1
As filed with the Securities and Exchange Commission on April 1, 1999.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-effective Amendment No. ____ Post-effective Amendment No. ____
(Check appropriate box or boxes)
AIM ADVISOR FUNDS, INC.
-----------------------------------------
(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:
CAROL F. RELIHAN, ESQUIRE THOMAS H. DUNCAN, 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 Reorganization: As soon as practicable
after the Registration Statement becomes effective under the Securities Act of
1933.
It is proposed that this filing will become effective on May 3, 1999
pursuant to Rule 488.
The title of the securities being registered is Class A Shares of AIM
Advisor Flex Fund, Class B Shares of AIM Advisor Flex Fund and Class C Shares of
AIM Advisor Flex Fund. No filing fee is due in reliance on Section 24(f) of the
Securities Act of 1933.
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AIM ADVISOR FUNDS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
May ___, 1999
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your
approval of a proposed combination of AIM Advisor MultiFlex Fund ("MultiFlex
Fund"), an investment portfolio of AIM Advisor Funds, Inc. ("AAF"), with AIM
Advisor Flex Fund ("Flex Fund"), which is also an investment portfolio of AAF.
MultiFlex Fund and Flex Fund have the same investment objective - to
achieve a high total return on investment through growth of capital and current
income, without regard to federal income tax considerations. Flex Fund seeks to
meet this objective by investing in a combination of equity securities and
fixed-and variable-income securities, while MultiFlex Fund invests in a broader
range of securities, including stocks of large cap companies, stocks of small
cap companies, fixed income securities, real estate securities and foreign
securities. A I M Advisors, Inc. serves as the investment adviser to both
funds.
The net assets of MultiFlex Fund decreased from approximately $386
million at December 31, 1997 to approximately $233 million in March of this
year. The total operating expenses of the Class A shares of Flex Fund were
0.29% lower than the total operating expenses of the Class A shares of
MultiFlex Fund during 1998, and the expenses of the Flex Fund Class B and Class
C shares were 0.27% lower than the expenses of the MultiFlex Fund Class B and
Class C shares during 1998. Additionally, Flex Fund has out performed MultiFlex
Fund during recent years. For these reasons, the Board of Directors of your
fund concluded that it was desirable to combine MultiFlex Fund with Flex Fund.
The accompanying document describes the proposed transaction and compares the
investment policies, operating expenses and performance of the funds for your
evaluation.
You are being asked to approve a Plan of Reorganization for MultiFlex
Fund which provides for the reclassification and change of each outstanding
share of MultiFlex Fund into a fractional share of the corresponding class of
shares of Flex Fund based upon their respective net asset values. After careful
consideration, the Board of Directors recommends that you vote FOR the proposal
after carefully reviewing the enclosed materials.
Your vote is important. Please take a moment now to sign and return
your proxy card in the enclosed postage paid return envelope. If we do not hear
from you after a reasonable amount of time you may receive a telephone call
from our proxy solicitor, Shareholder Communications Corporation, reminding you
to vote your shares. You may also vote your shares on the web at
HTTP://WWW.AIMFUNDS.COM by following the instructions that appear on the
enclosed proxy insert.
Sincerely,
Charles T. Bauer
Chairman
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AIM ADVISOR MULTIFLEX FUND
A PORTFOLIO OF
AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 16, 1999
TO THE SHAREHOLDERS OF AIM Advisor MultiFlex Fund ("MultiFlex Fund"):
YOU ARE HEREBY NOTIFIED that a Special Meeting of Shareholders of
MultiFlex Fund, an investment portfolio of AIM Advisor Funds, Inc. ("AAF"),
will be held at 11 Greenway Plaza, Suite 100, Houston, TX 77046 on June 16,
1999, at 3:00 p.m., local time, for the following purposes:
1. To approve a Plan of Reorganization (the "Plan of
Reorganization") for MultiFlex Fund and the consummation of
the transactions contemplated therein. The Plan of
Reorganization provides for the reclassification and change
of outstanding MultiFlex Fund shares into shares of AIM
Advisor Flex Fund ("Flex Fund") of the same class (the
"Reorganization"). The value of each MultiFlex Fund
shareholder's account with Flex Fund immediately after the
Reorganization will be the same as the value of such
shareholder's account with MultiFlex Fund immediately prior
to the Reorganization. The Reorganization has been structured
as a tax-free transaction.
2. To transact any other business, not currently contemplated,
that may properly come before the Special Meeting, in the
discretion of the proxies or their substitutes.
Shareholders of record as of the close of business on April
26, 1999, are entitled to notice of, and to vote at, the Special Meeting or any
adjournment thereof.
YOU ARE REQUESTED TO PROMPTLY EXECUTE AND RETURN IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY WHICH IS BEING SOLICITED BY THE MANAGEMENT OF
AAF. THIS IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE
SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN
NOTICE OF REVOCATION TO AAF AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY
VOTING IN PERSON AT THE SPECIAL MEETING.
---------------------------------------
CAROL F. RELLHAN
SENIOR VICE PRESIDENT AND SECRETARY
May ___, 1999
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AIM ADVISOR MULTIFLEX FUND
AIM ADVISOR FLEX FUND
EACH A SERIES OF SHARE OF
AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 347-4246
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: May ___, 1999
This document is being furnished to you in connection with the Special
Meeting of Shareholders of AIM Advisor MultiFlex Fund ("MultiFlex Fund"), an
investment portfolio of AIM Advisor Funds, Inc. ("AAF"), to be held on June 16,
1999 (the "Special Meeting"). At the Special Meeting you will be asked to
consider and approve a Plan of Reorganization (the "Plan of Reorganization")
for MultiFlex Fund and the consummation of the transactions described therein,
as further described in this Combined Proxy Statement and Prospectus (the
"Reorganization"). THE BOARD OF DIRECTORS OF AAF HAS UNANIMOUSLY APPROVED THE
PLAN OF REORGANIZATION AS BEING IN THE BEST INTEREST OF MULTIFLEX FUND
SHAREHOLDERS.
The Plan of Reorganization provides for the reclassification of the
shares of MultiFlex Fund and the change of the outstanding shares of MultiFlex
Fund into shares of AIM Advisor Flex Fund ("Flex Fund") of the same class based
upon the net asset value of the shares of the two Funds. All of the assets and
liabilities of MultiFlex Fund will become assets and liabilities of Flex Fund.
The value of your account with Flex Fund immediately after the Reorganization
will be the same as the value of your account with MultiFlex Fund immediately
before the Reorganization.
Flex Fund is an investment portfolio of AAF, an open-end, series
management investment company. The investment objective of both MultiFlex Fund
and Flex Fund is to achieve a high total return on investment through growth of
capital and current income, without regard to federal income tax consequences.
Flex Fund seeks to obtain that objective by investing in a combination of
equity securities and fixed-and variable-income securities, while MultiFlex
Fund invests in a broader range of securities including large cap equity
securities, small cap equity securities, fixed income securities, real estate
securities and foreign securities. A I M Advisors, Inc. ("AIM Advisors") serves
as the investment adviser to both Funds. See "Comparison of Investment
Objectives, Policies and Restrictions."
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This Combined Proxy Statement and prospectus ("Proxy
Statement/Prospectus") sets forth the information that you should know before
voting on the Plan of Reorganization. It should be read and retained for future
reference.
The current prospectuses for both MultiFlex Fund and Flex Fund, dated
May 3, 1999, together with the related Statement of Additional Information also
dated May 3, 1999, are on file with the Securities and Exchange Commission (the
"SEC") and are incorporated into this Proxy Statement/Prospectus by this
reference. A copy of the current prospectus of Flex Fund is attached as
Appendix II to this Proxy Statement/Prospectus. These documents are available
without charge by writing to A I M Distributors, Inc., P.O. Box 4739, Houston,
Texas 77210- 4739 or by calling (800)347-4246. The SEC maintains a Web site at
http://www.sec.gov that contains the prospectus and statement of additional
information described above, material incorporated by reference, and other
information about AAF. You can obtain additional information about MultiFlex
Fund and Flex Fund on the Web at http://www.aimfunds.com.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SEC HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE INFORMATION IN THIS
PROXY STATEMENT/PROSPECTUS IN ADEQUATE OR ACCURATE. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A CRIME.
[END OF FRONT COVER PAGE]
6
[BACK COVER PAGE]
[AIM LOGO] THE AIM FAMILY OF FUNDS
TABLE OF CONTENTS
Page
----
INTRODUCTION......................................................................................................1
SUMMARY...........................................................................................................2
Reorganization...........................................................................................2
Background and Reasons for the Reorganization............................................................2
Comparison of Flex Fund and MultiFlex Fund...............................................................4
RISK FACTORS......................................................................................................6
Comparative Risks........................................................................................6
Risks Associated with Flex Fund..........................................................................6
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS....................................................7
Investment Objectives....................................................................................7
Investment Restrictions..................................................................................9
FINANCIAL HIGHLIGHTS..............................................................................................9
ADDITIONAL INFORMATION ABOUT THE PLAN OF REORGANIZATION..........................................................13
The Reorganization......................................................................................13
Board Considerations....................................................................................13
Operation of Flex Fund Following the Reorganization.....................................................15
Other Terms.............................................................................................16
Federal Tax Consequences................................................................................17
RIGHTS OF SHAREHOLDERS...........................................................................................19
OWNERSHIP OF FLEX FUND AND MULTIFLEX FUND SHARES.................................................................19
Significant Holders.....................................................................................19
Ownership of Officers and Officers......................................................................20
CAPITALIZATION...................................................................................................20
LEGAL MATTERS....................................................................................................21
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION....................................................21
ADDITIONAL INFORMATION ABOUT FLEX FUND...........................................................................22
APPENDIX I ................................................................................. Plan of Reorganization
APPENDIX II.............................................................................Prospectus of AIM Flex Fund
APPENDIX III.........................................................................Annual Report of AIM Flex Fund
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the
AIM logo), AIM and Design, AIM, AIM Link, AIM Institutional Funds,
aimfunds.com, Invest With Discipline, La Familia AIM de Fondos and La Familia
AIM de Fondos and Design are registered service marks, and AIM Bank Connection
is a service mark of A I M Management Group Inc.
[END OF BACK COVER]
7
INTRODUCTION
This Proxy Statement/Prospectus is furnished to you in connection with
the solicitation of proxies by AAF's Board of Directors for use at the Special
Meeting of Shareholders of MultiFlex Fund to be held at 11 Greenway Plaza,
Suite 100, Houston, TX 77046 on June 16, 1999, at 3:00 p.m., local time. That
meeting and any adjournments thereof are referred to as the "Special Meeting".
We have engaged Shareholder Communications Corporation ("SCC") to
assist in the solicitation of proxies for the Special Meeting. We expect to
solicit proxies principally by mail, but we may also solicit proxies by
telephone, facsimile, telegraph or personal interview. Our officers will not
receive any additional or special compensation for solicitation activities.
MultiFlex Fund and Flex Fund will each bear their own costs and expenses
incurred in connection with the Reorganization. For MultiFlex Fund, this will
include expenses incurred in preparing, printing and mailing proxy materials
for the Special Meeting of shareholders and proxy solicitation costs. Because
AIM Advisors has agreed to pay the administrative expenses of MultiFlex Fund
that exceed specified levels, the costs incurred by MultiFlex Fund in
connection with the Reorganization will effectively be borne by AIM Advisors.
All properly executed and unrevoked proxies received in time for the
Special Meeting will be voted in accordance with the instructions they contain.
If no instructions are given, shares represented by proxies will be voted FOR
the proposal to approve the Plan of Reorganization and in accordance with
management's recommendation on other matters. The presence in person or by
proxy of one-third of the outstanding shares of each class of shares of
MultiFlex Fund entitled to vote at the Special Meeting will constitute a quorum
("Quorum") with respect to that class. Approval of the Plan of Reorganization
requires the affirmative vote of a majority of all votes cast by the
shareholders at the Special Meeting of each class of shares of MultiFlex Fund.
Abstentions and broker non-votes will be counted as shares present at the
Special Meeting for quorum purposes but will not be considered votes cast at
the Special Meeting. Broker non-votes arise from a proxy returned by a broker
holding shares for a customer which indicates that the broker has not been
authorized by the customer to vote on a proposal. If you return a proxy, you
may revoke it at any time prior to its exercise by executing a superseding
proxy or by submitting a notice of revocation to the Secretary of AAF. In
addition, although mere attendance at the Special Meeting will not revoke a
proxy, if you attend 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.
Shareholders of record as of the close of business on April 26, 1999
(the "Record Date"), are entitled to vote at the Special Meeting. On the Record
Date, there were outstanding __________ Class A shares, __________ Class B
shares and _____ Class C shares of MultiFlex Fund. Each share is entitled to
one vote for each full share held, and a fractional vote for a fractional share
held.
We intend to mail this Proxy Statement/Prospectus and the accompanying
proxy on or about May 5, 1999.
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8
SUMMARY
REORGANIZATION
The Plan of Reorganization provides for the reclassification and
change of outstanding MultiFlex Fund shares into Flex Fund shares of the same
class (the "Reorganization"). If shareholders of MultiFlex Fund approve the
Plan of Reorganization and other closing conditions are satisfied, all of the
assets and liabilities of MultiFlex Fund will become the assets and liabilities
of Flex Fund, and each issued and outstanding share of MultiFlex Fund will be
changed into a fractional share of Flex Fund of the same class that has a net
asset value equal to the net asset value of the MultiFlex Fund share
immediately prior to the Reorganization. The value of each MultiFlex Fund
shareholder's account with Flex Fund immediately after the Reorganization will
be the same as the value of such shareholder's account with MultiFlex Fund
immediately prior to the Reorganization.
We 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
Federal income taxes as a result of the Reorganization. See "Additional
Information About the Plan of Reorganization - Federal Tax Consequences" below.
No initial sales charge will be imposed in connection with the
Reorganization. A copy of the Plan of Reorganization is attached as Appendix I
to this Proxy Statement/Prospectus. See "Additional Information About the Plan
of Reorganization" below.
Flex Fund is a diversified investment portfolio of AAF, an open-end
series management investment company registered under the 1940 Act. The
principal offices of AAF are located at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046 (telephone: (800)347-4246).
BACKGROUND AND REASONS FOR THE REORGANIZATION
The Board of Directors of AAF, including the independent directors,
has determined that the reorganization of MultiFlex Fund into Flex Fund is in
the best interests of both Funds and their shareholders and that the interests
of the shareholders of each Fund will not be diluted as a result of the
Reorganization.
In making that determination, the Board of Directors considered the
fact that the operating expenses of Flex Fund are lower than the operating
expenses of MultiFlex Fund, as shown below.
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Comparative Fees for Year Ended December 31, 1998
Flex Fund MultiFlex Fund
---------------------------------------- -----------------------------------------
Class A Class B Class C Class A Class B Class C
Shares Shares Shares Shares Shares Shares
Management Fees 0.75% 0.75% 0.75% 1.00% 1.00% 1.00%
12b-1 Fees 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
Other 0.42% 0.44% 0.44% 0.44% 0.44% 0.44%
Total Fund
Operating
Expenses(1) 1.52% 2.19% 2.19% 1.79% 2.44% 2.44%
Total Expense 1.23% 2.00% 2.00% 1.52% 2.27% 2.27%
Ratio - (Net of
Waivers)(2)
- ---------
(1) A transfer of MultiFlex Fund's assets into Flex Fund is not expected
to materially affect the total fund operating expenses of Flex Fund.
(2) With voluntary expense limitations in effect through 1998.
The Board of Directors also considered the return to shareholders
provided by Flex Fund over the past two years, as shown below.
Performance Information
Flex Fund MultiFlex Fund
---------------------------------------------- ---------------------------------------------
Class A Class B Class C Class A Class B Class C
Shares Shares(1) Shares Shares Shares(1) Shares
Year 1997 24.60% N/A 23.64% 19.0% N/A 18.55%
Year 1998 13.26% 7.25% 12.41% 0.51% (3.96)% (0.26)%
(1) Class B shares did not exist until March 3, 1998.
Flex Fund has outperformed MultiFlex Fund in every year but one since
inception of the two Funds. Additional information about the performance of
Flex Fund can be found in its Annual Report to Shareholders which is attached
as Appendix III.
In addition, the Board of Directors considered the decrease in the
size of MultiFlex Fund's assets since December 31, 1998. The Board of Directors
noted that the two Funds have the same investment objective, but employ
different investment strategies to achieve that
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objective. The investment strategies of the two Funds are compatible in that
Flex Fund does not invest in any securities that fall outside of the investment
strategies of MultiFlex Fund.
For additional information concerning the deliberations of the Board
of Directors on the Plan of Reorganization see "Additional Information About
the Plan of Reorganization."
COMPARISON OF FLEX FUND AND MULTIFLEX FUND
Investment Objective and Policies
The investment objective of Flex Fund and MultiFlex Fund is the same -
to achieve a high total return on investment through growth of capital and
current income, without regard to federal income tax consequences. Flex Fund
and MultiFlex Fund follow different investment strategies to achieve that
objective.
Flex Fund invests in a combination of equity securities and fixed-and
variable-income securities. The Flex Fund normally invests at least 20% of its
total assets in equity securities issued by companies having large market
capitalizations and at least 20% of its total assets in fixed-and
variable-income securities. The remaining 60% of Flex Fund's assets will be
allocated according to the portfolio manager's assessment of current business,
economic and market conditions.
MultiFlex Fund invests in a combination of equity securities and
fixed-income securities through allocation in the following five asset
categories: stocks of large capitalization companies, stocks of small
capitalization companies, fixed income securities, real estate securities, and
foreign securities. MultiFlex Fund will normally invest 20% of its assets in
each of these five asset classes but may invest up to 40% of its assets in any
one category.
Investment Advisory Services
AIM Advisors serves as investment adviser to MultiFlex Fund and Flex
Fund. INVESCO Capital Management, Inc., a Delaware corporation, is the
sub-adviser to Flex Fund and INVESCO Management & Research, Inc., a
Massachusetts corporation, is the sub-adviser to MultiFlex Fund.
Sales Charges
No sales charges are applicable to the Reorganization.
The Class A shares of Flex Fund and MultiFlex Fund are both sold with
an initial sales charge ranging from 5.50% to 2.00% depending upon the dollar
amount of the purchase. Class B shares of Flex Fund and MultiFlex Fund are sold
without an initial sales charge, but are subject to a contingent deferred sales
charge of up to 5% if the shares are redeemed by the holder within six years
after purchase. Class C shares of the two Funds are sold without an initial
sales charge but are subject to a contingent deferred sales charge upon certain
redemptions.
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11
Distribution; Purchase, Exchange and Redemption
Shares of Flex Fund and MultiFlex Fund are both distributed by A I M
Distributors, Inc. Purchase and redemption procedures are the same for Flex
Fund and MultiFlex Fund. Shares of Flex Fund and MultiFlex Fund may be
exchanged for shares of other funds of The AIM Family of Funds--Registered
Trademark-- of the same class.
Further Information
Additional information concerning Flex Fund is contained in this Proxy
Statement/Prospectus and in the current prospectus for Flex Fund that is
attached hereto as Appendix II. Further information concerning MultiFlex Fund
can be found in its prospectus which has been made part of this Proxy
Statement/Prospectus by reference. See the cover page for information on how to
receive further information.
RISK FACTORS
COMPARATIVE RISKS
MultiFlex Fund and Flex Fund have the same investment objective. Flex
Fund seeks to meet this objective by investing in a combination of equity
securities and fixed-and-variable income securities, while MultiFlex Fund
invests in a broader range of securities, including large cap equity, small cap
equity, fixed income securities, real estate securities and foreign securities.
The greater asset diversification of MultiFlex Fund could provide some
protection against the risk of loss in times of declining markets. For example,
a general decline in the prices of securities of large cap companies could
result in a greater decline in the value of Flex Fund shares than of MultiFlex
Fund shares.
However, investments in the market sectors available to MultiFlex Fund
carry risks to which Flex Fund shareholders have little or no exposure. For
instance, MultiFlex Fund may invest up to 40% of its assets in foreign
securities which have risks in addition to those of domestic securities,
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.
Similarly, equity securities of smaller companies, as opposed to the large cap
companies which Flex Fund invests in, may not be traded as often and it may be
difficult or impossible for the Fund to sell securities at a desired price.
MultiFlex Fund's greater holdings of real estate securities carries with it
additional risks, including difficulties in valuing and trading real estate,
declines in value of the property and risks related to general and local
economic conditions, changes in the climate for real estate, environmental
liability risks, increase in taxes, expenses and costs, change in laws,
casualty and condemnation losses, rent control limitations and increases in
interest rates.
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RISKS ASSOCIATED WITH FLEX FUND
The risk associated with Flex Fund is that you could lose all or a
portion of your investment and that income you may receive from the Fund may
vary. The value of your investment in Flex 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.
Interest rate increases can cause the price of a debt security to
decrease; the longer a debt security's duration, the more sensitive it is to
this risk. The issuer of a security may default or otherwise be unable to honor
a financial obligation. A faster than expected principal prepayment rate on
U.S. government agency mortgage-backed securities will reduce both the market
value of, and income from, such securities.
Flex Fund may also invest up to 10% of its total assets in
non-Canadian foreign securities and unsponsored American Depository Receipts,
which 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 value of your shares could be adversely affected if the computer
systems used by Flex Fund's investment adviser and the Fund's other service
providers are unable to distinguish the year 2000 from the year 1900. Flex
Fund's investment adviser and independent technology consultants are working to
avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the Fund invests.
An investment in Flex 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 INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objective of both Flex Fund and MultiFlex Fund is to
achieve a high total return on investment through growth of capital and current
income, without regard to federal income tax considerations.
INVESTMENT POLICIES
A description of the investment policies of each of Flex Fund and
MultiFlex Fund is provided below.
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Flex Fund
Flex Fund seeks to meet its investment objective by investing in a
combination of equity securities and fixed- and variable-income securities. The
Fund normally invests at least 20% of its total assets in equity securities and
at least 20% of its total assets in fixed- and variable- income securities.
Flex Fund's equity investments will consist primarily of common stocks, and to
a lesser extent convertible securities, of selected companies from a list of
companies with market capitalizations among the largest 800 publicly traded
U.S. corporations.
Flex Fund's fixed-income investments will consist primarily of U.S.
government obligations and corporate obligations that have been rated
investment-grade, or securities deemed by the Fund's portfolio manager to be of
comparable quality.
Flex Fund may invest in mortgage-backed securities, including mortgage
pass-through securities and collateralized mortgage obligations, that are
guaranteed as to timely payment of principal and interest by an agency of the
U.S. government or a private issuer. The Fund may invest up to 10% of its total
assets in non-Canadian foreign securities and unsponsored American Depositary
Receipts (ADRs). The Fund may also invest up to 25% of its total assets in
securities of Canadian issuers and sponsored ADRs.
The portion of Flex Fund's assets that can be invested in either
equity securities or income securities is allocated according to the portfolio
managers' assessments of current business, economic and market conditions. The
Fund seeks reasonably consistent returns over a variety of market cycles. In
order to identify the equity securities having the best relative values, the
portfolio managers start with a list of the 800 largest publicly traded U.S.
corporations, which they reduce to a list of 100 eligible stocks by utilizing a
proprietary database system and fundamental analysis. The portfolio managers
will purchase fixed- and variable-income obligations that they believe are
undervalued and may offer superior yields. A particular income security is
usually sold when any of those factors materially change or when it no longer
qualifies for the list of eligible securities.
MultiFlex Fund
MultiFlex Fund seeks to meet its investment objective by investing in
a combination of equity securities and fixed-income securities. The Fund
attempts to allocate the mix of equity securities and fixed-income securities
among the following five asset classes: (1) equity securities of large
capitalization companies, i.e., companies with market capitalizations among the
largest 800 publicly traded U.S. corporations; (2) equity securities of small
capitalization companies, i.e., companies with market capitalizations smaller
than the largest 1,000 publicly traded U.S. corporations; (3) fixed-income
securities; (4) real estate securities; and (5) foreign securities. The Fund
may invest up to 40% of its assets in each asset class and will normally invest
20% of its assets in each asset class.
MultiFlex Fund's fixed-income securities investments will consist
primarily of U.S. government securities and corporate obligations. U.S.
government securities include securities
8
14
issued or guaranteed by the U.S. government and obligations of U.S. government
agencies or instrumentalities. The Fund may invest in mortgage and
asset backed securities, municipal obligations, and foreign currency
denominated securities. The Fund may also invest up to 5% of its assets in
lower quality debt securities, i.e., "junk bonds."
MultiFlex Fund's real estate securities investments will consist
primarily of the common stocks of real estate companies, shares of real estate
investments trusts (REITs) and other real estate related securities. The Fund
may invest in non-Canadian foreign securities and American Depositary Receipts
(ADRs). Securities of Canadian issuers and sponsored ADRs are not considered
within the 40% limitation on foreign securities.
The portion of MultiFlex Fund's assets that can be invested in each
asset class will be allocated according to the portfolio managers' assessment
of current business, economic and market conditions. The portfolio managers
focus on securities that they believe have the best relative values. A
particular security is usually sold when any of those factors materially
changes.
INVESTMENT RESTRICTIONS
Since MultiFlex Fund and Flex Fund are each a separate series of AAF,
each Fund is subject to the same investment restrictions with the following
exceptions. Flex Fund may not invest more than 10% of its total assets in
non-Canadian foreign securities, including unsponsored ADRs, or more than 25%
of its total assets in securities of Canadian issuers and sponsored ADRs. In
comparison, MultiFlex Fund may invest up to 40% of its total assets in foreign
securities, including unsponsored ADRs, and is not limited in the percentage of
net assets it may invest in securities of Canadian issuers or sponsored ADRs.
Additionally, with respect to 75% of MultiFlex Fund's net assets, MultiFlex
Fund is restricted from investing in the securities of any one issuer, other
than the obligations of the U.S. government, its agencies, authorities and
instrumentalities if immediately after such investment more than 5% of the
value of the Fund's total assets, taken at market value, would be invested in
such issuer or more than 10% of such issuers outstanding voting securities
would be owned by the Fund. This same restriction is imposed upon 100% of Flex
Fund's net assets.
FINANCIAL HIGHLIGHTS
Flex Fund
Shown below are the financial highlights for Flex Fund Class A shares
for the years ended December 31, 1998 and 1997; for the Flex Fund Class B
shares for the period March 3, 1998 through December 31, 1998; and for the Flex
Fund Class C shares for the five years ended December 31, 1998. This
information has been audited by AAF's independent accountants. The "Report of
Independent Accountants" and financial statements included in Flex Fund's
annual report to shareholders for the fiscal year ended December 31, 1998, are
hereby incorporated by reference into this Proxy Statement/Prospectus. Flex
Fund's annual report to shareholders, which contains additional unaudited
performance information, is available without
9
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charge upon request made to AAF at the address or telephone number appearing on
the cover page of this Proxy Statement/Prospectus.
10
16
FLEX FUND CLASS A SHARES
Year Ended December 31(a)
-----------------------------
1998 1997
---------- ----------
Net asset value beginning of period ...... $ 19.74 $ 16.63
Income from operations:
Net investment income ................. 0.39 0.41(b)
Net Gains on Securities (both realized
and unrealized) .......................... 2.16 3.63
---------- ----------
Total from net investment income ......... 2.55 4.04
---------- ----------
Less distributions:
Dividends from net investment
income ................................ (0.39) (0.43)
Distributions from net realized gains .... (1.84) (0.50)
---------- ----------
Total Distributions ...................... (2.23) (0.93)
---------- ----------
Net asset value, end of period ........... $ 20.06 $ 19.74
========== ==========
Total return(c) .......................... 13.26% 24.60%
========== ==========
Ratios/Supplemental Data:
Net assets, end of year (000s
omitted) .............................. $ 46,286 $ 25,151
========== ==========
Ratio of expenses to average net
assets ................................ 1.23%(d)(e) 1.45%(e)
========== ==========
Ratio of net investment income to
average net assets .................... 1.99%(d)(e) 2.34%(e)
========== ==========
Portfolio turnover rate ................ 34% 17%
========== ==========
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November
7, 1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges.
(d) Ratios are based on average net assets of $36,085,767.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average daily net assets prior to fee waivers
and/or expense reimbursements were 1.52% and 1.70%, respectively, for
1998 and 1.55% and 2.24%, respectively, for 1997.
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FLEX FUND CLASS B SHARES
Period March 3,
1998 through
December 31,
1998
----
Net asset value beginning of
period ............................ $20.69
Income from operations:
Net investment income ........... 0.22
Net gains on securities ........... 1.22
-------
Total from investment
operations ........................ 1.44
-------
Less distributions: (both
realized and unrealized)
Dividends from net investment
income ............................ (0.23)
Distributions from net realized
gains ............................. (1.84)
-------
Total distributions ............... (2.07)
-------
Net asset value, end of period .... $ 20.06
=======
Total return(a) ................... 7.25%
=======
Ratios/Supplemental Data:
Net assets, end of year (000s
omitted) .......................... $ 3,592
=======
Ratio of expenses to average
net assets ..................... 2.00%(b)(c)
=======
Ratio of net investment
income to average net assets ... 1.22%(b)(c)
=======
Portfolios turnover rate .......... 34%
(a) Does not deduct sales charges where applicable and are not annualized for
periods less than one year.
(b) Ratios are annualized and based on
average net assets of $1,313,596.
(c) After fee waivers and/or expense
reimbursements. Ratios of expenses and net investment income to average
daily net assets prior to fee waivers and/or expense reimbursements were
2.19% (annualized) and 1.03% (annualized), respectively, for 1998.
