================================================
HOME IMPROVEMENT RETAIL-2.44%
Home Depot, Inc. (The) 89,800 3,213,942
- -----------------------------------------------------------------------
Sherwin-Williams Co. (The) 113,831 5,404,696
=======================================================================
8,618,638
=======================================================================
HOMEFURNISHING RETAIL-0.29%
Rent-A-Center Inc.(b) 41,100 1,021,746
=======================================================================
HOUSEHOLD APPLIANCES-1.65%
Black & Decker Corp. (The) 48,910 4,130,938
- -----------------------------------------------------------------------
Whirlpool Corp. 20,532 1,696,970
=======================================================================
5,827,908
=======================================================================
HOUSEHOLD PRODUCTS-0.18%
Kimberly-Clark Corp. 10,200 629,340
=======================================================================
HYPERMARKETS & SUPER CENTERS-0.26%
Costco Wholesale Corp. 15,860 906,082
=======================================================================
INDUSTRIAL GASES-0.67%
Airgas, Inc. 63,200 2,354,200
=======================================================================
INDUSTRIAL MACHINERY-1.77%
Danaher Corp. 20,400 1,312,128
- -----------------------------------------------------------------------
Illinois Tool Works Inc. 41,900 1,990,250
- -----------------------------------------------------------------------
Ingersoll-Rand Co. Ltd.-Class A 69,000 2,951,820
=======================================================================
6,254,198
=======================================================================
INSURANCE BROKERS-0.54%
Aon Corp. 54,516 1,898,247
=======================================================================
INTEGRATED OIL & GAS-4.30%
Exxon Mobil Corp. 199,650 12,248,527
- -----------------------------------------------------------------------
Occidental Petroleum Corp. 28,500 2,922,675
=======================================================================
15,171,202
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.69%
CenturyTel, Inc. 55,900 2,076,685
- -----------------------------------------------------------------------
TALK America Holdings, Inc.(b) 55,500 343,545
=======================================================================
2,420,230
=======================================================================
</Table>
F-2
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES-0.45%
EarthLink, Inc.(b) 182,700 $ 1,582,182
=======================================================================
INVESTMENT BANKING & BROKERAGE-4.38%
Goldman Sachs Group, Inc. (The) 26,253 3,949,239
- -----------------------------------------------------------------------
Lehman Brothers Holdings Inc. 78,652 5,124,178
- -----------------------------------------------------------------------
Merrill Lynch & Co., Inc. 38,700 2,691,972
- -----------------------------------------------------------------------
Morgan Stanley 58,474 3,696,141
=======================================================================
15,461,530
=======================================================================
IT CONSULTING & OTHER SERVICES-0.16%
Accenture Ltd.-Class A 19,430 550,258
=======================================================================
LEISURE PRODUCTS-0.51%
Brunswick Corp. 41,300 1,373,225
- -----------------------------------------------------------------------
Marvel Entertainment, Inc.(b) 22,000 440,000
=======================================================================
1,813,225
=======================================================================
LIFE & HEALTH INSURANCE-0.77%
Lincoln National Corp. 19,790 1,116,948
- -----------------------------------------------------------------------
Prudential Financial, Inc. 20,385 1,583,914
=======================================================================
2,700,862
=======================================================================
LIFE SCIENCES TOOLS & SERVICES-0.93%
Techne Corp.(b) 27,900 1,420,668
- -----------------------------------------------------------------------
Waters Corp.(b) 41,600 1,847,040
=======================================================================
3,267,708
=======================================================================
MANAGED HEALTH CARE-4.00%
Aetna Inc. 140,510 5,610,564
- -----------------------------------------------------------------------
Coventry Health Care, Inc.(b) 13,350 733,449
- -----------------------------------------------------------------------
Sierra Health Services, Inc.(b) 43,900 1,976,817
- -----------------------------------------------------------------------
UnitedHealth Group Inc. 97,771 4,378,186
- -----------------------------------------------------------------------
WellPoint Inc.(b) 19,490 1,418,287
=======================================================================
14,117,303
=======================================================================
METAL & GLASS CONTAINERS-0.23%
Silgan Holdings Inc. 22,000 814,220
=======================================================================
MOTORCYCLE MANUFACTURERS-0.48%
Harley-Davidson, Inc. 31,100 1,707,079
=======================================================================
MULTI-LINE INSURANCE-1.25%
Genworth Financial Inc.-Class A 72,300 2,518,932
- -----------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 22,500 1,903,500
=======================================================================
4,422,432
=======================================================================
OFFICE SERVICES & SUPPLIES-0.65%
Brady Corp.-Class A 62,600 2,306,184
=======================================================================
OIL & GAS DRILLING-0.35%
Pride International, Inc.(b) 20,000 624,600
- -----------------------------------------------------------------------
Unit Corp.(b) 10,600 603,034
=======================================================================
1,227,634
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-1.60%
BJ Services Co. 78,900 $ 2,939,814
- -----------------------------------------------------------------------
Core Laboratories N.V. (Netherlands)(b) 16,800 1,025,472
- -----------------------------------------------------------------------
Maverick Tube Corp.(b) 12,400 783,556
- -----------------------------------------------------------------------
Schlumberger Ltd. 13,500 878,985
=======================================================================
5,627,827
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.86%
Anadarko Petroleum Corp. 42,470 2,025,394
- -----------------------------------------------------------------------
Devon Energy Corp. 16,500 996,765
=======================================================================
3,022,159
=======================================================================
OIL & GAS REFINING & MARKETING-0.72%
Sunoco, Inc. 22,920 1,588,127
- -----------------------------------------------------------------------
Valero Energy Corp. 14,200 944,584
=======================================================================
2,532,711
=======================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-5.10%
Bank of America Corp. 196,340 9,443,954
- -----------------------------------------------------------------------
Citigroup Inc. 177,090 8,542,822
=======================================================================
17,986,776
=======================================================================
PACKAGED FOODS & MEATS-0.96%
General Mills, Inc. 65,260 3,371,332
=======================================================================
PHARMACEUTICALS-6.74%
AstraZeneca PLC-ADR (United Kingdom) 20,200 1,208,364
- -----------------------------------------------------------------------
Johnson & Johnson 98,805 5,920,396
- -----------------------------------------------------------------------
King Pharmaceuticals, Inc.(b) 78,800 1,339,600
- -----------------------------------------------------------------------
Merck & Co. Inc. 180,690 6,582,537
- -----------------------------------------------------------------------
Novartis A.G.-ADR (Switzerland) 67,220 3,624,502
- -----------------------------------------------------------------------
Pfizer Inc. 130,500 3,062,835
- -----------------------------------------------------------------------
Wyeth 45,500 2,020,655
=======================================================================
23,758,889
=======================================================================
PROPERTY & CASUALTY INSURANCE-4.25%
Allstate Corp. (The) 34,110 1,866,840
- -----------------------------------------------------------------------
Ambac Financial Group, Inc. 60,636 4,917,580
- -----------------------------------------------------------------------
Chubb Corp. (The) 25,600 1,277,440
- -----------------------------------------------------------------------
Fidelity National Financial, Inc. 40,100 1,561,895
- -----------------------------------------------------------------------
FPIC Insurance Group, Inc.(b) 21,100 817,625
- -----------------------------------------------------------------------
MBIA Inc. 19,520 1,142,896
- -----------------------------------------------------------------------
SAFECO Corp. 21,400 1,205,890
- -----------------------------------------------------------------------
United Fire & Casualty Co. 24,000 723,120
- -----------------------------------------------------------------------
W. R. Berkley Corp. 43,560 1,486,703
=======================================================================
14,999,989
=======================================================================
REGIONAL BANKS-1.56%
Cullen/Frost Bankers, Inc. 33,800 1,936,740
- -----------------------------------------------------------------------
KeyCorp 76,700 2,736,656
- -----------------------------------------------------------------------
Nara Bancorp, Inc. 44,200 828,750
=======================================================================
5,502,146
=======================================================================
</Table>
F-3
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
RESTAURANTS-3.30%
CEC Entertainment Inc.(b) 32,550 $ 1,045,506
- -----------------------------------------------------------------------
Darden Restaurants, Inc. 92,800 3,656,320
- -----------------------------------------------------------------------
Jack in the Box Inc.(b) 20,820 816,144
- -----------------------------------------------------------------------
Papa John's International, Inc.(b) 24,800 823,360
- -----------------------------------------------------------------------
Yum! Brands, Inc. 105,300 5,293,431
=======================================================================
11,634,761
=======================================================================
SEMICONDUCTORS-1.14%
Intel Corp. 38,300 725,785
- -----------------------------------------------------------------------
Microchip Technology Inc. 22,100 741,455
- -----------------------------------------------------------------------
National Semiconductor Corp. 53,690 1,280,506
- -----------------------------------------------------------------------
NVIDIA Corp.(b) 23,800 506,702
- -----------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.-
ADR (Taiwan) 84,459 775,334
=======================================================================
4,029,782
=======================================================================
SOFT DRINKS-0.26%
PepsiCo, Inc. 15,479 929,359
=======================================================================
SPECIALIZED CONSUMER SERVICES-1.01%
Jackson Hewitt Tax Service Inc. 68,100 2,134,935
- -----------------------------------------------------------------------
Steiner Leisure Ltd.(b) 36,500 1,442,845
=======================================================================
3,577,780
=======================================================================
SPECIALIZED FINANCE-0.50%
CIT Group, Inc. 23,032 1,204,343
- -----------------------------------------------------------------------
Portfolio Recovery Associates, Inc.(b) 12,600 575,820
=======================================================================
1,780,163
=======================================================================
SPECIALTY CHEMICALS-0.63%
A. Schulman, Inc. 97,500 2,231,775
=======================================================================
SPECIALTY STORES-0.73%
Staples, Inc. 105,700 2,570,624
=======================================================================
STEEL-2.70%
IPSCO, Inc. (Canada)(c) 57,300 5,483,037
- -----------------------------------------------------------------------
Nucor Corp. 74,200 4,025,350
=======================================================================
9,508,387
=======================================================================
SYSTEMS SOFTWARE-0.94%
Microsoft Corp. 87,400 2,036,420
- -----------------------------------------------------------------------
Oracle Corp.(b) 89,500 1,296,855
=======================================================================
3,333,275
=======================================================================
</Table>
<Table>
<Caption>
SHARES VALUE
- -----------------------------------------------------------------------
TECHNOLOGY DISTRIBUTORS-0.29%
CDW Corp. 18,800 $ 1,027,420
=======================================================================
THRIFTS & MORTGAGE FINANCE-0.24%
MGIC Investment Corp. 13,290 863,850
=======================================================================
TOBACCO-0.87%
Loews Corp-Carolina Group 16,570 851,201
- -----------------------------------------------------------------------
Reynolds American Inc. 16,200 1,867,860
- -----------------------------------------------------------------------
Vector Group Ltd.(a) 20,895 339,544
=======================================================================
3,058,605
=======================================================================
TRUCKING-0.75%
Arkansas Best Corp. 36,670 1,841,201
- -----------------------------------------------------------------------
Marten Transport, Ltd.(b) 36,800 800,032
=======================================================================
2,641,233
=======================================================================
Total Common Stocks & Other Equity
Interests (Cost $296,864,118) 344,501,673
=======================================================================
MONEY MARKET FUNDS-2.56%
Liquid Assets Portfolio-Institutional
Class(d) 4,515,909 4,515,909
- -----------------------------------------------------------------------
Premier Portfolio-Institutional Class(d) 4,515,909 4,515,909
=======================================================================
Total Money Market Funds (Cost
$9,031,818) 9,031,818
=======================================================================
Total Investments (excluding investments
purchased with cash collateral from
securities loaned)-100.23% (Cost
$305,895,936) 353,533,491
=======================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED-1.53%
MONEY MARKET FUNDS-1.53%
Liquid Assets Portfolio-Institutional Class
(Cost $5,391,945)(d)(e) 5,391,945 5,391,945
=======================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $5,391,945) 5,391,945
=======================================================================
TOTAL INVESTMENTS-101.76% (Cost $311,287,881) 358,925,436
=======================================================================
OTHER ASSETS LESS LIABILITIES-(1.76)% (6,216,305)
=======================================================================
NET ASSETS-100.00% $352,709,131
_______________________________________________________________________
=======================================================================
</Table>
Investment Abbreviations:
<Table>
ADR - American Depositary Receipt
</Table>
Notes to Schedule of Investments:
(a) All or a portion of this security was out on loan at June 30, 2006.
(b) Non-income producing security.
(c) A portion of this security is subject to call options written. See Note 1G
and Note 9.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(e) The security has been segregated to satisfy the 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-4
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006
(Unaudited)
<Table>
ASSETS:
Investments, at value (cost $296,864,118)* $344,501,673
- -----------------------------------------------------------
Investments in affiliated money market funds
(cost $14,423,763) 14,423,763
===========================================================
Total investments (Cost $311,287,881) 358,925,436
===========================================================
Receivables for:
Fund shares sold 32,109
- -----------------------------------------------------------
Dividends 341,797
- -----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 79,124
- -----------------------------------------------------------
Other assets 24,988
===========================================================
Total assets 359,403,454
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 751,916
- -----------------------------------------------------------
Options written, at value (premiums
received $33,879) 22,575
- -----------------------------------------------------------
Trustee deferred compensation and
retirement plans 120,844
- -----------------------------------------------------------
Collateral upon return of securities loaned 5,391,945
- -----------------------------------------------------------
Accrued distribution fees 131,331
- -----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 548
- -----------------------------------------------------------
Accrued transfer agent fees 173,632
- -----------------------------------------------------------
Accrued operating expenses 101,532
===========================================================
Total liabilities 6,694,323
===========================================================
Net assets applicable to shares outstanding $352,709,131
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $385,431,339
- -----------------------------------------------------------
Undistributed net investment income (loss) (568,017)
- -----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and option contracts (79,803,050)
- -----------------------------------------------------------
Unrealized appreciation of investment
securities and option contracts 47,648,859
===========================================================
$352,709,131
___________________________________________________________
===========================================================
NET ASSETS:
Class A $244,452,193
___________________________________________________________
===========================================================
Class B $ 88,772,775
___________________________________________________________
===========================================================
Class C $ 19,484,163
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 12,903,253
___________________________________________________________
===========================================================
Class B 5,301,748
___________________________________________________________
===========================================================
Class C 1,165,415
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 18.95
- -----------------------------------------------------------
Offering price per share
(Net asset value of $18.95 / 94.50%) $ 20.05
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 16.74
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 16.72
___________________________________________________________
===========================================================
</Table>
* At June 30, 2006, securities with an aggregate value of $5,298,789 were on
loan to brokers.
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-5
STATEMENT OF OPERATIONS
For the six months ended June 30, 2006
(Unaudited)
<Table>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $29,325) $ 2,418,382
- --------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $7,665, after compensation to
counterparties of $107,812) 244,688
==========================================================================
Total investment income 2,663,070
==========================================================================
EXPENSES:
Advisory fees 1,309,351
- --------------------------------------------------------------------------
Administrative services fees 53,312
- --------------------------------------------------------------------------
Custodian fees 18,541
- --------------------------------------------------------------------------
Distribution fees:
Class A 319,924
- --------------------------------------------------------------------------
Class B 498,729
- --------------------------------------------------------------------------
Class C 108,263
- --------------------------------------------------------------------------
Transfer agent fees 702,617
- --------------------------------------------------------------------------
Trustees' and officer's fees and benefits 12,852
- --------------------------------------------------------------------------
Other 127,405
==========================================================================
Total expenses 3,150,994
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (26,288)
==========================================================================
Net expenses 3,124,706
==========================================================================
Net investment income (loss) (461,636)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities (includes net gains from securities
sold to affiliates of $211,634) 23,018,990
- --------------------------------------------------------------------------
Option contracts written 19,904
==========================================================================
23,038,894
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (14,105,028)
- --------------------------------------------------------------------------
Option contracts written 11,304
==========================================================================
(14,093,724)
==========================================================================
Net gain from investment securities and option contracts 8,945,170
==========================================================================
Net increase in net assets resulting from operations $ 8,483,534
__________________________________________________________________________
==========================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-6
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2006 and the year ended December 31, 2005
(Unaudited)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2006 2005
- ------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (461,636) $ (1,966,358)
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 23,038,894 69,678,599
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and option contracts (14,093,724) (50,186,478)
==========================================================================================
Net increase in net assets resulting from operations 8,483,534 17,525,763
==========================================================================================
Share transactions-net:
Class A (21,338,575) (45,443,426)
- ------------------------------------------------------------------------------------------
Class B (19,516,045) (46,135,865)
- ------------------------------------------------------------------------------------------
Class C (3,822,153) (7,734,281)
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (44,676,773) (99,313,572)
==========================================================================================
Net increase (decrease) in net assets (36,193,239) (81,787,809)
==========================================================================================
NET ASSETS:
Beginning of period 388,902,370 470,690,179
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(568,017) and $(106,381),
respectively) $352,709,131 $388,902,370
__________________________________________________________________________________________
==========================================================================================
</Table>
See accompanying Notes to Financial Statements which are an integral part of the
financial statements.
F-7
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Select Equity Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware statutory trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of seven separate portfolios,
each authorized to issue an unlimited number of shares of beneficial interest.
The Fund currently offers multiple classes of shares. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund.
The Fund's investment objective is to achieve long-term growth of capital.
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.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period including estimates
and assumptions related to taxation. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities, including restricted securities, are
valued according to the following policy.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or
lacking any sales on a particular day, the security is valued at the
closing bid price on that day. Securities traded in the over-the-counter
market (but not securities reported on the NASDAQ National Market System)
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. 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 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.
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 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.
F-8
Securities for which market quotations are not readily available or are
unreliable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask
quotes of brokers and information providers and other market data may be
reviewed in the course of making a good faith determination of a security's
fair value.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.
C. 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 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 use 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, as such, will not be subject to federal
income taxes on otherwise taxable income (including net realized capital
gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.