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FLEX FUND CLASS C SHARES
Year Ended December 31(a)
--------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net asset value beginning of period ...... $ 19.74 $ 16.63 $ 15.66 $ 12.63 $ 13.54
Income from operations:
Net investment income .................. 0.25 0.30(b) 0.30 0.32 0.32
Net gains (losses) or securities (both
realized and unrealized) ................. 2.14 3.60 1.81 3.09 (0.23)
-------- -------- -------- -------- --------
Total from investment operations ......... 2.39 3.90 2.11 3.41 0.09
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income ................................ (0.23) (0.29) (0.29) (0.32) (0.31)
Distributions from net realized gains .. (1.84) (0.50) (0.85) (0.06) (0.69)
-------- -------- -------- -------- --------
Total distributions .................... (2.07) (0.79) (1.14) (0.38) (1.00)
-------- -------- -------- -------- --------
Net asset value, end of period ........... $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
======== ======== ======== ======== ========
Total return(c) .......................... 12.41% 23.64% 13.61% 27.30% 0.64%
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of year (000's omitted) $670,256 $603,179 $489,918 $399,162 $243,848
======== ======== ======== ======== ========
Ratio of expenses to average net
assets ................................ 2.00%(d)(e) 2.20 2.26% 2.28% 2.25%
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets .................... 1.22%(d)(e) 1.59% 1.81% 2.28% 2.32%
======== ======== ======== ======== ========
Portfolio turnover rate .................. 34% 17% 26% 5% 36%
======== ======== ======== ======== ========
- ---------
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges.
(d) Ratios are based on average net assets of $636,501,142.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average daily net assets prior to fee waivers
and/or expense reimbursements were 2.19% and 1.03%, respectively, for
1998.
ADDITIONAL INFORMATION ABOUT THE PLAN OF REORGANIZATION
The terms and conditions under which the Reorganization may be
consummated are set forth in the Plan of Reorganization. The deliberations of
the Board of Directors concerning the Reorganization and significant provisions
of the Plan of Reorganization are summarized below.
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19
A copy of the Plan of Reorganization is attached as Appendix I to this Proxy
Statement/Prospectus.
THE REORGANIZATION
Pursuant to the Plan of Reorganization each issued and outstanding
share of MultiFlex Fund will be changed into a fractional share of Flex Fund of
the same class having an aggregate net asset value equal to the net asset value
of the MultiFlex Fund share immediately prior to the Reorganization. The value
of each MultiFlex Fund shareholder's account with Flex Fund immediately after
the Reorganization will be the same as the value of such shareholder's account
with MultiFlex Fund immediately prior to the Reorganization. Shareholders will
not pay any initial sales charge in connection with the Reorganization.
All of the assets and liabilities of MultiFlex Fund will become assets
and liabilities of Flex Fund. The authorized but unissued shares of MultiFlex
Fund will become authorized shares of AAF without any further designation or
classification.
Each share of Flex Fund is entitled to one vote, to participate
equally in dividends and distributions declared by the Board of Directors with
respect to a class of shares of Flex Fund and, upon liquidation of Flex Fund,
to participate proportionately in its net assets allocable to a class after
satisfaction of the outstanding liabilities allocable to that class. Fractional
shares of Flex Fund have proportionately the same rights, including voting
rights as are provided for full shares.
Consummation of the Reorganization is expected to occur on June 21,
1999, at 8:00 a.m. Central Time on the basis of values calculated as of the
close of regular trading on the New York Stock Exchange on the preceding
business day.
BOARD CONSIDERATIONS
The Board of Directors of AAF determined that the proposed
reorganization of MultiFlex Fund is in the best interests of the shareholders
of MultiFlex Fund, and recommended approval of the Plan of Reorganization by
the shareholders at the Special Meeting. A summary of the information that was
presented to, and considered by, the Board of Directors in making their
determination is provided below.
At a meeting of the Board of Directors held on March 11, 1999, AIM
Advisors proposed that the Board of Directors approve the proposed
reorganization of MultiFlex Fund. The Directors received from AIM Advisors
written materials that described the structure and tax consequences of the
proposed reorganization and contained information concerning MultiFlex Fund and
Flex Fund, including comparative historical total return and fee and expense
information and a comparison of the investment policies of the two Funds.
In considering the proposed reorganization, the Board of Directors
noted that MultiFlex Fund and Flex Fund have the same investment objective,
which is to achieve a high total return
14
20
on investment through growth of capital and current income, without regard to
federal income tax consequences. Flex Fund seeks to meet that objective by
investing in a combination of equity securities and fixed-income securities,
while MultiFlex Fund invests in a broader range of securities including large
cap equity, small cap equity, fixed-income securities, real estate securities
and foreign securities. The Reorganization was proposed by AIM Advisors because
investors have not viewed MultiFlex Fund as an attractive investment
alternative. The net assets of MultiFlex Fund have decreased significantly
since December 31, 1997. The combined assets of the two Funds should provide a
more stable base for management because daily purchases and redemptions of
shares should have a less significant impact on the size of the combined Fund.
MultiFlex Fund shareholders will benefit from Flex Fund's lower
operating expenses. The total operating expenses of each class of Flex Fund
shares are lower than the total operating expenses of the comparable class of
MultiFlex Fund shares, both before and after fee waivers. The total operating
expenses paid by the Class A shares of Flex Fund were 0.29% lower than the
total operating expenses of the MultiFlex Fund Class A shares, and the expenses
of the Flex Fund Class B and Class C shares were 0.27% lower than the total
operating expenses paid by the MultiFlex Fund Class B and Class C shares,
during 1998. In addition, once MultiFlex Fund is combined with Flex Fund, Flex
Fund will have a larger asset base which may enable Flex Fund to achieve
economies of scale thereby reducing the expenses of Flex Fund as a percentage
of net assets.
The information provided by AIM Advisors to the Board of Directors
demonstrated that Flex Fund has provided a better return to its shareholders.
Although past performance is not a guarantee of future results, MultiFlex Fund
shareholders could benefit from the better performance of Flex Fund after the
Reorganization is completed.
AIM Advisors indicated to the Board of Directors that AIM does not
expect any immediate benefit from the Reorganization. In fact, the investment
advisory fee paid by Flex Fund is 0.25% lower than the fee paid by MultiFlex
Fund, and as a result, the advisory fee paid to AIM Advisors on the assets of
MultiFlex Fund will decrease as a result of the Reorganization.
The Board of Directors further noted that the value of each
shareholder's account with Flex Fund immediately after the Reorganization will
be the same as the value of that shareholder's account with MultiFlex Fund
immediately prior to the Reorganization meaning that there will be no dilution
of the value of the shares of either Fund. No initial sales or other charges
will be imposed on any of the shares of Flex Fund acquired by the shareholders
of MultiFlex Fund in connection with the Reorganization.
Finally, the Board of Directors reviewed the principal terms of the
Plan of Reorganization. The Board of Directors noted that MultiFlex Fund would
be provided with an opinion of counsel that the Reorganization would be
tax-free as to MultiFlex Fund and its shareholders.
At the meeting of the Board of Directors, based upon their evaluation
of the information presented to them, the Board of Directors determined that
the proposed Reorganization will not
15
21
dilute the interests of MultiFlex Fund's shareholders and is in the best
interest of MultiFlex Fund's shareholders in view of the above-mentioned
factors. Therefore, the Board of Directors recommends the approval of the Plan
of Reorganization by the shareholders at a Special Meeting.
OPERATION OF FLEX FUND FOLLOWING THE REORGANIZATION
There are differences in some of the investment policies of the Funds.
Flex Fund will not revise its investment objectives to reflect those of
MultiFlex Fund. Rather, AIM Advisors and INVESCO Capital Management, Inc.
believe that a substantial portion of the assets of MultiFlex Fund are
consistent with the investment policies of Flex Fund and can be transferred to
and held by Flex Fund. If the Reorganization is approved, MultiFlex Fund will
sell any assets that are inconsistent with Flex Fund's investment policies
prior to the effective time of the Reorganization, and the proceeds of such
sales will be held in temporary investments or reinvested in assets that are
consistent with Flex Fund's investment policies. The need for MultiFlex Fund to
dispose of assets prior to the Reorganization may result in sales at
disadvantageous times and could result in MultiFlex Fund realizing losses that
would not otherwise have been realized.
After the Reorganization, AIM Advisors and INVESCO Capital Management,
Inc. will continue to serve as investment adviser and sub-adviser to Flex Fund.
The individuals who are primarily responsible for the day-to-day management of
Flex Fund are:
o Edward C. Mitchell, Jr., C.F.A., Senior Portfolio Manager,
who has been responsible for the Fund since 1988 and has
been associated with the sub-adviser and/or its affiliates
since 1979.
o Margaret (Peg) W. Durkes, C.F.A., Assistant Portfolio
Manager, who has been responsible for the Fund since 1997
and has been associated with the sub-adviser and/or its
affiliates since 1993.
o David S. Griffin, C.F.A., Assistant Portfolio Manager, who
has been responsible for the Fund since 1993 and has been
associated with the sub-adviser and/or its affiliates since
1991.
OTHER TERMS
Completion of the Reorganization is subject to various conditions,
including the following:
o An amendment to the Charter of AAF shall have been filed with the
Maryland Department of Assessments and Taxation,
o All consents, approvals, permits and authorizations required to
be obtained from governmental authorities, including the SEC and
state securities commissions, to
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22
permit the parties to carry out the transactions contemplated by
the Plan of Reorganization shall have been received,
o The Plan of Reorganization, the amendment to the Charter and
related corporate matters shall have been approved by the
shareholders of MultiFlex Fund at the Special Meeting by the
affirmative vote of a majority of the total number of votes
entitled to be cast for each class of MultiFlex Fund shares.
o The assets of MultiFlex Fund to be acquired by Flex 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 MultiFlex Fund immediately prior to the
reclassification,
o The dividend or dividends as described in the Plan of
Reorganization shall have been declared,
o AAF shall have received an opinion of Ballard Spahr Andrews &
Ingersoll, LLP ("BSA&I") to the effect that consummation of the
transactions contemplated by the Plan of Reorganization will
constitute a "reorganization" within the meanings of Section
368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that the shareholders of MultiFlex Fund will
recognize no gain or loss to the extent that they receive shares
of Flex Fund in exchange for their shares of MultiFlex Fund in
accordance with the Plan of Reorganization,
o AAF shall have received an opinion of BSA&I addressed to and in
form and substance satisfactory to AAF, to the effect that the
Plan of Reorganization has been duly authorized and approved by
all requisite action of AAF and the holders of the shares of
MultiFlex Fund.
Flex Fund and MultiFlex Fund have each agreed to bear their own
expenses in connection with the Reorganization. For MultiFlex Fund, this will
include expenses incurred in preparing, printing and mailing proxy materials
for the Special Meeting of shareholders and proxy solicitation costs. Because
AIM Advisors has agreed to pay the administrative expenses of MultiFlex Fund
that exceed specified levels, the costs incurred by MultiFlex Fund in
connection with the Reorganization will effectively be borne by AIM Advisors.
FEDERAL 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 Code, the existing Treasury regulations thereunder, current administrative
rulings of the Internal Revenue Service ("IRS") and 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:
17
23
o The Reorganization will qualify as a "reorganization" within the
meaning of Section 368(a) of the Code;
o No gain or loss will be recognized by MultiFlex Fund upon
reclassification of its assets to Flex Fund;
o No gain or loss will be recognized by any shareholder of
MultiFlex Fund upon the exchange of shares of MultiFlex Fund
solely for shares of Flex Fund;
o The tax basis of the shares of Flex Fund to be received by a
shareholder of MultiFlex Fund will be the same as the tax basis
of the shares of MultiFlex Fund surrendered in exchange therefor;
o The holding period of the shares of Flex Fund to be received by a
shareholder of MultiFlex Fund will include the holding period for
which such shareholder held the shares of MultiFlex Fund
exchanged therefor, provided that such shares of MultiFlex Fund
are capital assets in the hands of such shareholder as of the
date the Reorganization is consummated;
o No gain or loss will be recognized by Flex Fund on the receipt of
assets of MultiFlex Fund in exchange for shares of Flex Fund and
Flex Fund's assumption of MultiFlex Fund's liabilities;
o The tax basis of the assets of MultiFlex Fund in the hands of
Flex Fund will be the same as the tax basis of such assets in the
hands of MultiFlex Fund immediately prior to the Reorganization;
and
o The holding period of the assets of MultiFlex Fund to be received
by Flex Fund will include the holding period of such assets in
the hands of MultiFlex Fund immediately prior to the
Reorganization.
As a condition to closing, BSA&I will render a favorable opinion to
AAF as to the foregoing Federal income tax consequences of the Reorganization,
which opinion will be conditioned upon the accuracy, as of the date of closing,
of certain representations made by AAF upon which BSA&I will rely in rendering
its opinion, which representations include, but are not limited to, the
following (taking into account for purposes thereof any events that are part of
the Plan of Reorganization, regardless of their date of occurrence):
o There is no plan or intention by the shareholders of MultiFlex
Fund to redeem a number of shares of Flex Fund received in the
Reorganization that would reduce the MultiFlex Fund shareholders'
ownership of Flex Fund shares to a number of shares having a
value, as of the date the Reorganization is consummated, of less
than 50% of the value of all of the formerly outstanding shares
of MultiFlex Fund as of the date the Reorganization is
consummated;
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24
o Following the Reorganization, Flex Fund will continue the
historic business of MultiFlex Fund (for this purpose "historic
business" shall mean the business most recently conducted by
MultiFlex Fund which was not entered into in connection with the
Reorganization) or use a significant portion of MultiFlex Fund's
historic business assets in its business;
o At the direction of MultiFlex Fund, Flex Fund will issue directly
to each MultiFlex Fund shareholder in the Reorganization shares
of Flex Fund having a net asset value equal to the net asset
value of the MultiFlex Fund shares exchanged therefor; MultiFlex
Fund will transfer all of its assets and liabilities to Flex Fund
in the Reorganization; and MultiFlex Fund will terminate its
existence as an investment portfolio of AAF on, or as soon as
practicable after, the date the Reorganization is consummated.
o Flex Fund has no plan or intention to reacquire any of its shares
issued in the Reorganization, except to the extent that Flex Fund
is required by the 1940 Act to redeem any of its shares presented
for redemption;
o Flex Fund does not plan or intend to sell or otherwise dispose of
any of the assets of MultiFlex Fund acquired in the
Reorganization, except for dispositions made in the ordinary
course of its business in a manner consistent with its investment
objectives and policies and dispositions necessary to maintain
its status as a "regulated investment company" ("RIC") under the
Code;
o Flex Fund, MultiFlex Fund and the shareholders of MultiFlex Fund
will pay their respective expenses, if any, incurred in
connection with the Reorganization in accordance with current IRS
guidelines;
o Flex Fund will acquire at least 90 percent of the fair market
value of the net assets, and at least 70 percent of the fair
market value of the gross assets, held by MultiFlex Fund
immediately before the Reorganization, including for this purpose
any amounts used by MultiFlex Fund to pay its reorganization
expenses and all redemptions and distributions made by MultiFlex
Fund immediately before the MultiFlex Fund Reorganization (other
than redemptions pursuant to a demand of a shareholder in the
ordinary course of MultiFlex Fund's business as an open-end
diversified management investment company under the 1940 Act and
regular, normal dividends not in excess of the requirements of
Section 852 of the Code); and
o Flex Fund and MultiFlex Fund have each elected to be taxed as a
RIC under Section 851 of the Code and will each have qualified
for the special Federal tax treatment afforded RICs under the
Code for all taxable periods (including the last short taxable
period of MultiFlex Fund ending on the date the Reorganization is
consummated and the taxable year of Flex Fund that includes the
date the Reorganization is consummated.
19
25
THE DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION PROVIDED ABOVE IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS
AND CIRCUMSTANCES OF ANY SHAREHOLDER OF MULTIFLEX FUND. MULTIFLEX FUND
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.
RIGHTS OF SHAREHOLDERS
MultiFlex Fund and Flex Fund are each separate series of shares of the
capital stock of AAF, a Maryland corporation. Since both Funds are part of the
same corporate entity there are no differences in shareholder's rights.
OWNERSHIP OF FLEX FUND AND MULTIFLEX FUND SHARES
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person
who as of April 26, 1999, to the knowledge of AAF, owned beneficially 5% or
more of the outstanding shares of MultiFlex Fund:
PERCENT
MULTIFLEX FUND: NUMBER OF SHARES BENEFICIAL
NAME AND ADDRESS OWNED OWNERSHIP
Listed below is the name, address and percent ownership of each person
who as of April 26, 1999 to the knowledge of AAF, owned beneficially 5% or more
of the outstanding shares of Flex Fund:
PERCENT
FLEX FUND: NUMBER OF SHARES BENEFICIAL
NAME AND ADDRESS OWNED OWNERSHIP
20
26
OWNERSHIP OF OFFICERS AND OFFICERS
To the best of the knowledge of AAF, the beneficial ownership of
shares of MultiFlex Fund or of Flex Fund by officers of AAF as a group
constituted less than 1% of the outstanding shares of such Fund as of the date
of this Proxy Statement/Prospectus.
CAPITALIZATION
The following tables set forth as of December 31, 1998, (i) the
capitalization of Flex Fund Class A shares, Flex Fund Class B shares, and Flex
Fund Class C shares, (ii) the capitalization of MultiFlex Fund Class A, Class B
and Class C shares and the pro forma capitalization of Flex Fund Class A, Class
B and Class C shares as adjusted to give effect to the transactions
contemplated by the Plan of Reorganization.
MULTIFLEX FUND FLEX FUND
FLEX FUND CLASS A SHARES CLASS A SHARES PRO FORMA
------------------------ -------------- ---------
Net Assets $46,286,433 $16,485,231 $62,771,664
Shares Outstanding 2,307,756 1,225,276 3,129,290
Net Asset Value Per Shares $ 20.06 $ 13.45 $ 20.06
MULTIFLEX FUND FLEX FUND
FLEX FUND CLASS B SHARES CLASS B SHARES PRO FORMA
------------------------ -------------- ---------
Net Assets $ 3,591,573 $ 7,221,683 $10,813,256
Shares Outstanding 179,008 535,931 539,145
Net Asset Value Per Shares $ 20.06 $ 13.48 $ 20.06
MULTIFLEX FUND FLEX FUND
FLEX FUND CLASS C SHARES CLASS C SHARES PRO FORMA
------------------------ -------------- ---------
Net Assets $670,255,537 $312,182,627 $982,438,164
Shares Outstanding 33,407,634 23,188,570 48,966,864
Net Asset Value Per Shares $ 20.06 $ 13.46 $ 20.06
20
27
LEGAL MATTERS
Certain legal matters concerning AAF and its participation in the
Reorganization, the issuance of shares of Flex Fund in connection with the
Reorganization and the tax consequences of the Reorganization will be passed
upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st Floor,
Philadelphia, PA 19103-7599.
INFORMATION FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of
Additional Information do not contain all the information set forth in the
registration statements and the exhibits relating thereto and annual reports
which AAF 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 for
AAF's registration statement containing the current prospectus and statement of
additional information relating to both MultiFlex Fund and Flex Fund is
Registration No. 2-87377.
AAF is subject to the informational requirements of the 1940 Act and
in accordance therewith files reports and other information with the SEC.
Reports, proxy statements, registration statements and other information filed
by AAF (including the Registration Statement of AAF relating to Flex Fund on
Form N-14 of which this Proxy Statement/Prospectus is a part and which is
hereby incorporated by reference) may be inspected without charge and copied at
the public reference facilities maintained by the SEC at Room 1014, Judiciary
Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the following
regional offices of the SEC: 7 World Trade Center, New York, New York 10048;
and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of
such material may also be obtained from the Public Reference Section of the SEC
at 450 Fifth Street, NW, Washington, DC 20549 at the prescribed rates. The SEC
maintains a Web site at http://www.sec.gov that contains information regarding
AAF and other registrants that file electronically with the SEC.
ADDITIONAL INFORMATION ABOUT FLEX FUND
For more information with respect to AAF and Flex Fund concerning the
following topics, please refer to the current prospectus of Flex Fund attached
as Appendix II as indicated: (i) see the discussion "Performance Information"
and "Fee Table and Expense Example" for further information regarding Flex Fund
performance and expenses; (ii) the discussion "Fund Management" for further
information regarding management of Flex Fund; and (iii) see the discussion
"Other Information" and "Shareholder Information" for further information
regarding share pricing, purchase and redemption of shares, dividends and
distribution arrangements for the shares.
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28
APPENDIX I
PLAN OF REORGANIZATION
for the
AIM ADVISOR MULTIFLEX FUND
an Investment Portfolio of
AIM Advisor Funds, Inc.
This Plan of Reorganization provides for the reorganization of AIM
Advisors MultiFlex Fund ("MultiFlex Fund"), an investment portfolio of AIM
Advisor Funds, Inc. ("AAF"), into AIM Advisors Flex Fund ("Flex Fund"), another
investment portfolio of AAF.
WHEREAS, AAF is a Maryland corporation and a registered investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, MultiFlex Fund and Flex Fund are each investment portfolios of
AAF representing separate series of shares of the capital stock of AAF;
WHEREAS, the Board of Directors of AAF has determined that it would be
in the best interests of the MultiFlex Fund shareholders to reorganize MultiFlex
Fund by reclassifying the shares of MultiFlex Fund as Flex Fund shares pursuant
to an amendment to the Charter of AAF, all in the manner described below.
NOW, THEREFORE, MultiFlex Fund shall be reorganized into Flex Fund on
the following terms and conditions.
1. PLAN OF REORGANIZATION.
(a) RECLASSIFICATION OF SHARES. At the Effective Time
described in Section 3 below:
(i) all of the issued and outstanding Class A shares of MultiFlex Fund
shall be reclassified and changed into and become Class A shares of
Flex Fund based upon their respective net asset values, and thereafter
shall have the attributes of Class A shares of Flex Fund;
(ii) all of the issued and outstanding Class B shares of MultiFlex Fund
shall be reclassified and changed into and become Class B shares of
Flex Fund based upon their respective net asset values, and thereafter
shall have the attributes of Class B shares of Flex Fund; and
(iii) all of the issued and outstanding Class C shares of MultiFlex
Fund shall be reclassified and changed into and become Class C shares
of Flex Fund based upon their respective net assets values, and
thereafter shall have the attributes of Class C shares of Flex Fund.
29
All authorized but unissued shares of MultiFlex Fund shall be reclassified
as authorized shares of the Corporation without further designation or
classification. The stock transfer books of MultiFlex Fund will be
permanently closed at the Effective Time and only requests for the
redemption of shares of MultiFlex Fund received in proper form prior to the
close of trading on the New York Stock Exchange on the date of the
Effective Time shall be accepted. Thereafter, redemption requests received
by MultiFlex Fund shall be deemed to be redemption requests for the Flex
Fund shares into which such MultiFlex Fund shares were reclassified under
this Plan of Reorganization.
(b) ATTRIBUTION OF ASSETS AND LIABILITIES. At the Effective Time described
in Section 3 below:
(i) the proportionate undivided interest in the net assets of MultiFlex
Fund attributable to its Class A shares shall become a part of the
proportionate undivided interest in the net assets of Flex Fund
attributable to its Class A shares and the expenses, costs, charges and
reserves allocated to the Class A shares of MultiFlex Fund immediately
prior to the Effective Time shall become expenses, costs, charges and
reserves of Class A shares of Flex Fund;
(ii) the proportionate undivided interest in the net assets of
MultiFlex Fund attributable to its Class B shares shall become a part
of the proportionate undivided interest in the net assets of Flex Fund
attributable to its Class B shares and the expenses, costs, charges and
reserves allocated to the Class B shares of MultiFlex Fund immediately
prior to the Effective Time shall become expenses, costs, charges and
reserves of Class B shares of Flex Fund; and
(iii) the proportionate undivided interest in the net assets of
MultiFlex Fund attributable to its Class C shares shall become a part
of the proportionate undivided interest in the net assets of Flex Fund
attributable its Class C shares and the expenses, costs, charges and
reserves allocated to the Class C shares of MultiFlex Fund immediately
prior to the Effective Time shall become expenses, costs, charges and
reserves of Class C shares of Flex Fund.
AAF shall instruct its custodian to reflect in the custodian's records for
Flex Fund the attribution of the assets of MultiFlex Fund in the manner
described above. Additionally, the books and records of MultiFlex Fund will
become the books and records of Flex Fund upon reclassification of
MultuFlex Fund shares.
(c) SHAREHOLDER ACCOUNTS. At the Effective Time described in Section 3
below:
(i) each shareholder of record of Class A shares of MultiFlex Fund will
receive that number of Class A shares of Flex Fund having an aggregate
net asset value equal to the aggregate net asset value of the Class A
shares of MultiFlex Fund held by such shareholder immediately prior to
the Effective Time;
2
30
(ii) each shareholder of record of Class B shares of MultiFlex Fund
will receive that number of Class B shares of Flex Fund having an
aggregate net asset value equal to the aggregate net asset value of the
Class B shares of MultiFlex Fund held by such shareholder immediately
prior to the Effective Time; and
(iii) each shareholder of record of Class C shares of MultiFlex Fund
will receive a number of Class C shares of Flex Fund having an
aggregate net asset value equal to the aggregate net asset value of the
Class C shares of MultiFlex Fund held by such shareholder immediately
prior to the Effective Time.
AAF will establish an open account on the records of the Flex Fund in the
name of each shareholder of MultiFlex Fund to which will be credited the
respective number of shares of Flex Fund due such shareholder. Fractional
shares of Flex Fund will be carried to the third decimal place.
Certificates representing shares of Flex Fund will not be issued. The net
asset value of the shares of MultiFlex Fund and Flex Fund will be
determined at the Effective Time in accordance with the policies and
procedures of AAF.
2. AMENDMENT TO CHARTER. AAF shall effect the reorganization of MultiFlex
Fund by amending its Charter to provide for the reclassification of Class A,
Class B and Class C shares of MultiFlex Fund as Class A, Class B and Class C
shares of Flex Fund, respectively, based upon their respective net asset values,
to provide for the transfer of assets and liabilities from MultiFlex Fund to
Flex Fund, and to provide for the crediting of shares of Flex Fund to the
account of shareholders of MultiFlex Fund, all in the manner provided in
paragraph 1.
3. EFFECTIVE TIME OF THE REORGANIZATION. The reorganization of MultiFlex
Fund contemplated by this Plan of Reorganization shall occur on June 21, 1999 at
8:00 a.m. Eastern Time, or such later date and time as the officers of AAF shall
determine (the "Effective Time").
4. APPROVAL OF SHAREHOLDERS. A meeting of the holders of MultiFlex Fund
shares shall be duly called and constituted for the purpose of acting upon this
Plan of Reorganization and the transactions contemplated herein, including
approval of the amendment to the Charter of AAF described above. Approval by
such shareholders of this Plan of Reorganization shall authorize AAF to take the
actions required to effect the Plan of Reorganization.
5. CONDITIONS PRECEDENT. AAF will consummate the Plan of Reorganization
only after satisfaction of each of the following conditions:
(a) The amendment to the Charter of AAF described in paragraph 2 shall
have been filed with the Maryland Department of Assessments and Taxation
specifying the Effective Time as the effective date thereof.
(b) All consents, approvals, permits and authorizations required to be
obtained from governmental authorities, including the Securities and Exchange
Commission and state
3
31
securities commissions, to permit the parties to carry out the transactions
contemplated by this Plan of Reorganization shall have been received.
(c) This Plan of Reorganization, the amendment to the Charter and
related corporate matters shall have been approved by the shareholders of
MultiFlex Fund at a special meeting by the affirmative vote of a majority of the
total number of votes entitled to be cast.
(d) The assets of MultiFlex Fund to be acquired by Flex 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 MultiFlex Fund
immediately prior to the reclassification. For purposes of this paragraph 5(d),
assets used by MultiFlex Fund to pay the expenses it incurs in connection with
this Plan of Reorganization and to effect all shareholder redemptions and
distributions (other than regular, normal dividends and regular, normal
redemptions pursuant to the 1940 Act, and not in excess of the requirements of
Section 852 of the Code, occurring in the ordinary course of MultiFlex Fund's
business as a series of an open-end management investment company) after the
date of this Plan of Reorganization shall be included as assets of MultiFlex
Fund held immediately prior to the reclassification.
(e) The dividend or dividends described in the last sentence of
paragraph 6(a) shall have been declared.
(f) AAF shall have received an opinion of Ballard Spahr Andrews &
Ingersoll, LLP ("BSA&I") to the effect that consummation of the transactions
contemplated by this Plan of Reorganization will constitute a "reorganization"
within the meanings of Section 368(a) of the Internal Revenue Code (the "Code"),
and that the shareholders of Multiflex Fund will recognize no gain or loss to
the extent that they receive shares of Flex Fund in exchange for their shares of
Multiflex Fund in accordance with this Plan of Reorganization. In rendering such
opinion, BSA&I may request and rely upon representations contained in
certificates of officers of AAF and others, and the officers of AAF shall use
their best efforts to make available such truthful certificates.
(g) AAF shall have received an opinion of BSA&I, dated as of the
Effective Time, addressed to and in form and substance satisfactory to AAF, to
the effect that this Plan of Reorganization has been duly authorized and
approved by all requisite action of AAF and the holders of the shares of
MultiFlex Fund.
At any time prior to the Effective Time, any of the foregoing
conditions may be waived by AAF if, in the judgment of its Board of Trustees,
such waiver will not have a material adverse effect on the benefits intended
under this Plan of Reorganization for the MultiFlex shareholders.
6. MULTIFLEX FUND TAX MATTERS.
(a) MultiFlex Fund has elected to be a regulated investment company
under Subchapter M of the Code. MultiFlex Fund has qualified as such for each
taxable year since inception and that has ended prior to the Effective Time and
will have satisfied the requirements
4
32
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 at the
Effective Time. MultiFlex 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) insure continued qualification of MultiFlex Fund as a
"regulated investment company" for tax purposes and (ii) eliminate any tax
liability of MultiFlex Fund arising by reason of undistributed investment
company taxable income or net capital gain, MultiFlex Fund will declare on or
prior to the Effective Time to the shareholders of MultiFlex Fund a dividend or
dividends that, together with all previous such dividends, shall have the effect
of distributing (A) all of MultiFlex Fund's investment company taxable income
(determined without regard to any deductions for dividends paid) for the taxable
year ended December 31, 1998 and for the short taxable year beginning on January
1, 1999 and ending at the Effective Time and (B) all of MultiFlex Fund's net
capital gain recognized in its taxable year ended December 31, 1998 and in such
short taxable year (after reduction for any capital loss carryover).