F. 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. COVERED CALL OPTIONS -- The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. When the Fund
writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The amount of
the liability is subsequently "marked-to-market" to reflect the current
market value of the option written. The current market value of a written
option is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received. A risk in writing a
call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.
H. 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 $150 million 0.80%
- --------------------------------------------------------------------
Over $150 million 0.625%
___________________________________________________________________
====================================================================
</Table>
F-9
Through June 30, 2007, AIM has contractually agreed to waive advisory fees
to the extent necessary so that the advisory fees payable by the Fund (based on
the Fund's average daily net assets) do not exceed the annual rate of:
<Table>
<Caption>
AVERAGE NET ASSETS RATE
- --------------------------------------------------------------------
First $250 million 0.695%
- --------------------------------------------------------------------
Next $250 million 0.67%
- --------------------------------------------------------------------
Next $500 million 0.645%
- --------------------------------------------------------------------
Next $1.5 billion 0.62%
- --------------------------------------------------------------------
Next $2.5 billion 0.595%
- --------------------------------------------------------------------
Next $2.5 billion 0.57%
- --------------------------------------------------------------------
Next $2.5 billion 0.545%
- --------------------------------------------------------------------
Over $10 billion 0.52%
___________________________________________________________________
====================================================================
</Table>
Further, AIM has voluntarily agreed to waive advisory fees of the Fund in
the amount of 25% of the advisory fee AIM receives from the affiliated money
market funds on investments by the Fund in such affiliated money market funds
(excluding investments made in affiliated money market funds with cash
collateral from securities loaned by the fund). AIM is also voluntarily waiving
a portion of the advisory fee payable by the Fund equal to the difference
between the income earned from investing in the affiliated money market fund and
the hypothetical income earned from investing in an appropriate comparative
benchmark. Voluntary fee waivers or reimbursements may be modified or
discontinued at any time upon consultation with the Board of Trustees without
further notice to investors.
For the six months ended June 30, 2006, AIM waived fees of $15,389.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse
expenses incurred by the Fund in connection with market timing matters in the
AIM Funds, which may include legal, audit, shareholder reporting, communications
and trustee expenses. These expenses along with the related expense
reimbursement are included in the Statement of Operations. For the six months
ended June 30, 2006, AMVESCAP reimbursed expenses of the Fund in the amount of
$870.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. Pursuant to such agreement, for the six months
ended June 30, 2006, AIM was paid $53,312.
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 six months ended June 30, 2006, the Fund paid AIS $702,617.
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
and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule
12b-1 under the 1940 Act with respect to the Fund's Class A, Class B and Class C
shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI
compensation at the annual rate of 0.25% of the Fund's average daily net assets
of Class A shares and 1.00% of the average daily net assets of Class B and Class
C shares. Of the Rule 12b-1 payments, up to 0.25% of the average daily net
assets of the Class A, Class B or Class C shares may be paid to furnish
continuing personal shareholder services to customers who purchase and own
shares of such classes. Any amounts not paid as a service fee under the Plans
would constitute an asset-based sales charge 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 six months ended June 30, 2006, the Class A,
Class B and Class C shares paid $319,924, $498,729 and $108,263, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.
Front-end sales commissions are deducted from proceeds from the sales of Fund
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the six
months ended June 30, 2006, ADI advised the Fund that it retained $16,863 in
front-end sales commissions from the sale of Class A shares and $2, $22,710 and
$371 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-10
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and
Exchange Commission ("SEC") and 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 six months ended June 30,
2006.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 12/31/05 AT COST FROM SALES (DEPRECIATION) 06/30/06 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 5,977,525 $18,703,362 $(20,164,978) $ -- $4,515,909 $118,214 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
Premier
Portfolio-
Institutional
Class -- 4,932,921 (417,012) -- 4,515,909 1,934 --
- ----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 5,977,525 18,703,362 (24,680,887) -- -- 116,875 --
==================================================================================================================================
Subtotal $11,955,050 $42,339,645 $(45,262,877) $ -- $9,031,818 $237,023 $ --
==================================================================================================================================
</Table>
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
<Table>
<Caption>
CHANGE IN
UNREALIZED
VALUE PURCHASES PROCEEDS APPRECIATION VALUE DIVIDEND REALIZED
FUND 12/31/05 AT COST FROM SALES (DEPRECIATION) 06/30/06 INCOME* GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 1,402,365 $39,642,720 $(35,653,140) $ -- $ 5,391,945 $ 7,665 $ --
==================================================================================================================================
Total $13,357,415 $81,982,365 $(80,916,017) $ -- $14,423,763 $244,688 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
</Table>
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any
purchase or sale of securities by the Fund from or to another fund or portfolio
that is or could be considered an affiliate by virtue of having a common
investment advisor (or affiliated investment advisors), common Trustees and/or
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined
under the procedures, each transaction is effected at the current market price.
Pursuant to these procedures, for the six months ended June 30, 2006, the Fund
engaged in securities sales of $2,468,960, which resulted in net realized gains
of $211,634 and securities purchases of $2,141,990.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits
which result from balances in Demand Deposit Accounts (DDA) used by the transfer
agent for clearing shareholder transactions and (ii) custodian credits which
result from periodic overnight cash balances at the custodian. For the six
months ended June 30, 2006, the Fund received credits from these arrangements,
which resulted in the reduction of the Fund's total expenses of $10,029.
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 six months ended June 30, 2006, the Fund paid legal fees of
$2,433 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.
F-11
NOTE 7--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an
interfund lending facility that AIM has established for temporary borrowings by
the AIM Funds. An interfund loan will be made under this facility only if the
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on
each loan outstanding shall bear interest at the bid rate quoted by SSB at the
time of the request for the loan.
During the six months ended June 30, 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 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 rate contractually agreed upon.
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 June 30, 2006, securities with an aggregate value of $5,298,789 were on
loan to brokers. The loans were secured by cash collateral of $5,391,945
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended June 30, 2006, the Fund received dividends on cash
collateral investments of $7,665 for securities lending transactions, which are
net of compensation to counterparties.
NOTE 9--OPTION CONTRACTS WRITTEN
<Table>
<Caption>
TRANSACTIONS DURING THE PERIOD
- -----------------------------------------------------------------------------------
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
- -----------------------------------------------------------------------------------
Beginning of period -- $ --
- -----------------------------------------------------------------------------------
Written 520 53,783
- -----------------------------------------------------------------------------------
Expired (220) (19,904)
===================================================================================
End of period 300 $ 33,879
___________________________________________________________________________________
===================================================================================
</Table>
<Table>
<Caption>
OPEN OPTIONS WRITTEN AT PERIOD END
- ------------------------------------------------------------------------------------------------------------------------------
CONTRACT STRIKE NUMBER OF PREMIUMS UNREALIZED
MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
- ------------------------------------------------------------------------------------------------------------------------------
CALLS
Eagle Materials Inc. Jul-06 50 90 $ 7,470 $ 7,425 $ 45
- ------------------------------------------------------------------------------------------------------------------------------
Eagle Materials Inc. Jul-06 55 90 2,970 1,350 1,620
- ------------------------------------------------------------------------------------------------------------------------------
IPSCO, Inc. (Canada) Jul-06 100 40 12,279 8,600 3,679
- ------------------------------------------------------------------------------------------------------------------------------
IPSCO, Inc. (Canada) Jul-06 105 40 7,280 3,800 3,480
- ------------------------------------------------------------------------------------------------------------------------------
IPSCO, Inc. (Canada) Jul-06 110 40 3,880 1,400 2,480
==============================================================================================================================
Total 300 $33,879 $22,575 $11,304
______________________________________________________________________________________________________________________________
==============================================================================================================================
</Table>
F-12
NOTE 10--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
reported at the Fund's fiscal year-end. Capital loss carryforward is calculated
and reported as of a specific date. Results of transactions and other activity
after that date may affect the amount of capital loss carryforward actually
available for the Fund to utilize. The ability to utilize capital loss
carryforward in the future may be limited under the Internal Revenue Code and
related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2005 which
expires as follows:
<Table>
<Caption>
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
- -----------------------------------------------------------------------------
December 31, 2010 $ 56,001,620
- -----------------------------------------------------------------------------
December 31, 2011 46,792,314
=============================================================================
Total capital loss carryforward $102,793,934
_____________________________________________________________________________
=============================================================================
</Table>
* Capital loss carryforward as of the date listed above is reduced for
limitations, if any, to the extent required by the Internal Revenue Code.
NOTE 11--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities
and money market funds) purchased and sold by the Fund during the six months
ended June 30, 2006 was $128,595,816 and $170,808,132, respectively. For interim
reporting periods, the cost of investments for tax purposes includes reversals
of certain tax items, such as, wash sales that have occurred since the prior
fiscal year-end.
<Table>
<Caption>
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS}
- -------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $56,192,398
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (8,568,310)
===============================================================================
Net unrealized appreciation of investment securities $47,624,088
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $311,301,348.
</Table>
NOTE 12--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A, Class B
and Class C. Class A shares are sold with a front-end sales charge. Class B
shares and Class C shares are sold with 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
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, 2005
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 292,459 $ 5,643,892 780,120 $ 13,761,890
- -----------------------------------------------------------------------------------------------------------------------
Class B 155,575 2,653,233 498,217 7,793,624
- -----------------------------------------------------------------------------------------------------------------------
Class C 73,427 1,251,507 193,899 3,028,919
=======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 384,879 7,422,341 1,121,759 19,623,817
- -----------------------------------------------------------------------------------------------------------------------
Class B (434,746) (7,422,341) (1,259,304) (19,623,817)
=======================================================================================================================
Reacquired:
Class A (1,788,029) (34,404,808) (4,470,464) (78,829,133)
- -----------------------------------------------------------------------------------------------------------------------
Class B (866,492) (14,746,937) (2,192,148) (34,305,672)
- -----------------------------------------------------------------------------------------------------------------------
Class C (299,372) (5,073,660) (688,802) (10,763,200)
=======================================================================================================================
(2,482,299) $(44,676,773) (6,016,723) $(99,313,572)
_______________________________________________________________________________________________________________________
=======================================================================================================================
</Table>
F-13
NOTE 13 -- 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 of 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.
NOTE 14 -- FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<Table>
<Caption>
CLASS A
--------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------------------------------
2006 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 18.55 $ 17.65 $ 15.50 $ 11.97 $ 17.00 $ 22.88
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.00) (0.04)(a) (0.06)(a)(b) (0.09)(a) (0.06)(a) (0.08)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.40 0.94 2.21 3.62 (4.97) (5.79)
=================================================================================================================================
Total from investment
operations 0.40 0.90 2.15 3.53 (5.03) (5.87)
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- -- (0.01)
=================================================================================================================================
Net asset value, end of
period $ 18.95 $ 18.55 $ 17.65 $ 15.50 $ 11.97 $ 17.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 2.16% 5.10% 13.87% 29.49% (29.59)% (25.64)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $244,452 $259,946 $292,681 $288,976 $250,666 $396,779
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets 1.42%(d)(e) 1.39% 1.38%(e) 1.47% 1.32% 1.24%
=================================================================================================================================
Ratio of net investment
income (loss) to average
net assets (0.00)%(d) (0.21)% (0.40)%(b) (0.65)% (0.45)% (0.45)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 35% 91% 38% 69% 86% 117%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.08) and (0.51)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$258,060,258.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.43% (annualized) and 1.40% for the six months ended June 30, 2006
and the year ended December 31, 2004, respectively.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
F-14
NOTE 14--FINANCIAL HIGHLIGHTS--(CONTINUED)
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------------------------------
2006 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 16.46 $ 15.78 $ 13.96 $ 10.86 $ 15.54 $ 21.07
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.07) (0.15)(a) (0.17)(a)(b) (0.17)(a) (0.16)(a) (0.20)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.35 0.83 1.99 3.27 (4.52) (5.32)
=================================================================================================================================
Total from investment
operations 0.28 0.68 1.82 3.10 (4.68) (5.52)
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- -- (0.01)
=================================================================================================================================
Net asset value, end of period $ 16.74 $ 16.46 $ 15.78 $ 13.96 $ 10.86 $ 15.54
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.70% 4.31% 13.04% 28.55% (30.12)% (26.19)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $88,773 $106,097 $148,300 $198,148 $214,709 $432,002
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets 2.17%(d)(e) 2.14% 2.13%(e) 2.22% 2.07% 2.00%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.75)%(d) (0.96)% (1.15)%(b) (1.40)% (1.20)% (1.21)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 35% 91% 38% 69% 86% 117%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.19) and (1.26)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$100,572,409.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.18% (annualized) and 2.15% for the six months ended June 30, 2006
and the year ended December 31, 2004, respectively.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
<Table>
<Caption>
CLASS C
--------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------
2006 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 16.43 $ 15.75 $ 13.94 $ 10.84 $ 15.52 $ 21.05
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.15)(a) (0.17)(a)(b) (0.17)(a) (0.16)(a) (0.20)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.36 0.83 1.98 3.27 (4.52) (5.32)
=================================================================================================================================
Total from investment
operations 0.29 0.68 1.81 3.10 (4.68) (5.52)
=================================================================================================================================
Less distributions from net
realized gains -- -- -- -- -- (0.01)
=================================================================================================================================
Net asset value, end of period $ 16.72 $ 16.43 $ 15.75 $ 13.94 $ 10.84 $ 15.52
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.76% 4.32% 12.98% 28.60% (30.15)% (26.21)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $19,484 $22,860 $29,710 $33,585 $32,558 $59,112
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 2.17%(d)(e) 2.14% 2.13%(e) 2.22% 2.07% 2.00%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.75)%(d) (0.96)% (1.15)%(b) (1.40)% (1.20)% (1.21)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 35% 91% 38% 69% 86% 117%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
</Table>
(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend
received of $3.00 per share owned of Microsoft Corp. on December 2,
2004. Net investment income (loss) per share and the ratio of net
investment income (loss) to average net assets excluding the special
dividend are $(0.19) and (1.26)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$21,832,111.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.18% (annualized) and 2.15% for the six months ended June 30, 2006
and the year ended December 31, 2004, respectively.
(f) Portfolio turnover is calculated at the fund level and is not annualized
for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the
purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds), 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. As the methodology is unknown at the present time, management
of AIM and the Fund are unable to estimate the impact, if any, that the
distribution of these two fair funds may have on the Fund or whether such
distribution will have an impact on the Fund's financial statements in the
future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by
the AIM Funds related to market timing matters.
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, including those formerly advised by IFG, 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.
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.
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 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.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the AIM Funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the AIM Funds.