(b) MultiFlex Fund has timely filed all tax returns required to be
filed by it and all taxes with respect thereto have been paid. No deficiencies
for any taxes have been proposed, assessed or asserted in writing by any taxing
authority against MultiFlex 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 on the
condition, financial or otherwise, property, assets or prospects of Multiflex
Fund.
(c) The fiscal year of MultiFlex Fund has not been changed for tax
purposes since the date on which it commenced operations.
7. FLEX FUND TAX MATTERS.
(a) Flex Fund has elected to be treated as a regulated investment
company under Subchapter M of the Code. Flex Fund has qualified as such for each
taxable year since inception that has ended prior to the Effective Time and will
satisfy the requirements of Part I of Subchapter M of the Code to maintain such
qualification for its current taxable year. MultiFlex 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) Flex Fund has timely filed all returns required to be filed by it
and all taxes with respect thereto have been paid. No deficiencies for any taxes
have been proposed, assessed or asserted in writing by any taxing authority
against Flex 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 on the condition, financial or
otherwise, property, assets or prospects of Flex Fund.
(c) The fiscal year of Flex Fund has not been changed for tax purposes
since the date on which it commenced operations.
5
33
8. TERMINATION. AAF may terminate this Plan of Reorganization with the
approval of its Board of Directors at any time prior to the Effective Time,
notwithstanding approval thereof by MultiFlex Fund shareholders if, in the
judgment of the Board, proceeding with the Plan of Reorganization would be
inadvisable.
9. FURTHER ASSURANCES. AAF shall take such further action as may be
necessary or desirable and proper to consummate the transactions contemplated
hereby.
10. EXPENSES. MultiFlex Fund and Flex Fund shall each bear any expenses
it incurs in connection with this Plan of Reorganization and the transactions
contemplated hereby.
This Plan of Reorganization was approved and adopted by the Board of
Directors of AAF on the 11th day of March, 1999.
6
34
APPENDIX II
AIM ADVISOR FLEX FUND
------------------------------------------------------------------------
AIM Advisor Flex Fund seeks to achieve a high total return on investment
through growth of capital and current income, without regard to federal
income tax considerations.
PROSPECTUS
MAY 3, 1999
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.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
35
---------------------
AIM ADVISOR FLEX FUND
---------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group 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.
36
---------------------
AIM ADVISOR FLEX FUND
---------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to achieve a high total return on investment
through growth of capital and current income, without regard to federal income
tax considerations.
The fund seeks to meet this objective by investing in a combination of equity
securities and fixed-and-variable income securities. The fund normally invests
at least 20% of its total assets in equity securities and at least 20% of its
total assets in fixed-and variable-income securities. The fund's equity
investments will consist primarily of common stocks, and to a lesser extent
convertible securities, of selected companies from a list of companies with
market capitalizations among the largest 800 publicly traded U.S. corporations.
The fund's fixed-income investments will consist primarily of U.S. government
obligations and corporate obligations that have been rated investment-grade, or
securities deemed by the portfolio managers to be of comparable quality.
The fund may invest in mortgage-backed securities, including mortgage
pass-through securities and collateralized mortgage obligations, that are
guaranteed as to timely payment of principal and interest by an agency of the
U.S. government or a private issuer. The fund may invest up to 10% of its total
assets in non-Canadian foreign securities and unsponsored American Depositary
Receipts (ADRs). The fund may also invest up to 25% of its total assets in
securities of Canadian issuers and sponsored ADRs.
The portion of the fund's assets that can be invested in either equity
securities or income securities will be allocated according to the portfolio
managers' assessment of current business, economic and market conditions. The
fund seeks reasonably consistent returns over a variety of market cycles. In
order to identify the equity securities having the best relative values, the
portfolio managers start with a list of the 800 largest publicly traded U.S.
corporations, which they reduce to a list of 100 eligible stocks by utilizing a
proprietary database system and fundamental analysis. The portfolio managers
usually sell a particular equity security when it no longer qualifies for the
list of eligible securities. The portfolio managers will purchase fixed-and
variable-income obligations that they believe are undervalued and may offer
superior yields. The portfolio managers consider whether to sell a particular
income security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objectives.
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 and that the income you may receive from the fund may vary. 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.
Interest rate increases can cause the price of a debt security to decrease;
the longer a debt security's duration, the more sensitive it is to this risk.
The issuer of a security may default or otherwise be unable to honor a financial
obligation. A faster than expected principal prepayment rate on U.S. Government
agency mortgage-backed securities will reduce both the market value of, and
income from, such securities.
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 value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
37
---------------------
AIM ADVISOR FLEX 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 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 C
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
Annual
Year Ended Total
December 31 Return
- ----------- ------
1989 ....................................... 17.26%
1990 ....................................... -1.68%
1991 ....................................... 24.80%
1992 ....................................... 7.72%
1993 ....................................... 10.48%
1994 ....................................... 0.64%
1995 ....................................... 27.30%
1996 ....................................... 13.61%
1997 ....................................... 23.64%
1998 ....................................... 12.41%
During the periods shown in the bar chart, the highest quarterly return was
12.12% (quarter ended March 31, 1991) and the lowest quarterly return was -8.25%
(quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------------------
Class A 7.03% -- -- 15.48% 12/31/96
Class B -- -- -- -- 03/03/98
Class C 11.41% 15.13% 13.23% 12.49% 02/24/88
S&P 500(1) 28.60% 24.05% 19.19% 18.31%(2) 02/29/88(2)
- -------------------------------------------------------------------------------------------
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
38
---------------------
AIM ADVISOR FLEX 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:
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
- -------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(2)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
Management Fees 0.75% 0.75% 0.75%
Distribution and/or
Service (12b-1)
Fees(3) 0.25 1.00 1.00
Other 0.42 0.44 0.44
Total Annual Fund
Operating Expenses 1.42 2.19 2.19
Fee Waiver 0.31 0.31 0.31
Net Expenses(4) 1.11% 1.88% 1.88%
- -------------------------------------------------------
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The fees and expenses set forth in this table are based on the actual
expenses of the Fund for the fiscal year ended December 31, 1998 as adjusted
for current fee waiver arrangements.
(3) AIM Distributors has voluntarily agreed to limit the Class A shares Rule
12b-1 distribution plan payments to 0.25% for three years beginning August
4, 1997. If these limitations were not in effect, the distribution and/or
service (12b-1) fees of the Class A shares would be 0.35%.
(4) The investment advisor has contractually agreed to limit net expenses. If
all limitations were not in effect, the total annual fund operating
expenses would be 1.52%, 2.19% and 2.19% for the Class A shares, Class B
shares and Class C shares, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
Class A $657 $883 $1,128 $1,827
Class B 691 891 1,216 2,000
Class C 291 591 1,016 2,201
- ----------------------------------------------
You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
Class A $657 $883 $1,128 $1,827
Class B 191 591 1,016 2,000
Class C 191 591 1,016 2,201
- ----------------------------------------------
3
39
---------------------
AIM ADVISOR FLEX FUND
---------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
manages the investment operations of the fund and has agreed to perform or
arrange for the performance of the fund's day-to-day management. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. INVESCO
Capital Management, Inc. (the subadvisor), the fund's subadvisor, is located at
1315 Peachtree Street, N.E., Atlanta, GA 30309. The subadvisor is responsible
for the fund's day-to-day management, including the fund's investment decisions
and the execution of securities transactions with respect to the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives. The subadvisor has acted as an investment advisor since
1979.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 1.00% of average daily net assets consisting of a management fee
of 0.75% and an operating services fee of 0.25%.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - Edward C. Mitchell, Jr., C.F.A., Senior Portfolio Manager, who has been
responsible for the fund since 1988 and has been associated with the
subadvisor and/or its affiliates since 1979.
- - Margaret (Peg) W. Durkes, C.F.A., Assistant Portfolio Manager, who has been
responsible for the fund since 1997 and has been associated with the
subadvisor and/or its affiliates since 1993.
- - David S. Griffin, C.F.A., Assistant Portfolio Manager, who has been
responsible for the fund since 1993 and has been associated with the
subadvisor and/or its affiliates since 1991.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Advisor Flex 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. Purchase of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, quarterly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term gains [(including any net gains from
foreign currency transactions)], if any, annually and short-term capital gains
(including any net gains from foreign currency transactions), if any, quarterly.
4
40
---------------------
AIM ADVISOR FLEX 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).
The information for the years or periods ended December 31, 1997, 1996, 1995
and 1994 has been audited by PricewaterhouseCoopers LLP. The information for the
fiscal year or period ended December 31, 1998, has been audited by KPMG LLP,
whose report, along with the fund's financial statements, is included in the
fund's annual report, which is available upon request.
CLASS A(a)
--------------------
YEAR ENDED
DECEMBER 31,
--------------------
1998 1997(b)
- -------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.74 $ 16.63
Income from investment operations:
Net investment income 0.39 0.41(c)
Net gains on securities (both realized and unrealized) 2.16 3.63
Total from investment operations 2.55 4.04
Less distributions:
Dividends from net investment income (0.39) (0.43)
Distributions from net realized gains (1.84) (0.50)
Total distributions (2.23) (0.93)
Net asset value, end of period $ 20.06 $ 19.74
Total return(d) 13.26% 24.60%
- -------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $46,286 $25,151
Ratio of expenses to average net assets(e) 1.23%(f) 1.45%
Ratio of net investment income to average net assets(g) 1.99%(f) 2.34%
Portfolio turnover rate 34% 17%
- -------------------------------------------------------------------------------------
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.52% and 1.55% for 1998-1997.
(f) Ratios are based on average net asset of $36,085,767.
(g) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.70% and 2.24% for 1998-1997.
5
41
---------------------
AIM ADVISOR FLEX FUND
---------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
CLASS B
-------------------
FOR THE PERIOD
MARCH 3,
THROUGH
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Net asset value, beginning of period $20.69
Income from investment operations:
Net investment income 0.22
Net gains on securities (both realized and unrealized) 1.22
Total from investment operations 1.44
Less distributions:
Dividends from net investment income (0.23)
Distributions from net realized gains (1.84)
Total distributions (2.07)
Net asset value, end of period $20.06
Total return(a) 7.25%
- --------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $3,592
Ratio of expenses to average net assets(b) 2.00%(c)(d)
Ratio of net investment income to average net assets(e) 1.22%(c)(d
Portfolio turnover rate 34%
- --------------------------------------------------------------------------------
(a) Does not deduct contingent deferred sales charges and for periods less than
one year is not annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.19% (annualized).
(c) Ratios are based on average net assets of $1,313,596.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.03% (annualized).
CLASS C(a)
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997(b) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.74 $ 16.63 $ 15.66 $ 12.63 $ 13.54
Income from investment operations:
Net investment income 0.25 0.30(c) 0.30 0.32 0.32
Net gains (losses) on securities (both
realized and unrealized) 2.14 3.60 1.81 3.09 (0.23)
Total from investment operations 2.39 3.90 2.11 3.41 0.09
Less distributions:
Dividends from net investment income (0.23) (0.29) (0.29) (0.32) (0.31)
Distributions from net realized gains (1.84) (0.50) (0.85) (0.06) (0.69)
Total distributions (2.07) (0.79) (1.14) (0.38) (1.00)
Net asset value, end of period $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
Total return(d) 12.41% 23.64% 13.61% 27.30% 0.64%
- --------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $670,256 $603,179 $489,918 $399,162 $243,848
Ratio of expenses to average net assets 2.00%(e)(f) 2.20% 2.26% 2.28% 2.25%
Ratio of net investment income to average
net assets 1.22%(f)(g) 1.59% 1.81% 2.28% 2.32%
Portfolio turnover rate 34% 17% 26% 5% 36%
- --------------------------------------------------------------------------------------------------------------------
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.19%.
(f) Ratios are based on average net assets of $636,501,142.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.03%.
6
42
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THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
43
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
CATEGORY I INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
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
- ----------------------------------------------------------
CATEGORY II INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
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
- ----------------------------------------------------------
CATEGORY III INITIAL SALES CHARGES
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
Less than $ 100,000 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
- ----------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
44
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem 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.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
A- 3 MCF--05/99
45
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
46
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
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
Withdrawal 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 trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(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.
A- 5 MCF--05/99
47
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account 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 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM 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.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. 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 from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM 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 sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for 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 (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
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-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM 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. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM 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 the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C 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 shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
49
-------------------
THE AIM FUNDS
-------------------
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
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
50
---------------------
AIM ADVISOR FLEX FUND
---------------------
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.
If you have questions about this fund, another fund in The AIM Family of
Funds(R) 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: A I M Distributors, Inc.
11 Greenway Plaza, Suite
100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: general@aimfunds.com
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, DC 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Advisor Flex Fund
SEC 1940 Act file number: 811-3886
[AIM LOGO APPEARS HERE] www.aimfunds.com FLX-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
51
APPENDIX III
AIM
ADVISOR FLEX FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31, 1998
INVEST WITH DISCIPLINE
-- Registratered Trademark --
52
[ COVER IMAGE ]
------------------------------------------------------------
THE CIRCUS BY GEORGES PIERRE SEURAT, 1859-1891,
FRENCH ONE OF FRENCH ARTIST GEORGES SEURAT'S MOST
FAMOUS PAINTINGS, THE CIRCUS FEATURES A GRACEFUL
RIDER BALANCING ON THE BACK OF A WHITE HORSE. WHILE
THE MOOD OF THE PAINTING IS CAREFREE, THE WORK WAS
PAINSTAKINGLY EXECUTED. SEURAT PIONEERED A TECHNIQUE
CALLED "POINTILLISM" USING TINY BRUSHSTROKES OF
CONTRASTING COLORS. SEURAT PLANNED HIS PAINTINGS TO
THE LAST DETAIL AND CAREFULLY PLACED EACH DOT, MUCH
THE SAME WAY A FUND MANAGER CHOOSES THE STOCKS FOR A
PORTFOLIO. VIEWED AS A WHOLE, THE POINTS FORM A
HARMONIOUS COMPOSITION.
------------------------------------------------------------
AIM Advisor Flex Fund is for shareholders who seek to achieve a high total
return on investment through capital appreciation and current income through
investments in a combination of equity securities and fixed and variable income
securities.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Advisor Flex Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, the Fund's performance is computed at net asset value
without a sales charge.
o During the fiscal year ended 12/31/98 the Fund paid distributions of $2.07
per share for Class B and C shares, $2.23 per share for Class A shares.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund's Class B and Class C shares will differ from
that of Class A shares due to differences in sales charge structure and Fund
expenses.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of
the stock market in general.
o The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
o The unmanaged Lipper Flexible Portfolio Index represents an average of the
performance of the 30 largest funds in the flexible portfolio fund category.
It is compiled by Lipper, Inc., an independent mutual funds performance
monitor. Results shown reflect reinvestment of dividends.
o The Lehman Aggregate Bond Index is an unmanaged index generally considered
to be representative of corporate debt securities.
o The NASDAQ (National Association of Securities Dealers Automated Quotation
system) Composite Index is a group of more than 4,500 unmanaged
over-the-counter securities widely regarded by investors to be
representative of the small- and medium sized company stock universe.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY. THERE IS A RISK THAT
YOU COULD LOSE A PORTION OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
AIM ADVISOR FLEX FUND
53
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
As the fiscal year opened, markets were recovering from the
concerns produced by financial crises in Asia during 1997,
[PHOTO OF and this optimism early in 1998 led several market indexes
Charles T. to all-time highs in spring and early summer. However, the
Bauer, year was to bring two particularly serious financial shocks,
Chairman of first the debt default by Russia, and later the gathering
the Board of crisis in Brazil, which devalued its currency shortly after
THE FUND the fiscal year closed. The result was another year of
APPEARS HERE] significant market volatility here and abroad.
Optimism yielded to pessimism over the summer amid
global financial crises and a widespread decline in U.S.
corporate earnings growth. Particularly from July through
October, a major market correction for equities, including
previously high-flying blue chips, bolstered U.S. Treasury
issues, whose safety attracts investors in doubtful times.
Beginning in late September, the U.S. Federal Reserve Board
intervened to pump liquidity and confidence into markets. Investors responded
favorably, and the year closed on a positive note with domestic equities
rallying and bonds displaying much less momentum.
Some stock indexes produced excellent total return for the year, with the
S&P 500 index of large-company stocks up a dramatic 28.60%. But focusing on one
market benchmark may give you an incomplete view. There was wide divergence
among market segments this fiscal year. For example, the Russell 2000 index of
small-company stocks declined 2.55%. Even within the S&P 500, the bigger the
company, the better the performance.
HOW SHOULD INVESTORS RESPOND?
We understood how unnerving 1998's level of volatility could have been. Of
course, our repeated message to you is to keep a long-term outlook on
investments rather than responding to short-term fluctuations. And we are
pleased to note that most mutual fund shareholders remained cool headed and did
not pull out of the markets during 1998. In the end, most were rewarded for
their long-term perspective.
In view of recent volatility and the divergent performance of market
sectors, this may be a very good time to meet with your financial consultant to
review your current asset allocation and the diversification of your portfolio.
Broad portfolio diversification remains one of the most fundamental principles
of investing, along with long-term thinking and realistic expectations.
YOUR FUND MANAGERS' COMMENTS
On the pages that follow, your Fund's managers, experienced professionals who
have weathered previous periods of market turbulence, offer more detailed
discussion of how markets behaved, how they managed the portfolio in light of
recent volatility, and what they foresee for markets and your Fund. We hope you
find their discussion informative.
YEAR 2000 CONCERN
Many of our shareholders have asked us about AIM's year 2000 readiness status.
We appreciate these concerns, and we take the year 2000 issue seriously. AIM has
devoted considerable effort to creating a comprehensive plan for assessing,
correcting and testing our in-house systems. We will also participate in an
industrywide testing effort scheduled to begin in March. But no matter how well
we prepare and test, no one can know for sure what the year 2000 will bring. Our
industry's systems are connected in complex ways to many third parties, and
there may be unforeseen problems when the year 2000 actually arrives. Though we
cannot predict what all those problems might be, we are working with our
business recovery team to develop contingency plans appropriate for a variety of
year 2000 scenarios.
We are pleased to send you this report on your Fund's fiscal year. If you
have any questions or comments, please contact our Client Services department at
800-959-4246, or e-mail your inquiry to us at general@aimfunds.com. You can
access information about your account through our AIM Investor Line at
800-246-5463 or at our Web site, www.aimfunds.com. We often post market updates
on our Web site.
We thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
----------------------------------
. . . WE ARE PLEASED
TO NOTE THAT MOST
MUTUAL FUND SHAREHOLDERS
REMAINED COOL HEADED AND
DID NOT PULL OUT OF THE
MARKETS DURING 1998.
----------------------------------
AIM ADVISOR FLEX FUND
54
ANNUAL REPORT / MANAGERS' OVERVIEW
ALLOCATION STRATEGY HELPS FUND WEATHER
VOLATILE MARKET
THIS YEAR WAS PARTICULARLY TURBULENT FOR BOTH EQUITY AND FIXED-INCOME MARKETS.
HOW DID THE FUND PERFORM?
The Fund reported solid earnings in a year of intense volatility. Its Class C
shares produced a total annual return of 12.41%, while Class A shares had a
total annual return of 13.26%. Class B shares were introduced on March 3, 1998,
and reported a cumulative return of 7.25% since their inception. The Fund's net
assets rose from $628 million a year ago to $720 million as of December 31,
1998.
HOW WOULD YOU CHARACTERIZE MARKET CONDITIONS OVER THE FISCAL YEAR?
We would describe 1998 as a market with three definite phases: bull, decline,
bull. During the first stage, from January to mid-July, the market climbed,
spurred by strong economies in the United States and Europe. But by summer these
good sentiments began to disintegrate. In July the market entered its second
phase, abruptly declining. By August, market indexes such as the Dow plunged. A
convergence of international problems triggered the downturn: Currency
devaluation occurred in Thailand, Malaysia, Indonesia and Korea. A lingering
recession gripped Japan. Crippled by overwhelming debt, Russia suspended
repayment of much of its foreign debt and suffered deep currency devaluation.
Fears of a global credit crunch then spread to Latin America. Markets there
plunged as investors worried that Brazil could not sustain its exchange rate in
light of the country's increasing debt. The down market spurred a "flight to
quality," as investors turned away from riskier securities such as small-cap
stocks and high-yield bonds. Seeking a safe haven, they turned to the liquidity
of large-cap stocks and U.S. Treasuries.
The third phase came in October as markets stabilized and rallied,
encouraged by a series of interest rate cuts. Over the course of seven weeks,
the U.S. Federal Reserve Board lowered the key federal funds rate from 5.50% to
4.75%. The three cuts triggered an astounding market rally. By the end of the
fiscal year, major stock and bond indexes reported impressive total returns: the
S&P 500, up 28.6%; the Lehman Aggregate Bond Index, up 8.7% and 30-year U.S.
Treasuries, up 17.1%.
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
[Pie Chart]
================================================================================
PERCENTAGE OF HOLDINGS
- --------------------------------------------------------------------------------
Cash Equivalents 2.27%
Corporate Notes 6.17%
U.S. Government 12.81%
Common Stocks 78.75%
NUMBER OF HOLDINGS: 134
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
================================================================================
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
We maintained our high weighting in stocks throughout the fiscal year. Our asset
allocation as of December 31, 1998, was 79% stocks, 19% government and corporate
bonds.
Our asset allocation decisions are based on the expected return on stock
investments compared to the expected earnings on bond investments. Historically,
the spread between the expected returns of these investments has averaged about
3%. When that spread widened, we gradually shifted the portfolio to emphasize
stocks. This occurred in October, and we increased our equities to about 80% of
the portfolio. Our model proved beneficial for Fund shareholders as the equity
market had a tremendous rally in the fourth quarter, and the fund was well
positioned to take advantage of it.
----------------------------------
OUR ASSET ALLOCATION DECISIONS
ARE BASED ON THE EXPECTED
RETURN ON STOCK INVESTMENTS
COMPARED TO THE EXPECTED
EARNINGS ON BOND INVESTMENTS.
----------------------------------
See important Fund and index disclosures inside front cover.
AIM ADVISOR FLEX FUND
2
55
ANNUAL REPORT / MANAGERS' OVERVIEW
The fixed-income portion of the portfolio was dedicated mostly to government
bonds, with a minor position in corporate securities. U.S. Treasuries were the
undisputed fixed-income leaders in 1998 in a classic case of supply and demand.
The investor flight to quality during market upheavals drove up demand for
Treasuries, particularly among foreign investors. At the same time, supply
diminished as the U.S. government, faced with a budget surplus for the first
time in decades, issued fewer Treasury securities. Meanwhile, corporate bonds
were less attractive in 1998 as earnings growth slowed across broad sectors of
the market.
WHAT STOCKS OR SECTOR WEIGHTINGS HELPED THE FUND'S PERFORMANCE?
The Fund's largest sector weighting was in computer hardware manufacturers,
particularly PC market leaders IBM and Compaq. Their respective stock prices
doubled over the course of the fiscal year. Our other top technology position
was EDS, the world's largest data-processing company. A leader in corporate
outsourcing, EDS has benefited from the need for corporations to fix the
so-called "millennium bug." The computer glitch requires older computers and
software to be re-programmed to recognize the year 2000. Technology stocks
powered the stock market rally in the fourth quarter, and the Fund benefited
from the great performance.
Besides technology stocks, our other major holdings include pharmaceutical
companies Merck, Mylan Laboratories, American Home Products and Abbott
Laboratories. Earnings growth for major U.S. drug companies has been strong in
recent years for several reasons, including expedited product approval by the
Federal Drug Administration, growing demand from an aging population, and the
recent success of new drugs.
Because of its value orientation, the Fund bought economically sensitive
stocks during the fourth quarter because their prices were low relative to the
market as a whole. Our purchases included consumer cyclical stocks (retailers,
auto-related companies, household furnishings), capital goods stocks
(manufacturing and machinery) and financial services stocks (banks and insurance
firms).
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
=================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- -------------------------------------------------------------------------------------------------
1. International Business 2.05% 1. Computers (Hardware) 4.99%
Machines Corp. 2. Banks (Major Regional) 3.90
2. Compaq Computer Corp. 1.75 3. Oil (International Integrated) 3.76
3. Merck & Co., Inc. 1.54 4. Electric Companies 3.75
4. Nucor Corp. 1.50 5. Telephone 3.62
5. Mylan Laboratories, Inc. 1.42 6. Health Care 3.31
6. American Home Products Corp. 1.41 (Drugs-Major Pharmaceuticals)
7. Electronic Data Systems Corp. 1.40 7. Financial (Diversified) 3.01
8. Anheuser-Busch Companies, Inc. 1.37 8. Machinery (Diversified) 2.96
9. Abbott Laboratories 1.36 9. Health Care (Diversified) 2.77
10. Hanson PLC - ADR (United Kingdom) 1.35 10. Manufacturing (Diversified) 2.73
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
=================================================================================================
WHAT IS YOUR OUTLOOK FOR THE FUND AND THE MARKETS IN GENERAL?
We expect continued volatility in the stock markets, perhaps as much as we
experienced in 1998. At the same time, we're optimistic that the United States
will avoid a recession in 1999. The economy is likely to experience annual gross
domestic product growth in the 1.5% to 2% range, so low inflation and low
interest rates should continue. With global markets experiencing weakness and
the U.S. economy expanding more slowly, many companies may find it difficult to
produce earnings growth.
For the fixed-income markets, a slowdown in the U.S. economy could benefit
government bonds, because it could lead to more interest rate cuts. At the same
time, corporate bonds could suffer if the economy slows and earnings falter. As
with stock markets, we expect another year of intense volatility.
Our asset allocation model continues to support a high concentration in
stocks. But should the performance differences between stocks and bonds change
significantly during the year, we remain prepared to adjust the Fund's
allocation as needed.
See important Fund and index disclosures inside front cover.
AIM ADVISOR FLEX FUND
3
56
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM ADVISOR FLEX FUND VS. BENCHMARK INDEXES
2/24/88-12/31/98
- --------------------------------------------------------------------------------
AIM S&P 500 LIPPER FLEXIBLE
ADVISOR FLEX, INDEX PORTFOLIO FUND INDEX
CLASS C SHARES
- --------------------------------------------------------------------------------
2/24/88 10,000 10,000 10,000
12/31/88 10,357 10,721 10,324
12/31/89 12,143 14,113 12,104
12/31/90 11,941 13,676 12,217
12/31/91 14,901 17,835 15,510
12/31/92 16,053 19,192 16,388
12/31/93 17,736 21,124 18,474
12/31/94 17,850 21,402 17,980
12/31/95 22,723 29,437 22,223
12/31/96 25,816 36,193 25,357
12/31/97 31,919 48,264 29,983
12/31/98 35,881 62,055 34,935
================================================================================
PAST PERFORMANCE CANNOT GUARANTEE COMPARABLE FUTURE RESULTS.
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/98, including sales charges
CLASS C SHARES
Inception (2/24/88) 12.49%
10 years 13.23
5 years 15.13
1 year 11.41*
*12.41% excluding sales charges
CLASS A SHARES
Inception (12/31/96) 15.48%
1 year 7.03**
**13.26% excluding sales charges
CLASS B SHARES
Inception (3/3/98) 2.40%***
***cumulative total return since inception, 7.25% excluding sales charges
================================================================================
Source: Towers Data Systems HYPO--Registered Trademark--
================================================================================
Your Fund's total return includes sales charges, expenses, and management fees.
For Fund data performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover. The performance of the Fund's
Class B and C shares will differ from Class A shares due to differences in sales
charge structure and Fund expenses.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS OF
AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THESE CHARTS
The chart compares your Fund's Class C shares to benchmark indexes. It is
intended to give you a general idea of how your Fund performed compared to the
stock market over the period 2/24/88-12/31/98. It is important to understand
differences between your Fund and these indexes. An index measures performance
of a hypothetical portfolio. A market index such as the S&P 500 is not managed,
incurring no sales charges, expenses or fees. If you could buy all the
securities that make up a market index, you would incur expenses that would
affect the return on your investment. It is important to note that the S&P 500
is representative of the stock market only while a portion of AIM Advisor Flex
Fund is invested in the bond market. An index of funds such as the Lipper
Flexible Portfolio Fund Index includes a number of mutual funds grouped by
investment objective. Each of those funds interprets that objective differently,
and each employs a different management style and investment strategy.
AIM ADVISOR FLEX FUND
4
57
ANNUAL REPORT / FOR CONSIDERATION
OF FINANCE AND THE FED
A few words from Federal Reserve Board Chairman Alan Greenspan can send the
markets into a frenzy or calm them down.
Why? In 1998, a year of record volatility in stock and bond markets, when
investors and analysts alike seemed genuinely puzzled as to what to do next, the
Federal Reserve Board became a constant in the midst of the unsettling
environment.
WHAT IS THE FED?
The Federal Reserve Board, or "The Fed," consists of seven presidential
appointees including Chairman Greenspan. In addition to overseeing the country's
Federal Reserve System--the central bank of the United States--members of the
Fed serve on the Federal Open Market Committee (FOMC), which decides monetary
policy. Other FOMC members include the chairman of the New York Federal Reserve
Bank and four other FOMC seats that are rotated among the remaining 11 Federal
Reserve Banks.
The FOMC meets eight times a year. These meetings are preceded by the
release of the so-called "Beige Book" (see sidebar) and are always followed with
a great deal of interest because it is here that decisions on monetary policy
are made. The meetings traditionally feature reports on international and
domestic economic developments, conditions in financial markets, and forecasts
for the future. Policy options are then laid out and discussed, and a vote is
taken on whether the Fed will act, often by adjusting interest rates.
WHY ARE ADJUSTMENTS TO INTEREST RATES SO CLOSELY FOLLOWED?
Interest rate changes by the Fed are important for several reasons: (1) they
frequently reflect economic trends; (2) they immediately affect bond markets;
(3) they usually affect the stock market because when rates are high, people
tend to be less apt to take on the greater risks of stocks; and (4) they often
have a trickle-down effect.
For example, an interest rate hike was considered during the first half of
1998 when the U.S. economy seemed in danger of overheating and sparking
inflation. A rate hike would have helped slow things down by making borrowing
more expensive. Instead, myriad financial difficulties abroad affected markets
and slowed the U.S. economy enough to persuade the Fed to lower the federal
funds rate--the interest rate banks charge each other for overnight credit--in
September. When that rate cut did little to calm markets and loosen credit in
the U.S., the Fed cut both the federal funds rate and the discount rate--the
interest rate at which banks borrow emergency funds from the Federal Reserve--in
October and set off rallies in stock and bond markets. The Fed cut both interest
rates again in November 1998, citing continued strains in financial markets and
spurring another jump in the stock market as a whole.
Consumers feel the effect of interest rate adjustments as they trickle down
through the banking system. Rate cuts by the Fed often prompt rate reductions on
home mortgages, car loans, and variable-rate credit cards. Conversely, rate
hikes
------------
THE
BEIGE
BOOK
------------
WHAT IS THE BEIGE BOOK?
The Beige Book report is published about two weeks before each FOMC meeting. The
report contains anecdotal data on current economic conditions in each Federal
Reserve Bank district, summarizing the information by district and sector.
Interviews with key business people, economists, market experts and other
sources supply the details for the report. You can find out more about the Fed's
Beige Book and other interesting topics by visiting the Fed's Web site at
www.bog.frb.fed.us.
AIM ADVISOR FLEX FUND
5
58
ANNUAL REPORT / FOR CONSIDERATION
make all forms of loans more expensive.
Although the Fed does not directly control the financial markets, its
influence over short-term interest rates makes it a potent force.
WHAT ELSE DOES THE FED DO?
The Fed is an integral part of the Federal Reserve System (FRS), created by
Congress in 1913. The FRS includes 12 regional Federal Reserve Banks in New
York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis,
Philadelphia, Richmond, St. Louis, and San Francisco. A Federal Reserve Bank
o clears checks,
o lends money to banks needing emergency reserves,
o issues currency, and
o holds reserve deposits of member banks.
A bank must hold a percentage of its loans as liquid reserves, meaning
readily available. The Fed decides what this percentage will be and can lower it
to inject more money into the economy or raise it to tighten credit.
The Fed also determines the margin requirements for securities investors and
traders and which securities may be purchased on margin. (Margin is the minimum
amount of cash that a customer is required to deposit on the purchase of
securities.) Known as Regulation T, this rule prevents the overextension of
credit in securities transactions.
While these other functions of the Federal Reserve System do not generate as
many headlines as its interest rate moves, they are crucial to the Fed's purpose
of keeping the nation's banking system safe, flexible and stable.
FED RATE CUTS AND THE DOW
WEEKLY CLOSES, DOW JONES INDUSTRIAL AVERAGE*
7/3/98-12/31/98
================================================================================
1998 DJIA DOW Close
- --------------------------------------------------------------------------------
7/10/98 9,105.74
7/17/98 9,337.97
7/24/98 8,937.36
7/31/98 8,883.29
8/7/98 8,598.02
8/14/98 8,425
8/21/98 8,533.66
8/28/98 8,051.68
9/4/98 7,640.25
9/11/98 7,795.5
9/18/98 7,895.66
9/25/98 8,028.77
10/2/98 7,784.69
10/9/98 7,899.52
10/16/98 8,416.76
10/23/98 8,452.29
10/30/98 8,592.1
11/6/98 8,975.46
11/13/98 8,919.59
11/20/98 9,159.55
11/27/98 9,333.08
12/4/98 9,016.14
12/11/98 8,821.76
12/18/98 8,903.63
12/24/98 9,217.99
12/31/98 9,181.43
================================================================================
This graph shows the weekly closing levels for the Dow from July 3 through
December 31, 1998. While the Fed does not control the Dow, which is affected by
innumerable factors, its influence is clearly reflected in the index's behavior.
* The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
AIM ADVISOR FLEX FUND
6
59
SCHEDULE OF INVESTMENTS
December 31, 1998
MARKET
SHARES VALUE
COMMON STOCKS-78.75%
AEROSPACE/DEFENSE-2.03%
Boeing Co. (The) 110,000 $ 3,588,751
- --------------------------------------------------------------
Lockheed Martin Corp. 60,000 5,085,000
- --------------------------------------------------------------
Precision Castparts Corp. 135,000 5,973,750
- --------------------------------------------------------------
14,647,501
- --------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.81%
Archer-Daniels-Midland Co. 341,250 5,865,235
- --------------------------------------------------------------
AIRLINES-0.50%
Southwest Airlines Co. 160,000 3,590,001
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-2.03%
Cooper Tire & Rubber Co. 160,000 3,270,001
- --------------------------------------------------------------
Genuine Parts Co. 210,000 7,021,875
- --------------------------------------------------------------
Snap-on Inc. 125,000 4,351,562
- --------------------------------------------------------------
14,643,438
- --------------------------------------------------------------
AUTOMOBILES-1.02%
Ford Motor Co. 125,000 7,335,938
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.96%
Bank One Corp. 121,500 6,204,094
- --------------------------------------------------------------
National City Corp. 100,000 7,250,000
- --------------------------------------------------------------
Wachovia Corp. 90,000 7,869,375
- --------------------------------------------------------------
21,323,469
- --------------------------------------------------------------
BANKS (MONEY CENTER)-0.92%
BankAmerica Corp. 110,000 6,613,751
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-1.37%
Anheuser-Busch Companies, Inc. 150,000 9,843,751
- --------------------------------------------------------------
CHEMICALS-0.95%
Dow Chemical Co. (The) 75,000 6,820,312
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.24%
Great Lakes Chemical Corp. 100,000 4,000,000
- --------------------------------------------------------------
Morton International, Inc. 200,000 4,900,000
- --------------------------------------------------------------
8,900,000
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-4.99%
Compaq Computer Corp. 300,000 12,581,250
- --------------------------------------------------------------
Hewlett-Packard Co. 125,000 8,539,062
- --------------------------------------------------------------
International Business Machines
Corp. 80,000 14,780,000
- --------------------------------------------------------------
35,900,312
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-2.14%
Computer Associates International,
Inc. 125,000 5,328,125
- --------------------------------------------------------------
MARKET
SHARES VALUE
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Electronic Data Systems Corp. 200,000 $ 10,050,000
- --------------------------------------------------------------
15,378,125
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.17%
SUPERVALU, Inc. 300,000 8,400,000
- --------------------------------------------------------------
ELECTRIC COMPANIES-3.30%
Edison International 200,000 5,575,000
- --------------------------------------------------------------
Entergy Corp. 300,000 9,337,500
- --------------------------------------------------------------
GPU, Inc. 200,000 8,837,500
- --------------------------------------------------------------
23,750,000
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.80%
General Electric Co. 75,000 7,654,687
- --------------------------------------------------------------
Rockwell International Corp. 110,000 5,341,875
- --------------------------------------------------------------
12,996,562
- --------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.38%
W.W. Grainger, Inc. 65,500 2,726,437
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.72%
Raytheon Co.-Class A 100,000 5,168,750
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-3.01%
American General Corp. 110,000 8,580,000
- --------------------------------------------------------------
MGIC Investment Corp. 150,000 5,971,875
- --------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 100,000 7,100,000
- --------------------------------------------------------------
21,651,875
- --------------------------------------------------------------
FOODS-1.43%
H.J. Heinz Co. 50,000 2,831,250
- --------------------------------------------------------------
Unilever N.V.-ADR-New York Shares
(Netherlands) 90,000 7,464,375
- --------------------------------------------------------------
10,295,625
- --------------------------------------------------------------
FOOTWEAR-0.41%
Reebok International Ltd.(a) 200,000 2,975,000
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.77%
Abbott Laboratories 200,000 9,800,000
- --------------------------------------------------------------
American Home Products Corp. 180,000 10,136,250
- --------------------------------------------------------------
19,936,250
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.42%
Mylan Laboratories, Inc. 325,000 10,237,500
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.31%
Lilly (Eli) & Co. 50,000 4,443,750
- --------------------------------------------------------------
7
60
MARKET
SHARES VALUE
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-(CONTINUED)
Merck & Co., Inc. 75,000 $ 11,076,562
- --------------------------------------------------------------
Schering-Plough Corp. 150,000 8,287,500
- --------------------------------------------------------------
23,807,812
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-1.03%
Columbia/HCA Healthcare Corp. 300,000 7,425,000
- --------------------------------------------------------------
HOUSEHOLD FURNITURE &
APPLIANCES-0.77%
Whirlpool Corp. 100,000 5,537,500
- --------------------------------------------------------------
HOUSEWARES-0.31%
Fortune Brands, Inc. 70,000 2,213,750
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-1.09%
Loews Corp. 80,000 7,860,000
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-2.38%
Ohio Casualty Corp. 150,000 6,168,750
- --------------------------------------------------------------
Old Republic International Corp. 200,000 4,500,000
- --------------------------------------------------------------
SAFECO Corp. 150,000 6,440,625
- --------------------------------------------------------------
17,109,375
- --------------------------------------------------------------
INSURANCE BROKERS-0.97%
Marsh & McLennan Co. 120,000 7,012,500
- --------------------------------------------------------------
IRON & STEEL-1.50%
Nucor Corp. 250,000 10,812,500
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-2.96%
Caterpillar, Inc. 100,000 4,600,000
- --------------------------------------------------------------
Deere & Co. 100,000 3,312,500
- --------------------------------------------------------------
Dover Corp. 100,000 3,662,500
- --------------------------------------------------------------
Hanson PLC-ADR (United Kingdom) 250,000 9,750,000
- --------------------------------------------------------------
21,325,000
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.73%
Illinois Tool Works, Inc. 75,000 4,350,000
- --------------------------------------------------------------
Minnesota Mining and Manufacturing
Co. 75,000 5,334,375
- --------------------------------------------------------------
Norsk Hydro A.S.A.-ADR (Norway) 125,000 4,273,437
- --------------------------------------------------------------
Textron, Inc. 75,000 5,695,312
- --------------------------------------------------------------
19,653,124
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.17%
Federal Signal Corp. 160,000 4,380,000
- --------------------------------------------------------------
York International Corp. 100,000 4,081,250
- --------------------------------------------------------------
8,461,250
- --------------------------------------------------------------
METALS MINING-0.74%
Phelps Dodge Corp. 105,000 5,341,875
- --------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-3.76%
Exxon Corp. 100,000 7,312,500
- --------------------------------------------------------------
Repsol S.A.-ADR (Spain) 150,000 8,193,750
- --------------------------------------------------------------
MARKET
SHARES VALUE
OIL (INTERNATIONAL INTEGRATED)-(CONTINUED)
Royal Dutch Petroleum Co.-ADR-New
York Shares (Netherlands) 125,000 $ 5,984,375
- --------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Argentina) 200,000 5,587,500
- --------------------------------------------------------------
27,078,125
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.56%
Westvaco Corp. 150,000 4,021,875
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.47%
IKON Office Solutions, Inc. 400,000 3,425,000
- --------------------------------------------------------------
PUBLISHING-0.08%
R.H. Donnelley Corp. 40,000 582,500
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.73%
Gannett Co., Inc. 80,000 5,295,000
- --------------------------------------------------------------
RAILROADS-0.72%
CSX Corp. 125,000 5,187,500
- --------------------------------------------------------------
RESTAURANTS-1.06%
McDonald's Corp. 100,000 7,662,500
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.63%
Lowe's Companies, Inc. 100,000 5,118,750
- --------------------------------------------------------------
Sherwin-Williams Co. 225,000 6,609,375
- --------------------------------------------------------------
11,728,125
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.24%
Dillards, Inc. 150,000 4,256,250
- --------------------------------------------------------------
J.C. Penney Co., Inc. 100,000 4,687,500
- --------------------------------------------------------------
8,943,750
- --------------------------------------------------------------
RETAIL (DRUG STORES)-0.69%
Rite Aid Corp. 100,000 4,956,250
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.53%
Kmart Corp.(a) 250,000 3,828,125
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.29%
Toys "R" Us, Inc.(a) 125,000 2,109,375
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.88%
Dun & Bradstreet Corp. 200,000 6,312,500
- --------------------------------------------------------------
SPECIALTY PRINTING-0.89%
Deluxe Corp. 175,000 6,398,437
- --------------------------------------------------------------
TELEPHONE-3.62%
Ameritech Corp. 65,000 4,119,375
- --------------------------------------------------------------
Bell Atlantic Corp. 140,000 7,953,750
- --------------------------------------------------------------
British Telecommunications PLC-ADR
(United Kingdom) 60,000 9,101,250
- --------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Mexico) 100,000 4,868,750
- --------------------------------------------------------------
26,043,125
- --------------------------------------------------------------
8
61
MARKET
SHARES VALUE
TEXTILES (APPAREL)-1.74%
Liz Claiborne, Inc. 175,000 $ 5,523,437
- --------------------------------------------------------------
VF Corp. 150,000 7,031,250
- --------------------------------------------------------------
12,554,687
- --------------------------------------------------------------
TEXTILES (SPECIALTY)-0.48%
Unifi, Inc.(a) 175,000 3,423,437
- --------------------------------------------------------------
TOBACCO-1.75%
Gallaher Group PLC-ADR (United
Kingdom) 110,000 2,990,625
- --------------------------------------------------------------
Philip Morris Companies, Inc. 180,000 9,630,000
- --------------------------------------------------------------
12,620,625
- --------------------------------------------------------------
WASTE MANAGEMENT-1.30%
Browning-Ferris Industries, Inc. 150,000 4,265,625
- --------------------------------------------------------------
Waste Management, Inc. 108,750 5,070,468
- --------------------------------------------------------------
9,336,093
- --------------------------------------------------------------
Total Common Stocks (Cost
$367,668,273) 567,066,547
- --------------------------------------------------------------
PRINCIPAL
AMOUNT
CORPORATE NOTES-6.17%
AUTOMOBILES-0.57%
Ford Motor Co., Notes,
7.50%, 11/15/99 $ 750,000 $ 763,778
- --------------------------------------------------------------
6.50%, 08/01/18 3,250,000 3,341,747
- --------------------------------------------------------------
4,105,525
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.94%
National City Corp., Sub Notes,
7.20%, 05/15/05 1,000,000 1,070,191
- --------------------------------------------------------------
Nationsbank Corp., Sr. Notes,
5.375%, 04/15/00 1,550,000 1,549,442
- --------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes,
6.25%, 08/04/08 4,000,000 4,164,400
- --------------------------------------------------------------
6,784,033
- --------------------------------------------------------------
BANKS (MONEY CENTER)-0.44%
First Union Corp., Unsec. Sub.
Notes, 6.40%, 04/01/08 3,000,000 3,145,320
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.51%
Anheuser Busch Co., Unsec. Notes,
5.375%, 09/15/08 3,700,000 3,710,323
- --------------------------------------------------------------
CHEMICALS-0.14%
Eastman Chemical, Notes, 6.375%,
01/15/04 1,000,000 997,400
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.44%
Motorola Inc., Notes, 6.50%,
03/01/08 3,000,000 3,174,600
- --------------------------------------------------------------
CONSUMER FINANCE-0.85%
Beneficial Corp., Medium Term
Notes, 6.625%, 09/27/04 3,000,000 3,092,760
- --------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
CONSUMER FINANCE-(CONTINUED)
Commercial Credit Co., Unsec.
Notes, 5.55%, 02/15/01 $3,000,000 $ 3,007,020
- --------------------------------------------------------------
6,099,780
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.45%
Penn Power & Lighting, First
Mortgage Notes,
6.875%, 02/01/03 1,000,000 1,063,350
- --------------------------------------------------------------
6.55%, 03/01/06 1,900,000 2,002,619
- --------------------------------------------------------------
Union Electric, First Mortgage
Notes, 6.75%, 10/15/99 150,000 151,999
- --------------------------------------------------------------
3,217,968
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.22%
Boeing Co., Notes, 6.625%, 06/01/05 1,500,000 1,572,660
- --------------------------------------------------------------
FOODS-0.35%
Campbell Soup Co., Unsec. Notes,
4.75%, 10/01/03 2,600,000 2,555,332
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.41%
CNA Financial Corp., Unsec. Notes,
6.50%, 04/15/05 3,000,000 2,990,760
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.43%
Sherwin-Williams Co., Notes, 6.50%,
02/01/02 3,000,000 3,099,360
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.42%
Dillard Dept. Stores, Inc., Unsec.
Notes, 6.30%, 02/15/08 3,000,000 3,015,120
- --------------------------------------------------------------
Total Corporate Notes (Cost
$43,397,815) 44,468,181
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-2.61%
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC")-0.52%
Pass through certificates
6.50%, 07/01/01 2,141,748 2,164,493
- --------------------------------------------------------------
8.00%, 10/01/10 1,530,209 1,577,064
- --------------------------------------------------------------
3,741,557
- --------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA")-1.34%
Pass through certificates
8.50%, 03/01/10 1,449,332 1,509,567
- --------------------------------------------------------------
6.50%, 06/01/11 to 05/01/26 6,152,443 6,238,374
- --------------------------------------------------------------
7.50%, 11/01/26 1,839,198 1,894,943
- --------------------------------------------------------------
9,642,884
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA")-0.75%
Pass through certificates
6.50%, 10/15/08 905,700 927,492
- --------------------------------------------------------------
7.00%, 10/15/08 952,794 984,055
- --------------------------------------------------------------
9
62
PRINCIPAL MARKET
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
("GNMA")-(CONTINUED)
6.00%, 11/15/08 $1,074,971 $ 1,088,407
- --------------------------------------------------------------
7.50%, 03/15/26 2,331,182 2,414,218
- --------------------------------------------------------------
5,414,172
- --------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost $18,294,842) 18,798,613
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-10.20%
U.S. TREASURY BONDS-0.73%
7.625%, 02/15/25 4,000,000 5,261,561
- --------------------------------------------------------------
U.S. TREASURY NOTES-9.47%
8.75%, 08/15/00 4,000,000 4,255,521
- --------------------------------------------------------------
7.875%, 08/15/01 5,000,000 5,397,601
- --------------------------------------------------------------
7.50%, 05/15/02 3,000,000 3,261,660
- --------------------------------------------------------------
6.25%, 02/15/03 4,000,000 4,232,800
- --------------------------------------------------------------
7.25%, 05/15/04 6,000,000 6,724,980
- --------------------------------------------------------------
7.25%, 08/15/04 2,000,000 2,249,240
- --------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY NOTES-(CONTINUED)
6.50%, 08/15/05 $7,000,000 $ 7,694,050
- --------------------------------------------------------------
9.375%, 02/15/06 4,000,000 5,101,240
- --------------------------------------------------------------
6.125%, 08/15/07 6,000,000 6,553,800
- --------------------------------------------------------------
5.50%, 02/15/08 8,000,000 8,474,320
- --------------------------------------------------------------
9.25%, 02/15/16 6,000,000 8,609,940
- --------------------------------------------------------------
7.25%, 08/15/22 4,500,000 5,603,715
- --------------------------------------------------------------
68,158,867
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $68,661,389) 73,420,428
- --------------------------------------------------------------
REPURCHASE AGREEMENT-1.01%(b)
SBC Warburg Dillon Read, Inc.,
4.75%, 01/04/99 (Cost
$7,293,570)(c) 7,293,570 7,293,570
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.74% 711,047,339
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.26% 9,086,204
- --------------------------------------------------------------
NET ASSETS-100.00% $720,133,543
==============================================================
Notes to Schedule of Investments:
(a) Non-income producing securities.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviations:
ADR - American Depositary Receipt
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
10
63
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at market value (cost
$505,315,889) $711,047,339
- ---------------------------------------------------------
Receivables for:
Investments sold 5,865,395
- ---------------------------------------------------------
Capital stock sold 2,597,804
- ---------------------------------------------------------
Interest and dividends 3,321,795
- ---------------------------------------------------------
Investment for deferred compensation plan 7,757
- ---------------------------------------------------------
Other assets 15,418
- ---------------------------------------------------------
Total assets 722,855,508
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 616,563
- ---------------------------------------------------------
Deferred compensation plan 7,757
- ---------------------------------------------------------
Accrued advisory fees 453,322
- ---------------------------------------------------------
Accrued operating services fees 75,761
- ---------------------------------------------------------
Accrued distribution fees 1,529,511
- ---------------------------------------------------------
Accrued directors' fees and expenses 39,051
- ---------------------------------------------------------
Total liabilities 2,721,965
- ---------------------------------------------------------
Net assets applicable to shares outstanding $720,133,543
- ---------------------------------------------------------
NET ASSETS:
Class A $ 46,286,433
=========================================================
Class B $ 3,591,573
=========================================================
Class C $670,255,537
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 2,307,756
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 179,008
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 33,407,634
=========================================================
Class A:
Net asset value and redemption price per
share $ 20.06
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $20.06 divided by
94.50%) $ 21.23
=========================================================
Class B:
Net asset value and offering price per
share $ 20.06
=========================================================
Class C:
Net asset value and offering price per
share $ 20.06
=========================================================
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Interest $ 11,514,476
- ---------------------------------------------------------
Dividends (net of $247,098 foreign
withholding tax) 10,195,106
- ---------------------------------------------------------
Total investment income 21,709,582
- ---------------------------------------------------------
EXPENSES:
Advisory fees 5,051,593
- ---------------------------------------------------------
Operating services fees 2,996,689
- ---------------------------------------------------------
Distribution fees-Class A 126,300
- ---------------------------------------------------------
Distribution fees-Class B 10,941
- ---------------------------------------------------------
Distribution fees-Class C 6,365,011
- ---------------------------------------------------------
Directors' fees and expenses 5,841
- ---------------------------------------------------------
Total expenses 14,556,375
- ---------------------------------------------------------
Less: Fees waived by advisor (1,328,869)
- ---------------------------------------------------------
Net expenses 13,227,506
- ---------------------------------------------------------
Net investment income 8,482,076
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain from investment
securities 59,176,179
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities 11,782,197
- ---------------------------------------------------------
Net gain from investment securities 70,958,376
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 79,440,452
=========================================================
See Notes to Financial Statements.
11
64
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ ------------
OPERATIONS:
Net investment income $ 8,482,076 $ 9,048,951
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities 59,176,179 23,883,293
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 11,782,197 86,058,520
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 79,440,452 118,990,764
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (693,499) (246,939)
- -----------------------------------------------------------------------------------------
Class B (14,661) --
- -----------------------------------------------------------------------------------------
Class C (7,001,855) (8,674,714)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (3,877,358) (610,538)
- -----------------------------------------------------------------------------------------
Class B (270,410) --
- -----------------------------------------------------------------------------------------
Class C (56,203,971) (14,999,384)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 21,305,857 24,377,889
- -----------------------------------------------------------------------------------------
Class B 3,715,719 --
- -----------------------------------------------------------------------------------------
Class C 55,402,752 19,575,501
- -----------------------------------------------------------------------------------------
Net increase in net assets 91,803,026 138,412,579
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 628,330,517 489,917,938
- -----------------------------------------------------------------------------------------
End of period $720,133,543 $628,330,517
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $510,018,210 $426,093,882
- -----------------------------------------------------------------------------------------
Undistributed net investment income 938,111 166,050
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 3,445,772 8,121,332
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 205,731,450 193,949,253
- -----------------------------------------------------------------------------------------
$720,133,543 $628,330,517
=========================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Flex Fund (the "Fund") is a series portfolio of AIM Advisor Funds,
Inc. (the "Company"). The Company is a Maryland corporation and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of five diversified
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to achieve a high total return on
investment through capital appreciation and current income, without regard to
federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) 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 mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date, or absent a last sales price, at the mean of the
12
65
closing bid and asked prices. Debt obligations (including convertible bonds)
are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors
such as yield, type of issue, coupon rate and maturity date. Securities for
which market prices are not provided by any of the above methods are valued
at the mean between last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations are not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Company's Board of Directors.
Investments with maturities of 60 days or less are valued on the basis of
amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions-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 as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are
declared and paid quarterly. On December 31, 1998 additional paid-in capital
was increased by $3,500,000 and undistributed net realized gains was
decreased by $3,500,000 as a result of equalization credits and in order to
comply with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Bond Premiums-It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
D. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements.
E. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Capital Management, Inc. ("ICM") whereby AIM pays ICM an
annual rate of 0.20% of the Fund's average daily net assets.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. This
agreement provides that AIM pays all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1998, AIM was paid $1,703,905 for such services. As of
June 1, 1998, AIM has voluntarily agreed to limit the operating services fees to
an annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the period June 1, 1998 through December 31, 1998, AIM
voluntarily waived operating services fees in the amount of $1,292,783.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The
Fund, pursuant to the Class B Plan, pays AIM Distributors compensation at an
annual rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B or Class C shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $90,214, $10,941 and $6,365,011, respectively, as compensation
under the Plans. During the year ended December 31, 1998, AIM Distributors
waived fees of $36,086 for the Class A shares.
AIM Distributors received commissions of $33,479 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1998,
AIM Distributors received commissions of $100,172 in contingent deferred sales
charges imposed on redemptions of shares. Certain officers and directors of the
Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average daily net assets of the Fund are less
than $500 million, the Fund's expenses shall not exceed 1.55% for Class A and
2.20% for Class C; on the next $500 million of net assets, expenses shall not
exceed 1.50% for Class A and 2.15% for Class C; on the next $1 billion of net
assets, expenses shall not exceed 1.45% for Class A and 2.10% for Class C; and
on all assets over $2 billion, expenses shall not exceed 1.40% for Class A and
2.05% for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $4,762
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
13
66
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, the Fund did
not borrow under the line of credit agreement. The funds which are party to the
line of credit are charged a commitment fee of 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1998 was
$232,418,225 and $222,893,137, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $222,128,397
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (16,396,947)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $205,731,450
==========================================================================
Investments have the same cost for tax and financial statement purposes.
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended December
31, 1998 and 1997 were as follows:
1998 1997*
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
Sold:
Class A 1,076,842 $ 22,390,887 1,255,277 $ 24,015,843
- --------------------------------------------------------------------------------------------------------------------
Class B** 175,059 3,648,126 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 5,318,582 109,967,149 4,707,789 86,294,017
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 223,596 4,399,200 42,162 821,435
- --------------------------------------------------------------------------------------------------------------------
Class B** 14,140 277,225 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 3,067,888 60,325,811 1,120,103 21,660,078
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (266,823) (5,484,230) (23,298) (459,389)
- --------------------------------------------------------------------------------------------------------------------
Class B** (10,191) (209,632) -- --
- --------------------------------------------------------------------------------------------------------------------
Class C (5,531,566) (114,890,208) (4,738,134) (88,378,594)
- --------------------------------------------------------------------------------------------------------------------
4,067,527 $ 80,424,328 2,363,899 $ 43,953,390
====================================================================================================================
* Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
** Class B shares commenced sales on March 3, 1998.
14
67
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998, and for a share of
Class C capital stock outstanding during each of the years in the five-year
period ended December 31, 1998.
CLASS A(a) CLASS B
----------------------- ------------
1998 1997(b) 1998
------- ------------ ------------
Net asset value, beginning of period $ 19.74 $ 16.63 $ 20.69
- ------------------------------------------------------------ ------- ---------- ----------
Income from investment operations:
Net investment income 0.39 0.41(c) 0.22
- ------------------------------------------------------------ ------- ---------- ----------
Net gains on securities (both realized and unrealized) 2.16 3.63 1.22
- ------------------------------------------------------------ ------- ---------- ----------
Total from investment operations 2.55 4.04 1.44
- ------------------------------------------------------------ ------- ---------- ----------
Less distributions:
Dividends from net investment income (0.39) (0.43) (0.23)
- ------------------------------------------------------------ ------- ---------- ----------
Distributions from net realized gains (1.84) (0.50) (1.84)
- ------------------------------------------------------------ ------- ---------- ----------
Total distributions (2.23) (0.93) (2.07)
- ------------------------------------------------------------ ------- ---------- ----------
Net asset value, end of period $ 20.06 $ 19.74 $ 20.06
- ------------------------------------------------------------ ------- ---------- ----------
Total return(d) 13.26% 24.60% 7.25%
- ------------------------------------------------------------ ------- ---------- ----------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,286 $ 25,151 $ 3,592
- ------------------------------------------------------------ ------- ---------- ----------
Ratio of expenses to average net assets(e) 1.23%(f) 1.45% 2.00%(f)(g)
- ------------------------------------------------------------ ------- ---------- ----------
Ratio of net investment income to average net assets(h) 1.99%(f) 2.34% 1.22%(f)(g)
- ------------------------------------------------------------ ------- ---------- ----------
Portfolio turnover rate 34% 17% 34%
- ------------------------------------------------------------ ------- ---------- ----------
(a) Per share information and shares have been restated to
reflect a 4 for 1 stock split, effected in the form of a
300% stock dividend, on November 7, 1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and for periods less than one
year is not annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.52% and 1.55% for 1998-1997
for Class A and 2.19% (annualized) for 1998 for Class B.
(f) Ratios are based on average net assets of $36,085,767 and
$1,313,596 for Class A and Class B, respectively.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratio of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 1.70% and 2.24%
for 1998-1997 for Class A and 1.03% (annualized) for 1998
for Class B.
CLASS C(a)
----------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 19.74 $ 16.63 $ 15.66 $ 12.63 $ 13.54
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.25 0.30(c) 0.30 0.32 0.32
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 2.14 3.60 1.81 3.09 (0.23)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 2.39 3.90 2.11 3.41 0.09
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.23) (0.29) (0.29) (0.32) (0.31)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (1.84) (0.50) (0.85) (0.06) (0.69)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (2.07) (0.79) (1.14) (0.38) (1.00)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total return(d) 12.41% 23.64% 13.61% 27.30% 0.64%
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $670,256 $603,179 $489,918 $399,162 $243,848
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of expenses to average net assets 2.00%(e)(f) 2.20% 2.26% 2.28% 2.25%
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of net investment income to average net assets 1.22%(f)(g) 1.59% 1.81% 2.28% 2.32%
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Portfolio turnover rate 34% 17% 26% 5% 36%
- ------------------------------------------------------------ -------- -------- -------- -------- ---------
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.19% for 1998.