F-16
APPENDIX III
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM OPPORTUNITIES II FUND AND AIM OPPORTUNITIES III FUND
INTO AIM SELECT EQUITY FUND
JUNE 30, 2006
(UNAUDITED)
SHARES VALUE
- ----------------------------------------------- ----------------------------------------------------
AIM AIM SELECT AIM SELECT
AIM AIM SELECT EQUITY FUND AIM AIM AIM SELECT EQUITY FUND
OPPORTUNITES OPPORTUNITES EQUITY PRO FORMA OPPORTUNITES OPPORTUNITES EQUITY PRO FORMA
II FUND III FUND FUND COMBINING II FUND III FUND FUND COMBINING
- ------------ ------------ --------- ----------- ------------ ------------ ------------ -------------
COMMON STOCKS & OTHER
EQUITY
INTERESTS--104.84%
ADVERTISING--0.18%
-- -- 37,280 37,280 Harte-Hanks, Inc. $ -- $ -- $ 955,859 $ 955,859
------------ ------------ ------------ ------------
AEROSPACE &
DEFENSE--2.93%
-- 6,060 30,750 36,810 Boeing Co. (The) -- 496,375 2,518,733 3,015,108
14,480 12,476 36,600 63,556 General Dynamics Corp. 947,861 816,679 2,395,836 4,160,376
-- 8,186 35,410 43,596 Lockheed Martin Corp. -- 587,264 2,540,313 3,127,577
13,760 -- -- 13,760 Precision Castparts
Corp. 822,298 -- -- 822,298
-- -- 17,470 17,470 Raytheon Co. -- -- 778,638 778,638
-- -- 41,700 41,700 Rockwell Collins, Inc. -- -- 2,329,779 2,329,779
-- -- 12,397 12,397 United Industrial Corp. (a) -- -- 560,964 560,964
-- -- 8,680 8,680 United Technologies
Corp. -- -- 550,486 550,486
------------ ------------ ------------ ------------
1,770,159 1,900,318 11,674,749 15,345,226
------------ ------------ ------------ ------------
AIR FREIGHT &
LOGISTICS--0.38%
10,164 -- -- 10,164 EGL, Inc. (b) 510,233 -- -- 510,233
-- -- 33,800 33,800 Hub Group, Inc.-Class A (b) -- -- 829,114 829,114
-- 7,952 -- 7,952 United Parcel Service,
Inc.-Class B -- 654,688 -- 654,688
------------ ------------ ------------ ------------
510,233 654,688 829,114 1,994,035
------------ ------------ ------------ ------------
AIRLINES--0.26%
-- -- 51,900 51,900 Mesa Air Group, Inc. (b) -- -- 511,215 511,215
8,225 -- -- 8,225 US Airways Group, Inc. (b) 415,691 -- -- 415,691
-- -- 52,900 52,900 World Air Holdings, Inc. (b) -- -- 454,411 454,411
------------ ------------ ------------ ------------
415,691 -- 965,626 1,381,317
------------ ------------ ------------ ------------
APPAREL RETAIL--2.34%
21,790 -- -- 21,790 American Eagle
Outfitters, Inc. 741,732 -- -- 741,732
16,546 -- -- 16,546 AnnTaylor Stores Corp. (b) 717,765 -- -- 717,765
22,226 9,382 -- 31,608 Buckle, Inc. (The) 930,603 392,824 -- 1,323,427
28,499 -- -- 28,499 Cato Corp. (The)-Class A 736,699 -- -- 736,699
8,624 -- -- 8,624 Charlotte Russe Holding
Inc. (b) 206,459 -- -- 206,459
4,993 -- -- 4,993 Chico's FAS, Inc. (b) 134,711 -- -- 134,711
94,338 -- 26,600 120,938 Dress Barn, Inc. (The) (b) 2,391,468 -- 674,310 3,065,778
-- -- 84,320 84,320 Gap, Inc. (The) -- -- 1,467,168 1,467,168
20,415 5,518 -- 25,933 Gymboree Corp. (The) (b) 709,625 191,806 -- 901,431
-- -- 76,400 76,400 Payless ShoeSource, Inc. (b) -- -- 2,075,788 2,075,788
7,000 -- -- 7,000 Shoe Carnival, Inc. (b) 167,020 -- -- 167,020
18,026 -- -- 18,026 Too Inc. (b) 692,018 -- -- 692,018
------------ ------------ ------------ ------------
7,428,100 584,630 4,217,266 12,229,996
------------ ------------ ------------ ------------
APPAREL, ACCESSORIES &
LUXURY GOODS--1.27%
13,650 13,627 -- 27,277 Phillips-Van Heusen
Corp. 520,884 520,006 -- 1,040,890
-- -- 22,900 22,900 Polo Ralph Lauren Corp. -- -- 1,257,210 1,257,210
-- -- 64,400 64,400 VF Corp. -- -- 4,374,048 4,374,048
------------ ------------ ------------ ------------
520,884 520,006 5,631,258 6,672,148
------------ ------------ ------------ ------------
APPLICATION
SOFTWARE--0.95%
-- -- 21,400 21,400 Amdocs Ltd. (b) -- -- 783,240 783,240
23,556 -- -- 23,556 Ansoft Corp. (b) 482,427 -- -- 482,427
25,722 5,246 22,390 53,358 FactSet Research Systems
Inc. 1,216,651 248,136 1,059,047 2,523,834
12,614 4,168 -- 16,782 Intuit Inc. (b) 761,759 251,705 -- 1,013,464
9,340 -- -- 9,340 Sonic Solutions (b) 154,110 -- -- 154,110
------------ ------------ ------------ ------------
2,614,947 499,841 1,842,287 4,957,075
------------ ------------ ------------ ------------
ASSET MANAGEMENT &
CUSTODY BANKS--2.05%
-- -- 32,150 32,150 Affiliated Managers
Group, Inc. (a)(b) -- -- 2,793,513 2,793,513
-- -- 9,540 9,540 Ameriprise Financial,
Inc. -- -- 426,152 426,152
-- -- 111,900 111,900 Bank of New York Co.,
Inc. (The) -- -- 3,603,180 3,603,180
-- -- 14,700 14,700 Franklin Resources, Inc. -- -- 1,276,107 1,276,107
-- 35,589 -- 35,589 MCG Capital Corp. -- 565,865 -- 565,865
32,252 3,929 -- 36,181 Nuveen Investments-Class
A 1,388,449 169,143 -- 1,557,592
33,246 -- -- 33,246 Patriot Capital Funding
Inc. 369,031 -- -- 369,031
3,910 -- -- 3,910 T. Rowe Price Group Inc. 147,837 -- -- 147,837
------------ ------------ ------------ ------------
1,905,317 735,008 8,098,952 10,739,277
------------ ------------ ------------ ------------
AUTO PARTS &
EQUIPMENT--0.04%
8,189 -- -- 8,189 Aftermarket Technology
Corp. (b) 203,497 -- -- 203,497
------------ ------------ ------------ ------------
AUTOMOBILE
MANUFACTURERS--0.20%
-- -- 21,200 21,200 Thor Industries, Inc. -- -- 1,027,140 1,027,140
------------ ------------ ------------ ------------
AUTOMOTIVE RETAIL--0.32%
21,665 7,663 -- 29,328 Group 1 Automotive, Inc. 1,220,606 431,733 -- 1,652,339
------------ ------------ ------------ ------------
BIOTECHNOLOGY--0.66%
13,316 -- -- 13,316 Alkermes, Inc. (b) $ 251,939 $ -- $ -- $ 251,939
-- 6,266 12,700 18,966 Amgen Inc. (b) -- 408,731 828,421 1,237,152
-- -- 12,280 12,280 Biogen Idec Inc. (b) -- -- 568,932 568,932
6,304 11,088 -- 17,392 Gilead Sciences, Inc. (b) 372,945 655,966 -- 1,028,911
9,021 -- -- 9,021 ImClone Systems Inc. (b) 348,571 -- -- 348,571
------------ ------------ ------------ ------------
973,455 1,064,697 1,397,353 3,435,505
------------ ------------ ------------ ------------
BUILDING PRODUCTS--0.58%
-- -- 86,100 86,100 Masco Corp. -- -- 2,552,004 2,552,004
5,608 -- -- 5,608 PW Eagle, Inc. 169,586 -- -- 169,586
-- -- 4,200 4,200 USG Corp. (a)(b) -- -- 306,306 306,306
------------ ------------ ------------ ------------
169,586 -- 2,858,310 3,027,896
------------ ------------ ------------ ------------
CASINOS & GAMING--0.33%
24,060 11,593 -- 35,653 Dover Downs Gaming &
Entertainment, Inc. 472,538 227,686 -- 700,224
-- -- 35,870 35,870 Monarch Casino & Resort,
Inc. (b) -- -- 1,008,664 1,008,664
------------ ------------ ------------ ------------
472,538 227,686 1,008,664 1,708,888
------------ ------------ ------------ ------------
CATALOG RETAIL--0.12%
11,565 10,441 -- 22,006 Blair Corp. 344,059 310,620 -- 654,679
------------ ------------ ------------ ------------
COAL & CONSUMABLE
FUELS--0.22%
20,261 -- -- 20,261 Peabody Energy Corp. 1,129,551 -- -- 1,129,551
------------ ------------ ------------ ------------
COMMERCIAL
PRINTING--0.46%
27,292 5,891 21,700 54,883 Harland (John H.) Co. 1,187,202 256,258 943,950 2,387,410
------------ ------------ ------------ ------------
COMMODITY
CHEMICALS--0.38%
41,558 17,717 -- 59,275 Lyondell Chemical Co. 941,704 401,467 -- 1,343,171
14,620 7,296 -- 21,916 Westlake Chemical Corp. 435,676 217,421 -- 653,097
------------ ------------ ------------ ------------
1,377,380 618,888 -- 1,996,268
------------ ------------ ------------ ------------
COMMUNICATIONS
EQUIPMENT--2.42%
-- 44,312 311,400 355,712 Cisco Systems, Inc. (b) -- 865,414 6,081,642 6,947,056
-- 15,268 -- 15,268 Corning Inc. (b) -- 369,333 -- 369,333
12,791 11,976 -- 24,767 EMS Technologies, Inc. (b) 229,854 215,209 -- 445,063
26,421 -- -- 26,421 Harris Corp. 1,096,736 -- -- 1,096,736
9,371 -- -- 9,371 Loral Space &
Communications Inc.
(Bermuda) (b) 265,761 -- -- 265,761
-- 19,056 66,800 85,856 Motorola, Inc. -- 383,978 1,346,020 1,729,998
22,187 23,055 -- 45,242 QUALCOMM Inc. 889,033 923,814 -- 1,812,847
------------ ------------ ------------ ------------
2,481,384 2,757,748 7,427,662 12,666,794
------------ ------------ ------------ ------------
COMPUTER & ELECTRONICS
RETAIL--0.03%
-- 2,578 -- 2,578 Best Buy Co., Inc. -- 141,377 -- 141,377
------------ ------------ ------------ ------------
COMPUTER HARDWARE--1.94%
-- 6,764 -- 6,764 Apple Computer, Inc. (b) -- 386,360 -- 386,360
-- -- 19,530 19,530 Dell Inc. (b) -- -- 476,727 476,727
30,730 38,003 46,170 114,903 Hewlett-Packard Co. 973,526 1,203,935 1,462,666 3,640,127
-- 13,764 59,846 73,610 International Business
Machines Corp. -- 1,057,350 4,597,370 5,654,720
------------ ------------ ------------ ------------
973,526 2,647,645 6,536,763 10,157,934
------------ ------------ ------------ ------------
COMPUTER STORAGE &
PERIPHERALS--0.90%
-- 17,489 -- 17,489 EMC Corp. (b) -- 191,854 -- 191,854
8,849 3,516 20,500 32,865 Komag, Inc. (a)(b) 408,647 162,369 946,690 1,517,706
-- -- 44,570 44,570 Lexmark International,
Inc.-Class A (b) -- -- 2,488,343 2,488,343
25,259 -- -- 25,259 Western Digital Corp. (b) 500,381 -- -- 500,381
------------ ------------ ------------ ------------
909,028 354,223 3,435,033 4,698,284
------------ ------------ ------------ ------------
CONSTRUCTION & FARM
MACHINERY & HEAVY
TRUCKS--1.60%
-- 4,933 -- 4,933 Caterpillar Inc. -- 367,410 -- 367,410
16,505 4,395 29,600 50,500 Cummins Inc. 2,017,736 537,289 3,618,600 6,173,625
-- -- 38,800 38,800 Oshkosh Truck Corp. -- -- 1,843,776 1,843,776
------------ ------------ ------------ ------------
2,017,736 904,699 5,462,376 8,384,811
------------ ------------ ------------ ------------
CONSTRUCTION
MATERIALS--1.14%
-- -- 14,705 14,705 Cemex S.A. de C.V.-ADR
(Mexico) (b) -- -- 837,744 837,744
21,511 -- 68,517 90,028 Eagle Materials Inc. 1,021,772 -- 3,254,557 4,276,329
9,648 -- -- 9,648 Martin Marietta
Materials, Inc. 879,415 -- -- 879,415
------------ ------------ ------------ ------------
1,901,187 -- 4,092,301 5,993,488
------------ ------------ ------------ ------------
CONSUMER
ELECTRONICS--0.33%
-- -- 56,007 56,007 Koninklijke (Royal)
Philips
Electronics N.V.-New
York Shares
(Netherlands) -- -- 1,744,058 1,744,058
------------ ------------ ------------ ------------
CONSUMER FINANCE--0.52%
10,740 -- 30,600 41,340 ASTA Funding, Inc. (a) 402,213 -- 1,145,970 1,548,183
-- -- 60,400 60,400 First Cash Financial
Services, Inc. (b) -- -- 1,192,900 1,192,900
------------ ------------ ------------ ------------
402,213 -- 2,338,870 2,741,083
------------ ------------ ------------ ------------
DATA PROCESSING &
OUTSOURCED
SERVICES--1.85%
4,481 -- -- 4,481 Computer Sciences Corp. (b) $ 217,060 $ -- $ -- $ 217,060
-- -- 67,580 67,580 Fiserv, Inc. (b) -- -- 3,065,429 3,065,429
29,955 7,380 12,270 49,605 Global Payments Inc. 1,454,315 358,299 595,708 2,408,322
34,116 10,511 -- 44,627 MoneyGram International,
Inc. 1,158,238 356,848 -- 1,515,086
32,598 15,710 15,300 63,608 Paychex, Inc. 1,270,670 612,376 596,394 2,479,440
------------ ------------ ------------ ------------
4,100,283 1,327,523 4,257,531 9,685,337
------------ ------------ ------------ ------------
DEPARTMENT STORES--1.00%
-- 3,892 -- 3,892 J.C. Penney Co., Inc. -- 262,749 -- 262,749
-- 5,908 -- 5,908 Kohl's Corp. (b) -- 349,281 -- 349,281
15,489 6,891 103,700 126,080 Nordstrom, Inc. 565,348 251,521 3,785,050 4,601,919
------------ ------------ ------------ ------------
565,348 863,551 3,785,050 5,213,949
------------ ------------ ------------ ------------
DIVERSIFIED BANKS--1.18%
-- 22,705 154,770 177,475 U.S. Bancorp -- 701,130 4,779,298 5,480,428
-- -- 10,800 10,800 Unibanco-Uniao de Bancos
Brasileiros S.A.-ADR
(Brazil) -- -- 717,012 717,012
------------ ------------ ------------ ------------
-- 701,130 5,496,310 6,197,440
------------ ------------ ------------ ------------
DIVERSIFIED
CHEMICALS--1.56%
64,942 10,223 -- 75,165 Ashland Inc. 4,331,631 681,874 -- 5,013,505
-- 14,923 -- 14,923 Dow Chemical Co. (The) -- 582,445 -- 582,445
35,997 12,072 -- 48,069 Eastman Chemical Co. 1,943,838 651,888 -- 2,595,726
------------ ------------ ------------ ------------
6,275,469 1,916,207 -- 8,191,676
------------ ------------ ------------ ------------
DIVERSIFIED COMMERCIAL &
PROFESSIONAL
SERVICES--1.34%
32,862 -- -- 32,862 CBIZ, Inc. (b) 243,507 -- -- 243,507
-- -- 163,600 163,600 Cendant Corp. (b) -- -- 2,665,044 2,665,044
17,441 1,768 -- 19,209 Corporate Executive
Board Co. (The) 1,747,588 177,154 -- 1,924,742
13,091 -- -- 13,091 Geo Group Inc. (The) (b) 458,840 -- -- 458,840
27,261 9,181 -- 36,442 West Corp. (b) 1,306,075 439,862 -- 1,745,937
------------ ------------ ------------ ------------
3,756,010 617,016 2,665,044 7,038,070
------------ ------------ ------------ ------------
DIVERSIFIED METALS &
MINING--0.11%
-- -- 10,900 10,900 Freeport-McMoRan Copper
& Gold,
Inc.-Class B -- -- 603,969 603,969
------------ ------------ ------------ ------------
ELECTRIC
UTILITIES--0.67%
27,530 6,682 -- 34,212 Allegheny Energy, Inc. (b) 1,020,537 247,702 -- 1,268,239
22,753 19,310 -- 42,063 Cleco Corp. 529,007 448,958 -- 977,965
7,351 -- -- 7,351 Edison International 286,689 -- -- 286,689
-- 18,006 -- 18,006 FirstEnergy Corp. -- 976,105 -- 976,105
------------ ------------ ------------ ------------
1,836,233 1,672,765 -- 3,508,998
------------ ------------ ------------ ------------
ELECTRICAL COMPONENTS &
EQUIPMENT--0.08%
-- 4,941 -- 4,941 Emerson Electric Co. -- 414,105 -- 414,105
------------ ------------ ------------ ------------
ELECTRONIC EQUIPMENT
MANUFACTURERS--0.96%
-- -- 50,400 50,400 Amphenol Corp.-Class A -- -- 2,820,384 2,820,384
-- -- 36,700 36,700 Mettler-Toledo
International Inc. (b) -- -- 2,222,919 2,222,919
------------ ------------ ------------ ------------
-- -- 5,043,303 5,043,303
------------ ------------ ------------ ------------
ELECTRONIC MANUFACTURING
SERVICES--0.27%
6,526 -- -- 6,526 Plexus Corp. (b) 223,254 -- -- 223,254
-- -- 27,100 27,100 Trimble Navigation Ltd. (b) -- -- 1,209,744 1,209,744
------------ ------------ ------------ ------------
223,254 -- 1,209,744 1,432,998
------------ ------------ ------------ ------------
FOOD DISTRIBUTORS--0.09%
-- 14,702 -- 14,702 Performance Food Group
Co. (b) -- 446,647 -- 446,647
------------ ------------ ------------ ------------
FOOD RETAIL--0.10%
-- -- 23,500 23,500 Kroger Co. (The) -- -- 513,710 513,710
------------ ------------ ------------ ------------
FOOTWEAR--0.64%
-- -- 18,600 18,600 Deckers Outdoor Corp. (b) -- -- 717,216 717,216
-- -- 32,500 32,500 NIKE, Inc.-Class B -- -- 2,632,500 2,632,500
------------ ------------ ------------ ------------
-- -- 3,349,716 3,349,716
------------ ------------ ------------ ------------
FOREST PRODUCTS--0.03%
3,247 -- -- 3,247 Deltic Timber Corp. 183,033 -- -- 183,033
------------ ------------ ------------ ------------
GAS UTILITIES--1.64%
20,113 6,407 -- 26,520 Energen Corp. 772,540 246,093 -- 1,018,633
80,629 21,115 -- 101,744 Equitable Resources,
Inc. 2,701,072 707,353 -- 3,408,425
39,822 5,628 -- 45,450 Questar Corp. 3,205,273 452,998 -- 3,658,271
6,242 12,389 -- 18,631 South Jersey Industries,
Inc. 170,968 339,335 -- 510,303
------------ ------------ ------------ ------------
6,849,853 1,745,779 -- 8,595,632
------------ ------------ ------------ ------------
GENERAL MERCHANDISE
STORES--0.08%
16,315 -- -- 16,315 Conn's, Inc. (b) 433,163 -- -- 433,163
------------ ------------ ------------ ------------
HEALTH CARE
DISTRIBUTORS--0.72%
-- -- 37,800 37,800 AmerisourceBergen Corp. -- -- 1,584,576 1,584,576
-- 3,447 42,930 46,377 McKesson Corp. -- 162,974 2,029,730 2,192,704
------------ ------------ ------------ ------------
-- 162,974 3,614,306 3,777,280
------------ ------------ ------------ ------------
HEALTH CARE
EQUIPMENT--1.11%
-- -- 16,100 16,100 Bard (C.R.), Inc. $ -- $ -- $ 1,179,486 $ 1,179,486
-- 11,370 38,000 49,370 Becton, Dickinson and
Co. -- 695,048 2,322,940 3,017,988
4,711 -- -- 4,711 Biosite Inc. (b) 215,104 -- -- 215,104
3,099 -- -- 3,099 Hillenbrand Industries,
Inc. 150,302 -- -- 150,302
-- 4,708 12,200 16,908 IDEXX Laboratories, Inc. (b) -- 353,712 916,586 1,270,298
------------ ------------ ------------ ------------
365,406 1,048,760 4,419,012 5,833,178
------------ ------------ ------------ ------------
HEALTH CARE
FACILITIES--0.99%
-- -- 47,500 47,500 AmSurg Corp. (b) -- -- 1,080,625 1,080,625
-- -- 22,000 22,000 Community Health Systems
Inc. (b) -- -- 808,500 808,500
-- -- 10,200 10,200 Universal Health
Services,
Inc.-Class B -- -- 512,652 512,652
-- -- 86,500 86,500 VCA Antech, Inc. (b) -- -- 2,761,945 2,761,945
------------ ------------ ------------ ------------
-- -- 5,163,722 5,163,722
------------ ------------ ------------ ------------
HEALTH CARE
SERVICES--1.47%
-- -- 51,500 51,500 Caremark Rx, Inc. -- -- 2,568,305 2,568,305
-- -- 23,410 23,410 Laboratory Corp. of
America
Holdings (b) -- -- 1,456,804 1,456,804
-- -- 56,766 56,766 Pediatrix Medical Group,
Inc. (b) -- -- 2,571,500 2,571,500
-- -- 18,400 18,400 Quest Diagnostics Inc. -- -- 1,102,528 1,102,528
------------ ------------ ------------ ------------
-- -- 7,699,137 7,699,137
------------ ------------ ------------ ------------
HEALTH CARE
SUPPLIES--0.14%
19,296 10,495 -- 29,791 Immucor, Inc. (b) 371,062 201,819 -- 572,881
18,986 -- -- 18,986 OraSure Technologies,
Inc. (b) 180,747 -- -- 180,747
------------ ------------ ------------ ------------
551,809 201,819 -- 753,628
------------ ------------ ------------ ------------
HEALTH CARE
TECHNOLOGY--0.27%
13,906 -- 22,010 35,916 Computer Programs and
Systems, Inc. 555,684 -- 879,520 1,435,204
------------ ------------ ------------ ------------
HOME FURNISHINGS--0.81%
-- -- 89,100 89,100 Ethan Allen Interiors
Inc. -- -- 3,256,605 3,256,605
-- -- 47,800 47,800 Furniture Brands
International, Inc. (a) -- -- 996,152 996,152
------------ ------------ ------------ ------------
-- -- 4,252,757 4,252,757
------------ ------------ ------------ ------------
HOME IMPROVEMENT
RETAIL--1.83%
-- 11,862 89,800 101,662 Home Depot, Inc. (The) -- 424,541 3,213,942 3,638,483
-- 8,885 -- 8,885 Lowe's Cos., Inc. -- 539,053 -- 539,053
-- -- 113,831 113,831 Sherwin-Williams Co.
(The) -- -- 5,404,696 5,404,696
------------ ------------ ------------ ------------
-- 963,594 8,618,638 9,582,232
------------ ------------ ------------ ------------
HOMEBUILDING--0.34%
16,418 7,020 -- 23,438 Cavco Industries, Inc. (b) 729,616 311,969 -- 1,041,585
10,258 4,467 -- 14,725 Centex Corp. 515,977 224,690 -- 740,667
------------ ------------ ------------ ------------
1,245,593 536,659 -- 1,782,252
------------ ------------ ------------ ------------
HOMEFURNISHING
RETAIL--0.23%
-- -- 41,100 41,100 Rent-A-Center Inc. (b) -- -- 1,021,746 1,021,746
7,783 -- -- 7,783 Select Comfort Corp. (b) 178,776 -- -- 178,776
------------ ------------ ------------ ------------
178,776 -- 1,021,746 1,200,522
------------ ------------ ------------ ------------
HOTELS, RESORTS & CRUISE
LINES--0.48%
28,596 12,457 -- 41,053 Choice Hotels
International, Inc. 1,732,918 754,894 -- 2,487,812
------------ ------------ ------------ ------------
HOUSEHOLD
APPLIANCES--1.11%
-- -- 48,910 48,910 Black & Decker Corp.
(The) -- -- 4,130,938 4,130,938
-- -- 20,532 20,532 Whirlpool Corp. -- -- 1,696,970 1,696,970
------------ ------------ ------------ ------------
-- -- 5,827,908 5,827,908
------------ ------------ ------------ ------------
HOUSEHOLD
PRODUCTS--0.12%
-- -- 10,200 10,200 Kimberly-Clark Corp. -- -- 629,340 629,340
------------ ------------ ------------ ------------
HYPERMARKETS & SUPER
CENTERS--0.34%
-- 5,466 15,860 21,326 Costco Wholesale Corp. -- 312,273 906,082 1,218,355
-- 11,396 -- 11,396 Wal-Mart Stores, Inc. -- 548,945 -- 548,945
------------ ------------ ------------ ------------
-- 861,218 906,082 1,767,300
------------ ------------ ------------ ------------
INDEPENDENT POWER
PRODUCERS & ENERGY
TRADERS--0.38%
20,309 12,964 -- 33,273 TXU Corp. 1,214,275 775,118 -- 1,989,393
------------ ------------ ------------ ------------
INDUSTRIAL
CONGLOMERATES--0.66%
13,205 25,840 -- 39,045 3M Co. 1,066,568 2,087,097 -- 3,153,665
-- 11,347 -- 11,347 Tyco International Ltd. -- 312,043 -- 312,043
------------ ------------ ------------ ------------
1,066,568 2,399,140 -- 3,465,708
------------ ------------ ------------ ------------
INDUSTRIAL GASES--0.45%
-- -- 63,200 63,200 Airgas, Inc. -- -- 2,354,200 2,354,200
------------ ------------ ------------ ------------
INDUSTRIAL
MACHINERY--2.27%
-- 5,197 20,400 25,597 Danaher Corp. -- 334,271 1,312,128 1,646,399
28,288 9,729 -- 38,017 Eaton Corp. 2,132,915 733,567 -- 2,866,482
9,469 -- -- 9,469 Graco Inc. 435,385 -- -- 435,385
8,182 4,993 -- 13,175 IDEX Corp. 386,190 235,670 -- 621,860
-- 7,270 41,900 49,170 Illinois Tool Works Inc. -- 345,325 1,990,250 2,335,575
10,176 -- 69,000 79,176 Ingersoll-Rand Co.
Ltd.-Class A 435,329 -- 2,951,820 3,387,149
9,419 -- -- 9,419 Nordson Corp. 463,226 -- -- 463,226
4,203 -- -- 4,203 Timken Co. (The) 140,843 -- -- 140,843
------------ ------------ ------------ ------------
3,993,888 1,648,833 6,254,198 11,896,919
------------ ------------ ------------ ------------
INSURANCE BROKERS--0.36%
-- -- 54,516 54,516 Aon Corp. -- -- 1,898,247 1,898,247
------------ ------------ ------------ ------------
INTEGRATED OIL &
GAS--3.62%
-- 7,863 -- 7,863 ConocoPhillips $ -- $ 515,262 $ -- $ 515,262
-- 44,243 199,650 243,893 Exxon Mobil Corp. -- 2,714,308 12,248,527 14,962,835
-- 5,617 28,500 34,117 Occidental Petroleum
Corp. -- 576,023 2,922,675 3,498,698
------------ ------------ ------------ ------------
-- 3,805,593 15,171,202 18,976,795
------------ ------------ ------------ ------------
INTEGRATED
TELECOMMUNICATION
SERVICES--1.22%
44,484 12,879 55,900 113,263 CenturyTel, Inc. 1,652,581 478,455 2,076,685 4,207,721
-- -- 55,500 55,500 TALK America Holdings,
Inc. (b) -- -- 343,545 343,545
10,711 44,438 -- 55,149 Verizon Communications
Inc. 358,711 1,488,229 -- 1,846,940
------------ ------------ ------------ ------------
2,011,292 1,966,684 2,420,230 6,398,206
------------ ------------ ------------ ------------
INTERNET SOFTWARE &
SERVICES--0.69%
3,332 -- -- 3,332 Digital River, Inc. (b) 134,579 -- -- 134,579
73,748 22,665 182,700 279,113 EarthLink, Inc. (b) 638,658 196,279 1,582,182 2,417,119
-- 10,229 -- 10,229 eBay Inc. (b) -- 299,607 -- 299,607
-- 583 -- 583 Google Inc.-Class A (b) -- 244,469 -- 244,469
10,533 -- -- 10,533 Knot, Inc. (The) (b) 220,456 -- -- 220,456
23,558 -- -- 23,558 United Online, Inc. 282,696 -- -- 282,696
------------ ------------ ------------ ------------
1,276,389 740,355 1,582,182 3,598,926
------------ ------------ ------------ ------------
INVESTMENT BANKING &
BROKERAGE--3.40%
-- 5,205 26,253 31,458 Goldman Sachs Group,
Inc. (The) -- 782,988 3,949,239 4,732,227
-- 9,866 78,652 88,518 Lehman Brothers
Holdings Inc. -- 642,770 5,124,178 5,766,948
-- 4,960 38,700 43,660 Merrill Lynch & Co.,
Inc. -- 345,018 2,691,972 3,036,990
-- 9,419 58,474 67,893 Morgan Stanley -- 595,375 3,696,141 4,291,516
------------ ------------ ------------ ------------
-- 2,366,151 15,461,530 17,827,681
------------ ------------ ------------ ------------
INVESTMENT
COMPANIES-
ETF'S--0.29%
16,224 10,573 -- 26,797 Energy Select Sector
SPDR
Fund 920,225 599,701 -- 1,519,926
------------ ------------ ------------ ------------
IT CONSULTING & OTHER
SERVICES--0.33%
24,500 9,852 19,430 53,782 Accenture Ltd.-Class A 693,840 279,009 550,258 1,523,107
9,074 -- -- 9,074 Acxiom Corp. 226,850 -- -- 226,850
------------ ------------ ------------ ------------
920,690 279,009 550,258 1,749,957
------------ ------------ ------------ ------------
LEISURE PRODUCTS--0.35%
-- -- 41,300 41,300 Brunswick Corp. -- -- 1,373,225 1,373,225
-- -- 22,000 22,000 Marvel Entertainment,
Inc. (b) -- -- 440,000 440,000
------------ ------------ ------------ ------------
-- -- 1,813,225 1,813,225
------------ ------------ ------------ ------------
LIFE & HEALTH
INSURANCE--1.28%
-- -- 19,790 19,790 Lincoln National Corp. -- -- 1,116,948 1,116,948
11,461 -- -- 11,461 Principal Financial
Group, Inc. 637,805 -- -- 637,805
15,643 23,460 20,385 59,488 Prudential Financial,
Inc. 1,215,461 1,822,842 1,583,914 4,622,217
5,200 -- -- 5,200 Torchmark Corp. 315,744 -- -- 315,744
------------ ------------ ------------ ------------
2,169,010 1,822,842 2,700,862 6,692,714
------------ ------------ ------------ ------------
LIFE SCIENCES TOOLS &
SERVICES--1.08%
38,054 18,745 -- 56,799 Applera Corp.-Applied
Biosystems Group 1,231,047 606,401 -- 1,837,448
10,364 -- 27,900 38,264 Techne Corp. (b) 527,735 -- 1,420,668 1,948,403
-- -- 41,600 41,600 Waters Corp. (b) -- -- 1,847,040 1,847,040
------------ ------------ ------------ ------------
1,758,782 606,401 3,267,708 5,632,891
------------ ------------ ------------ ------------
MANAGED HEALTH
CARE--4.06%
26,026 16,864 140,510 183,400 Aetna Inc. 1,039,218 673,380 5,610,564 7,323,162
6,835 -- -- 6,835 AMERIGROUP Corp. (b) 212,158 -- -- 212,158
8,578 -- 13,350 21,928 Coventry Health Care,
Inc. (b) 471,275 -- 733,449 1,204,724
13,092 4,162 -- 17,254 Humana Inc. (b) 703,040 223,499 -- 926,539
11,535 -- -- 11,535 Molina Healthcare Inc. (b) 438,907 -- -- 438,907
6,908 -- 43,900 50,808 Sierra Health Services,
Inc. (b) 311,067 -- 1,976,817 2,287,884
25,815 35,884 97,771 159,470 UnitedHealth Group Inc. 1,155,996 1,606,886 4,378,186 7,141,068
6,664 -- -- 6,664 WellCare Health Plans
Inc. (b) 326,869 -- -- 326,869
-- -- 19,490 19,490 WellPoint Inc. (b) -- -- 1,418,287 1,418,287
------------ ------------ ------------ ------------
4,658,530 2,503,765 14,117,303 21,279,598
------------ ------------ ------------ ------------
MARINE--0.50%
31,476 13,121 -- 44,597 Overseas Shipholding
Group, Inc. 1,861,805 776,107 -- 2,637,912
------------ ------------ ------------ ------------
METAL & GLASS
CONTAINERS--0.16%
-- -- 22,000 22,000 Silgan Holdings Inc. -- -- 814,220 814,220
------------ ------------ ------------ ------------
MOTORCYCLE
MANUFACTURERS--0.33%
-- -- 31,100 31,100 Harley-Davidson, Inc. -- -- 1,707,079 1,707,079
------------ ------------ ------------ ------------
MOVIES &
ENTERTAINMENT--0.09%
-- 18,810 -- 18,810 Time Warner Inc. -- 325,413 -- 325,413
-- 3,344 -- 3,344 Viacom Inc.-Class B (b) -- 119,849 -- 119,849
------------ ------------ ------------ ------------
-- 445,262 -- 445,262
------------ ------------ ------------ ------------
MULTI-LINE
INSURANCE--0.93%
-- 4,690 -- 4,690 American International
Group, Inc. -- 276,945 -- 276,945
-- -- 72,300 72,300 Genworth Financial
Inc.-Class A -- -- 2,518,932 2,518,932
-- 2,002 22,500 24,502 Hartford Financial
Services Group,
Inc. (The) -- 169,369 1,903,500 2,072,869
------------ ------------ ------------ ------------
-- 446,314 4,422,432 4,868,746
------------ ------------ ------------ ------------
MULTI-UTILITIES--0.64%
-- 8,811 -- 8,811 Duke Energy Corp. $ -- $ 258,779 $ -- $ 258,779
48,059 14,184 -- 62,243 MDU Resources Group,
Inc. 1,759,440 519,276 -- 2,278,716
13,622 7,414 -- 21,036 PG&E Corp. 535,072 291,222 -- 826,294
------------ ------------ ------------ ------------
2,294,512 1,069,277 -- 3,363,789
------------ ------------ ------------ ------------
OFFICE SERVICES &
SUPPLIES--0.44%
-- -- 62,600 62,600 Brady Corp.-Class A -- -- 2,306,184 2,306,184
OIL & GAS
DRILLING--0.39%
6,845 -- -- 6,845 ENSCO International Inc. 315,007 -- -- 315,007
4,475 -- -- 4,475 Patterson-UTI Energy,
Inc. 126,687 -- -- 126,687
-- -- 20,000 20,000 Pride International,
Inc. (b) -- -- 624,600 624,600
-- 4,473 -- 4,473 Transocean Inc. (b) -- 359,271 -- 359,271
-- -- 10,600 10,600 Unit Corp. (b) -- -- 603,034 603,034
------------ ------------ ------------ ------------
441,694 359,271 1,227,634 2,028,599
------------ ------------ ------------ ------------
OIL & GAS EQUIPMENT &
SERVICES--1.31%
-- -- 78,900 78,900 BJ Services Co. -- -- 2,939,814 2,939,814
-- -- 16,800 16,800 Core Laboratories N.V.