(f) Ratios are based on average net assets of $636,501,142.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.03% for 1998.
15
68
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Advisor Flex Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Flex Fund (a portfolio of AIM
Advisor Funds, Inc.), including the schedule of
investments, as of December 31, 1998, and the related
statement of operations, the statement of changes in net
assets, and the financial highlights for the year then
ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audit. The accompanying statement of changes
in net assets for the year ended December 31, 1997 and
the financial highlights for each of the years in the
four-year period ended December 31, 1997, were audited by
other auditors whose report thereon dated February 5,
1998, expressed an unqualified opinion on such statement
and financial highlights.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor Flex Fund as of December 31, 1998, the results of
its operations, the changes in its net assets and the
financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
KPMG LLP
Houston, Texas
February 5, 1999
16
69
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II SUB-ADVISOR
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President INVESCO Capital Management, Inc.
1315 Peachtree Street, N.E.
Edward K. Dunn Jr. Dana R. Sutton Atlanta, GA 30309
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, TRANSFER AGENT
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley
President, Mercantile Bankshares Vice President A I M Fund Services, Inc.
P.O. Box 4739
Jack Fields Stuart W. Coco Houston, TX 77210-4739
Chief Executive Officer Vice President
Texana Global, Inc.; CUSTODIAN
Formerly Member Melville B. Cox
of the U.S. House of Representatives Vice President State Street Bank and Trust Company
225 Franklin Street
Carl Frischling Karen Dunn Kelley Boston, MA 02110
Partner Vice President
Kramer, Levin, Naftalis & Frankel COUNSEL TO THE FUND
Jonathan C. Schoolar
Robert H. Graham Vice President Ballard Spahr
President and Chief Executive Officer Andrews & Ingersoll, LLP
A I M Management Group Inc. Renee A. Friedli 1735 Market Street
Assistant Secretary Philadelphia, PA 19103
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A.: P. Michelle Grace COUNSEL TO THE DIRECTORS
Commissioner, New York City Dept. for Assistant Secretary
the Aging; and member of the Board of Director Kramer, Levin, Naftalis & Frankel
Metropolitan Transportation Authority of Jeffrey H. Kupor 919 Third Avenue
New York State Assistant Secretary New York, NY 10022
Lewis F. Pennock Nancy L. Martin DISTRIBUTOR
Attorney Assistant Secretary
A I M Distributors, Inc.
Ian W. Robinson Ofelia M. Mayo 11 Greenway Plaza
Consultant; Formerly Executive Assistant Secretary Suite 100
Vice President and Houston, TX 77046
Chief Financial Officer Lisa A. Moss
Bell Atlantic Management Assistant Secretary AUDITORS
Services, Inc.
Kathleen J. Pflueger KPMG LLP
Louis S. Sklar Assistant Secretary 700 Louisiana
Executive Vice President Houston, TX 77002
Hines Interests Samuel D. Sirko
Limited Partnership Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Advisor Flex Fund Class A, Class B and Class C shares paid ordinary
dividends in the amount of $0.4906, $0.3346 and $0.3346 per share, respectively,
during the Fund's tax year ended December 31, 1998. Of these amounts, 74.25% is
eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $60,426,809 for the
Fund's tax year ended December 31, 1998. Of long-term capital gains distributed,
100% is 20% rate gain.
REQUIRED STATE INCOME TAX INFORMATION
Of the total income dividends paid, 32.98% was derived from U.S. Treasury
obligations.
70
THE AIM FAMILY OF FUNDS--Registered Trademark--
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Asian Growth Fund since 1976 and managed approximately $109
AIM Capital Development Fund AIM Developing Markets Fund(2) billion in assets for more than 6.2 million
AIM Constellation Fund AIM Europe Growth Fund(2) shareholders, including individual investors,
AIM Mid Cap Equity Fund(2), (A) AIM European Development Fund corporate clients, and financial institutions,
AIM Select Growth Fund(3) AIM International Equity Fund as of December 31, 1998.
AIM Small Cap Growth Fund(2), (B) AIM Japan Growth Fund(2) The AIM Family of Funds--Registered Trademark--
AIM Small Cap Opportunities Fund AIM Latin American Growth Fund(2) is distributed nationwide, and AIM today is the
AIM Value Fund AIM New Pacific Growth Fund(2) 10th-largest mutual fund complex in the U.S. in
AIM Weingarten Fund assets under management, according to Strategic
Insight, an independent mutual fund monitor.
GROWTH & INCOME FUNDS
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor MultiFlex Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund GLOBAL GROWTH & INCOME FUNDS
AIM Basic Value Fund(2), (C) AIM Global Growth & Income Fund(2)
AIM Charter Fund AIM Global Utilities Fund
INCOME FUNDS GLOBAL INCOME FUNDS
AIM Floating Rate Fund(2) AIM Emerging Markets Debt Fund(2), (D)
AIM High Yield Fund AIM Global Government Income Fund(2)
AIM High Yield Fund II AIM Global Income Fund
AIM Income Fund AIM Strategic Income Fund(2)
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund THEME FUNDS
AIM Global Consumer Products and Services Fund(2)
TAX-FREE INCOME FUNDS AIM Global Financial Services Fund(2)
AIM High Income Municipal Fund AIM Global Health Care Fund(2)
AIM Municipal Bond Fund AIM Global Infrastructure Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Resources Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2), (E)
MONEY MARKET FUNDS
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (2)
Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM
Small Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E) On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. For more complete
information about any AIM Fund(s), including sales charges and expenses, ask
your financial consultant or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money.
71
AIM ADVISOR MULTIFLEX FUND
AIM ADVISOR FLEX FUND
EACH A SERIES OF
AIM ADVISOR FUNDS, INC.
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
STATEMENT OF ADDITIONAL INFORMATION
(1999 Special Meeting of Shareholders of AIM Advisor MultiFlex Fund)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement and Prospectus dated
May __, 1999 of AIM Advisor Funds, Inc. (the "Company") for use in connection
with the Special Meeting of Shareholders of AIM Advisor MultiFlex Fund
("MultiFlex Fund") to be held on June 16, 1999. Copies of the Combined Proxy
Statement and Prospectus may be obtained at no charge by writing the Company at
the address shown above or by calling 1-800-347-4246.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement and Prospectus.
A Statement of Additional Information for the Company dated May 3, 1999
(subject to completion), 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 May __, 1999.
TABLE OF CONTENTS
THE COMPANY..................................................................... 2
DESCRIPTION OF PERMITTED INVESTMENTS............................................ 2
DIRECTORS AND OFFICERS OF THE COMPANY........................................... 2
ADVISORY AND MANAGEMENT - RELATED SERVICES AGREEMENTS AND PLANS OF
DISTRIBUTION........................................................... 2
PORTFOLIO TRANSACTIONS.......................................................... 2
DESCRIPTION OF SHARES........................................................... 2
DETERMINATION OF NET ASSET VALUE................................................ 2
TAXES ....................................................................... 2
PERFORMANCE DATA................................................................ 2
FINANCIAL INFORMATION........................................................... 3
Appendix I - AIM Advisor Funds, Inc. Statement of Additional Information
dated May 3, 1999
Appendix II - Pro Forma Financial Statements
72
THE COMPANY
This Statement of Additional Information relates to AIM Advisor Funds, Inc. (the
"Company"), AIM Advisor MultiFlex Fund ("MultiFlex Fund") and AIM Advisor Flex
Fund ("Flex Fund"). The Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"). MultiFlex Fund and Flex Fund are each separate series of shares of
capital stock of the Company.
DESCRIPTION OF PERMITTED INVESTMENTS
For a discussion of the fundamental and nonfundamental investment policies of
Flex Fund and MultiFlex Fund adopted by the Company's Board of Directors, see
heading "Investment Strategies and Risks" and "Investment Restrictions" in the
Company's Statement of Additional Information attached hereto as Appendix I.
DIRECTORS AND OFFICERS OF THE COMPANY
For a disclosure of the names and a brief occupational biography of each of the
Company's officers and directors identifying those who are interested persons of
the Company as well as stating their aggregate renumeration, see heading
"Management of the Company" in the Company's Statement of Additional Information
attached hereto as Appendix I.
ADVISORY AND MANAGEMENT - RELATED SERVICES AGREEMENTS AND PLANS OF
DISTRIBUTION
For a discussion of the Company's advisory and management-related services
agreements and plans of distribution, see headings "The Advisory and
Sub-advisory Agreements," "Operating Services Agreement," " Distribution of
Shares," and "The Distributor" in the Company's Statement of Additional
Information attached hereto as Appendix I.
PORTFOLIO TRANSACTIONS
For a discussion of the Company's brokerage policy, see heading "Portfolio
Transactions and Brokerage" in the Company's Statement of Additional Information
attached hereto as Appendix I.
DESCRIPTION OF SHARES
For a discussion of the Company's authorized securities and the characteristics
of the Company's shares of stock, see headings "General Information About the
Company," "Redemptions," and "Miscellaneous" in the Company's Statement of
Additional Information attached hereto as Appendix I.
DETERMINATION OF NET ASSET VALUE
For a discussion of the Company's valuation and pricing procedures and a
description of its purchase and redemption procedures, see headings "Net Asset
Value Determination," "How to Purchase and Redeem Shares," "Redemptions," and
"Miscellaneous" in the Company's Statement of Additional Information attached
hereto as Appendix I.
TAXES
For a discussion of any tax information relating to ownership of the Company's
shares, see heading "Dividends, Distributions and Tax Information" in the
Company's Statement of Additional Information attached hereto as Appendix I.
PERFORMANCE DATA
For a description and quotation of certain performance data used by the Company,
see heading "Performance Information" in the Company's Statement of Additional
Information attached hereto as Appendix I.
S-2
73
FINANCIAL INFORMATION
The audited financial statements for the period ending December 31, 1998 of Flex
Fund and the report thereon by KPMG LLP are included in the Annual Report to
Shareholders of Flex Fund dated December 31, 1998, that is attached as Appendix
III to the Combined Proxy Statement and Prospectus described on the cover page
of this Statement of Additional Information. The audited financial statements
for the period ended December 31, 1998 of the Multiflex Fund and the report
thereon by KPMG LLP are included in the Company's Statement of Additional
Information attached hereto as Appendix I.
Pro forma financial statements for Flex Fund and MultiFlex Fund, giving effect
to the Reorganization, are attached hereto as Appendix II.
S-3
74
APPENDIX I
STATEMENT OF
ADDITIONAL INFORMATION
AIM ADVISOR FLEX FUND
AIM ADVISOR INTERNATIONAL VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
AIM ADVISOR MULTIFLEX FUND
AIM ADVISOR REAL ESTATE FUND
(SERIES PORTFOLIOS OF AIM ADVISOR FUNDS, INC.)
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
(713) 626-1919
-----------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IT SHOULD BE READ IN CONJUNCTION WITH
A PROSPECTUS OF THE ABOVE-NAMED FUNDS,
A COPY OF WHICH MAY BE OBTAINED
FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TX 77210-4739
OR BY CALLING (800) 347-4246
-----------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 3, 1999,
RELATING TO THE AIM ADVISOR FLEX FUND PROSPECTUS DATED MAY 3, 1999,
THE AIM ADVISOR INTERNATIONAL VALUE FUND PROSPECTUS DATED MAY 3, 1999,
THE AIM ADVISOR LARGE CAP VALUE FUND PROSPECTUS DATED MAY 3, 1999,
THE AIM ADVISOR MULTIFLEX FUND PROSPECTUS DATED MAY 3, 1999,
AND THE AIM ADVISOR REAL ESTATE FUND DATED MAY 3, 1999
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TABLE OF CONTENTS
Page
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INTRODUCTION......................................................................................................1
GENERAL INFORMATION ABOUT THE COMPANY.............................................................................1
The Company and its Shares...............................................................................1
INVESTMENT STRATEGIES AND RISKS...................................................................................2
Convertible Securities...................................................................................2
Foreign Securities.......................................................................................3
Developing Countries.....................................................................................4
Options ................................................................................................4
Combined Option Positions................................................................................5
Futures Contracts........................................................................................5
Options on Futures Contracts.............................................................................6
Risks as to Futures Contracts and Related Options........................................................7
Forward Foreign Currency Exchange Contracts..............................................................7
Securities Issued on a When-Issued or Delayed Delivery Basis.............................................8
Swap Agreements..........................................................................................8
Mortgage-Related Securities..............................................................................9
Risks of Mortgage-Related Securities....................................................................11
Zero Coupon Obligations.................................................................................12
Real-Estate Industry Securities.........................................................................12
High Yield/High Risk Securities.........................................................................13
Repurchase Agreements...................................................................................14
Portfolio Turnover......................................................................................14
INVESTMENT RESTRICTIONS..........................................................................................14
PORTFOLIO SECURITIES LOANS.......................................................................................16
MANAGEMENT OF THE COMPANY........................................................................................16
Directors and Officers..................................................................................17
Remuneration of Directors...............................................................................20
AIM Funds Retirement Plan for Eligible Directors/Trustees...............................................22
THE ADVISORY AND SUB-ADVISORY AGREEMENTS.........................................................................23
OPERATING SERVICES AGREEMENT.....................................................................................25
DISTRIBUTION OF SHARES...........................................................................................26
Class A and Class C Distribution Plan...................................................................26
Class B Distribution Plan...............................................................................27
THE DISTRIBUTOR..................................................................................................31
Sales Charges and Dealer Concessions....................................................................32
REDUCTIONS IN INITIAL SALES CHARGES..............................................................................35
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Contingent Deferred Sales Charge Exceptions.............................................................38
HOW TO PURCHASE AND REDEEM SHARES................................................................................40
Backup Withholding......................................................................................40
NET ASSET VALUE DETERMINATION....................................................................................42
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................43
Reinvestment of Dividends and Distributions.............................................................43
Tax Matters.............................................................................................43
Special Tax Information.................................................................................43
Qualification as a Regulated Investment Company.........................................................44
Determination of Taxable Income of a Regulated Investment Company.......................................44
Excise Tax on Regulated Investment Companies............................................................45
Swap Agreements.........................................................................................46
Investment in Passive Foreign Investment Companies......................................................46
Debt Securities Acquired at a Discount..................................................................47
Distributions...........................................................................................47
Disposition of Shares...................................................................................48
Other Taxation..........................................................................................48
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................48
General Brokerage Policy................................................................................48
Allocation of Portfolio Transactions....................................................................49
Section 28(e) Standards.................................................................................50
Brokerage Commissions Paid..............................................................................50
REDEMPTIONS......................................................................................................51
PERFORMANCE INFORMATION..........................................................................................52
SHAREHOLDER INFORMATION..........................................................................................55
MISCELLANEOUS INFORMATION........................................................................................57
Charges for Certain Account Information.................................................................57
Audit Reports...........................................................................................58
Legal Matters...........................................................................................58
Custodian and Transfer Agent............................................................................58
Principal Holders of Securities.........................................................................59
APPENDIX ........................................................................................................63
FINANCIAL STATEMENTS.............................................................................................FS
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INTRODUCTION
AIM Advisor Funds, Inc. (INVESCO Advisor Funds, Inc. prior to August 4,
1997) (the "Company") is a series mutual fund. The rules and regulations of the
United States Securities and Exchange Commission (the "SEC") require all mutual
funds to furnish prospective investors certain information concerning the
activities of the fund being considered for investment. The information for the
AIM ADVISOR FLEX FUND (formerly, INVESCO Advisor Flex Portfolio) (the "Flex
Fund") is included in a Prospectus dated May 3, 1999. The information for the
AIM ADVISOR INTERNATIONAL VALUE FUND (formerly, INVESCO Advisor International
Value Portfolio) (the "International Value Fund") is included in a Prospectus
dated May 3, 1999. The information for the AIM ADVISOR LARGE CAP VALUE FUND
(formerly, INVESCO Advisor Equity Portfolio) (the "Large Cap Value Fund") is
included in a Prospectus dated May 3, 1999. The information for the AIM ADVISOR
MULTIFLEX FUND (formerly, INVESCO Advisor MultiFlex Portfolio) (the "MultiFlex
Fund") is included in a Prospectus dated May 3, 1999. The information for the
AIM ADVISOR REAL ESTATE FUND (formerly, INVESCO Advisor Real Estate Portfolio)
(the "Real Estate Fund") is included in a Prospectus dated May 3, 1999.
Additional copies of the Prospectuses and Statement of Additional Information
may be obtained without charge by writing the principal distributor of the
Company's shares, A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, Texas 77210-4739, or by calling (800) 347-4246. Investors must receive
a Prospectus before they invest in the Funds.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectus, and in order to avoid repetition, reference
will be made to sections of the Prospectus. Additionally, the Prospectus and
this Statement of Additional Information omit certain information contained in
the Company's Registration Statement filed with the SEC. Copies of the
Registration Statement, including items omitted from the Prospectus and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE COMPANY
THE COMPANY AND ITS SHARES
The Company was organized in 1989 as a Maryland corporation, and is
registered with the SEC as an open-end, series, management investment company.
The Company currently consists of five separate portfolios: AIM ADVISOR FLEX
FUND , AIM ADVISOR INTERNATIONAL VALUE FUND , AIM ADVISOR LARGE CAP VALUE FUND,
AIM ADVISOR MULTIFLEX FUND and AIM ADVISOR REAL ESTATE FUND (individually, a
"Fund" and collectively, the "Funds"). Each portfolio of the Company offers
Class A, Class B and Class C shares. This Statement of Additional Information
and the associated Prospectuses, relate solely to each Fund. Prior to August 4,
1997 and January 16, 1996, the Company was known as INVESCO Advisor Funds, Inc.
and the EBI Funds, Inc., respectively.
Effective August 4, 1997, A I M Advisors, Inc. ("AIM" or "Advisor")
became the investment advisor for the Funds pursuant to an investment advisory
agreement with terms substantially identical to those of the company's prior
investment advisory contracts with INVESCO Services, Inc. ("ISI"). The
sub-advisors did not change other than the substitution of INVESCO Global Asset
Management Limited for INVESCO Capital Management, Inc. as sub-advisor to
INTERNATIONAL VALUE FUND.
As used in this Statement of Additional Information, the term "majority
of the outstanding shares" of the Company, of a particular Fund or of a class of
a Fund means, respectively, the vote of the lesser of (i) 67% or more of the
shares of the Company, such Fund or such class present at a meeting of
shareholders, if the holders of more than 50% of the outstanding shares of the
Company, such Fund or such class are present or represented by proxy or (ii)
more than 50% of the outstanding shares of the Company, such Fund or such class.
78
Each share of a Fund is entitled to one vote, to participate equally in
dividends and distributions declared by the Board of Directors with respect to
the class of such Fund and, upon liquidation of the Fund, to participate
proportionately in the net assets of the Fund allocable to such class remaining
after satisfaction of the outstanding liabilities of the Fund allocable to such
class. Fund shares are fully paid, non-assessable and fully transferable when
issued and have no preemptive rights and have such conversion and exchange
rights as set forth in the Prospectuses and Statement of Additional Information.
Fractional shares have proportionately the same rights, including voting rights,
as are provided for full 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 different classes
of shares, where applicable, of a Fund. However, on matters affecting one
portfolio of the Company or one class of shares, a separate vote of shareholders
of that portfolio or class is required. Shareholders of a portfolio or class are
not entitled to vote on any matter which does not affect that portfolio or class
but which requires a separate vote of another portfolio or class. An example of
a matter which would be voted on separately by shareholders of a portfolio is
the approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of a class of shares is approval of a
distribution plan.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
voting together for election of directors may elect all of the members of the
Board of Directors of the Company. In such event, the remaining holders cannot
elect any directors of the Company.
The Company, as a Maryland corporation, is not required to hold annual
shareholder meetings. However, special meetings may be called for purposes such
as electing or removing directors, changing fundamental policies or approving an
advisory contract, or as may be required by applicable law or the Company's
Articles of Incorporation or By-Laws. Meetings of shareholders will be called
upon written request of shareholders holding in the aggregate at least 10% of
the Company's outstanding shares. The Directors will provide appropriate
assistance to shareholders, in compliance with provisions of the Investment
Company Act of 1940, as amended (the "1940 Act"), if such a request for a
meeting is received.
INVESTMENT STRATEGIES AND RISKS
The following discussion of investment policies supplement the
discussion of the investment objectives and policies set forth in the applicable
Prospectus under the heading "Investment Objective and Strategies" and
"Principal Risks of Investing in the Fund."
CONVERTIBLE SECURITIES
Although the equity investments of the INTERNATIONAL VALUE FUND consist
primarily of common and preferred stocks, the Fund may buy securities
convertible into common stock if, for example, the sub-adviser believes that a
company's convertible securities are undervalued in the market. Convertible
securities eligible for purchase by the Fund include convertible bonds,
convertible preferred stocks, and warrants. A warrant is an instrument issued by
a corporation which gives the holder the right to subscribe to a specific amount
of the corporation's capital stock at a set price for a specified period of
time. Warrants do not represent ownership of the securities, but only the right
to buy the securities. The prices of warrants do not necessarily move parallel
to the prices of underlying securities. Warrants may be considered speculative
in that they have no voting rights, pay no dividends, and have no rights with
respect to the assets of a corporation issuing them. Warrant positions will not
be used to increase the leverage of the Fund; consequently, warrant positions
are generally accompanied by cash positions equivalent to the required exercise
amount.
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FOREIGN SECURITIES
All of the Funds may invest directly in foreign securities and ADRs.
THE MULTIFLEX FUND, INTERNATIONAL VALUE FUND and REAL ESTATE FUND may also
invest in foreign currency-denominated fixed income securities. Foreign
securities are securities issued by companies whose principal business
activities are outside the United States. These foreign securities may be
registered and traded in U.S. markets, traded in foreign markets or evidenced by
ADRs. Securities of Canadian issuers and sponsored ADRs are not included within
the limitations applicable to foreign securities. Investing in foreign
securities may involve significant risks not present in domestic investments.
For example, there is generally less publicly available information about
foreign companies, particularly those not subject to the disclosure and
reporting requirements of the U.S. securities laws. Foreign issuers are
generally not bound by uniform accounting, auditing, and financial reporting
requirements and standards of practice comparable to those applicable to
domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitations on the removal of cash or
other assets of a Fund, political or financial instability, or diplomatic and
other developments which could affect such investments. Further, economies of
particular countries or areas of the world may differ favorable or unfavorable
the economy of the United States. Foreign securities often trade with less
frequency and volume than domestic securities and therefore may exhibit greater
price volatility. Additional costs associated with an investment in foreign
securities may include higher custodial fees than apply to domestic custodial
arrangements, and transaction costs of foreign currency conversions.
ADRs provide a method whereby the Funds may invest in securities issued
by companies whose principal business activities are outside the United States.
These securities will not be denominated in the same currency as the securities
into which they may be converted. Generally, ADRs, in registered form, are
designed for use in U.S. securities markets.
ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying securities, and may be issued as
sponsored or unsponsored programs. In sponsored programs, an issuer has made
arrangements to have its securities trade in the form of ADRs. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. The LARGE CAP VALUE FUND and FLEX FUND intend
to invest only in sponsored ADRs. The MULTIFLEX FUND, INTERNATIONAL VALUE FUND
and REAL ESTATE FUND may invest in both sponsored and unsponsored ADRS.
Since certain Funds are authorized to invest in securities denominated
or quoted in currencies other than the U.S. dollar, as well as ADRs with respect
to such securities, changes in foreign currency exchange rates relative to the
U.S. dollar will affect the value of such ADRs and securities in the Funds and
the unrealized appreciation or depreciation of such investments. Changes in
foreign currency exchange rates relative to the U.S. dollar will also affect a
Fund's yield on assets denominated in currencies other than the U.S. dollar and
ADRs.
On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain established a
common European currency known as the "euro" and each member's local currency
became a denomination of the euro. It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002. Any other
European country that is a member of the European Union and satisfies the
criteria for participation in the EMU may elect to participate in the EMU and
may supplement its existing currency with the euro. The anticipated replacement
of existing currencies with the euro on July 1, 2002 could cause market
disruptions before or after July 1, 2002 and could adversely affect the value of
securities held by a Fund.
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DEVELOPING COUNTRIES
The INTERNATIONAL VALUE FUND may invest in securities of companies
domiciled in developing countries. Investment in developing countries presents
risks greater in degree than, and in addition to, those presented by investment
in foreign issuers in general. A number of developing countries restrict, to
varying degrees, foreign investment in stocks. Repatriation of investment
income, capital, and the proceeds of sales by foreign investors may require
governmental registration and/or approval in some developing countries. A number
of the currencies of developing countries have experienced significant declines
against the U.S. dollar in recent years, and devaluation may occur subsequent to
investments in these currencies by the INTERNATIONAL VALUE 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, have
low trading volumes, suffer periods of relative illiquidity, and are
characterized by significant price volatility. There is a risk in developing
countries that a future economic or political crisis could lead to price
controls, forced mergers of companies, expropriation or confiscatory taxation,
seizure, nationalization, or creation of government monopolies, any of which may
have a detrimental effect on the Fund's investments.
OPTIONS
The purpose of engaging in put and call transactions is to hedge
against changes in the market value of the Funds' portfolio securities caused by
fluctuating interest rates, fluctuating currency exchange rates and changing
market conditions, and to close out or offset existing positions in such options
or futures contracts as described below. The Funds will not engage in such
transactions for speculative purposes and will engage in such transaction only
for hedging purposes and only when the benefits to be gained outweigh the cost
of entering into such transaction. Each of the Funds is authorized to write
(sell) covered call options on the securities in which it may invest and to
enter into closing purchase transactions with respect to such options. A Fund
may write a call or put option only if the option is "covered" by the Fund
holding a position in the underlying securities or by other means which would
permit immediate satisfaction of the Fund's obligation as writer of the option.
The purchase and writing of options involve certain risks. Writing a call option
obligates a Fund to sell or deliver the option's underlying security, in return
for the strike price, upon exercise of the option. By writing a call option, the
Fund receives an option premium from the purchaser of the call option. Writing
covered call options is generally a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, a Fund would seek to
mitigate the effects of a price decline. By writing covered call options,
however, a Fund gives up the opportunity, while the option is in effect, to
profit from any price increase in the underlying security above the option
exercise price. The writer of an option has no control over the time when it may
be required to fulfill its obligation as a writer of the option. Once an option
writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must
deliver the underlying securities at the exercise price. In addition, a Fund's
ability to sell the underlying security will be limited while the option is in
effect unless the Fund effects a closing purchase transaction.
Each Fund may purchase put options. A put purchased by a Fund
constitutes a hedge against a decline in the price of a security owned by the
Fund. It may be sold at a profit or loss depending upon changes in the price of
the underlying security. It may be exercised at a profit provided that the
amount of the decline in the price of the underlying security below the exercise
price during the option period exceeds the option premium, or it may expire
without value. A call constitutes a hedge against an increase in the price of a
security which the Fund has sold short. It may be sold at a profit or loss
depending upon changes in the price of the underlying security, it may be
exercised at a profit provided that the amount of the increase in the price of
the underlying security over the exercise price during the option period exceeds
the option premium, or it may expire without value. The maximum loss exposure
involved in the purchase of an option is the cost of the option contract. A Fund
may engage in strategies employing combinations of covered put and call options.
There can be no assurance that a liquid market will exist when a Fund seeks to
close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a Fund may be unable to close
out a position.
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Each Fund may also buy or sell put and call options on foreign
securities and foreign currencies. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the ability of the
Funds to reduce foreign currency risk using such options. Over-the-counter
options differ from traded options in that they are two-party contracts with
price and other terms negotiated between buyer and seller and generally do not
have as much market liquidity as exchange-traded options.
COMBINED OPTION POSITIONS
Each Fund, for hedging purposes, may purchase and write options in
combination with each other to adjust the risk and return characteristics of the
Fund's overall position. For example, a Fund may purchase a put option and write
a covered call option on the same underlying instrument, in order to construct a
combined position whose risk and return characteristics are similar to selling a
futures contract. This technique, called a "straddle," enables the Fund to
offset the cost of purchasing a put option with the premium received from
writing the call option. However, by selling the call option, the Fund gives up
the ability for potentially unlimited profit from the put option. Another
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.
FUTURES CONTRACTS
Each of the Funds may purchase and sell futures contracts in order to
hedge the value of its portfolio against changes in market conditions. In cases
of purchases of futures contracts, an amount of liquid assets, equal to the cost
of the futures contracts (less any related margin deposits), will be segregated
to collateralize the position and ensure that the use of such futures contracts
is unleveraged. Unlike when a Fund purchases or sells a security, no price is
paid or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with its custodian for the account
of the broker a stated amount, as called for by the particular contract, of cash
or U.S. Treasury bills. This amount is known as "initial margin." The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called "variation margin," to and from the broker will be made on a
daily basis as the price of the futures contract fluctuates making the long and
short positions in the futures contract more or less valuable, a process known
as "marking-to-market." For example, when a Fund has purchased a stock index
futures contract and the price of the underlying stock index has risen, that
position will have increased in value and the Fund will receive from the broker
a variation margin payment with respect to that increase in value. Conversely,
where a Fund has purchased a stock index futures contract and the price of the
underlying stock index has declined, that position would be less valuable and
the Fund would be required to make a variation margin payment to the broker.
Variation margin payments would be made in a similar fashion when a Fund has
purchased an interest rate futures contract. At any time prior to expiration of
the futures contract, a Fund may elect to close the position by taking an
opposite position which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund and the Fund
realizes a loss or gain.
A description of the various types of futures contracts that may be
utilized by the Funds is as follows:
Stock Index Futures Contracts
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of the
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82
underlying stocks in the index is made. Currently, stock index futures contracts
can be purchased or sold primarily with respect to broad based stock indices
such as the Standard & Poor's 500 Stock Index, the New York Stock Exchange
Composite Index, the American Stock Exchange Major Market Index, the NASDAQ --
100 Stock Index and the Value Line Stock Index. The stock indices listed above
consist of a spectrum of stocks not limited to any one industry. The Funds will
only enter into stock index futures contracts in order to hedge the value of its
portfolio against changes in market conditions. When a Fund anticipates a
significant market or market sector advance, the purchase of a stock index
futures contract affords a hedge against not participating in such advance.