(Netherlands) (b) -- -- 1,025,472 1,025,472
13,419 -- -- 13,419 Grant Prideco, Inc. (b) 600,500 -- -- 600,500
-- -- 12,400 12,400 Maverick Tube Corp. (b) -- -- 783,556 783,556
-- -- 13,500 13,500 Schlumberger Ltd. -- -- 878,985 878,985
9,032 -- -- 9,032 Smith International,
Inc. 401,653 -- -- 401,653
6,229 -- -- 6,229 Trico Marine Services,
Inc. (b) 211,786 -- -- 211,786
------------ ------------ ------------ ------------
1,213,939 -- 5,627,827 6,841,766
------------ ------------ ------------ ------------
OIL & GAS EXPLORATION &
PRODUCTION--0.86%
-- -- 42,470 42,470 Anadarko Petroleum Corp. -- -- 2,025,394 2,025,394
-- 3,987 -- 3,987 Apache Corp. -- 272,113 -- 272,113
18,869 -- -- 18,869 Arena Resources, Inc. (b) 647,018 -- -- 647,018
6,989 -- -- 6,989 CREDO Petroleum Corp. (b) 134,678 -- -- 134,678
-- 3,862 16,500 20,362 Devon Energy Corp. -- 233,303 996,765 1,230,068
16,066 -- -- 16,066 Harvest Natural
Resources, Inc. (b) 217,534 -- -- 217,534
------------ ------------ ------------ ------------
999,230 505,416 3,022,159 4,526,805
------------ ------------ ------------ ------------
OIL & GAS REFINING &
MARKETING--0.48%
-- -- 22,920 22,920 Sunoco, Inc. -- -- 1,588,127 1,588,127
-- -- 14,200 14,200 Valero Energy Corp. -- -- 944,584 944,584
------------ ------------ ------------ ------------
-- -- 2,532,711 2,532,711
------------ ------------ ------------ ------------
OIL & GAS STORAGE &
TRANSPORTATION--0.61%
29,269 11,772 -- 41,041 Energy Transfer
Partners, L.P. 1,306,861 525,620 -- 1,832,481
25,135 -- -- 25,135 OMI Corp. 544,173 -- -- 544,173
12,757 13,821 -- 26,578 Suburban Propane
Partners, L.P. 402,101 435,638 -- 837,739
------------ ------------ ------------ ------------
2,253,135 961,258 -- 3,214,393
------------ ------------ ------------ ------------
OTHER DIVERSIFIED
FINANCIAL
SERVICES--4.22%
-- 33,482 196,340 229,822 Bank of America Corp. -- 1,610,484 9,443,954 11,054,438
-- 26,651 177,090 203,741 Citigroup Inc. -- 1,285,644 8,542,822 9,828,466
-- 29,098 -- 29,098 JPMorgan Chase & Co. -- 1,222,116 -- 1,222,116
------------ ------------ ------------ ------------
-- 4,118,244 17,986,776 22,105,020
------------ ------------ ------------ ------------
PACKAGED FOODS &
MEATS--1.04%
-- 15,600 65,260 80,860 General Mills, Inc. -- 805,896 3,371,332 4,177,228
-- 8,791 -- 8,791 Premium Standard Farms,
Inc. -- 142,678 -- 142,678
579 285 -- 864 Seaboard Corp. 741,120 364,800 -- 1,105,920
------------ ------------ ------------ ------------
741,120 1,313,374 3,371,332 5,425,826
------------ ------------ ------------ ------------
PHARMACEUTICALS--4.95%
-- -- 20,200 20,200 AstraZeneca PLC-ADR
(United Kingdom) -- -- 1,208,364 1,208,364
11,291 -- -- 11,291 CNS, Inc. 276,630 -- -- 276,630
-- -- 98,805 98,805 Johnson & Johnson -- -- 5,920,396 5,920,396
-- -- 78,800 78,800 King Pharmaceuticals,
Inc. (b) -- -- 1,339,600 1,339,600
-- 25,831 180,690 206,521 Merck & Co. Inc. -- 941,023 6,582,537 7,523,560
-- -- 67,220 67,220 Novartis A.G.-ADR
(Switzerland) -- -- 3,624,502 3,624,502
-- -- 130,500 130,500 Pfizer Inc. -- -- 3,062,835 3,062,835
21,266 -- -- 21,266 ViproPharma Inc. (b) 183,313 -- -- 183,313
-- 16,756 45,500 62,256 Wyeth -- 744,134 2,020,655 2,764,789
------------ ------------ ------------ ------------
459,943 1,685,157 23,758,889 25,903,989
------------ ------------ ------------ ------------
PROPERTY & CASUALTY
INSURANCE--4.61%
26,761 -- -- 26,761 21st Century Holding Co. 350,034 -- -- 350,034
-- -- 34,110 34,110 Allstate Corp. (The) -- -- 1,866,840 1,866,840
9,448 -- 60,636 70,084 Ambac Financial Group,
Inc. 766,233 -- 4,917,580 5,683,813
-- -- 25,600 25,600 Chubb Corp. (The) -- -- 1,277,440 1,277,440
-- -- 40,100 40,100 Fidelity National
Financial, Inc. -- -- 1,561,895 1,561,895
8,281 6,200 21,100 35,581 FPIC Insurance Group,
Inc. (b) 320,889 240,250 817,625 1,378,764
6,274 -- -- 6,274 Harleysville Group Inc. 199,011 -- -- 199,011
20,824 7,384 19,520 47,728 MBIA Inc. 1,219,245 432,333 1,142,896 2,794,474
-- 18,721 -- 18,721 Mercer Insurance Group,
Inc. -- 350,644 -- 350,644
-- -- 21,400 21,400 SAFECO Corp. -- -- 1,205,890 1,205,890
50,117 12,539 -- 62,656 Safety Insurance Group,
Inc. 2,383,063 596,229 -- 2,979,292
46,452 15,907 -- 62,359 Seabright Insurance
Holdings (b) 748,342 256,262 -- 1,004,604
-- 6,549 -- 6,549 St. Paul Travelers Cos.,
Inc. (The) -- 291,954 -- 291,954
-- -- 24,000 24,000 United Fire & Casualty
Co. -- -- 723,120 723,120
28,327 -- 43,560 71,887 W. R. Berkley Corp. 966,801 -- 1,486,703 2,453,504
------------ ------------ ------------ ------------
6,953,618 2,167,672 14,999,989 24,121,279
------------ ------------ ------------ ------------
PUBLISHING--0.48%
21,467 28,508 -- 49,975 McGraw-Hill Cos., Inc.
(The) 1,078,287 1,431,957 -- 2,510,244
RAILROADS--0.53%
9,186 2,749 -- 11,935 Burlington Northern
Santa Fe Corp. $ 727,991 $ 217,858 $ -- $ 945,849
12,531 5,113 -- 17,644 CSX Corp. 882,684 360,160 -- 1,242,844
-- 11,478 -- 11,478 Norfolk Southern Corp. -- 610,859 -- 610,859
------------ ------------ ------------ ------------
1,610,675 1,188,877 -- 2,799,552
------------ ------------ ------------ ------------
REGIONAL BANKS--2.04%
41,125 -- -- 41,125 Columbia Banking System,
Inc. 1,537,253 -- -- 1,537,253
-- -- 33,800 33,800 Cullen/Frost Bankers,
Inc. -- -- 1,936,740 1,936,740
62,781 22,325 -- 85,106 First BanCorp. 583,863 207,623 -- 791,486
16,115 -- -- 16,115 First Community Bancorp 952,074 -- -- 952,074
-- -- 76,700 76,700 KeyCorp -- -- 2,736,656 2,736,656
-- -- 44,200 44,200 Nara Bancorp, Inc. -- -- 828,750 828,750
72,476 22,851 -- 95,327 R&G Financial
Corp.-Class B
(Puerto Rico) 622,569 196,290 -- 818,859
-- 3,548 -- 3,548 SunTrust Banks, Inc. -- 270,570 -- 270,570
24,840 -- -- 24,840 TriCo Bancshares 680,119 -- -- 680,119
-- 3,676 -- 3,676 Virginia Financial
Group, Inc. -- 155,201 -- 155,201
------------ ------------ ------------ ------------
4,375,878 829,684 5,502,146 10,707,708
------------ ------------ ------------ ------------
RESTAURANTS--2.59%
-- -- 32,550 32,550 CEC Entertainment Inc. (b) -- -- 1,045,506 1,045,506
-- -- 92,800 92,800 Darden Restaurants, Inc. -- -- 3,656,320 3,656,320
-- -- 20,820 20,820 Jack in the Box Inc. (b) -- -- 816,144 816,144
-- 17,877 -- 17,877 McDonald's Corp. -- 600,667 -- 600,667
-- -- 24,800 24,800 Papa John's
International, Inc. (b) -- -- 823,360 823,360
-- 9,451 -- 9,451 Starbucks Corp. (b) -- 356,870 -- 356,870
61,032 -- -- 61,032 Triarc Cos., Inc.-Class
B 953,930 -- -- 953,930
-- -- 105,300 105,300 Yum! Brands, Inc. -- -- 5,293,431 5,293,431
------------ ------------ ------------ ------------
953,930 957,537 11,634,761 13,546,228
------------ ------------ ------------ ------------
SEMICONDUCTOR
EQUIPMENT--0.30%
27,876 -- -- 27,876 Lam Research Corp. (b) 1,299,579 -- -- 1,299,579
7,734 -- -- 7,734 MEMC Electronic
Materials, Inc. (b) 290,025 -- -- 290,025
------------ ------------ ------------ ------------
1,589,604 -- -- 1,589,604
------------ ------------ ------------ ------------
SEMICONDUCTORS--1.56%
12,784 -- -- 12,784 Altera Corp. (b) 224,359 -- -- 224,359
12,295 40,847 38,300 91,442 Intel Corp. 232,990 774,051 725,785 1,732,826
23,328 6,613 -- 29,941 Linear Technology Corp. 781,255 221,469 -- 1,002,724
15,036 -- -- 15,036 Maxim Integrated
Products, Inc. 482,806 -- -- 482,806
14,379 -- 22,100 36,479 Microchip Technology
Inc. 482,415 -- 741,455 1,223,870
16,151 5,249 53,690 75,090 National Semiconductor
Corp. 385,201 125,189 1,280,506 1,790,896
-- -- 23,800 23,800 NVIDIA Corp. (b) -- -- 506,702 506,702
-- -- 84,459 84,459 Taiwan Semiconductor
Manufacturing
Co. Ltd.-ADR (Taiwan) -- -- 775,334 775,334
-- 13,935 -- 13,935 Texas Instruments Inc. -- 422,091 -- 422,091
------------ ------------ ------------ ------------
2,589,026 1,542,800 4,029,782 8,161,608
------------ ------------ ------------ ------------
SOFT DRINKS--0.45%
-- 24,887 -- 24,887 Coca-Cola Co. (The) -- 1,070,639 -- 1,070,639
-- 6,257 15,479 21,736 PepsiCo, Inc. -- 375,670 929,359 1,305,029
------------ ------------ ------------ ------------
-- 1,446,309 929,359 2,375,668
------------ ------------ ------------ ------------
SPECIALIZED CONSUMER
SERVICES--0.90%
25,379 10,266 68,100 103,745 Jackson Hewitt Tax
Service Inc. 795,632 321,839 2,134,935 3,252,406
-- -- 36,500 36,500 Steiner Leisure Ltd. (b) -- -- 1,442,845 1,442,845
------------ ------------ ------------ ------------
795,632 321,839 3,577,780 4,695,251
------------ ------------ ------------ ------------
SPECIALIZED
FINANCE--1.30%
-- 248 -- 248 Chicago Mercantile
Exchange
Holdings Inc. -- 121,805 -- 121,805
13,277 6,132 23,032 42,441 CIT Group, Inc. 694,254 320,642 1,204,343 2,219,239
16,319 11,675 -- 27,994 Medallion Financial
Corp. 211,494 151,308 -- 362,802
24,598 39,855 -- 64,453 Moody's Corp. 1,339,607 2,170,503 -- 3,510,110
-- -- 12,600 12,600 Portfolio Recovery
Associates, Inc. (b) -- -- 575,820 575,820
------------ ------------ ------------ ------------
2,245,355 2,764,258 1,780,163 6,789,776
------------ ------------ ------------ ------------
SPECIALTY
CHEMICALS--0.43%
-- -- 97,500 97,500 A. Schulman, Inc. -- -- 2,231,775 2,231,775
SPECIALTY STORES--0.49%
-- -- 105,700 105,700 Staples, Inc. -- -- 2,570,624 2,570,624
------------ ------------ ------------ ------------
STEEL--2.76%
39,218 17,208 -- 56,426 Commercial Metals Co. 1,007,903 442,246 -- 1,450,149
9,843 2,479 -- 12,322 Great Northern Iron Ore
Properties 1,093,656 275,442 -- 1,369,098
-- -- 57,300 57,300 IPSCO, Inc. (Canada) (c) -- -- 5,483,037 5,483,037
63,369 19,978 -- 83,347 Mesabi Trust 1,175,495 370,592 -- 1,546,087
-- 6,001 74,200 80,201 Nucor Corp. -- 325,554 4,025,350 4,350,904
6,889 -- -- 6,889 Olympic Steel, Inc. 243,802 -- -- 243,802
------------ ------------ ------------ ------------
3,520,856 1,413,834 9,508,387 14,443,077
------------ ------------ ------------ ------------
SYSTEMS SOFTWARE--0.77%
-- 29,692 87,400 117,092 Microsoft Corp. -- 691,824 2,036,420 2,728,244
-- -- 89,500 89,500 Oracle Corp. (b) -- -- 1,296,855 1,296,855
------------ ------------ ------------ ------------
-- 691,824 3,333,275 4,025,099
------------ ------------ ------------ ------------
TECHNOLOGY
DISTRIBUTORS--0.21%
2,790 -- -- 2,790 Arrow Electronics, Inc. (b) 89,838 -- -- 89,838
-- -- 18,800 18,800 CDW Corp. -- -- 1,027,420 1,027,420
------------ ------------ ------------ ------------
89,838 -- 1,027,420 1,117,258
------------ ------------ ------------ ------------
THRIFTS & MORTGAGE
FINANCE--1.57%
21,248 25,015 -- 46,263 Beverly Hills Bancorp.
Inc. $ 204,406 $ 240,644 $ -- $ 445,050
-- 22,506 -- 22,506 CharterMac -- 421,087 -- 421,087
18,500 7,306 -- 25,806 Corus Bankshares, Inc. 484,330 191,271 -- 675,601
-- 8,594 -- 8,594 Countrywide Financial
Corp. -- 327,260 -- 327,260
13,616 6,503 -- 20,119 Downey Financial Corp. 923,846 441,229 -- 1,365,075
12,149 11,009 -- 23,158 Fremont General Corp. 225,485 204,327 -- 429,812
2,069 -- -- 2,069 Harbor Florida
Bancshares, Inc. 76,843 -- -- 76,843
7,619 -- 13,290 20,909 MGIC Investment Corp. 495,235 -- 863,850 1,359,085
35,687 -- -- 35,687 PMI Group, Inc. (The) 1,590,926 -- -- 1,590,926
18,770 -- -- 18,770 Radian Group Inc. 1,159,611 -- -- 1,159,611
-- 8,008 -- 8,008 Washington Mutual, Inc. -- 365,005 -- 365,005
------------ ------------ ------------ ------------
5,160,682 2,190,823 863,850 8,215,355
------------ ------------ ------------ ------------
TOBACCO--1.26%
-- 14,466 -- 14,466 Altria Group, Inc. -- 1,062,238 -- 1,062,238
-- -- 16,570 16,570 Loews Corp - Carolina
Group -- -- 851,201 851,201
10,229 7,910 16,200 34,339 Reynolds American Inc. 1,179,404 912,023 1,867,860 3,959,287
8,326 -- -- 8,326 UST Inc. 376,252 -- -- 376,252
-- -- 20,895 20,895 Vector Group Ltd. (a) -- -- 339,544 339,544
------------ ------------ ------------ ------------
1,555,656 1,974,261 3,058,605 6,588,522
------------ ------------ ------------ ------------
TRADING COMPANIES &
DISTRIBUTORS--0.04%
4,017 -- -- 4,017 MSC Industrial Direct
Co.,
Inc.-Class A 191,089 -- -- 191,089
------------ ------------ ------------ ------------
TRUCKING--1.04%
-- -- 36,670 36,670 Arkansas Best Corp. -- -- 1,841,201 1,841,201
31,981 6,609 -- 38,590 Con-way Inc. 1,852,659 382,859 -- 2,235,518
11,769 -- -- 11,769 Hunt (J.B.) Transport
Services, Inc. 293,166 -- -- 293,166
10,243 -- -- 10,243 Laidlaw International
Inc. 258,124 -- -- 258,124
-- -- 36,800 36,800 Marten Transport, Ltd. (b) -- -- 800,032 800,032
------------ ------------ ------------ ------------
2,403,949 382,859 2,641,233 5,428,041
------------ ------------ ------------ ------------
Total Common Stocks &
Other Equity
Interests
(Cost $488,453,511) 125,150,213 79,342,512 344,501,673 548,994,398
------------ ------------ ------------ ------------
MONEY MARKET FUNDS--2.85%
1,877,080 1,070,797 4,515,909 7,463,786 Liquid Assets
Portfolio-
Institutional Class (d) 1,877,080 1,070,797 4,515,909 7,463,786
------------ ------------ ------------ ------------
1,877,080 1,070,797 4,515,909 7,463,786 Premier Portfolio-
Institutional Class (d) 1,877,080 1,070,797 4,515,909 7,463,786
------------ ------------ ------------ ------------
Total Money Market Funds
(Cost $14,927,572) 3,754,160 2,141,594 9,031,818 14,927,572
------------ ------------ ------------ ------------
Adjustment for
Extinguishment
of Debt--0.00%
(Cost $39,417,896) (g) (26,000,000) (16,000,000) (42,000,000)
------------ ------------ ------------ ------------
TOTAL
INVESTMENTS--99.67%
(excluding
investments
purchased
with cash collateral
from securities
loaned)
(Cost $503,381,083) 128,904,373 81,484,106 353,533,491 521,921,970
------------ ------------ ------------ ------------
INVESTMENTS PURCHASED
WITH CASH COLLATERAL
FROM SECURITIES
LOANED
MONEY MARKET
FUNDS--1.03%
-- -- 5,391,945 5,391,945 Liquid Assets
Portfolio-
Institutional Class (d)(e) -- -- 5,391,945 5,391,945
------------ ------------ ------------ ------------
Total Money Market Funds
(purchased with cash
collateral
from securities
loaned)
(Cost $5,391,945) -- -- 5,391,945 5,391,945
------------ ------------ ------------ ------------
TOTAL INVESTMENTS
--100.70%
(Cost $508,773,028) 128,904,373 81,484,106 358,925,436 527,313,915
------------ ------------ ------------ ------------
OTHER ASSETS LESS
LIABILITIES--(0.70%) (h) (24,368,877) (15,027,651) (6,216,305) (3,642,833)
------------ ------------ ------------ ------------
ADJUSTMENTS--(0.00%) -- -- --
NET ASSETS--100.00% $104,535,496 $ 66,456,455 $352,709,131 $523,671,082
------------ ------------ ------------ ------------
SECURITIES SOLD SHORT*
SHARES VALUE
- ----------------------------------------------- ----------------------------------------------------
COMMON STOCKS--0.00% (f)
AEROSPACE &
DEFENSE--0.00%
-- 4,600 -- -- Argon ST, Inc. $ -- $ 122,498 $ -- $ --
-- 7,900 -- -- Hexcel Corp. -- 124,109 -- --
7,900 -- -- -- L-3 Communications
Holdings, Inc. 595,818 -- -- --
------------ ------------ ------------ ------------
595,818 246,607 -- --
------------ ------------ ------------ ------------
COMMERCIAL
PRINTING--0.00%
-- 26,700 -- -- Deluxe Corp. -- 466,716 -- --
------------ ------------ ------------ ------------
COMPUTER HARDWARE--0.00%
32,100 11,100 -- -- Diebold, Inc. 1,303,902 450,882 -- --
------------ ------------ ------------ ------------
CONSTRUCTION &
ENGINEERING--0.00%
9,900 8,000 -- -- Fluor Corp. 920,007 743,440 -- --
------------ ------------ ------------ ------------
-- 3,300 -- -- Foster Wheeler Ltd. -- 142,560 -- --
------------ ------------ ------------ ------------
920,007 886,000 -- --
------------ ------------ ------------ ------------
CONSUMER FINANCE--0.00%
12,600 -- -- -- Nelnet, Inc.-Class A 510,930 -- -- --
23,900 27,400 -- -- SLM Corp. 1,264,788 1,450,008 -- --
------------ ------------ ------------ ------------
1,775,718 1,450,008 -- --
------------ ------------ ------------ ------------
ELECTRIC
UTILITIES--0.00%
141,800 -- -- -- Northeast Utilities 2,931,006 -- -- --
------------ ------------ ------------ ------------
GAS UTILITIES--0.00%
82,600 20,900 -- -- Peoples Energy Corp. $ 2,966,166 $ 750,519 $ -- $ --
-- 23,200 -- -- WGL Holdings Inc. -- 671,640 -- --
------------ ------------ ------------ ------------
2,966,166 1,422,159 -- --
------------ ------------ ------------ ------------
HEALTH CARE
EQUIPMENT--0.00%
-- 9,400 -- -- Conor Medsystems, Inc. -- 259,346 -- --
------------ ------------ ------------ ------------
HEALTH CARE
FACILITIES--0.00%
16,600 19,618 -- -- LifePoint Hospitals,
Inc. 533,358 630,326 -- --
-- 41,400 -- -- Tenet Healthcare Corp. -- 288,972 -- --
20,600 16,300 -- -- Triad Hospitals, Inc. 815,348 645,154 -- --
------------ ------------ ------------ ------------
1,348,706 1,564,452 -- --
------------ ------------ ------------ ------------
HEALTH CARE
SERVICES--0.00%
41,100 16,100 -- -- DaVita, Inc. 2,042,670 800,170 -- --
------------ ------------ ------------ ------------
HOME ENTERTAINMENT
SOFTWARE--0.00%
30,600 10,400 -- -- Take-Two Interactive
Software, Inc. 326,196 110,864 -- --
------------ ------------ ------------ ------------
HOMEBUILDING--0.00%
63,100 20,200 -- -- Levitt Corp.-Class A 1,009,600 323,200 -- --
12,100 -- -- -- M.D.C. Holdings, Inc. 628,353 -- -- --
-- 12,600 -- -- M/I Homes, Inc. -- 442,008 -- --
------------ ------------ ------------ ------------
1,637,953 765,208 -- --
------------ ------------ ------------ ------------
HOUSEWARES &
SPECIALTIES--0.00%
-- 47 -- -- CSS Industries, Inc. -- 1,351 -- --
------------ ------------ ------------ ------------
INVESTMENT BANKING &
BROKERAGE--0.00%
17,600 -- -- -- Stifel Financial Corp. 621,456 -- -- --
------------ ------------ ------------ ------------
IT CONSULTING & OTHER
SERVICES--0.00%
89,900 27,500 -- -- BearingPoint, Inc. 752,463 230,175 -- --
55,700 16,500 -- -- SRA International,
Inc.-Class A 1,483,291 439,395 -- --
81,900 -- -- -- Unisys Corp. 514,332 -- -- --
------------ ------------ ------------ ------------
2,750,086 669,570 -- --
------------ ------------ ------------ ------------
LEISURE PRODUCTS--0.00%
-- 6,100 -- -- MarineMax, Inc. -- 160,003 -- --
------------ ------------ ------------ ------------
LIFE SCIENCES TOOLS &
SERVICES--0.00%
-- 4,800 -- -- Affymetrix Inc. -- 122,880 -- --
------------ ------------ ------------ ------------
MULTI-UTILITIES--0.00%
-- 11,900 -- -- Energy East Corp. -- 284,767 -- --
5,800 12,300 -- -- KeySpan Corp. 234,320 496,920 -- --
-- 14,900 -- -- NiSource Inc. -- 325,416 -- --
-- 5,400 -- -- PNM Resources Inc. -- 134,784 -- --
-- 51,200 -- -- TECO Energy, Inc. -- 764,928 -- --
------------ ------------ ------------ ------------
234,320 2,006,815 -- --
------------ ------------ ------------ ------------
PAPER PACKAGING--0.00%
80,800 29,800 -- -- Packaging Corp. of
America 1,779,216 656,196 -- --
-- 5,700 -- -- Temple-Inland Inc. -- 244,359 -- --
------------ ------------ ------------ ------------
1,779,216 900,555 -- --
------------ ------------ ------------ ------------
PUBLISHING--0.00%
15,100 -- -- -- Dow Jones & Co., Inc. 528,651 -- -- --
-- 54,499 -- -- Hollinger International
Inc.-Class A -- 437,627 -- --
------------ ------------ ------------ ------------
528,651 437,627 -- --
------------ ------------ ------------ ------------
RAILROADS--0.00%
29,000 29,700 -- -- Kansas City Southern 803,300 822,690 -- --
------------ ------------ ------------ ------------
REAL ESTATE MANAGEMENT &
DEVELOPMENT--0.00%
-- 4,300 -- -- Jones Lang LaSalle Inc. -- 376,465 -- --
------------ ------------ ------------ ------------
REGIONAL BANKS--0.00%
-- 6,400 -- -- Century Bancorp,
Inc.-Class A -- 156,800 -- --
17,000 -- -- -- Community Bancorp. 528,360 -- -- --
23,300 15,500 -- -- Signature Bank 754,454 501,890 -- --
------------ ------------ ------------ ------------
1,282,814 658,690 -- --
------------ ------------ ------------ ------------
SEMICONDUCTOR
EQUIPMENT--0.00%
-- 15,200 -- -- Entegris Inc. -- 144,856 -- --
------------ ------------ ------------ ------------
SEMICONDUCTORS--0.00%
-- 3,800 -- -- Integrated Device
Technology Inc. $ -- $ 53,884 $ -- $ --
------------ ------------ ------------ ------------
SPECIALTY
CHEMICALS--0.00%
3,300 -- -- -- Cytec Industries Inc. 177,078 -- -- --
------------ ------------ ------------ ------------
TOBACCO--0.00%
-- 37,700 -- -- Alliance One
International, Inc. -- 167,388 -- --
------------ ------------ ------------ ------------
TOTAL SECURITIES SOLD
SHORT
(PROCEEDS
$39,997,232) $ 24,025,063 $14,945,186 $ -- $ --
------------ ------------ ------------ ------------
Adjustment for
liquidation of short
sale positions (i) (24,025,063) (14,945,186) -- --
------------ ------------ ------------ ------------
Total Securities Sold
Short After
Adjustments
(Proceeds $0) $ -- $ -- $ -- $ --
============ ============ ============ ============
Investment Abbreviations:
ADR- American Depositary Receipt
Notes to Pro Forma Combining Schedule of Investments:
* [As of June 30, 2006, all securities, except for securities sold short,
held by the AIM Opportunities II Fund and AIM Opportunities III Fund would
comply with the investment objectives and/or strategies of the AIM Select
Equity Fund. AIM Select Equity Fund does not engage in selling securities
short. All securities sold short in AIM Opportunities II Fund and AIM
Opportunities III Fund will be liquidated prior to the reorganization. In
addition, AIM Select Equity Fund does not utilize leveraging as part of its
investment strategies. Securities would need to be sold prior to the
reorganization in order for AIM Select Equity Fund to comply with its
investments restrictions. The foregoing shall not restrict in any way the
ability of the investment advisor of either of the Funds from buying or
selling securities in the normal course of such Fund's operations.]
(a) All or a portion of this security was out on loan at June 30, 2006.
(b) Non-income producing security.
(c) A portion of this security is subject to call options written.
(d) Liquid Assets Portfolio and Premier Portfolio are affiliated with AIM
Opportunities II Fund, AIM Opportunities III Fund and AIM Select Equity
Fund by having the same advisor.
(e) 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.
(f) Collateral on short sales was segregated by AIM Opportunities II Fund and
AIM Opportunities III Fund in the amount of $25,664,427 and $15,340,794
which represents 106.82% and 102.65% of the value of its securites sold
short, respectively.
(g) At June 30, 2006 AIM Opportunities II Fund and AIM Opportunities III Fund
had an outstanding loan of $26,000,000 and $16,000,000, respectively that
will be extinguished prior to the closing of the reorganization. AIM
Opportunities II Fund and AIM Opportunities III Fund are expected to sell
securities valued at $26,000,000 and $16,000,000, respectively and
accordingly the value of the AIM Opportunities II Fund and AIM
Opportunities III Fund's investments and the payable for the loan
outstanding have been reduced by $26,000,000 and $16,000,000, respectively.
AIM Opportunities II and AIM Opportunities III Fund's cost of securities
have been reduced by $24,171,207 and $15,246,689, respectively 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.
(h) The estimated transaction costs for the reorganization, which includes
legal, accounting, filing, printing, postage and solicitation, are
estimated to be $120,000 and $90,000 for AIM Opportunities II Fund and AIM
Opportunities III Fund. AIM has agreed to bear all of these costs. In
addition AIM Select Equity Fund will bear approximately $30,000 with
respect to the reorganization and accordingly the liabilities of AIM Select
Equity Fund have been increased by $30,000.
(i) At June 30, 2006 AIM Opportunities II Fund and AIM Opportunities III Fund
had open short positions valued at $25,025,063 and $14,945,186 with
proceeds of $24,597,577 and $15,399,655, respectively 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 OPPORTUNITIES II FUND AND AIM OPPORTUNITIES III FUND
INTO AIM SELECT EQUITY FUND
JUNE 30, 2006
(Unaudited)
AIM AIM AIM AIM
OPPORTUNITIES OPPORTUNITIES SELECT SELECT EQUITY
II III EQUITY PRO FORMA
FUND FUND FUND ADJUSTMENTS ** COMBINING
-------------- ------------- ------------- --------------- --- -------------
Assets:
Investments, at value * $ 125,150,213 $ 79,342,512 $344,501,673 $(42,000,000.00) (a) $ 506,994,398
(cost $116,083,310 - AIM Opportunities II Fund)
(cost $75,506,083 - AIM Opportunities III Fund)
(cost $296,864,118 - AIM Select Equity Fund)
(cost $488,453,511 - Pro Forma combining)
-------------- ------------- ------------ --------------- -------------
Investments in affiliated money market funds 3,754,160 2,141,594 14,423,763 -- 20,319,517
(cost $3,754,160 - AIM Opportunities II Fund)
(cost $2,141,594 - AIM Opportunities III Fund)
(cost $14,423,763 - AIM Select Equity Fund)
(cost $20,319,517 - Pro Forma combining)
-------------- ------------- ------------ --------------- -------------
Total investments 128,904,373 81,484,106 358,925,436 (42,000,000) (a) 527,313,915
(cost $119,837,470 - AIM Opportunities II Fund)
(cost $77,647,677 - AIM Opportunities III Fund)
(cost $311,287,881 - AIM Select Equity Fund)
(cost adjustment $(24,171,207) - AIM
Opportunities II Fund)
(cost adjustment $(15,246,689) - AIM
Opportunities III Fund)
(cost $469,355,132 - Pro Forma combining)
Cash -- -- -- -- --
Foreign currencies, at value 229 176 -- -- 405
(cost $223 - AIM Opportunities II Fund)
(cost $167 - AIM Opportunities III Fund)
(cost $390 - Pro Forma combining)
Cash -- -- -- 2,189,733 (b) 2,189,733
Receivables for:
Deposits with brokers for securities sold
short 25,215,396 16,101,306 -- (41,316,702) (b) --
Investments sold -- -- -- -- --
Investments sold to affiliates -- -- -- -- --
Fund shares sold 806,481 797 32,109 -- 839,387
Dividends and interest 175,637 160,577 341,797 -- 678,011
Short stock rebates 93,279 57,250 -- (150,529) (b) --
Investment for trustee deferred compensation
and retirement plans 30,753 27,825 79,124 -- 137,702
Other assets 3,416 -- 24,988 -- 28,404
-------------- ------------- ------------ --------------- -------------
Total assets 155,229,564 97,832,037 359,403,454 (81,277,498) 531,187,557
-------------- ------------- ------------ --------------- -------------
LIABILITIES:
Payables for:
Investments purchased -- -- -- --
Investments purchased from affiliates -- -- -- --
Fund shares reacquired 288,106 149,950 751,916 -- 1,189,972
Options written, at market value (premiums
received $33,879 - AIM Select Equity Fund) 22,575 -- 22,575
Loan outstanding 26,000,000 16,000,000 -- (42,000,000) (a) --
Short stock account dividends 66,917 24,100 -- (91,017) (b) --
Trustee deferred compensation and retirement
plans 42,434 -- 120,844 -- 163,278
Collateral upon return of securities loaned -- -- 5,391,945 -- 5,391,945
Securities sold short, at value 24,025,063 14,945,186 -- (38,970,249) (b) --
(proceeds $24,597,577 - AIM Opportunities II
Fund)
(proceeds $15,399,655 - AIM Opportunities III
Fund)
(proceeds $39,997,232 - Pro Forma combining)
Accrued interest expense 130,444 85,788 -- (216,232) (a) --
Accrued distribution fees 44,733 40,498 131,331 -- 216,562
Accrued trustees' and officer's fees and
benefits 1,283 1,850 548 -- 3,681
Accrued transfer agent fees 44,292 50,699 173,632 -- 268,623
Accrued reorganization expenses 30,000 30,000
Accrued operating expenses 50,796 77,511 101,532 -- 229,839
Total liabilities 50,694,068 31,375,582 6,694,323 (81,247,498) 7,516,475
-------------- ------------- ------------ --------------- -------------
Net assets applicable to shares outstanding $ 104,535,496 $ 66,456,455 $352,709,131 $ (30,000) $ 523,671,082
-------------- ------------- ------------ --------------- -------------
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 237,894,350 $ 328,320,299 $385,431,339 $ -- $ 951,645,988
Undistributed net investment income (loss) (828,385) (435,033) (568,017) (30,000) (1,861,435)
Undistributed net realized gain (loss) from
investment securities, foreign currencies,
futures contracts, option contracts and
securities sold short (142,169,892) (265,719,716) (79,803,050) -- (487,692,658)
Unrealized appreciation of investment
securities, foreign currencies, option
contracts and securities sold short 9,639,423 4,290,905 47,648,859 -- 61,579,187
-------------- ------------- ------------ --------------- -------------
$ 104,535,496 $ 66,456,455 $352,709,131 $ (30,000) $ 523,671,082
-------------- ------------- ------------ --------------- -------------
NET ASSETS:
Class A $ 57,155,666 $ 29,616,998 $244,452,193 $ (20,792) $ 331,204,065
-------------- ------------- ------------ --------------- -------------
Class B $ 34,517,066 $ 28,556,443 $ 88,772,775 $ (7,551) $ 151,838,733
-------------- ------------- ------------ --------------- -------------
Class C $ 12,862,764 $ 8,283,014 $ 19,484,163 $ (1,657) $ 40,628,284
-------------- ------------- ------------ --------------- -------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE
(AIM OPPORTUNITIES II FUND):
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE
(AIM OPPORTUNITIES III FUND):
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE
(AIM SELECT EQUITY FUND):
Class A 2,547,340 3,316,047 12,903,253 (1,284,355) 17,482,285
-------------- ------------- ------------ --------------- -------------
Class B 1,611,361 3,332,021 5,301,748 (1,175,550) 9,069,580
-------------- ------------- ------------ --------------- -------------
Class C 600,423 966,692 1,165,415 (302,415) 2,430,115
-------------- ------------- ------------ --------------- -------------
Class A:
Net asset value per share $ 22.44 $ 8.93 $ 18.95 $ 18.95
-------------- ------------- ------------ --------------- -------------
Offering price per share:
(Net asset value of $22.44 / 94.50% - AIM
Opportunities II Fund)
(Net asset value of $8.93 / 94.50% - AIM
Opportunities III Fund)
(Net asset value of $18.95/ 94.50% - AIM
Select Equity Fund)
$ 23.75 $ 9.45 $ 20.05 $ 20.05
-------------- ------------- ------------ -------------
Class B:
Net asset value and offering price per share $ 21.42 $ 8.57 $ 16.74 $ 16.74
-------------- ------------- ------------ -------------
Class C:
Net asset value and offering price per share $ 21.42 $ 8.57 $ 16.72 $ 16.72
-------------- ------------- ------------ -------------
* At June 30, 2006, securities with an aggregate market value of $5,298,789
were on loan to brokers for AIM Select Equity Fund.