Conversely, in anticipation of or in a general market or market sector decline
that adversely affects the market values of a Fund's portfolio of securities,
the Fund may sell stock index futures contracts. The Funds are subject to
certain restrictions on their use of financial futures contracts and options. A
Fund will not enter into financial futures contracts or purchase options on
financial futures contracts if, after such a transaction, the sum of initial
margin deposits on the open financial futures contracts and of premiums paid on
open options on financial futures contracts would exceed 5% of the Fund's total
assets. Subject to the provisions of the Company's fundamental investment
policies, a Fund will not enter into financial futures contracts or write
options (except to close out open positions) if, after such a transaction, the
aggregate principal amount of all open financial futures contract and all
options under which the Fund is obligated would exceed 100% of the Fund's total
assets. A Fund will not purchase put and call options on debt securities if,
after such a transaction, the sum invested for premiums in such options exceeds
2% of the Fund's total assets.
The Funds will only enter into futures contracts or futures options
which are standardized and traded on a U.S. or foreign exchange or board of
trade, or similar entity, or quoted on an automated quotation system. A Fund
will use financial futures contracts and related options only for "bona fide
hedging" purposes, as such term is defined in applicable regulations of the
Commodity Futures Trading Commission, or, with respect to positions in financial
futures and related options that do not qualify as "bona fide hedging"
positions, will enter into such non-hedging positions only to the extent that
aggregate initial margin deposits plus premiums paid by it for open futures
option positions, less the amount by which any such positions are
"in-the-money," would not exceed 5% of the Fund's total assets.
Foreign Currency Futures Contracts
A Fund may also use futures contracts to hedge the risk of changes in
the exchange rate of foreign currencies. A foreign currency futures contract
provides for the future sale by one party and purchase by another party of a
specified quantity of a foreign currency at a specified price and time.
OPTIONS ON FUTURES CONTRACTS
Each Fund may purchase options on futures contracts. An option on a
futures contract gives 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 option exercise period. The writer of the option is
required upon exercise to assume an offsetting futures position (a short
position if the option is a call and a long 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 assumption of offsetting futures positions by the
writer and holder of the option will be accompanied by delivery of the
accumulated cash balance in the writer's futures margin account which represents
the amount by which the market price of the futures contract, at exercise,
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. If an option on a futures
contract is exercised on the last trading date prior to the expiration date of
the option, the settlement will be made entirely in cash equal to the difference
between the exercise price of the option and the closing price of the futures
contract on the expiration date.
A Fund will purchase put options on futures contracts to hedge against
the risk of falling prices for its respective portfolio securities. A Fund will
purchase call options on futures contracts as a hedge against a rise in the
price of securities which it intends to purchase. Options on futures contracts
may also be used to hedge the risks of changes in the exchange rate of foreign
currencies. The purchase of a put option on a futures contract is similar to the
purchase of protective put options on a portfolio security or a foreign
currency. The
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purchase of a call option on a futures contract is similar in some respects to
the purchase of a call option on an individual security or a foreign currency.
Depending on the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the underlying
securities or currency, it may or may not be less risky than ownership of the
futures contract or underlying securities or currency.
RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS
There are several risks in connection with the use of futures contracts
and related options as hedging devices. One risk arises because of the imperfect
correlation between movements in the price of hedging instruments and movements
in the price of the stock, debt security or foreign currency which are the
subject of the hedge. If the price of a hedging instrument moves less than the
price of the stock, debt security or foreign currency which is the subject of
the hedge, the hedge will not be fully effective. If the price of a hedging
instrument moves more than the price of the stock, debt security or foreign
currency, a Fund will experience either a loss or gain on the hedging instrument
which will not be completely offset by movements in the price of the stock, debt
security or foreign currency which is the subject of the hedge. The use of
options on futures contracts involves the additional risk that changes in the
value of the underlying futures contract will not be fully reflected in the
value of the option.
Successful use of hedging instruments by the Funds is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market, of interest rates or of foreign exchange rates. Because of possible
price distortions in the futures and options markets and because of the
imperfect correlation between movements in the prices of hedging instruments and
the investments being hedged, even a correct forecast by AIM of general market
trends may not result in a completely successful hedging transaction.
It is also possible that where a Fund has sold futures contracts to
hedge its portfolio against a decline in the market, the market may advance and
the value of stocks or debt securities held in its portfolio may decline. If
this occurred, a Fund would lose money on the futures contracts and also
experience a decline in the value of its portfolio securities. Similar risks
exist with respect to foreign currency hedges.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts there is no assurance that a liquid market on
an exchange or a board of trade will exist for any particular contract at any
particular time. If there is not a liquid market, it may not be possible to
close a futures position or purchase an option at such time. In the event of
adverse price movements under those circumstances, a Fund would continue to be
required to make daily cash payments of maintenance margin on its futures
positions. The extent to which a Fund may engage in futures contracts or related
options will be limited by Internal Revenue Code requirements for qualification
as a regulated investment company and a Fund's intent to continue to qualify as
such. The result of a hedging program cannot be foreseen and may cause a Fund to
suffer losses which it would not otherwise sustain.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Each Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. Such contracts may not be
entered into for speculative purposes. A Fund will not enter into forward
contracts if, as a result, more than 10% of the value of its total assets would
be committed to the consummation of such contracts, and will segregate assets or
"cover" its positions consistent with requirements under the 1940 Act to avoid
any potential leveraging of the Fund.
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SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
The MULTIFLEX FUND, REAL ESTATE FUND and INTERNATIONAL VALUE FUND may
purchase or sell securities on a when-issued or delayed delivery basis. These
transactions involve a commitment by the Fund to purchase or sell securities for
a predetermined price or yield, with payment and delivery taking place more than
three days in the future, or after a period longer than the customary settlement
period for that type of security. Investment in securities on a when-issued or
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 when-issued or delayed delivery commitment. In
a delayed delivery transaction, a Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued security, the Fund's
custodian bank will segregate liquid assets in an amount equal to the
when-issued commitment. If the market value of such securities declines,
additional liquid assets will be segregated on a daily basis so that the market
value of the segregated liquid assets will equal the amount of the Fund's
when-issued commitments. To the extent liquid assets are segregated, they will
not be available for new investments or to meet redemptions. Securities
purchased on a delayed delivery basis may require a similar segregation of
liquid assets.
Typically, no income accrues on securities purchased on a delayed
delivery basis prior to the time delivery of the securities is made, although a
Fund may earn income on securities it has segregated. When purchasing a security
on a delayed delivery basis, a Fund assumes the rights and risks of ownership of
the security, including the risk of price and yield fluctuations, and takes such
fluctuations into account when determining its net asset value. Because a Fund
is not required to pay for the security until the delivery date, these risks are
in addition to the risks associated with the Fund's other investments. If a Fund
remains substantially fully invested at a time when delayed delivery purchases
are outstanding, the delayed delivery purchases may result in a form of
leverage. When a Fund has sold a security on a delayed delivery basis, the Fund
does not participate in future gains or losses with respect to the security. If
the other party to a delayed delivery transaction fails to deliver or pay for
the securities, the Fund could miss a favorable price or yield opportunity or
could suffer a loss. A Fund may dispose of or renegotiate a delayed delivery
transaction after it is entered into, and may sell when-issued securities before
they are delivered, which may result in a capital gain or loss.
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 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";
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 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 fictive basis on
which to calculate the obligations which the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by a Fund would calculate
the obligations of the parties to the agreement on a "net basis." Consequently,
a Fund's obligations (or rights) under a swap agreement will generally be equal
only to the net amount to be
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paid or received under the agreement based on the relative values of the
positions held by each party to the agreement (the "net amount"). Obligations
under a swap agreement will be accrued daily (offset against amounts owing to
the Fund) and any accrued but unpaid net amounts owed to a swap counterparty
will be covered by segregating liquid assets, to avoid any potential leveraging
of the Fund. A Fund will not enter into a swap agreement with any single party
if the net amount owed or to be received under existing contracts with that
party would exceed 5% of the Fund's total assets. For a discussion of the tax
considerations relating to swap agreements, see "Dividends, Distributions and
Tax Matters-Swap Agreements."
MORTGAGE-RELATED SECURITIES
Mortgage-related securities are interests in pools of mortgage loans
made to residential home buyers, including mortgage loans made by savings and
loan institutions, mortgage bankers, commercial banks and others. Pools of
mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations (see "Mortgage
Pass-Through Securities" below). The Funds may also invest in debt securities
which are secured with collateral consisting of mortgage-related securities (see
"Collateralized Mortgage Obligations ("CMO")"), and in other types of
mortgage-related securities.
MORTGAGE PASS-THROUGH SECURITIES. The FLEX FUND may invest in mortgage
pass-through securities. Interests in pools of mortgage-related securities
differ from other forms of debt securities, which normally provide for periodic
payment of interest in fixed amounts with principal payments at maturity or
specified call dates. Instead, these securities provide a monthly payment which
consists of both interest and principal payments. In effect, these payments are
a "pass-through" of the monthly payments made by the individual borrowers on
their residential or commercial mortgage loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments are caused by
repayments of principal resulting from the sale of the underlying property,
refinancing or foreclosure, net of fees or costs which may be incurred. Some
mortgage-related securities (such as securities issued by the Government
National Mortgage Association ("GNMA")) are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.
GNMA is the principal governmental guarantor of mortgage-related
securities. GNMA is a wholly owned U.S. government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the U.S. government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of FHA-insured or VA-guaranteed mortgages.
Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. government) include the Fannie Mae (formerly, the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC")). Fannie Mae is a government-sponsored corporation owned
entirely by private stockholders. It is subject to general regulation by the
Secretary of Housing and Urban Development. Fannie Mae purchases conventional
(i.e., not insured or guaranteed by any government agency) residential mortgages
from a list of approved seller/servicers which include state and federally
chartered savings and loan associations, mutual savings banks, commercial banks
and credit unions and mortgage bankers. Pass-through securities issued by Fannie
Mae are guaranteed as to timely payment of principal and interest by Fannie Mae
but are not backed by the full faith and credit of the U.S. government.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a
government-sponsored corporation formerly owned by the 12 Federal Home Loan
Banks and now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("PCS") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCS are not backed by the full faith and
credit of the U.S. government.
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Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Such
issuers may, in addition, be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private insurers and the
mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related
security meets a Fund's investment quality standards. There can be no assurance
that the private insurers or guarantors can meet their obligations under the
insurance policies or guarantee arrangements. Although the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable. A Fund will not purchase
mortgage-related securities or other assets which in the sub-adviser's opinion
are illiquid if, as a result, more than 15% of the value of the Fund's total
assets will be illiquid.
Mortgage-backed securities that are issued or guaranteed by the U.S.
government, its agencies or instrumentalities, are not subject to a Fund's
industry concentration restrictions, by virtue of the exclusion from that test
available to all U.S. Government securities. In the case of privately issued
mortgage-related securities, the Funds take the position that mortgage-related
securities do not represent interests in any particular "industry" or group of
industries. The assets underlying such securities may be represented by a
portfolio of first lien residential mortgages (including both whole mortgage
loans and mortgage participation interests) or portfolios of mortgage
pass-through securities issued or guaranteed by GNMA, Fannie Mae or FHLMC.
Mortgage loans underlying a mortgage-related security may in turn be insured or
guaranteed by the Federal Housing Administration or the Department of Veterans
Affairs. In the case of private issue mortgage-related securities whose
underlying assets are neither U.S. government securities nor U.S. government-
insured mortgages, to the extent that real properties securing such assets may
be located in the same geographical region, the security may be subject to a
greater risk of default than other comparable securities in the event of adverse
economic, political or business developments that may affect such region and,
ultimately, the ability of residential homeowners to make payments of principal
and interest on the underlying mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs"). The FLEX FUND, MULTIFLEX
FUND and REAL ESTATE FUND may invest in CMOs. The MULTIFLEX FUND and REAL ESTATE
FUND can also invest in mortgage-backed bonds and asset-backed securities. A CMO
is a hybrid between a mortgage-backed bond and a mortgage pass-through security.
Similar to a bond, interest and prepaid principal is paid, in most cases,
semiannually. CMOs may be collateralized by whole mortgage loans, but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form of
call protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds
all bear current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are paid in full,
interest and principal on the Series Z Bond begins to be paid
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currently. With some CMOs, the issuer serves as a conduit to allow loan
originators (primarily builders or savings and loan associations) to borrow
against their loan portfolios.
CMOs that are issued or guaranteed by the U.S. government or by any of
its agencies or instrumentalities will be considered U.S. government securities
by the Funds, while other CMOs, even if collateralized by U.S. government
securities, will have the same status as other privately issued securities for
purposes of applying a Fund's diversification tests.
Mortgage-backed bonds --- are general obligations of the issuer fully
collateralized directly or indirectly by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds but
interest and principal payments on the mortgages are not passed through either
directly (as with GNMA certificates and Fannie Mae and FHLMC pass-through
securities) or on a modified basis (as with CMOs). Accordingly, a change in the
rate of prepayments on the pool of mortgages could change the effective maturity
of a CMO but not that of a mortgage-backed bond (although, like many bonds,
mortgage-backed bonds can provide that they are callable by the issuer prior to
maturity).
Asset-backed securities --- are securities representing interests in
other types of financial assets, such as automobile-finance receivables or
credit-card receivables. Such securities are subject to many of the same risks
as are mortgage-backed securities, including prepayment risks and risks of
foreclosure. They may or may not be secured by the receivables themselves or may
be unsecured obligations of their issuers.
FHLMC CMOs. FHLMC CMOs are debt obligations of FHLMC issued in multiple
classes having different maturity dates which are secured by the pledge of a
pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC PCS,
payments of principal and interest on the CMOs are made semiannually, as opposed
to monthly. The amount of principal payable on each semiannual payment date is
determined in accordance with FHLMC's mandatory sinking fund schedule, which, in
turn, is equal to approximately 100% of FHA prepayment experience applied to the
mortgage collateral pool. All sinking fund payments in the CMOs are allocated to
the retirement of the individual classes of bonds in the order of their stated
maturities. Payment of principal on the mortgage loans in the collateral pool in
excess of the amount of FHLMC's minimum sinking fund obligation for any payment
date are paid to the holders of the CMOs as additional sinking fund payments.
Because of the "pass-through" nature of all principal payments received on the
collateral pool in excess of FHLMC's minimum sinking fund requirement, the rate
at which principal of the CMOs is actually repaid is likely to be such that each
class of bonds will be retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage
loans during any semiannual payment period is not sufficient to meet FHLMC's
minimum sinking fund obligation on the next sinking fund payment date, FHLMC
agrees to make up the deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC PCS. FHLMC has the right to substitute collateral in
the event of delinquencies and/or defaults.
RISKS OF MORTGAGE-RELATED SECURITIES
Investment in mortgage-backed securities poses several risks, including
prepayment, market, and credit risk. Prepayment risk reflects the risk that
borrowers may prepay their mortgages faster than expected, thereby affecting the
investment's average life and perhaps its yield. Whether or not a mortgage loan
is prepaid is almost entirely controlled by the borrower. Borrowers are most
likely to exercise prepayment options at the time when it is least advantageous
to investors, generally prepaying mortgages as interest rates fall, and slowing
payments as interest rates rise. Besides the effect of prevailing interest
rates, the rate of prepayment and refinancing of mortgages may also be affected
by home value appreciation, ease of the refinancing process and local economic
conditions.
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Market risk reflects the risk that the price of the security may
fluctuate over time. The price of mortgage-backed securities may be particularly
sensitive to prevailing interest rates, the length of time the security is
expected to be outstanding, and the liquidity of the issue. In a period of
unstable interest rates, there may be decreased demand for certain types of
mortgage-backed securities, and a Fund invested in such securities wishing to
sell them may find it difficult to find a buyer, which may in turn decrease the
price at which they may be sold.
Credit risk reflects the risk that a Fund may not receive all or part
of its principal because the issuer or credit enhancer has defaulted on its
obligations. Obligations issued by U.S. government-related entities are
guaranteed as to the payment of principal and interest, but are not backed by
the full faith and credit of the U.S. government. The performance of private
label mortgage-backed securities, issued by private institutions, is based on
the financial health of those institutions. With respect to GNMA certificates,
although GNMA guarantees timely payment even if homeowners delay or default,
tracking the "pass-through" payments may, at times, be difficult.
ZERO COUPON OBLIGATIONS
The MULTIFLEX FUND may invest in zero coupon obligations, which are
fixed-income securities that do not make regular interest payments. Instead,
zero coupon obligations are sold at substantial discounts from their face value.
The Fund accrues income on these investments for tax and accounting purposes,
which is distributable to shareholders and which, because no cash is received at
the time of accrual, may require the liquidation of other portfolio securities
to satisfy distribution obligations, in which case the Fund will forego the
purchase of additional income-producing assets with these funds. The difference
between a zero coupon obligations's issue or purchase price and its face value
represents the imputed interest an investor will earn if the obligation is held
until maturity. Zero coupon obligations may offer investors the opportunity to
earn higher yields than those available on ordinary interest-paying obligations
of similar credit quality and maturity. However, zero coupon obligation prices
may also exhibit greater price volatility than ordinary fixed-income securities
because of the manner in which their principal and interest are returned to the
investor.
REAL-ESTATE INDUSTRY SECURITIES
Because each of the MULTIFLEX FUND and REAL ESTATE FUND invests in
securities of companies engaged in the real-estate industry, it could
conceivably own real estate directly as a result of a default on debt securities
it owns. The 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 qualify for tax-free pass-through of income under the Internal
Revenue Code and of failing to maintain exemption from the 1940 Act. Changes in
interest rates may also affect the value of debt securities held by the Fund. By
investing in REITs indirectly through the Fund, a shareholder will bear not only
his proportionate share of the expenses of the Fund, but also, indirectly,
similar expenses of the REITs.
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HIGH YIELD/HIGH RISK SECURITIES
The MULTIFLEX FUND may invest up to 5% of assets in securities rated
lower than Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard
& Poor's, a division of McGraw-Hill Companies Inc. ("S&P"), but rated at least
Ba by Moody's or BB by S&P or, if unrated, determined by the Fund's sub-advisor
to be of comparable quality. Securities rated lower than Baa by Moody's or lower
than BBB by S&P are sometimes referred to as "high yield," "high risk," or
"junk" bonds. In addition, securities rated Baa are considered by Moody's to
have some speculative characteristics.
Investing in high yield securities involves special risks in addition
to the risks associated with investments in higher rated debt securities. High
yield securities may be regarded as predominately speculative with respect to
the issuer's continuing ability to meet principal and interest payments.
Analysis of the creditworthiness of issuers of high yield securities may be more
complex than for issuers of higher quality debt securities, and the ability of
the Fund to achieve its investment objective may, to the extent of its
investments in high yield securities, be more dependent upon such
creditworthiness analysis than would be the case if the Fund were investing in
higher quality securities.
High yield securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than higher grade
securities. The prices of high yield securities have been found to be less
sensitive to interest rate changes than more highly rated investments, but more
sensitive to economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in high yield security prices because the advent
of a recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of high
yield securities defaults, the Fund may incur additional expenses to seek
recovery. In the case of high yield securities structured as zero coupon
securities or payment-in-kind securities (which pay interest in the form of
additional securities), the market prices of such securities are affected to a
greater extent by interest rate changes, and therefore tend to be more volatile
than securities which pay interest periodically and in cash. Moreover, the Fund
records the interest on these securities as income even though it receives no
cash interest until the security's maturity or payment date. The Fund will be
required to distribute all or substantially all such amounts annually and may
have to obtain the cash to do so by selling securities which otherwise would
continue to be held. Shareholders will be taxed on these distributions.
The secondary markets on which high yield securities are traded may be
less liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect and cause large fluctuations in
the daily net asset value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high yield securities, especially in thinly traded
markets.
The use of credit ratings as the sole method of evaluating high yield
securities can involve certain risks. For example, credit rating agencies
evaluate the safety of principal and interest payments, not the market value
risk of high yield securities. Also, credit rating agencies may fail to change
credit ratings in a timely fashion to reflect events since the security was last
rated. The sub-advisor does not rely solely on credit ratings when selecting
securities for the Fund, and develops its own independent analysis of issuer
credit quality. If a credit rating agency changes the rating of a portfolio
security held by the Fund, the Fund may retain the security if the subadvisor
deems it in the best interest of the shareholders.
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REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase agreements. A repurchase
agreement, which may be considered a "loan" under the 1940 Act, is a transaction
in which a Fund purchases a security and simultaneously commits to sell the
security to the seller at an agreed-upon price and date (usually not more than
seven days) after the date of purchase. The resale price reflects the purchase
price plus an agreed-upon market rate of interest which is unrelated to the
coupon rate or maturity of the purchased security. A Fund's risk is limited to
the ability of the seller to pay the agreed-upon amount on the delivery date. In
the opinion of management this risk is not material; if the seller defaults, the
underlying security constitutes collateral for the seller's obligations to pay.
This collateral, equal to or in excess of 100% of the repurchase agreement, will
be held by the custodian for the particular Fund's assets. Repurchase agreements
carry certain risks not associated with direct investments in securities,
including a possible decline in the market value of the underlying securities
and delays and costs to the Funds if the other party to the repurchase agreement
becomes insolvent. To the extent that the proceeds from a sale upon a default in
the obligation to repurchase are less than the repurchase price, the particular
Fund would suffer a loss. It is intended (but not required) that at no time will
the market value of any of the Fund's securities subject to repurchase
agreements exceed 50% of the total assets of such Fund entering into such
agreements. It is intended for these Funds to enter into repurchase agreements
with commercial banks and securities dealers. The Board of Directors will
monitor the creditworthiness of such entities.
PORTFOLIO TURNOVER
Generally, the rate of portfolio turnover will not be a limiting factor
when the Funds deem changes appropriate; however, it is anticipated that no
Fund's annual portfolio turnover rate generally will exceed 100%. In any
particular year, however, market conditions could result in portfolio activity
at a greater rate than anticipated.
INVESTMENT RESTRICTIONS
The Directors of the Company, on behalf of the Funds, have adopted the
following investment restrictions, all of which are fundamental policies and may
not be changed as to any Fund without the approval of the holders of a majority
of such Fund's outstanding voting securities. The Funds may not:
(1) Invest in the securities of issuers conducting their principal
business activity in the same industry, if immediately after such investment the
value of a Fund's investments in such industry would exceed 25% of the value of
such Fund's total assets; provided, however, that this limitation does not apply
to a Fund's investments in obligations issued or guaranteed by the U.S.
government, its agencies, authorities or instrumentalities.
(2) For the MULTIFLEX FUND, REAL ESTATE FUND and INTERNATIONAL VALUE
FUND, with respect to 75% of the Fund's assets, invest in the securities of any
one issuer, other than obligations of, or guaranteed by, the U.S. government,
its agencies, authorities or instrumentalities, if immediately after such
investment more than 5% of the value of the Fund's total assets, taken at market
value, would be invested in such issuer or more than 10% of such issuer's
outstanding voting securities would be owned by such Fund. For the LARGE CAP
VALUE FUND and FLEX FUND, with respect to 100% of the Fund's assets, invest in
the securities of any one issuer, other than obligations of, or guaranteed by,
the U.S. government, its agencies, authorities or instrumentalities, if
immediately after such investment more than 5% of the value of the Fund's total
assets, taken at market value, would be invested in such issuer or more than 10%
of such issuer's outstanding voting securities would be owned by such Fund.
(3) Underwrite securities of other issuers, except insofar as it may
technically be deemed an "underwriter" under the Securities Act of 1933, as
amended, in connection with the disposition of a Fund's portfolio securities.
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(4) Invest in companies for the purpose of exercising control or
management.
(5) Issue any class of senior securities or borrow money, except
borrowings from banks for temporary or emergency purposes not in excess of 5% of
the value of a Fund's total assets at the time the borrowing is made.
(6) Mortgage, pledge, hypothecate or in any manner transfer as
security for indebtedness any securities owned or held except to an extent not
greater than 5% of the value of a Fund's total assets.
(7) Make short sales of securities or maintain a short position. All
Funds may, however, purchase or sell options on futures and write, purchase and
sell puts and calls.
(8) Purchase securities on margin, except that a Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities.
(9) Purchase or sell real estate or interests in real estate. A Fund
may invest in securities secured by real estate or interests therein or issued
by companies, including real estate investment trusts, which invest in real
estate or interests therein.
(10) Purchase or sell commodities or commodity contracts, except as set
forth in the Prospectus and in this Statement of Additional Information for
purchases and sales of options and futures, and options or futures on underlying
financial instruments.
(11) Make loans to other persons, provided that a Fund may purchase
debt obligations consistent with its investment objectives and policies and may
lend limited amounts (not to exceed 10% of total assets) of its portfolio
securities to broker-dealers or other institutional investors.
(12) Purchase securities of other investment companies except (a) in
connection with a merger, consolidation, acquisition or reorganization; or (b)
by purchase in the open market of securities of other investment companies
involving only customary brokers' commissions and only if immediately thereafter
(i) no more than 3% of the voting securities of any one investment company are
owned by the Fund, (ii) no more than 5% of the value of the total assets of a
Fund would be invested in any one investment company, and (iii) no more than 10%
of the value of the total assets of a Fund would be invested in the securities
of such investment companies. A portion of a Fund's cash may be invested from
time to time in investment companies to which the Advisor or sub-advisor serves
as investment advisor; provided that no management or distribution fee will be
charged by the Advisor or sub-advisor with respect to any such assets so
invested and provided further that at no time will more than 3% of the Fund's
assets be so invested. Should a Fund purchase securities of other investment
companies, shareholders may incur additional management, advisory and
distribution fees.
(13) Invest in securities for which there are legal or contractual
restrictions on resale, if more than 2% of the value of a Fund's total assets
would be invested in such securities, or invest in securities for which there is
no readily available market, if more than 5% of the value of a Fund's total
assets would be invested in such securities. In determining securities subject
to this 5% restriction, the Funds will include repurchase agreements maturing in
more than seven days.
Additional investment restrictions adopted by the Directors on behalf
of the Funds, which may be changed by the Directors at their discretion, provide
that the Funds may not:
(1) For the LARGE CAP VALUE FUND and FLEX FUND invest more than 10%
of the value of the applicable Fund's total assets directly in foreign
securities, including unsponsored ADRs. Up to 25% of the total assets of the
LARGE CAP VALUE FUND and FLEX FUND may be invested in securities of Canadian
issuers and sponsored ADRs. The REAL ESTATE FUND may invest up to 25% of total
assets in foreign securities including unsponsored ADRs. The MULTIFLEX FUND may
invest up to 40% of total assets in securities of foreign issuers. Securities
of Canadian issuers and securities purchased by means of sponsored
15
92
ADRs are not subject to this 40% limitation. The INTERNATIONAL VALUE FUND may
invest up to 100% of its total assets in securities of foreign issuers.
(2) Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except as set forth in the Prospectuses and this Statement
of Additional Information for transactions in options, futures, and options on
futures and transactions arising under swap agreements. Options on interest rate
futures contracts and investments in initial margins will not exceed 5% of the
applicable Fund's total assets. Covered call options and cash secured puts will
not exceed 25% of the applicable Fund's total assets.
(3) Engage in arbitrage transactions.
Except for the Funds' investment objectives and those investment
policies of a Fund specifically identified as fundamental, all investment
policies and practices described in the Prospectuses and in the Statement of
Additional Information are not fundamental and, therefore, may be changed by the
Board of Directors without shareholder approval. Such changes may result in a
Fund having investment policies different from the investment policies which the
shareholder considered appropriate at the time of investment in the Fund.
PORTFOLIO SECURITIES LOANS
Each of the Funds may lend limited amounts of Fund securities (not to
exceed 10% of total assets) to broker-dealers or other institutional investors.
The sub-advisors will monitor the creditworthiness of such broker-dealers in
accordance with procedures adopted by the Directors. Fund management understands
that it is the current view of the staff of the SEC that the Funds are permitted
to engage in loan transactions only if the following conditions are met: (1) the
applicable Fund must receive 100% collateral in the form of cash or U.S.
government securities, e.g., U.S. Treasury bills or notes, from the borrower;
(2) the borrower must increase the collateral whenever the market value of the
borrowed securities (determined on a daily basis) rises above the level of the
collateral; (3) the applicable Fund must be able to terminate the loan after
notice; (4) the applicable Fund must receive reasonable interest on the loan or
a flat fee from the borrower, as well as amounts equivalent to any dividends,
interest or other distributions on the securities loaned and any increase in
market value; (5) the applicable Fund may pay only reasonable custodian fees in
connection with the loan; and (6) voting rights on the securities loaned may
pass to the borrower; however, if a material event affecting the investment
occurs, the Fund must be able to terminate the loan and vote proxies or enter
into an alternative arrangement with the borrower to enable the Fund to vote
proxies. Excluding items (1) and (2), these practices may be amended from time
to time as regulatory provisions permit.
While there may be delays in recovery of loaned securities or even a
loss of rights in collateral supplied should the borrower fail financially,
loans will be made only to firms deemed by the sub-advisers to be of good
standing and will not be made unless, in the judgment of the respective
sub-adviser, the consideration to be earned from such loans would justify the
risk.
It is expected that each of the Funds will use the cash portions of
loan collateral to invest in short-term income producing securities for such
Fund's account and that such Fund may share some of the income from these
investments with the borrower.
MANAGEMENT OF THE COMPANY
The overall management of the business and affairs of the Fund is
vested in the Company's Board of Directors. The Board of Directors approves all
significant agreements between the Company and persons or companies furnishing
services to the Funds, including the investment advisory agreement with AIM, the
agreements with AIM Distributors regarding distribution of each Fund's shares
and the agreements with State Street Bank and Trust Company as the custodian.