** 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 OPPORTUNITIES II FUND AND AIM OPPORTUNITIES III FUND
INTO AIM SELECT EQUITY FUND
FOR THE YEAR ENDED JUNE 30, 2006
(Unaudited)
AIM AIM AIM
OPPORTUNITIES OPPORTUNITIES SELECT EQUITY
II III AIM SELECT PRO FORMA
FUND FUND EQUITY FUND ADJUSTMENTS * COMBINING
------------- ------------- ------------ ------------ --- -------------
INVESTMENT INCOME:
Dividends $ 1,836,168 $ 1,506,786 $ 4,828,661 $ (740,459) (c) $ 7,431,156
(net of foreign withholding tax of $3,590 -
AIM AIM Opportunities II Fund)
(net of foreign withholding tax of $(1,410) -
AIM AIM Opportunities III Fund)
(net of foreign withholding tax of $31,725 -
AIM Select Equity Fund)
(net of foreign withholding tax of $33,905 -
Pro Forma Combining)
Dividends from affiliated money market funds 176,164 122,970 474,814 -- 773,948
(including security lending income of $0 -
AIM Opportunities II Fund)
(including security lending income of $0 -
AIM Opportunities III Fund)
(including security lending income of $15,824 -
AIM Select Equity Fund)
(including security lending income of $15,824 -
AIM Pro Forma Combining)
Interest 1,560 15,751 -- -- 17,311
Short stock rebates 1,128,386 776,944 -- (1,905,330) (b) --
----------- ----------- ------------ ------------ ------------
Total investment income 3,142,278 2,422,451 5,303,475 (2,645,789) 8,222,415
----------- ----------- ------------ ------------ ------------
EXPENSES:
Advisory fees 1,063,329 1,035,012 2,705,280 (808,338) (d) 3,995,283
Administrative services fees 50,000 50,000 109,894 (52,528) (e) 157,366
Custodian fees 21,321 22,367 40,200 (18,133) (f) 65,755
Distribution fees:
Class A 164,310 90,535 651,626 -- 906,471
Class B 430,658 355,392 1,071,134 -- 1,857,184
Class C 151,013 107,562 230,810 -- 489,385
Dividends on short sales 767,015 400,510 -- (1,167,525) (b) --
Interest and line of credit fees 1,502,521 786,237 -- (2,288,758) (b) --
Transfer agent fees 285,853 254,707 1,453,205 -- (g) 1,993,765
Trustees' and officer's fees and benefits 17,421 16,169 27,785 (27,794) (h) 33,581
Other 176,915 169,568 267,878 (150,806) (i) 463,555
----------- ----------- ------------ ------------ ------------
Total expenses 4,630,356 3,288,059 6,557,812 (4,513,882) 9,962,345
----------- ----------- ------------ ------------ ------------
Less: Fees waived, expenses reimbursed and expense
offset arrangements (118,583) (160,250) (47,693) 290,322 (36,204)
----------- ----------- ------------ ------------ ------------
Net expenses 4,511,773 3,127,809 6,510,119 (4,223,560) (d) 9,926,141
----------- ----------- ------------ ------------ ------------
Net investment income (loss) (1,369,495) (705,358) (1,206,644) 1,577,771 (1,703,726)
----------- ----------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES CONTRACTS,
OPTION CONTRACTS AND SECURITIES SOLD SHORT:
Net realized gain (loss) from:
Investment securities** 9,831,978 11,491,592 57,008,842 (4,628,671) (c) 73,703,741
Foreign currencies 19,239 (105,505) (549) -- (86,815)
Futures contracts 16,008 334,063 -- -- 350,071
Option contracts written -- -- 57,710 -- 57,710
Securities sold short (4,105,940) (1,483,742) -- 5,589,682 (b) --
----------- ----------- ------------ ------------ ------------
5,761,285 10,236,408 57,066,003 961,011 74,024,707
----------- ----------- ------------ ------------ ------------
Change in net unrealized appreciation (depreciation)
of:
Investment securities 6,372,058 (7,212,136) (25,514,167) (157,246) (c) (26,511,491)
Foreign currencies (14,433) 2,683 -- -- (11,750)
Option contracts written -- -- (2,488) -- (2,488)
Securities sold short 882,604 454,468 -- (1,337,072) (b) --
----------- ----------- ------------ ------------ ------------
7,240,229 (6,754,985) (25,516,655) (1,494,318) (26,525,729)
----------- ----------- ------------ ------------ ------------
Net gain from investment securities, foreign
currencies, futures contracts, option contracts
and securities sold short 13,001,514 3,481,423 31,549,348 (533,307) 47,498,978
----------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from operations $11,632,019 $ 2,776,065 $ 30,342,704 $ 1,044,464 $ 45,795,252
=========== =========== ============ ============ ============
* See Note 2 Pro Forma Adjustments
** Includes gains (losses) from securities sold to affiliates of $(146,112),
$0 and $385,561 for AIM Opportunities II Fund, AIM Opportunities III Fund
and AIM Select Equity Fund, respectively.
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 OPPORTUNITIES II FUND AND AIM OPPORTUNITIES III FUND
INTO AIM SMALL CAP EQUITY FUND
JUNE 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
between AIM Select Equity FUND ("Buying Fund") and AIM Opportunities II Fund and
Plan of Reorganization between Buying Fund and AIM Opportunities III Fund
(collectively, "the Plans") and the consummation of the transactions
contemplated therein to be accounted for as a tax-free reorganization of
investment companies. AIM Select Equity Fund, AIM Opportunities II Fund and AIM
Opportunities III Fund are all registered open-end management investment
companies that issue their shares in separate series. The Plans would be
accomplished by an exchange of shares of Buying Fund for the net assets of AIM
Opportunities II Fund and AIM Opportunities III Fund and the distribution of
Buying Fund shares to AIM Opportunities II Fund and AIM Opportunities III Fund
shareholders. If the Plans were to have taken place at June 30, 2006, AIM
Opportunities II Fund -Class A shareholders would have received 3,016,130 shares
of Buying Fund -Class A shares, AIM Opportunities II Fund -Class B shareholders
would have received 2,061,951 shares of Buying Fund -Class B shares and AIM
Opportunities II Fund -Class C shareholders would have received 769,304 shares
of Buying Fund -Class C shares. AIM Opportunities III Fund -Class A shareholders
would have received 1,562,902 shares of Buying Fund -Class A shares, AIM
Opportunities III Fund -Class B shareholders would have received 1,705,881shares
of Buying Fund -Class B shares and AIM Opportunities III Fund -Class C
shareholders would have received 495,396 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 June 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 AIM Opportunities II Fund and AIM
Opportunities III Fund and Buying Fund.
NOTE 2 - PRO FORMA ADJUSTMENTS
(a) With respect to the Pro Forma Statement of Assets and Liabilities as of June
30, 2006, AIM Opportunities II Fund and AIM Opportunities III Fund are expected
to sell securities valued at $26,000,000 and $16,000,000, respectively and
accordingly the value of AIM Opportunities II Fund and AIM Opportunities III
Fund's investments and the payable for the loan outstanding have been reduced by
$26,000,000 and $16,000,000, respectively. AIM Opportunities II Fund and AIM
Opportunities III Fund's cost of securities have been reduced by $24,171,207 and
$15,246,689, respectively based on the proportion of borrowing to total
investments at June 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 June 30, 2006 AIM Opportunities II Fund and AIM
Opportunities III 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
June 30, 2006 and for the 12 months ended June 30, 2006, respectively.
(c) During the 12 months ended June 30, 2006, the AIM Opportunities II Fund and
AIM Opportunities III Fund had average borrowings of approximately 24% and 19%,
respectively 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 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 June 30,
2006 are $3,995,283. The advisory fees were adjusted to reflect the advisory fee
rates in effect for Buying Fund. Correspondingly, advisory fee waivers have been
adjusted to reflect the contractual agreement by the advisor to waive advisory
fees for the period January 1, 2005 through December 31, 2009 as part of its
settlement with the Attorney General of New York. The advisory fees will not
exceed the following annual rates applied to the average daily net assets of the
Fund: 0.695% of the first $250 million; 0.67% of the next $250 million; 0.645%
of the next $500 million; 0.62% of the next $1.5 billion; 0.595% of the next
$2.5 billion; 0.57% of the next $2.5 billion; 0.545% of the next $2.5 billion
and 0.52% of the excess over $10 billion.
(e) Pursuant to the master administrative services agreement for Buying Fund,
fees paid on pro forma combined assets for the year ended June 30, 2006 are
$157,366. 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 $18,133 to reflect the transaction costs on
the pro forma combined assets for the year ended June 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 $756 for Class A, Class B and Class C shares.
(h) Trustees' and Officer's fees and benefits were reduced by $27,794 to
eliminate the effects of duplicative fixed costs of retainer and meeting fees.
(i) Other Expenses were reduced by $150,806 to eliminate the effects of
duplicative fixed costs of production of reports to shareholders and
professional services fees.
NOTE 3 - REORGANIZATION COSTS
AIM Opportunities II Fund and AIM Opportunities III Fund are expected to incur
an estimated $217,000 in reorganization costs. These costs represent the
estimated non recurring expense of AIM Opportunities II Fund and AIM
Opportunities III 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. The reorganization
costs related to AIM Opportunities II Fund are estimated to be $120,000 and AIM
has agreed to pay 100% of these costs. The reorganization costs related to AIM
Opportunities III Fund are estimated to be $97,000 and AIM has agreed to pay
100% of these costs.
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.
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 and certain other domestic
insurers with limits up to $60,000,000 (plus an additional $20,000,000
limit that applies to independent directors/trustees only).
Section 16 of the Master Investment Advisory Agreement between the
Registrant and AIM provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of AIM or any of its officers, directors or
employees, that AIM shall not be subject to liability to the Registrant or
to any series of the Registrant, or to any shareholder of any series of the
Registrant for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security. Any liability of AIM to any
series of the Registrant shall not automatically impart liability on the
part of AIM to any other series of the Registrant. No series of the
Registrant shall be liable for the obligations of any other series of the
Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in connection with the
successful defense of any action, suit
C-1
or proceeding) is asserted by such trustee, officer or controlling person
in connection with the shares being registered hereby, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and be governed by the final adjudication of such
issue.
Item 16. Exhibits
1 (a) - Amended and Restated Agreement and Declaration of Trust, dated
September 14, 2005.(28)
(b) - Amendment No. 1 to Amended and Restated Agreement and Declaration of
Trust of AIM Funds Group, dated September 14, 2005, as amended April
10, 2006.(31)
(c) - Amendment No. 2 to Amended and Restated Agreement and Declaration of
Trust of AIM Funds Group, dated September 14, 2005, as amended April
10, 2006 and May 24, 2006.(31)
(d) - Amendment No. 3 to Amended and Restated Agreement and Declaration of
Trust of AIM Funds Group, dated September 14, 2005, as amended April
10, 2006, May 24, 2006 and July 5, 2006.(31)
2 (a) - Amended and Restated Bylaws, adopted effective September 14,
2005.(28)
(b) - Amendment to Amended and Restated Bylaws of AIM Funds Group, adopted
effective September 14, 2005 as amended August 1, 2006.(31)
3 - Voting Trust Agreements - None.
4 (a) - Form of Agreement and Plan of Reorganization of Registrant on behalf of
AIM Small Cap Equity Fund and AIM Opportunities I Fund is attached as
Appendix I to the Combined Proxy Statement Prospectus relating to AIM
Opportunities I Fund contained in this Registration Statement.
(b) - Form of Agreement and Plan of Reorganization of Registrant on behalf of
AIM Select Equity Fund and AIM Opportunities II Fund is attached as
Appendix I to the Combined Proxy Statement Prospectus relating to AIM
Opportunities II Fund contained in this Registration Statement.
(c) - Form of Agreement and Plan of Reorganization of Registrant on behalf of
AIM Select Equity Fund and AIM Opportunities III Fund is attached as
Appendix II to the Combined Proxy Statement Prospectus relating to AIM
Opportunities III Fund contained in this Registration Statement.
5 - Instruments Defining Rights of Security Holders - 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 June 1, 2000, between
Registrant and A I M Advisors, Inc.(10)
- (2) Amendment No. 1, dated August 30, 2000, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc.(11)
C-2
- (3) Amendment No. 2, dated December 27, 2000, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc.(13)
- (4) Amendment No. 3, dated September 28, 2001, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc.(15)
- (5) Amendment No. 4, dated December 27, 2001, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc.(18)
- (6) Amendment No. 5, dated July 1, 2002, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc.(20)
- (7) Amendment No. 6, dated April 30, 2003, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc.(22)
- (8) Amendment No. 7, dated November 24, 2003, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc.(24)
- (9) Amendment No. 8, dated December 30, 2004, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc.(25)
- (10) Amendment No. 9, dated July 18, 2005, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc. (27)
- (11) Amendment No. 10, dated April 10, 2006, to the Master Investment
Advisory Agreement, dated June 1, 2000, between Registrant and A I M
Advisors, Inc. (30)
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.(23)
- (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.(23)
- (3) Amendment No. 2, dated November 4, 2003, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(23)
- (4) Amendment No. 3, dated November 20, 2003, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(23)
- (5) Amendment No. 4, dated November 24, 2003, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(23)
- (6) Amendment No. 5, dated November 25, 2003, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(23)
- (7) Amendment No. 6, dated January 6, 2004, to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc. (24)
C-3
- (8) Amendment No. 7, dated March 31, 2004, to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(24)
- (9) Amendment No. 8, dated April 30, 2004, to the Amended and Restated
Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(24)
- (10) Amendment No. 9, dated September 14, 2004, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(25)
- (11) Amendment No. 10, dated September 15, 2004, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(25)
- (12) Amendment No. 11, dated October 15, 2004, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(25)
- (13) Amendment No. 12, dated November 30, 2004, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(25)
- (14) Amendment No. 13, dated December 30, 2004, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(25)
- (15) Amendment No. 14, dated February 25, 2005, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(25)
- (16) Amendment No. 15, dated March 15, 2005, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(27)
- (17) Amendment No. 16, dated April 29, 2005, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(27)
- (18) Amendment No. 17, dated July 13, 2005, to the Amended and Restated
Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(28)
- (19) Amendment No. 18, dated July 18, 2005, to the Amended and Restated
Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(28)
- (20) Amendment No. 19, dated October 22, 2005, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(29)
- (21) Amendment No. 20, dated October 25, 2005, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(29)
C-4
- (22) Amendment No. 21, dated October 31, 2005, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(29)
- (23) Amendment No. 22, dated January 31, 2006, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.(30)
- (24) Amendment no. 23, dated March 27, 2006, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc. (30)
- (25) Amendment no. 24, dated March 31, 2006, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc. (30)
- (26) Amendment no. 25, dated April 10, 2006, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc. (30)
- (27) Amendment no. 26, dated April 14, 2006, to the Amended and
Restated Master Distribution Agreement, dated August 18, 2003, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc. (30)
(b) - (1) Amended and Restated Master Distribution Agreement (Class B shares)
dated August 18, 2003, between Registrant and A I M Distributors,
Inc.(23)
- (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.(23)
- (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.(23)
- (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.(23)
- (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.(23)
- (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.(23)
- (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.(23)
- (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.(23)
C-5
- (9) Amendment No. 8, dated March 31, 2004, to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (Class B shares) and A I M Distributors, Inc.(24)
- (10) Amendment No. 9, dated April 30, 2004, to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (Class B Shares) and A I M Distributors, Inc.(24)
- (11) Amendment No. 10, dated September 15, 2004, to the Amended and
Restated Master Distribution Agreement, dated as of August 18, 2003,
between Registrant (Class B Shares) and A I M Distributors, Inc.(25)
- (12) Amendment No. 11, dated October 15, 2004, to the Amended and
Restated Master Distribution Agreement, dated as of August 18, 2003,
between Registrant (Class B Shares) and A I M Distributors, Inc.(25)
- (13) Amendment No. 12, dated December 30, 2004 to the Amended and
Restated Master Distribution Agreement, dated as of August 18, 2003,
between Registrant (Class B Shares) and A I M Distributors, Inc.(25)
- (14) Amendment No. 13, dated March 15, 2005 to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (Class B Shares) and A I M Distributors, Inc.(27)
- (15) Amendment No. 14, dated April 29, 2005 to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (Class B Shares) and A I M Distributors, Inc.(27)
- (16) Amendment No. 15, dated July 18, 2005 to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (Class B Shares) and A I M Distributors, Inc.(27)
- (17) Amendment No. 16, dated October 31, 2005 to the Amended and
Restated Master Distribution Agreement, dated as of August 18, 2003,
between Registrant (Class B Shares) and A I M Distributors, Inc.(29)
- (18) Amendment No. 17, dated March 27, 2006 to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (Class B Shares) and A I M Distributors, Inc.(30)
- (19) Amendment No. 18, dated March 31, 2006 to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (Class B Shares) and A I M Distributors, Inc.(30)
- (20) Amendment No. 19, dated April 10, 2006 to the Amended and Restated
Master Distribution Agreement, dated as of August 18, 2003, between
Registrant (Class B Shares) and A I M Distributors, Inc.(30)
(c) - Form of Selected Dealer Agreement between A I M Distributors, Inc. and
selected dealers.(13)
(d) - Form of Bank Selling Group Agreement between A I M Distributors, Inc.