The day-to-day operations of each Fund are delegated to the officers of the
Company and to AIM, subject always to the objective and policies of the
applicable Fund and to the general supervision of the Board of Directors.
Certain directors and officers of the Company are affiliated with AIM and A I M
Management Group Inc. ("AIM Management"), the parent corporation of AIM.
16
93
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during the last five years are set forth below. Unless otherwise
indicated, the address of each director and officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046. All of the Company's executive officers hold similar
offices with some or all of the other investment companies managed or advised by
AIM or its subsidiaries (the " AIM Funds").
==============================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING, AT LEAST,
NAME, ADDRESS AND AGE WITH REGISTRANT THE PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------
*CHARLES T. BAUER (80) Director and Chairman of the Board of Directors,
Chairman A I M Management Group Inc.,
A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund
Management Company; and Vice Chairman
and Director, AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (55) Director Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief
McLean, VA 22102 Executive Officer, COMSAT Corporation and
Chairman, Board of Governors of INTELSAT
(international communications company.)
- --------------------------------------------------------------------------------------------------------------
OWEN DALY II (74) Director Director, Cortland Trust Inc. (investment
Six Blythewood Road company). Formerly, Director, CF & I Steel
Baltimore, MD 21210 Corp., Monumental Life Insurance Company
and Monumental General Insurance
Company; and Chairman of the Board of
Equitable Bancorporation.
- --------------------------------------------------------------------------------------------------------------
EDWARD K. DUNN, JR. (63) Director Chairman of the Board of Directors,
2 Hopkins Plaza, 20th Floor Mercantile Mortgage Corp. Formerly, Vice
Baltimore, MD 21201 Chairman of the Board of Directors and
President, Mercantile-Safe Deposit & Trust
Co.; and President, Mercantile Bankshares.
- --------------------------------------------------------------------------------------------------------------
JACK FIELDS (47) Director Chief Executive Officer, Texana Global, Inc.
Jetero Plaza, Suite E (foreign trading company) and Twenty-First
8810 Will Clayton Parkway Century Group, Inc. (governmental affairs
Humble, TX 77338 company). Formerly, Member of the U. S.
House of Representatives.
- --------------------------------------------------------------------------------------------------------------
- -------------------
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
17
94
==============================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING, AT LEAST,
NAME, ADDRESS AND AGE WITH REGISTRANT THE PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------
**CARL FRISCHLING (62) Director Partner, Kramer, Levin, Naftalis & Frankel
919 Third Avenue LLP (law firm). Formerly, Partner, Reid &
New York, NY 10022 Priest (law firm).
- --------------------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (52) Director and Director, President and Chief Executive
President Officer, A I M Management Group Inc.;
Director and President, A I M Advisors, Inc.;
Director and Senior Vice President,
A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services,
Inc. and Fund Management Company;
Director, AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (48) Director Chief Executive Officer, YWCA of the U.S.A.;
350 Fifth Avenue, Suite 301 Commissioner, New York City Department
New York, NY 10118 for the Aging; and Member of the Board of
Directors, Metropolitan Transportation
Authority of New York State.
- --------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (56) Director Attorney in private practice in Houston,
6363 Woodway, Suite 825 Texas.
Houston, TX 77057
- --------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (59) Director Executive Vice President, Development and
Transco Tower, 50th Floor Operations, Hines Interests Limited
2800 Post Oak Blvd. Partnership (real estate development).
Houston, TX 77056
- --------------------------------------------------------------------------------------------------------------
- -----------------
** A director who is an "interested person" of the Company as defined in the
1940 Act.
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
18
95
==============================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING, AT LEAST,
NAME, ADDRESS AND AGE WITH REGISTRANT THE PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------
***JOHN J. ARTHUR (54) Senior Vice Director, Senior Vice President, A I M
President and Advisors, Inc.; and Vice President and
Treasurer Treasurer, A I M Management Group Inc.
- --------------------------------------------------------------------------------------------------------------
GARY T. CRUM (51) Senior Vice Director and President, A I M Capital
President Management, Inc.; Director and Senior Vice
President, A I M Management Group Inc.
and A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------
***CAROL F. RELIHAN (44) Senior Vice Director, Senior Vice President, General
President and Counsel and Secretary, A I M Advisors, Inc.;
Secretary Senior Vice President, General Counsel and
Secretary, A I M Management Group Inc.;
Director, Vice President and General
Counsel, Fund Management Company;
General Counsel and Vice President,
A I M Fund Services, Inc.; and Vice
President, A I M Capital Management, Inc.
and A I M Distributors, Inc.
- --------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (40) Vice President Vice President and Fund Controller,
and Assistant A I M Advisors, Inc.; and Assistant Vice
Treasurer President and Assistant Treasurer, Fund
Management Company.
- --------------------------------------------------------------------------------------------------------------
ROBERT G. ALLEY (50) Vice President Senior Vice President, A I M Capital
Management, Inc.; and Vice President,
A I M Advisors, Inc.
- --------------------------------------------------------------------------------------------------------------
STUART W. COCO (43) Vice President Senior Vice President, A I M Capital
Management, Inc.; and Vice President,
A I M Advisors, Inc.
- --------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (55) Vice President Vice President and Chief Compliance
Officer, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund
Management Company.
- --------------------------------------------------------------------------------------------------------------
- -----------------
*** Mr. Arthur and Ms. Relihan are married to each other.
19
96
================================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING, AT LEAST,
NAME, ADDRESS AND AGE WITH REGISTRANT THE PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------------
KAREN DUNN KELLEY (38) Vice President Senior Vice President, A I M Capital
Management, Inc.; and Vice President,
A I M Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------------
EDGAR M. LARSEN (58) Vice President Vice President, A I M Capital Management, Inc.
- ----------------------------------------------------------------------------------------------------------------
================================================================================================================
The standing committees of the Board of Directors are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock, Sklar and Ms. Mathai-Davis. The Audit
Committee is responsible for meeting with the Company's auditors to review audit
procedures and results and to consider any matters arising from an audit to be
brought to the attention of the directors as a whole with respect to the
Company's fund accounting or its internal accounting controls, and for
considering such matters as may from time to time be set forth in a charter
adopted by the Board of Directors and such committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock, Sklar (Chairman) and Ms. Mathai-Davis.
The Investments Committee is responsible for reviewing portfolio compliance,
brokerage allocation, portfolio investment pricing issues, interim dividend and
distribution issues, and considering such matters as may from time to time be
set forth in a charter adopted by the Board of Directors and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock, Sklar and Ms. Mathai-Davis.
The Nominating and Compensation Committee is responsible for considering and
nominating individuals to stand for election as directors who are not interested
persons as long as the Company maintains a distribution plan pursuant to Rule
12b-1 under the 1940 Act, reviewing from time to time the compensation payable
to the disinterested directors, and considering such matters as may from time to
time be set forth in a charter adopted by the Board of Directors and such
committee.
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in attending each
meeting of the Board of Directors or any committee thereof. Each director who is
not also an officer of the Company is compensated for his or her services
according to a fee schedule which recognizes the fact that such director also
serves as a director or trustee of other AIM Funds as well as a director of the
Funds. Each such director receives a fee, allocated among the AIM Funds for
which he or she serves as a director or trustee, which consists of an annual
retainer component and a meeting fee component.
20
97
Set forth below is information regarding compensation paid or accrued
for each director of the Company during the year ended December 31, 1998:
===============================================================================================================
RETIREMENT TOTAL
ESTIMATED BENEFITS COMPENSATION
COMPENSATION ACCRUED BY ALL FROM ALL
DIRECTOR FROM COMPANY(1) AIM FUNDS(2) AIM FUNDS(3)
- ---------------------------------------------------------------------------------------------------------------
Charles T. Bauer $ 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------------
Bruce L. Crockett 5,543 37,485 96,000
- ---------------------------------------------------------------------------------------------------------------
Owen Daly II 5,543 122,898 96,000
- ---------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. 4,466 0 78,889
- ---------------------------------------------------------------------------------------------------------------
Jack Fields 5,514 15,826 95,500
- ---------------------------------------------------------------------------------------------------------------
Carl Frischling(4) 5,515 97,791 95,500
- ---------------------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ---------------------------------------------------------------------------------------------------------------
John F. Kroeger(5) 3,912 107,896 91,654
- ---------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis 1,800 0 32,636
- ---------------------------------------------------------------------------------------------------------------
Lewis F. Pennock 5,515 45,766 95,500
- ---------------------------------------------------------------------------------------------------------------
Ian W. Robinson(6) 5,455 94,442 94,500
- ---------------------------------------------------------------------------------------------------------------
Louis S. Sklar 5,486 90,232 94,500
===============================================================================================================
- ----------------
(1) The total amount of compensation deferred by all Directors of the Company
during the fiscal year ended December 31, 1998, including interest earned
thereon, was $22,522.
(2) During the fiscal year ended December 31, 1998, the total amount of expenses
allocated to the Company in respect of such retirement benefits was $10,063.
Data reflects compensation for the calendar year ended December 31, 1998.
(3) Each Director serves as director or trustee of a total of 12 registered
investments companies advised by AIM (comprised of over 50 portfolios). Data
reflect total compensation earned during the calendar year ended December 31,
1998. Does not include accrued retirement benefits or earnings on deferred
compensation.
(4) During the fiscal year ended December 31, 1998, the Company paid $20,036 in
legal fees for services rendered by Kramer, Levin, Naftalis & Frankel LLP. Mr.
Frischling is a partner is such firm.
(5) Mr. Kroeger was a Director until June 11, 1998, when he resigned. On that
date he became a consultant to the Fund. Of the amount listed above, $2,242 was
compensation for services as a director and the remainder as a consultant. Mr.
Kroeger passed away on November 26, 1998. Mr. Kroeger's widow will receive his
pension as described below under "AIM Fund Retirement Plan for Eligible
Directors/Trustees."
(6) Mr. Robinson was a director until March 31, 1999, when he retired.
21
98
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not a employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible director is entitled to receive an annual benefit
from the Applicable AIM Funds commencing on the first day of the calendar
quarter coincident with or following his or her date of retirement equal to 75%
of the retainer paid or accrued by the Applicable AIM Funds for such director
during the twelve-month period immediately preceding the director's retirement
(including amounts deferred under a separate agreement between the Applicable
AIM Funds and the director) for the number of such director's years of service
(not in excess of 10 years of service) completed with respect to any of the
Applicable AIM Funds. Such benefit is payable to each eligible director in
quarterly installments. If an eligible director dies after attaining the normal
retirement date but before receipt of any benefits under the Plan commences, the
director's surviving spouse (if any) shall receive a quarterly survivor's
benefit equal to 50% of the amount payable to the deceased director for no more
than ten years beginning the first day of the calendar quarter following the
date of the director's death. Payments under the Plan are not secured or funded
by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Fields, Frischling, Kroeger, Pennock,
Robinson, Sklar and Ms. Mathai-Davis are 11, 11, 0, 1, 21, 20, 17, 11, 9 and 0
years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
=================================================
Number of Annual Retainer
Years of Paid by all
Service with Applicable AIM Funds
the Applicable
AIM Funds $90,000
=================================================
10 $67,500
- -------------------------------------------------
9 $60,750
- -------------------------------------------------
8 $54,000
- -------------------------------------------------
7 $47,250
- -------------------------------------------------
6 $40,500
- -------------------------------------------------
5 $33,750
=================================================
22
99
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling, Kroeger, Robinson and Sklar
(for purposes of this paragraph only, the "deferring directors") have each
executed a Deferred Compensation Agreement (collectively, the "Agreements").
Pursuant to the Agreements, the deferring directors may elect to defer receipt
of up to 100% of their compensation payable by the Company, and such amounts are
placed into a deferral account. Currently, the deferring directors may select
various AIM Funds in which all or part of their deferral accounts shall be
deemed to be invested. Distributions from the deferring directors' deferral
accounts will be paid in cash, in generally equal quarterly installments over a
period of five (5) or ten (10) years (depending on the Agreement) beginning on
the date the deferring director's retirement benefits commence under the Plan.
The Company's Board of Directors, in its sole discretion, may accelerate or
extend the distribution of such deferral accounts after the deferring director's
termination of service as a director of the Company. If a deferring director
dies prior to the distribution of amounts in his deferral account, the balance
of the deferral account will be distributed to his designated beneficiary in a
single lump sum payment as soon as practicable after such deferring director's
death. The Agreements are not funded and, with respect to the payments of
amounts held in the deferral accounts, the deferring directors have the status
of unsecured creditors of the Company and of each other AIM Fund from which they
are deferring compensation.
THE ADVISORY AND SUB-ADVISORY AGREEMENTS
The Company has entered into an Investment Advisory Agreement, with
AIM. AIM is a wholly owned subsidiary of A I M Management Group Inc. ("AIM
Management"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. AIM was
organized in 1976, and, together with its subsidiaries, advises or manages over
110 investment portfolios encompassing a broad range of investment objectives.
AIM Management is a holding company engaged in the Financial services business
and is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London EC2M 4YR, United Kingdom. AMVESCAP PLC and its subsidiaries are
an independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific Region. Certain of the directors and officers of AIM are also
executive officers of the Company and their affiliations are shown under
"Directors and Officers."
The sub-advisor to the LARGE CAP VALUE FUND and FLEX FUND is INVESCO
Capital Management, Inc., a Delaware corporation ("ICM"), which has its
principal office at 1315 Peachtree Street, N. E., Atlanta, Georgia 30309. ICM
also has an advisory office in Miami, Florida and a marketing and client service
office in San Francisco, California. ICM is registered as an investment advisor
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). ICM
believes it has one of the nation's largest discretionary portfolios of
tax-exempt accounts (such as pension and profit sharing funds for corporations
and state and local governments). Funds are supervised by investment managers
who utilize ICM's facilities for investment research and analysis, review of
current economic conditions and trends, and consideration of long-range
investment policy matters.
The sub-advisor to the MULTIFLEX FUND is INVESCO Management and
Research, Inc., of Boston, Massachusetts, a Massachusetts corporation ("IMR"),
which has its principal office at 101 Federal Street, Boston, MA 02110. IMR is
registered as an investment advisor under the Advisers Act. IMR manages
predominantly pension and endowment accounts. IMR currently sponsors one
investment company, The Commonwealth Investment Trust, which consists of one
portfolio.
The sub-advisor to the REAL ESTATE FUND is INVESCO Realty Advisors,
Inc., a Texas corporation based in Dallas ("IRAI"), which has its principal
office at One Lincoln Centre, Suite 700, 5400 LBJ Freeway/LB 2, Dallas, Texas
75240. IRAI is registered as an investment advisor under the Advisers Act. IRAI
is responsible for providing advisory services in the U.S. real estate markets
for AMVESCAP's clients worldwide. IRAI was established in 1983 as a registered
investment adviser and qualified professional asset manager. As of December 31,
1998, IRAI's portfolio contained 199 properties totaling over 48 million square
feet of commercial real estate and 25,410 apartment units. Clients include
corporate plans and public pension funds as well as endowment and foundation
accounts. IRAI currently advises one other mutual fund, INVESCO Realty Fund.
23
100
The sub-advisor to INTERNATIONAL VALUE FUND is INVESCO Global Asset
Management Limited, a Bermuda corporation ("IGAM"), which has its principal
office at Cedar House, 12 Bermudian Rd., 3rd Floor, Hamilton, HM AX, Bermuda.
IGAM is registered as an investment advisor under the Advisers Act. IGAM's
responsibilities include analyzing global economic trends and establishing
AMVESCAP PLC's global investment asset allocation for AMVESCAP PLC affiliates.
AIM and ICM provide general investment advice and portfolio management
to the LARGE CAP VALUE FUND and FLEX FUND. AIM and IMR provide general
investment advice and portfolio management to the MULTIFLEX FUND. AIM and IGAM
provide general investment advice and portfolio management to INTERNATIONAL
VALUE FUND. AIM and IRAI provide general investment advice and portfolio
management to the REAL ESTATE FUND. AIM, ICM, IMR, IRAI and IGAM are indirect
wholly owned subsidiaries of AMVESCAP (formerly, AMVESCO PLC and INVESCO PLC).
AMVESCAP is one of the largest independent investment management businesses in
the world.
Effective August 4, 1997, AIM became the investment advisor for the
Funds pursuant to an investment advisory agreement with terms substantially
identical to those of the company's prior investment advisory contracts with
INVESCO Services, Inc. ("ISI"). The sub-advisors did not change other than the
substitution of IGAM for ICM as sub-advisor to INTERNATIONAL VALUE FUND.
Under their Investment Advisory and Sub-Advisory Agreements (the
"Agreements") with the respective Funds, the Advisor and sub-advisors will,
subject to the supervision of the Directors of the Company and in conformance
with the stated policies of the Funds, manage the investment operations of the
Funds. In this regard, it will be the responsibility of the Advisor and
sub-advisors not only to make investment decisions for the Funds, but also to
place the purchase and sale orders for the portfolio transactions of the Funds.
(See "Brokerage and Portfolio Transactions.") The Advisor and sub-advisors may
follow a policy of considering sales of shares of the Company as a factor in the
selection of broker-dealers to execute portfolio transactions. The Investment
Advisory Agreement provides that, in fulfilling its responsibilities, the
Advisor may engage the services of other investment managers with respect to one
or more of the Funds. In accordance with policies established by the Board of
Directors, AIM may take into account sales of shares of the Funds and other
funds advised by AIM in selecting broker-dealers to effect portfolio
transactions on behalf of the Funds.
The Advisor is also responsible for furnishing to the Funds, at the
Advisor'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 Directors, 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. Operational services which are
necessary for the day-to-day operations of the Funds are provided under a
separate Operating Services Agreement between the Company and AIM (See
"Operating Services Agreement.")
Rule 18f-3 under the 1940 Act ("Rule 18f-3") permits a fund to use a
multiclass system including separate class arrangements for distribution of
shares and related exchange privileges applicable to the classes. The Company
has adopted a multiple class plan pursuant to Rule 18f-3, which provides that
advisory and operating services fees (see "Operating Services Agreement") are
expenses of a particular Fund and are not attributable to a particular class of
the Fund ("Fund Expenses") and, therefore, shall be allocated to each class on
the basis of its net asset value relative to the net asset value of the Fund.
(See "Computation of Net Asset Value.")
Except as discussed below (see "Operating Services Agreement"), each of
the Funds is responsible for the payment of its own expenses. Interest, taxes,
distribution expenses, directors' fees and expenses and extraordinary items such
as litigation costs will be borne by the Company or particular Fund, as
applicable. Expenditures, including costs incurred in connection with the
purchase or sale of Fund securities, which are capitalized in accordance with
generally accepted accounting principles applicable to investment companies, are
accounted for as capital items and not as expenses.
24
101
For the services to be rendered and the expenses to be assumed by the
Advisor under the Investment Advisory Agreements, each Fund will pay to the
Advisor an advisory fee which will be computed daily and paid as of the last day
of each month on the basis of the Fund's daily net asset value, using for each
daily calculation the most recently determined net asset value of the Fund. In
order to increase the return to investors, AIM may from time to time waive,
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 Tables in the Prospectuses may not be terminated without the approval of
the Board of Directors. On an annual basis, the advisory fee is equal to 0.75%
of the average net asset value of the LARGE CAP VALUE FUND and FLEX FUND, 0.90%
of the average net asset value of the REAL ESTATE FUND and 1.00% of the average
net asset value of each of the MULTIFLEX FUND and INTERNATIONAL VALUE FUND.
Those fees which equal 0.75% of average annual net assets are higher than those
generally charged by investment advisors to similar funds for advisory services.
However, the Advisor also provides certain supervisory and administrative
services to the Funds pursuant to the Investment Advisory Agreements.
For the services to be rendered and the expenses to be assumed by ICM,
IGAM, IMR and IRAI under their respective Sub-Advisory Agreements, the Advisor
will pay to each sub-advisor a fee which will be computed daily and paid as of
the last day of each month on the basis of each Fund's daily net asset value,
using for each daily calculation the most recently determined net asset value of
the Fund. (See "Computation of Net Asset Value.") On an annual basis, the
sub-advisory fee is equal to 0.20% of the average net asset value of the Fund
for each of the LARGE CAP VALUE FUND and FLEX FUND; 0.35% of the average net
asset value of the REAL ESTATE FUND on assets up to $100 million and 0.25% on
assets in excess of $100 million; 0.35% of the average net asset value of the
MULTIFLEX FUND on assets up to $500 million and 0.25% on assets in excess of
$500 million; and the following for the INTERNATIONAL VALUE FUND: 0.35% on net
assets up to $50 million, 0.30% on net assets over $50 million and up to $100
million, and 0.25% on net assets over $100 million.
The Agreements will each continue from year to year, provided that they
are specifically approved at least annually by (i) the vote of a majority of
each applicable Fund's outstanding voting securities (see "General Information
About the Company") or by the Directors, and (ii) the vote of a majority of the
Directors, who are not "interested persons" (as such term is defined in the 1940
Act) of the Funds or the Advisor or the respective sub-advisor. The Agreements
are terminable on 60 days' written notice by either party thereto and will
terminate automatically if assigned.
For the fiscal years ended December 31, 1998, 1997 and 1996, the
aggregate amounts of the advisory fees paid to AIM (or INVESCO Services, Inc.,
the prior advisor) by the Funds, were as follows:
Aug. 4 Jan. 1
to Dec. 31 to Aug. 3
Fund 1998 1997* 1997 1996
---- ---- -------------- ---------- ----
LARGE CAP VALUE FUND $1,430,336 $ 698,693 $ 486,185 $ 946,203
FLEX FUND $5,051,593 2,511,884 1,732,896 3,351,899
MULTIFLEX FUND $3,855,357 2,126,222 1,153,820 2,164,778
REAL ESTATE FUND $ 625,129 229,632 90,122 102,386
INTERNATIONAL VALUE FUND $1,238,568 536,578 272,940 314,843
*Effective August 4, 1997, AIM became advisor to the Funds.
The investment advisory services of the Advisor to the Funds are not
exclusive and the Advisor is free to render investment advisory services to
others, including other investment companies. See "Operating Services Agreement"
below regarding expense limitations.
OPERATING SERVICES AGREEMENT
AIM, as manager of the Funds, also provides operating services pursuant
to an Operating Services Agreement with the Fund. Under the Operating Services
Agreement, each Fund pays to AIM an annual fee of 0.45% of daily net assets of
the Fund for providing or arranging to provide accounting, legal (except
litigation), dividend disbursing, registrar, custodial, shareholder reporting,
sub-accounting and recordkeeping services and functions. These agreements
provide that AIM pays all fees and expenses associated with these
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and other functions, including, but not limited to, registration fees,
shareholder meeting fees, and proxy statement and shareholder report expenses.
The combined effect of the Advisory Agreements and Operating Services
Agreement, and the Distribution Plans of each of the Funds (see "Distribution of
Shares"), is to place a cap or ceiling on the total expenses of each Fund, other
than brokerage commissions, interest, taxes, litigation, directors' fees and
expenses, and other extraordinary expenses. AIM has voluntarily agreed to adhere
to maximum expense ratios for the Funds. To the extent that a Fund's expenses
exceed the amounts listed below, AIM will waive its fees or reimburse the Fund
to assure that each Fund's expenses do not exceed the designated maximum amounts
except for those items specifically identified above. The expense ceilings
include reductions at larger asset sizes to reflect anticipated economies of
scale as the Funds grow in size.
If, in any calendar quarter, the average net assets of each of the
LARGE CAP VALUE FUND or FLEX FUND are less than $500 million, each Fund's
expenses shall not exceed 1.55% for Class A and 2.20% for Class C; on the next
$500 million of net assets, expenses shall not exceed 1.50% for Class A and
2.15% for Class C; on the next $1 billion of net assets, expenses shall not
exceed 1.45% for Class A and 2.10% for Class C; and on all assets over $2
billion, expenses shall not exceed 1.40% for Class A and 2.05% for Class C. If,
in any calendar quarter, the average net assets of the MULTIFLEX FUND or
INTERNATIONAL VALUE FUND are less than $100 million, expenses shall not exceed
1.80% for Class A and 2.45% for Class C; on the next $400 million of net assets,
expenses shall not exceed 1.75% for Class A and 2.40% for Class C; on the next
$500 million, expenses shall not exceed 1.70% for Class A and 2.35% for Class C;
on the next $1 billion of net assets, expenses shall not exceed 1.65% for Class
A and 2.30% for Class C; and on all assets over $2 billion, expenses shall not
exceed 1.60% for Class A and 2.25% for Class C. If, in any calendar quarter, the
average net assets of the REAL ESTATE FUND are less than $500 million, expenses
shall not exceed 1.70% for Class A and 2.35% for Class C; on the next $500
million, expenses shall not exceed 1.65% for Class A and 2.30% for Class C; and
on all assets over $1 billion, expenses shall not exceed 1.60% for Class A and
2.25% for Class C.
DISTRIBUTION OF SHARES
Rule 12b-1 under the 1940 Act ("Rule 12b-1") permits a fund to use its
assets to bear expenses of distributing its shares if it complies with various
conditions, including adoption of a plan of distribution containing certain
provisions set forth in the Rule. The plans described below were approved with
respect to each Fund by the directors of the Fund, including a majority of the
directors who are not "interested persons" of the Funds as defined in the 1940
Act ("Independent Directors") and the directors who have no direct or indirect
financial interest in the plan or any agreement related thereto (the "Rule 12b-1
Directors"). The directors determined that, in their judgment, there was a
reasonable likelihood that the plans will benefit each Fund and its shareholders
by, among other things, providing broker-dealers with an incentive to sell
additional shares of the Company, thereby helping to satisfy the Company's
liquidity needs and helping to increase the Company's investment flexibility.
Continuation of the plans is approved annually. On June 8, 1993, the Plan and
Agreement of Distribution ("Distribution Plan") applicable to Class C shares was
approved by shareholders of the LARGE CAP VALUE FUND and FLEX FUND. On November
8, 1993, the Distribution Plan applicable to Class C shares was approved by the
sole shareholder of the MULTIFLEX FUND. On April 10, 1995, the Distribution Plan
applicable to Class C shares was approved by the sole shareholder of each of the
REAL ESTATE FUND and INTERNATIONAL VALUE FUND. The Distribution Plan for Class A
shares was approved by the board of directors of the Company at its August 13,
1996 Board meeting, and by the initial shareholder(s) of Class A shares of each
Fund prior to their public offering. On February 4, 1997, the board of directors
approved amending the Distribution Plan for Class A shares, effective January 1,
1997, to convert the Distribution Plan to a compensation type Rule 12b-1 plan.
This amendment of the Distribution Plan did not result in increasing the amount
of any Fund's payments thereunder. The Master Distribution Plan for Class B
shares was approved by the board of directors of the Company at its September
20, 1997 Board meeting.
CLASS A AND CLASS C DISTRIBUTION PLAN. The Company has adopted a Plan and
Agreement of Distribution pursuant to Rule 12b-1 under the 1940 Act relating to
the Class A and Class C shares of the Funds (the "Class A and C Plan"). The
Class A and C Plan provides that each Fund may incur certain distribution and
maintenance fees which may not exceed a maximum annual rate of 0.35% of the
average net assets attributable to Class A shares and 1.00% of the average net
assets attributable to Class C shares. For both
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Class A and Class C shares, this expense includes the payment of 0.25% of
average annual net assets to broker-dealers and other qualifying financial
institutions as a "service fee" for providing account maintenance or personal
service to existing shareholders.
Under the Class A and C Plan, broker-dealers selling Fund shares may be
paid fees for selling shares and maintaining Fund assets. For Class A shares, of
such fees .25% of average net assets may be paid as a "service fee." The service
fee, computed on the basis of the average net asset value of Class A shares sold
by broker-dealers which are outstanding on the books of such Funds for each
month, will be made at least quarterly to the selling broker-dealer. For Class C
shares, generally an asset-based fee for selling shares and providing services
to shareholders will be paid out of Rule 12b-1 plan payments by the Distributor
as follows: payments not exceeding 1.00% per annum, which amount includes the
0.25% "service fee," of the average net asset value of Class C shares sold by
broker-dealers, which are outstanding on the books of such Funds for each month,
will be made at least quarterly to the selling broker-dealer. Additionally, the
plan authorizes each applicable Fund, subject to the annual limitations
described above, to pay the Distributor (or other broker-dealers): (1) the costs
and expenses incurred in preparation, printing and distribution of the Company's
sales literature and prospectuses and statements of additional information for
prospective investors; (2) amounts from time to time to support marketing shares
of the Company through programs with broker-dealers selling Company shares; and
(3) overhead expenses which include the costs of the Distributor's personnel
whose primary responsibilities involve marketing the Company. In addition, the
plan provides that the Company may pay, subject to the annual limitations, such
other distribution costs and expenses as the Directors may from time to time
specify.
CLASS B DISTRIBUTION PLAN. The Company has also adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of the
Funds. Under the Class B Plan, the Funds pay compensation to AIM Distributors at
an annual rate of 1.00% of the average daily net assets attributable to Class B
shares. Of such amount, the Funds pay a service fee of 0.25% of the average
daily net assets attributable to Class B shares to selected dealers and other
institutions which furnish continuing personal shareholder services to their
customers who purchase and own Class B shares. Amounts paid in accordance with
the Class B Plan may be used to finance any activity primarily intended to
result in the sale of Class B shares, including, but not limited to, 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 the Class B Plan.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Funds; assisting customers
in changing dividend options, account designations and addresses, and in
enrolling in any of several special investment plans offered in connection with
the purchase of the Fund's shares; assisting in the establishment and
maintenance of customer accounts and records and in the processing of purchase
and redemption transactions; investing dividends and any capital gains
distributions automatically in the Fund's shares; and providing such other
information and services as the Funds or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Funds and
the Company; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements
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104
with those of other transactions and balances in the shareholder's other
accounts serviced by the bank; forwarding applicable prospectuses, proxy
statements, reports and notices to bank clients who hold shares of the Funds;
and such other administrative services as the Funds reasonably may request, to
the extent permitted by applicable statute, rule or regulation. Similar
agreements may be permitted under the Plans for institutions which provide
recordkeeping for and administrative services to 401(k) plans.