and banks.(22)
8 (a) - AIM Funds Retirement Plan for Eligible Directors/Trustees as restated
October 1, 2001.(16)
C-6
(b) - Form of AIM Funds Director Deferred Compensation Agreement, as amended
September 26, 2002.(22)
9 (a) - (1) Master Custodian Contract, dated May 1, 2000, between Registrant
and State Street Bank and Trust Company.(11)
- (2) Amendment, dated May 1, 2000, to the Master Custodian Contract,
dated May 1, 2000, between Registrant and State Street Bank and Trust
Company.(11)
- (3) Amendment, dated June 29, 2001, to the Master Custodian Contract,
dated May 1, 2000, between Registrant and State Street Bank and Trust
Company.(16)
- (4) Amendment, dated April 2, 2002, to the Master Custodian Contract,
dated May 1, 2000, between Registrant and State Street Bank and Trust
Company.(18)
- (5) Amendment, dated September 8, 2004, to the Master Custodian
Contract, dated May 1, 2000, between Registrant and State Street Bank
and Trust Company.(25)
- (6) Amendment, dated February 8, 2006, to the Master Custodian
Contract, dated May 1, 2000, between Registrant and State Street Bank
and Trust Company. (29)
(b) - (1) Subcustodian Agreement, dated September 9, 1994, among the
Registrant, Texas Commerce Bank National Association, State Street Bank
and Trust Company and A I M Fund Services, Inc.(2)
- (2) Amendment No. 1, dated October 2, 1998, to Subcustodian Agreement,
dated September 9, 1994, among the Registrant, Chase Bank of Texas,
N.A. (formerly Texas Commerce Bank), State Street Bank and Trust
Company and A I M Fund Services, Inc.(8)
- (3) Amendment No. 2, dated March 15, 2002, to 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 Fund Services, Inc.(20)
- (4) Amendment No. 3, dated May 1, 2004, to 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.(29)
(c) - Subcustodian Agreement, dated January 20, 1993, between State Street
Bank and Trust Company and The Bank of New York.(20)
(d) - Foreign Assets Delegation Agreement, dated May 31, 2002, between A I M
Advisors, Inc. and Registrant.(16)
10 (a) - (1) Amended and Restated Master Distribution Plan (Class A Shares),
dated August 18, 2003.(23)
- (2) Amendment No. 1, dated October 29, 2003, to Amended and Restated
Master Distribution Plan (Class A Shares).(23)
- (3) Amendment No. 2, dated November 4, 2003, to Amended and Restated
Master Distribution Plan (Class A Shares).(23)
C-7
- (4) Amendment No. 3, dated November 20, 2003, to Amended and Restated
Master Distribution Plan (Class A Shares).(23)
- (5) Amendment No. 4, dated November 24, 2003, to Amended and Restated
Master Distribution Plan (Class A Shares).(23)
- (6) Amendment No. 5, dated November 25, 2003, to Amended and Restated
Master Distribution Plan (Class A Shares).(23)
- (7) Amendment No. 6, dated March 31, 2004, to the Amended and Restated
Master Distribution Plan between Registrant (Class A Shares) and A I M
Distributors, Inc.(24)
- (8) Amendment No. 7, dated April 30, 2004, to the Amended and Restated
Master Distribution Plan between Registrant (Class A Shares) and A I M
Distributors, Inc.(24)
- (9) Amendment No. 8, dated September 15, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Shares)
and A I M Distributors, Inc.(25)
- (10) Amendment No. 9, dated October 15, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Shares)
and A I M Distributors, Inc.(25)
- (11) Amendment No. 10, dated December 30, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Shares)
and A I M Distributors, Inc.(25)
- (12) Amendment No. 11, dated January 1, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Chares)
and A I M Distributors, Inc.(25)
- (13) Amendment No. 12, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Chares)
and A I M Distributors, Inc.(27)
- (14) Amendment No. 13, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Chares)
and A I M Distributors, Inc.(27)
- (15) Amendment No. 14, dated July 1, 2005, to the Amended and Restated
Master Distribution Plan between Registrant (Class A Chares) and A I M
Distributors, Inc.(27)
- (16) Amendment No. 15, dated July 18, 2005, to the Amended and Restated
Master Distribution Plan between Registrant (Class A Chares) and A I M
Distributors, Inc.(27)
- (17) Amendment No. 16, dated October 31, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Chares)
and A I M Distributors, Inc.(29)
- (18) Amendment No. 17, dated March 27, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Chares)
and A I M Distributors, Inc.(30)
- (19) Amendment No. 18, dated March 31, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Chares)
and A I M Distributors, Inc.(30)
C-8
- (20) Amendment No. 19, dated April 10, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Chares)
and A I M Distributors, Inc.(30)
- (21) Amendment No. 20, dated April 14, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class A Chares)
and A I M Distributors, Inc.(30)
(b) - (1) Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature), dated August 18, 2003.(23)
- (2) Amendment No. 1, dated October 29, 2003, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(23)
- (3) Amendment No. 2, dated November 4, 2003, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(23)
- (4) Amendment No. 3, dated November 20, 2003, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(23)
- (5) Amendment No. 4, dated November 24, 2003, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(23)
- (6) Amendment No. 5, dated November 25, 2003, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(23)
- (7) Amendment No. 6, dated March 31, 2004, to the Amended and Restated
Master Distribution Plan (Class B Shares) (Securitization Feature) and
A I M Distributors, Inc.(24)
- (8) Amendment No. 7, dated April 30, 2004, to the Amended and Restated
Master Distribution Plan (Class B Shares) (Securitization Feature).(24)
- (9) Amendment No. 8, dated September 15, 2004, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(25)
- (10) Amendment No. 9, dated October 15, 2004, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(25)
- (11) Amendment No. 10, dated December 30, 2004, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(25)
- (12) Amendment No. 11, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(27)
- (13) Amendment No. 12, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature).(27)
- (14) Amendment No. 13, dated July 18, 2005, to the Amended and Restated
Master Distribution Plan (Class B Shares) (Securitization Feature).(27)
- (15) Amendment No, 14, dated October 31, 2005, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature). (29)
- (16) Amendment No, 15, dated March 27, 2006, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature). (30)
C-9
- (17) Amendment No, 16, dated March 31, 2006, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature). (30)
- (18) Amendment No, 17, dated April 10, 2006, to the Amended and
Restated Master Distribution Plan (Class B Shares) (Securitization
Feature). (30)
(c) - (1) Amended and Restated Master Distribution Plan (Class C Shares),
dated August 18, 2003.(23)
- (2) Amendment No. 1, dated October 29, 2003, to the Amended and
Restated Master Distribution Plan (Class C Shares).(23)
- (3) Amendment No. 2, dated November 4, 2003, to the Amended and
Restated Master Distribution Plan (Class C Shares).(23)
- (4) Amendment No. 3, dated November 20, 2003, to the Amended and
Restated Master Distribution Plan (Class C Shares).(23)
- (5) Amendment No. 4, dated November 24, 2003, to the Amended and
Restated Master Distribution Plan (Class C Shares).(23)
- (6) Amendment No. 5, dated November 25, 2003, to the Amended and
Restated Master Distribution Plan (Class C Shares).(23)
- (7) Amendment No. 6, dated March 31, 2004, to the Amended and Restated
Master Distribution Plan between Registrant (Class C Shares) and A I M
Distributors, Inc.(24)
- (8) Amendment No. 7, dated April 30, 2004, to the Amended and Restated
Master Distribution Plan between Registrant (Class C Shares) and A I M
Distributors, Inc.(24)
- (9) Amendment No. 8, dated September 15, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc.(25)
- (10) Amendment No. 9, dated October 15, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc.(25)
- (11) Amendment No. 10, dated December 30, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc.(25)
- (12) Amendment No. 11, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc. (27)
- (13) Amendment No. 12, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc. (27)
- (14) Amendment No. 13, dated July 18, 2005, to the Amended and Restated
Master Distribution Plan between Registrant (Class C Shares) and A I M
Distributors, Inc. (27)
- (15) Amendment No. 14, dated October 31, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc. (29)
C-10
- (16) Amendment No. 15, dated March 27, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc.(30)
- (17) Amendment No. 16, dated March 31, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc.(30)
- (18) Amendment No. 17, dated April 10, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc.(30)
- (19) Amendment No. 18, dated April 14, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class C Shares)
and A I M Distributors, Inc.(30)
(d) - (1) Amended and Restated Master Distribution Plan (Class R Shares),
dated August 18, 2003.(23)
- (2) Amendment No. 1, dated November 4, 2003, to the Amended and
Restated Master Distribution Plan (Class R Shares).(23)
- (3) Amendment No. 2, dated November 24, 2003, to the Amended and
Restated Master Distribution Plan (Class R Shares).(23)
- (4) Amendment No. 3, dated November 25, 2003, to the Amended and
Restated Master Distribution Plan (Class R Shares).(23)
- (5) Amendment No. 4, dated April 30, 2004, to the Amended and Restated
Master Distribution Plan between Registrant (Class R Shares) and A I M
Distributors, Inc.(24)
- (6) Amendment No. 5, dated September 14, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class R Shares)
and A I M Distributors, Inc.(25)
- (7) Amendment No. 6, dated October 15, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class R Shares)
and A I M Distributors, Inc.(25)
- (8) Amendment No. 7, dated April 29, 2005 to the Amended and Restated
Master Distribution Plan between Registrant (Class R Shares) and A I M
Distributors, Inc.(27)
- (9) Amendment No. 8, dated July 1, 2005 to the Amended and Restated
Master Distribution Plan between Registrant (Class R Shares) and A I M
Distributors, Inc.(27)
- (10) Amendment No. 9, dated October 25, 2005 to the Amended and
Restated Master Distribution Plan between Registrant (Class R Shares)
and A I M Distributors, Inc.(29)
- (11) Amendment No. 10, dated October 31, 2005 to the Amended and
Restated Master Distribution Plan between Registrant (Class R Shares)
and A I M Distributors, Inc.(29)
- (12) Amendment No. 11, dated March 27, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class R Shares)
and A I M Distributors, Inc.(30)
C-11
- (13) Amendment No. 12, dated March 31, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class R Shares)
and A I M Distributors, Inc.(30)
- (14) Amendment No. 13, dated April 10, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class R Shares)
and A I M Distributors, Inc.(30)
- (15) Amendment No. 14, dated April 14, 2006, to the Amended and
Restated Master Distribution Plan between Registrant (Class R Shares)
and A I M Distributors, Inc.(30)
(e) - (1) Amended and Restated Master Distribution Plan (Investor Class
Shares), dated July 1, 2004.(25)
- (2) Amendment No. 1, dated October 15, 2004, to the Amended and
Restated Master Distribution Plan (Investor Class Shares).(25)
- (3) Amendment No. 2, dated April 29, 2005, to the Amended and Restated
Master Distribution Plan (Investor Class Share).(27)
- (4) Amendment No. 3, dated July 18, 2005, to the Amended and Restated
Master Distribution Plan (Investor Class Share).(27)
(f) - Master Related Agreement to Amended and Restated Master Distribution
Plan (Class A Shares).(27)
(g) - Form of Master Related Agreement to Amended and Restated Master
Distribution Plan (Class C Shares).(23)
(h) - Form of Master Related Agreement to Amended and Restated Master
Distribution Plan (Class R Shares).(23)
(i) - Form of Master Related Agreement to Amended and Restated Master
Distribution Plan (Investor Class Shares).(25)
(j) - Ninth Amended and Restated Multiple Class Plan of The AIM Family of
Funds(R), effective December 12, 2001 as amended and restated December
6, 2005.(29)
11 - Consent of Ballard Spahr Andrews & Ingersoll, LLP.
12 - Opinion of counsel and Consent of Ballard Spahr Andrews & Ingersoll,
LLP, supporting the tax matters and consequences to shareholder will be
filed as part of a Post-effective Amendment to this Registration
Statement.
13 (a) - (1) Amended and Restated Transfer Agency and Service Agreement, dated
July 1, 2005, between the Registrant and AIM Investment Services,
Inc.(29)
- (2) Second Amended and Restated Transfer Agency & Service Agreement,
dated October 1, 2005, between Registrant and AIM Investment Services,
Inc.(29)
(b) - Shareholder Sub-Accounting Services Agreement, dated as of October 1,
1993, between the Registrant and PFPC, Inc., Financial Data Services,
Inc. and Merrill, Lynch, Pierce, Fenner & Smith Incorporated.(2)
(c) - (1) Amended and Restated Master Administrative Services Agreement,
dated July 1, 2004, between the Registrant and A I M Advisors, Inc.(25)
C-12
- (2) Amendment No. 1, dated December 2, 2004, to the Amended and
Restated Master Administrative Services Agreement, dated July 1, 2004,
between Registrant and A I M Advisors, Inc.(25)
- (3) Amendment No. 2, dated December 30, 2004, to the Amended and
Restated Master Administrative Services Agreement, dated July 1, 2004,
between Registrant and A I M Advisors, Inc.(25)
- (4) Amendment No. 3, dated July 18, 2005, to the Amended and Restated
Master Administrative Services Agreement, dated July 1, 2004, between
Registrant and A I M Advisors, Inc.(27)
- (5) Amendment No. 4, dated April 10, 2006, to the Amended and Restated
Master Administrative Agreement, dated July 1, 2004, between Registrant
and A I M Advisors, Inc.(30)
(d) - (1) Memorandum of Agreement regarding securities lending, dated October
29, 2003, between Registrant and A I M Advisors, Inc. with respect to
all Funds.(25)
- (2) Memorandum of Agreement, dated January 1, 2006, between Registrant
and A I M Advisors, Inc., with respect to AIM Premier Equity Fund.(29)
- (3) Memorandum of Agreement, dated as of May 5, 2005, between
Registrant and A I M Advisors, Inc. with respect to AIM Balanced Fund,
AIM Basic Balanced Fund, AIM European Small Company Fund, AIM Global
Value Fund, AIM International Small Company Fund, AIM Mid Cap Basic
Value Fund, AIM Premier Equity Fund, AIM Select Equity Fund and AIM
Small Cap Equity Fund.(27)
- (4) Memorandum of Agreement, dated January 1, 2006, between Registrant
and A I M Advisors, Inc. with respect to AIM European Small Company
Fund, AIM Global Value Fund and AIM International Small Company Fund.
(29)
(e) - Second Amended and Restated Interfund Loan Agreement, dated April 30,
2004, between Registrant and A I M Advisors, Inc.(25)
(f) - Expense Reimbursement Agreement Related to DST Transfer Agent System
Conversion, dated June 30, 2003.(24)
14 - Consents of PricewaterhouseCoopers LLP are filed herewith.
15 - Financial Statements for the period ended December 31, 2005 are
incorporated by reference to the Funds' annual reports to shareholders
contained in the Registrant's Form N-CSR filed on March 10, 2006 as
amended May 8, 2006.
16 - Powers of Attorney for Baker, Bayley, Bunch, Crockett, Dowden, Fields,
Frischling, Graham, Mathai-Davis, Pennock, Quigley, Soll, Stickel,
Taylor and Zerr.(31)
17 (a) - Form of Proxy relating to the Special Meeting of Shareholders of AIM
Opportunities I Fund is filed herewith.
(b) - Form of Proxy relating to the Special Meeting of Shareholders of AIM
Opportunities II Fund is filed herewith.
(c) - Form of Proxy relating to the Special Meeting of Shareholders of AIM
Opportunities III Fund is filed herewith.
C-13
(1) Incorporated by reference to PEA No. 70 to the Registrant's Registration
Statement on Form N-1A, filed on November 17, 1995.
(2) Incorporated by reference to PEA No. 71 to the Registrant's Registration
Statement on Form N-1A, filed on April 26, 1996.
(3) Incorporated by reference to PEA No. 72 to the Registrant's Registration
Statement on Form N-1A, filed on April 28, 1997.
(4) Incorporated by reference to PEA No. 73 to the Registrant's Registration
Statement on Form N-1A, filed on July 25, 1997.
(5) Incorporated by reference to PEA No. 74 to the Registrant's Registration
Statement on Form N-1A, filed on February 27, 1998.
(6) Incorporated by reference to PEA No. 75 to the Registrant's Registration
Statement on Form N-1A, filed on February 12, 1999.
(7) Incorporated by reference to PEA No. 76 to the Registrant's Registration
Statement on Form N-1A, filed on April 15, 1999.
(8) Incorporated by reference to PEA No. 77 to the Registrant's Registration
Statement on Form N-1A, filed on March 9, 2000.
(9) Incorporated by reference to PEA No. 78 to the Registrant's Registration
Statement on Form N-1A, filed on March 13, 2000.
(10) Incorporated by reference to PEA No. 80 to the Registrant's Registration
Statement on Form N-1A, filed on June 15, 2000.
(11) Incorporated by reference to PEA No. 81 to the Registrant's Registration
Statement on Form N-1A, filed on September 29, 2000.
(12) Incorporated by reference to PEA No. 82 to the Registrant's Registration
Statement on Form N-1A, filed on December 13, 2000.
(13) Incorporated by reference to PEA No. 84 to the Registrant's Registration
Statement on Form N-1A, filed on April 27, 2001.
(14) Incorporated by reference to PEA No. 85 to the Registrant's Registration
Statement on Form N-1A, filed on July 13, 2001.
(15) Incorporated by reference to PEA No. 86 to the Registrant's Registration
Statement on Form N-1A, filed on October 12, 2001.
(16) Incorporated by reference to PEA No. 87 to the Registrant's Registration
Statement on Form N-1A, filed on January 2, 2002.
(17) Incorporated by reference to PEA No. 88 to the Registrant's Registration
Statement on Form N-1A, filed on March 1, 2002.
(18) Incorporated by reference to PEA No. 89 to the Registrant's Registration
Statement on Form N-1A, filed on April 26, 2002.
(19) Incorporated by reference to PEA No. 90 to the Registrant's Registration
Statement on Form N-1A, filed on May 22, 2002.
(20) Incorporated by reference to PEA No. 91 to the Registrant's Registration
Statement on Form N-1A, filed on November 7, 2002.
(21) Incorporated by reference to PEA No. 92 to the Registrant's Registration
Statement on Form N-1A, filed on February 21, 2003.
(22) Incorporated by reference to PEA No. 93 to the Registrant's Registration
Statement on Form N-1A, filed on April 25, 2003.
(23) Incorporated by reference to PEA No. 94 to the Registrant's Registration
Statement on Form N-1A, filed on March 1, 2004.
(24) Incorporated by reference to PEA No. 95 to the Registrant's Registration
Statement on Form N-1A, filed on April 26, 2004.
(25) Incorporated by reference to PEA No. 96 to the Registrant's Registration
Statement on Form N-1A, filed on February 25, 2005.
(26) Incorporated by reference to PEA No. 97 to the Registrant's Registration
Statement on Form N-1A, filed on March 31, 2005.
(27) Incorporated by reference to PEA No. 98 to the Registrant's Registration
Statement on Form N-1A, filed on August 24, 2005.
(28) Incorporated by reference to PEA No. 99 to the Registrant's Registration
Statement on Form N-1A, filed on October 25, 2005.
(29) Incorporated by reference to PEA No. 100 to the Registrant's Registration
Statement on Form N-1A, filed on February 17, 2006.
(30) Incorporated by reference to PEA No. 101 to the Registrant's Registration
Statement on Form N-1A, filed on April 24, 2006.
(31) Incorporated by reference to PEA No. 1 to the Registrant's Initial
Registration Statement on N-14, filed on November 16, 2006.
C-14
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a
part of this registration statement by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities Act
[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 o counsel
supporting the tax matters and consequences to shareholders discussed in
the prospectus in a post-effective amendment to this registration
statement.
C-15
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 FUNDS GROUP
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 January 25, 2007
-------------------------------
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 - Consents of PricewaterhouseCoopers LLP.
17(a) - Form of Proxy relating to the Special Meeting of Shareholders of
AIM Opportunities I Fund.
17(b) - Form of Proxy relating to the Special Meeting of Shareholders of
AIM Opportunities II Fund.
17(c) - Form of Proxy relating to the Special Meeting of Shareholders of
AIM Opportunities III Fund