The Company may also enter into Variable Group Annuity Contractholder
Service Agreements ("Variable Contract Agreements") on behalf of the Funds
authorizing payments to selected insurance companies offering variable annuity
contracts to employers as funding vehicles for retirement plans qualified under
Section 401(a) of the Internal Revenue Code. Services provided pursuant to such
Variable Contract Agreements may include some or all of the following: answering
inquiries regarding the Fund and the Company; performing sub-accounting;
establishing and maintaining Contractholder accounts and records; processing and
bunching purchase and redemption transactions; providing periodic statements of
contract account balances; forwarding such reports and notices to
Contractholders relative to the Fund as deemed necessary; generally,
facilitating communications with Contractholders concerning investments in a
Fund on behalf of Plan participants; and performing such other administrative
services as deemed to be necessary or desirable, to the extent permitted by
applicable statute, rule or regulation to provide such services.
Financial intermediaries and any other person entitled to receive
compensation for selling shares of the Funds may receive different compensation
for selling shares of one particular class over another.
Under a Shareholder Service Agreement, the Funds agree 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 generally will be calculated at the end of each payment period
for each business day of the Funds during such period at the annual rate of
0.25% of the average daily net asset value of the Funds' shares purchased or
acquired through exchange. Fees calculated in this manner 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 the Funds' shares are held.
The Plans are subject to any applicable limitations imposed from time
to time by rules of the National Association of Securities Dealers, Inc.
Under the Plans, AIM Distributors may in its discretion from time to
time agree to waive voluntarily all or any portion of its 12b-1 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
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 the Prospectuses may not be terminated without the approval of the
Board of Directors.
AIM Distributors does not act as principal, but rather as agent for the
Funds, in making dealer incentive and shareholder servicing payments under the
Plans. These payments are an obligation of the Funds and not of AIM
Distributors.
GENERAL. The Plans may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors or by vote of a majority of the outstanding voting
securities of the applicable class of the Fund. Any change in a Plan that would
materially increase the distribution expenses of a class of the Fund provided
for in the Plans requires shareholder approval; otherwise, the Plans may be
amended by a majority of the Directors, including a majority of the Rule 12b-1
Directors.
For so long as the Plans are in effect, the Funds will be required to
commit the selection and nomination of candidates for Independent Directors to
the discretion of the Independent Directors.
The total amounts paid by each Fund under the foregoing arrangements
for any year may not exceed the maximum plan limit specified above, and the
amounts and purposes of expenditures under the Plans must be reported to the
Rule 12b-1 Directors quarterly. The Rule 12b-1 Directors may require or approve
changes in the implementation or operation of the Plans and may also require
that total expenditures by each applicable class of a Fund under the Plans be
kept within limits lower than the maximum amount permitted by the Plans as
stated above.
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The Distributor may pay additional amounts from its own resources to
dealers or others who meet designated eligibility criteria relating to sales of
Company shares, or who provide administrative or informational assistance to
shareholders.
An estimate by category of the allocation of actual fees paid by each
of the Funds under the Plan for Class A shares for the year ended December 31,
1998, was as follows:
LARGE CAP MULTIFLEX REAL INTERNATIONAL
VALUE FUND FLEX FUND FUND ESTATE FUND VALUE FUND
---------- --------- ---- ----------- ----------
CLASS A
Advertising ................. $ 1,538 $ 4,095 $ 665 $ 1,432 $ 1,400
Printing and mailing
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)................ 134 389 63 136 138
Seminars .................... 371 830 170 290 343
Compensation to
Underwriters to partially
offset other marketing
expenses..................... 0 0 0 0 0
Compensation to
Dealers including
finder's fees................ 25,246 84,900 37,901 55,976 39,695
Compensation to
Sales Personnel.............. 0 0 0 0 0
Annual Report Total.......... 27,289 90,214 38,799 57,834 41,576
An estimate by category of the allocation of actual fees paid by each of the
Funds under the Plan for Class B shares for the period March 3, 1998 through
December 31, 1998, was as follows:
LARGE CAP MULTIFLEX REAL INTERNATIONAL
VALUE FUND FLEX FUND FUND ESTATE FUND VALUE FUND
---------- --------- ---- ----------- ----------
CLASS B
Advertising ................ $ 3,923 $ 2,411 $ 7,324 $ 6,485 $ 2,975
Printing and mailing
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)................. 0 0 612 744 0
Seminars ..................... 0 0 1,134 1,033 0
Compensation to
Underwriters to partially
offset other marketing
expenses...................... 26,462 8,206 29,156 38,154 14,789
Compensation to
Dealers including
finder's fees................. 4,898 324 649 4,456 1,954
Compensation to
Sales Personnel............... 0 0 0 0 0
Annual Report Total........... 35,283 10,941 38,875 50,872 19,718
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An estimate by category of the allocation of actual fees paid by each of the
Funds under the Plan for Class C shares for the year ended December 31, 1998,
was as follows:
LARGE CAP MULTIFLEX REAL INTERNATIONAL
VALUE FUND FLEX FUND FUND ESTATE FUND VALUE FUND
---------- --------- ---- ----------- ----------
CLASS C
Advertising .................. $ 49,140 $ 204,426 $ 144,179 $ 25,491 $ 60,806
Printing and mailing
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)................. 4,766 19,942 14,259 2,521 6,139
Seminars ..................... 12,294 47,480 33,641 6,366 13,894
Compensation to
Underwriters to partially
offset other marketing
expenses...................... 153,212 700,869 519,997 107,453 233,975
Compensation to
Dealers including
finder's fees................. 1,543,648 5,392,294 2,949,208 270,551 737,736
Compensation to
Sales Personnel............... 0 0 0 0 0
Annual Report Total........... 1,763,060 6,365,011 3,661,284 412,382 1,052,550
For the fiscal year ended December 31, 1998, each Fund paid AIM
Distributors the following amounts with respect to the Class A shares under the
Distribution Plans:
CLASS A SHARES
1998
LARGE CAP VALUE FUND $ 27,288
FLEX FUND 90,214
MULTIFLEX FUND 38,800
REAL ESTATE FUND 57,833
INTERNATIONAL VALUE FUND 41,575
For the period March 3, 1998 through December 31, 1998, each Fund paid
AIM Distributors the following amount with respect to the Class B shares under
the Distribution Plans:
CLASS B SHARES
1998
LARGE CAP VALUE FUND $ 35,283
FLEX FUND 10,941
MULTIFLEX FUND 38,874
REAL ESTATE FUND 50,872
INTERNATIONAL VALUE FUND 19,718
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For the fiscal year ended December 31, 1998, each Fund paid AIM
Distributors the following amount with respect to the Class C shares under the
Distribution Plans:
CLASS C SHARES
1998
LARGE CAP VALUE FUND $1,763,060
FLEX FUND 6,365,011
MULTIFLEX FUND 3,661,284
REAL ESTATE FUND 412,382
INTERNATIONAL VALUE FUND 1,052,550
THE DISTRIBUTOR
AIM Distributors, the Company's distributor, is the principal
underwriter of the Company under separate Distribution Agreements (the
"Distribution Agreements"). The Distributor's office is located at 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1143. The Distributor will receive
payments from each Fund pursuant to the provisions of the Company's plans of
distribution described under "Distribution of Shares." Prior to August 4, 1997,
INVESCO Services, Inc. (the "Prior Distributor") was the principal underwriter
of the Company.
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds directly and through institutions with
whom AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of each Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors.
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Funds' shares, including expenses
of advertising in connection with such public offerings. 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 and Class C shares of the
Funds at the time of such sales.
The Company (on behalf of any class of any Fund) or AIM Distributors
may terminate the Distribution Agreements on sixty (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; 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
a Fund and its Class B shareholders to pay contingent deferred sales charges.
From time to time, AIM Distributors may transfer and sell its rights to
payments under the Class B Plan in order to finance distribution expenditures in
respect of Class B shares.
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108
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 year ended December 31, 1998 and for period August 4, 1997
to December 31, 1997, and the amount retained by the Prior Distributor for the
period January 1, 1997 to August 3, 1997:
AUGUST 4, 1997 JANUARY 1, 1997
TO TO
1998 DECEMBER 31, 1997 AUGUST 3, 1997
---- ----------------- --------------
SALES AMOUNT SALES SALES AMOUNT
CHARGES RETAINED CHARGES CHARGES RETAINED
------- -------- ------- ------- --------
LARGE CAP VALUE FUND $ 205,367 $ 32,564 $50,144 $ 7,461 $ 999
FLEX FUND 209,334 33,479 80,657 11,729 6,860
MULTIFLEX FUND 447,970 66,763 200,181 30,382 7,203
REAL ESTATE FUND 495,211 85,554 356,286 54,138 1,424
INTERNATIONAL VALUE FUND 159,987 24,723 113,771 16,464 8,333
The following chart reflects the contingent deferred sales charges paid
by Class A shareholders for the year ended December 31, 1998 and for the period
August 4, 1997 to December 31, 1997, and by Class B shareholder for the period
March 3, 1998 (inception date for Class B shares) to December 31, 1998, and by
Class C shareholders for the year ended December 1998 and for the period August
4, 1997 to December 1997, and the amount paid by Class A and Class C
shareholders to the Prior Distributor for the period January 1, 1997 to August
3, 1997:
1998 AUGUST 4, 1997 JANUARY 1, 1997
---- TO TO
DECEMBER 31, 1997 AUGUST 3, 1997
----------------- --------------
LARGE CAP VALUE FUND $ 34,868 $ 570 $ 8,692
FLEX FUND 100,172 18,422 18,877
MULTIFLEX FUND 86,385 10,269 12,043
REAL ESTATE FUND 25,274 2,643 1,935
INTERNATIONAL VALUE FUND 67,046 13,392 8,692
SALES CHARGES AND DEALER CONCESSIONS
CATEGORY I. Certain AIM Funds are currently sold with a sales charge
ranging from 5.50% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds include Class A shares of each of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Advisor Large Cap Value Fund,
AIM Advisor MultiFlex Fund, AIM Aggressive Growth Fund, AIM Asian Growth Fund,
AIM Basic Value Fund, AIM Blue Chip Fund, AIM Capital Development Fund, AIM
Charter Fund, AIM Constellation Fund, AIM European Development Fund, AIM Europe
Growth Fund, AIM Global Utilities Fund, AIM Global Growth & Income Fund, AIM
International Equity Fund, AIM Japan Growth Fund, AIM Large Cap Growth Fund, AIM
Mid Cap Equity Fund, AIM Mid Cap Opportunities Fund, AIM New Pacific Growth
Fund, AIM Select Growth Fund, AIM Small Cap Growth Fund, AIM Small Cap
Opportunities Fund, AIM Value Fund and AIM Weingarten Fund.
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Dealer
Concession
Investor's Sales Charge ----------
---------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction 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
CATEGORY II. Certain AIM Funds are currently sold with a sales charge
ranging from 4.75% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds are: the Class A shares of each of AIM Advisor Real
Estate Fund, AIM Balanced Fund, AIM Developing Markets Fund, AIM Emerging
Markets Debt Fund, AIM Global Aggressive Growth Fund, AIM Global Consumer
Products and Services Fund, AIM Global Financial Services Fund, AIM Global
Government Income Fund, AIM Global Growth Fund, AIM Global Health Care Fund, AIM
Global Income Fund, AIM Global Infrastructure Fund, AIM Global Resources Fund,
AIM Global Telecommunications Fund, AIM Global Trends Fund, AIM High Income
Municipal Fund, AIM High Yield Fund, AIM High Yield Fund II, AIM Income Fund,
AIM Intermediate Government Fund, AIM Latin American Fund, AIM Municipal Bond
Fund, AIM Strategic Income Fund and AIM Tax-Exempt Bond Fund of Connecticut.
Dealer
Concession
Investor's Sales Charge ----------
---------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction 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
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110
CATEGORY III. Certain AIM Funds are currently sold with a sales charge
ranging from 1.00% to 0.50% of the offering price on purchases of less than
$1,000,000. These AIM Funds are the Class A shares of each of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
Dealer
Concession
Investor's Sales Charge ----------
---------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction 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
There is no sales charge on purchases of $1,000,000 or more; however,
AIM Distributors may pay a dealer concession and/or advance a service fee on
such transactions as set forth below.
ALL GROUPS OF AIM FUNDS. 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 Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. At the option of the dealer, such
incentives may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are
dealers of record for purchases of $1 million or more of Class A shares (or
shares which normally involve payment of initial sales charges), which are sold
at net asset value and are subject to a contingent deferred sales charge, for
all AIM Funds other than Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund as follows: 1% of the first $2 million
of such purchases, plus 0.80% of the next $1 million of such purchases, plus
0.50% of the next $17 million of such purchases, plus 0.25% of amounts in excess
of $20 million of such purchases. AIM Distributors may make payments to dealers
and institutions who are dealers of record for purchases of $1 million or more
of Class A shares (or shares which normally involve payment of initial sales
charges), and which are sold at net asset value and are not subject to a
contingent deferred sales charge, in an amount up to 0.10% of such purchases of
Class A shares of AIM Limited Maturity Treasury Fund, and in an amount up to
0.25% of such purchases of Class A shares of AIM Tax-Free Intermediate Fund.
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
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
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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.
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 and C 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 on-going sales commissions to dealers
plus financing costs, if any. After the first full year, AIM Distributors will
make such payments quarterly 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
commissions are not paid on sales to investors exempt from the CDSC, including
shareholders of record 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 investment dealers or other financial service
firms for share purchases (measured on an annual basis) of Class A Shares of all
AIM Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate
Fund and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit
plan as follows: 1% of the first $2 million of such purchases, plus 0.80% of the
next $1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases and
up to 0.10% of the net asset value of any Class A shares of AIM Limited Maturity
Treasury Fund sold at net asset value to an employee benefit plan in accordance
with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class
B and Class C shares of the AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
o an individual and his or her spouse and children, including any
trust established exclusively for the benefit of any such person;
or a pension, profit-sharing, or other benefit plan established
exclusively for the benefit of any such person, such as an IRA,
Roth IRA, a single-participant money-purchase/profit-sharing plan
or an individual participant in a 403(b) Plan (unless such 403(b)
plan qualifies as the purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for all
participating employees in a single contribution transmittal
(i.e., the Funds will not accept contributions submitted with
respect to individual participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by
submitting an application on behalf of each new participant
with the contribution transmittal;
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o a trustee or fiduciary purchasing for a single trust, estate or
single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Code) and 457 plans, although more than
one beneficiary or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or a
Savings Incentive Match Plans for Employees IRA (SIMPLE IRA),
where the employer has notified the distributor in writing that
all of its related employee SEP, SAR-SEP or SIMPLE IRA accounts
should be linked; or
o any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six
months and has some purpose other than the purchase at a discount
of redeemable securities of a registered investment company.
Investors or 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, by virtue of the foregoing
definition, to the reduced sales charge. No person or entity may distribute
shares of the AIM Funds without payment of the applicable sales charge other
than to persons or entities who qualify for a reduction in the sales charge as
provided herein.
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay
reduced initial sales charges by completing the appropriate section of the
account application and by fulfilling a Letter of Intent ("LOI"). The LOI
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. The LOI confirms such purchaser's intention as to
the total investment to be made in shares of the AIM Funds (except for (i) Class
A shares of AIM Tax-Exempt Cash Fund, and AIM Cash Reserve Shares of AIM Money
Market Fund and (ii) Class B and Class C shares of the AIM Funds) within the
following 13 consecutive months. By marking the LOI section on the account
application and by signing the account application, the purchaser indicates that
he understands and agrees to the terms of the LOI and is bound by the provisions
described below.
Each purchase of fund shares normally subject to an initial sales
charge made during the 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, as described under "Sales Charges and Dealer Concessions." It is the
purchaser's responsibility at the time of purchase to specify the account
numbers that should be considered in determining the appropriate sales charge.
The offering price may be further reduced as described under "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. At any time during the
13-month period after meeting the original obligation, a purchaser may revise
his intended investment amount upward by submitting a written and signed
request. Such a revision will not change the original expiration date. By
signing an LOI, a purchaser is not making a binding commitment to purchase
additional shares, but if purchases made within the 13-month period do not total
the amount specified, the investor will pay the increased amount of sales charge
as described below. 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. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the
initial purchase (or subsequent purchases if necessary) the Transfer Agent will
escrow in the form of shares an appropriate dollar amount (computed to the
nearest full share). All dividends and any capital gain distributions on the
escrowed shares will be credited to the purchaser. All shares purchased,
including those escrowed, will be registered in the purchaser's name. If the
total investment specified under this LOI is completed within the 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 amount
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actually purchased. If the purchaser does not pay such difference within 20 days
of the expiration date, he irrevocably constitutes and appoints the Transfer
Agent as his attorney to surrender for redemption any or all shares, to make up
such difference within 60 days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes
to cancel the agreement, he must give written notice to AIM Distributors. If at
any time before completing the LOI Program the purchaser requests the Transfer
Agent to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
2. RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may
also qualify for reduced initial sales charges based upon such purchaser's
existing investment in shares of any of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund and (ii) Class B and Class C shares of the AIM Funds) at the time of
the proposed purchase. 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. 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
(except for (i) Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve
Shares of AIM Money Market Fund and (ii) Class B and Class C shares of the AIM
Funds) owned by such purchaser, calculated at their then current public offering
price. If a purchaser so qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money then being invested by such
purchaser and not just to the portion that exceeds the breakpoint above which a
reduced sales charge applies. 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 AFS with a list of the account numbers and
the names in which such accounts of the purchaser are registered at the time the
purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM
Funds at net asset value (without payment of an initial sales charge) may be
made in connection with: (a) the reinvestment of dividends and distributions
from a fund; (b) exchanges of shares of certain other funds; (c) use of the
reinstatement privilege; or (d) a merger, consolidation or acquisition of assets
of a fund.
The following purchasers will not pay initial sales charges on
purchases of Class A shares because there is a reduced sales effort involved in
sales to these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and
members of their immediate family) of AIM Management, its
affiliates or The AIM Family of Funds--Registered
Trademark--and any foundation, trust or employee benefit plan
established exclusively for the benefit of, or by, such
persons;
o Any current or retired officer, director, or employee (and
members of their immediate family), of CIGNA Corporation or its
affiliates, or of First Data Investor Services Group; and any
deferred compensation plan for directors of investment
companies sponsored by CIGNA Investments, Inc. or its
affiliates;
o Sales representatives and employees (and members of their
immediate family) of selling group members or financial
institutions that have arrangements with such selling group
members;
o Purchases through approved fee-based programs;
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o Employee benefit plans designated as purchasers as defined
above, and non-qualified plans offered in conjunction
therewith, provided the initial investment in the plan(s) is at
least $1 million; the sponsor signs a $1 million LOI; the
employer-sponsored plan(s) has at least 100 eligible employees;
or all plan transactions are executed through a single omnibus
account per Fund and the financial institution or service
organization has entered into the appropriate agreements with
the distributor. Section 403(b) plans sponsored by public
educational institutions are not eligible for a sales charge
exception based on the aggregate investment made by the plan or
the number of eligible employees. Purchases of AIM Small Cap
Opportunities Fund by such plans are subject to initial sales
charges;
o Shareholders of record or discretionary advised clients of any
investment advisor holding shares of AIM Weingarten Fund or AIM
Constellation Fund on September 8, 1986, or of AIM Charter Fund
on November 17, 1986, who have continuously owned shares having
a market value of at least $500 and who purchase additional
shares of the same Fund;
o Shareholders of record of Advisor Class shares of AIM
International Growth Fund or AIM Worldwide Growth Fund on
February 12, 1999 who have continuously owned shares of the AIM
Funds.
o Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or
AIM Constellation Fund; provided, however, prior to the
termination date of the trusts, a unitholder may invest
proceeds from the redemption or repurchase of his units only
when the investment in shares of AIM Weingarten Fund and AIM
Constellation Fund is effected within 30 days of the redemption
or repurchase;
o A shareholder of a fund that merges or consolidates with an AIM
Fund or that sells its assets to an AIM Fund in exchange for
shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who
since that date continually have owned shares of one or more of
these funds; and
o Certain former AMA Investment Advisers' shareholders who became
shareholders of the AIM Global Health Care Fund in October
1989, and who have continuously held shares in the GT Global
funds since that time.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
CDSCs will not apply to the following:
o Additional purchases of Class C shares of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Advisor Large
Cap Value Fund, AIM Advisor MultiFlex Fund and AIM Advisor Real
Estate Fund by shareholders of record on April 30, 1995, of
these Funds, except that shareholders whose broker-dealers
maintain a single omnibus account with AFS on behalf of those
shareholders, perform sub-accounting functions with respect to
those shareholders, and are unable to segregate shareholders of
record prior to April 30, 1995, from shareholders whose
accounts were opened after that date will be subject to a CDSC
on all purchases made after March 1, 1996;
o Redemptions following the death or post-purchase disability of
(1) any registered shareholders on an account or (2) a settlor
of a living trust, of shares held in the account at the time of
death or initial determination of post-purchase disability;
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o Certain distributions from individual retirement accounts,
Section 403(b) retirement plans, Section 457 deferred
compensation plans and Section 401 qualified plans, where
redemptions result from (i) required minimum distributions to
plan participants or beneficiaries who are age 70-1/2 or older,
and only with respect to that portion of such distributions
that does not exceed 12% annually of the participant's or
beneficiary's account value in a particular AIM Fund; (ii) in
kind transfers of assets where the participant or beneficiary
notifies the distributor of the transfer no later than the time
the transfer occurs; (iii) tax-free rollovers or transfers of
assets to another plan of the type described above invested in
Class B or Class C shares of one or more of the AIM Funds; (iv)
tax-free returns of excess contributions or returns of excess
deferral amounts; and (v) distributions on the death or
disability (as defined in the Internal Revenue Code of 1986, as
amended) of the participant or beneficiary;
o Amounts from a Systematic Withdrawal Plan of up to an annual
amount of 12% of the account value on a per fund basis, at the
time the withdrawal plan is established, provided the investor
reinvests his dividends;
o Liquidation by the Fund when the account value falls below the
minimum required account size of $500;
o Investment account(s) of AIM; and
o Class C shares where the investor's dealer or record notifies
the distributor prior to the time of investment that the dealer
waives the payment otherwise payable to him.
Upon the redemption of shares in Categories I and II purchased in
amounts of $1 million or more, no CDSC will be applied in the following
situations:
o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as qualified
purchasers, as defined above, where the redemptions are in
connection with employee terminations or withdrawals, provided
the total amount invested in the plan is at least $1,000,000;
the sponsor signs a $1 million LOI; or the employer-sponsored
plan has at least 100 eligible employees; provided, however,
that 403(b) plans sponsored by public educational institutions
shall qualify for the CDSC waiver on the basis of the value of
each plan participant's aggregate investment in the AIM Funds,
and not on the aggregate investment made by the plan or on the
number of eligible employees;
o Private foundations or endowment funds;
o Redemption 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; and
o Shares acquired by exchange from Class A shares in Categories I
and II unless the shares acquired by exchange are redeemed
within 18 months of the original purchase of the Class A
shares.
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HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may
be purchased appears in the Prospectuses under the caption "Purchasing Shares -
How to Purchase Shares."
The sales charge normally deducted on purchases of Class A shares of
the Funds is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the distribution of such shares.
Since there is little expense associated with unsolicited orders placed directly
with AIM Distributors by persons, who because of their relationship with the
Funds or with AIM and its affiliates, are familiar with the Funds, or whose
programs for purchase involve little expense (e.g., because of the size of the
transaction and shareholder records required), AIM Distributors believes that it
is appropriate and in the Funds' best interests that such persons be permitted
to purchase Class A shares of the Funds through AIM Distributors without payment
of a sales charge. The persons who may purchase Class A shares of the Funds
without a sales charge are shown in the Prospectuses.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other mutual funds managed or advised by AIM is set
forth in the Prospectuses under the caption "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in
the Prospectuses under the caption "Redeeming Shares - How to Redeem Shares."
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 obligation of the Funds to redeem shares, AIM Distributors also
repurchases shares. AIM intends to redeem all shares of the Funds in cash. 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 Fund telephone: (713) 626-1919,
Extension 5001 (in Houston) or (800) 347-4246 (elsewhere) and guarantee delivery
of all required documents in good order. A repurchase is effected at the net
asset value of a Fund next determined after such order is received. Such
arrangement is subject to timely receipt by AFS of all required documents in
good order. If such documents are not received within a reasonable time after
the order is placed, the order is subject to cancellation. While there is no
charge imposed by the Funds or by AIM Distributors (other than any applicable
CDSC) when shares are redeemed or repurchased, dealers may charge a fair service
fee for handling the transaction.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("NYSE") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
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, must, according to IRS regulations,
withhold 31% 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, or
2. the IRS notifies the Fund that the investor furnished an incorrect
TIN, or
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3. the investor 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), or
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
reportable interest, dividend, broker or barter exchange accounts
opened after 1983, or broker accounts considered inactive during
1983.
Except as explained in (5) above, other reportable payments are
subject to backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and
information reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
o a corporation
o an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section
403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United
States, or any of their political subdivisions or instrumentalities
o a foreign government or any of its political subdivisions, agencies
or instrumentalities
o an international organization or any of its agencies or
instrumentalities
o a foreign central bank of issue
o a dealer in securities or commodities required to register in the
U.S. or a possession of the U.S.
o a futures commission merchant registered with the Commodity Futures
Trading Commission
o a real estate investment trust
o an entity registered at all times during the tax year under the 1940
Act
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o a middleman known in the investment community as a nominee or listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List
o a trust exempt from tax under Section 664 or described in Section
4947
Investors should contact the IRS if they have any questions
concerning entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
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
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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 remains in effect for three calendar years beginning with
the calendar year in which it is received by the Fund. Such shareholders may,
however, be subject to federal income tax withholding at a 30% rate on ordinary
income dividends and distributions and return of capital distributions. Under
applicable treaty law, residents of treaty countries may qualify for a reduced
rate of withholding or a withholding exemption.
NET ASSET VALUE DETERMINATION
In accordance with the current rules and regulations of the SEC, the
net asset value of a share of each Fund is determined once daily as of the close
of trading 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, the net asset value of a Fund share is determined as
of the close of the NYSE on such day. For purposes of determining net asset
value per share, futures and options contract closing prices which are available
fifteen (15) minutes after the close of trading on the NYSE will generally be
used. The income or loss and the expenses (except those listed below) of a Fund
are allocated to each class on the basis of the net assets of the Fund allocable
to each such class, calculated as of the close of business on the previous
business day, as adjusted for the current day's shareholder activity of each
class. Distribution and service fees and transfer agency fees (to the extent
different rates are charged to different classes) are allocated only to the
class to which such expenses relate. The net asset value per share of a class is
determined by subtracting the liabilities (e.g., the expenses) of the Fund
allocated to the class from the assets of the Fund allocated to the class and
dividing the result by the total number of shares outstanding of such class.
Determination of each Fund's net asset value per share is made in accordance
with generally accepted accounting principles.
A security listed or traded on an exchange (except convertible bonds)
is valued at its last sales price on the exchange where the security is
principally traded or, lacking any sales on a particular day, the security is
valued at the closing bid price on that day. Each security traded in the
over-the-counter market (but not including securities reported on the NASDAQ
National Market system) is valued on the basis of prices provided by independent
pricing services. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date, or lacking a last sale, at
the closing bid price on that day; option contracts are valued at the mean
between the closing bid and asked prices on the exchange where the contracts are
principally traded; futures contracts are valued at final settlement price
quotations from the primary exchange on which they are traded. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by an independent pricing service
may be determined without exclusive reliance on quoted prices and may reflect
appropriate factors such as dividend rate, yield, type of issue, coupon rate and
maturity date. Securities for which market quotations are not readily available
or for which market quotations are not reflective of fair value are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of Directors
of the Company. Short-term obligations having sixty (60) days or less to
maturity are valued at amortized cost, which approximates market value. (See
also "Purchasing Shares - How to Purchase Shares," and "Redeeming Shares - How
to Redeem Shares" and "Pricing of Shares" in the Prospectuses.)
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, 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 a Fund's shares are
determined as of such times. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times at
which they are determined and the close of the NYSE which will not be reflected
in the computation of a Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
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Fund securities primarily traded in foreign markets may be traded in
such markets on days which are not business days of the Fund. Because the net
asset value per share of each Fund is determined only on business days of the
Fund, the net asset value per share of a Fund may be significantly affected on
days when an investor can not exchange or redeem shares of the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
It is the intention of each of the Funds to distribute to its
respective shareholders all of the applicable Fund's net investment income and
net realized capital gains, if any. The per share dividends and distribution on
each class of shares of a Fund will be reduced as a result of any service fees
applicable to that class. The gross income, realized and unrealized capital
gains and losses and expenses (other than Class Expenses, as defined below) of
each Fund shall be allocated to each class on the basis of its net asset value
relative to the net asset value of the Fund. Expenses to be so allocated include
expenses of the Company that are allocated to a Fund and are not attributable to
a particular Fund or class of a Fund ("Company Expenses") and expenses of the
particular Fund that are not attributable to a particular class of the Fund
("Fund Expenses"). Company Expenses include, but are not limited to, directors'
fees. Fund Expenses include advisory fees and operating service fees. 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 Internal Revenue Code of 1986, as
amended ("Code").
The LARGE CAP VALUE FUND, FLEX FUND, MULTIFLEX FUND, and REAL ESTATE
FUND make periodic distributions of their net investment income (including any
net short-term capital gain) during the months of March, June, September and
December and distribute any realized net capital gains at least annually, during
the month of December. The INTERNATIONAL VALUE FUND makes semiannual
distributions of net investment income (including any net short-term capital
gain) during the months of June and December and distributes any realized net
capital gain at least annually, during the month of December.
All such distributions will be reinvested automatically in additional
shares (or fractions thereof) of each applicable Fund and class pursuant to each
Fund's Automatic Dividend Reinvestment Plan unless a shareholder has elected not
to participate in this plan or has elected to terminate his participation in the
plan and to receive his distributions in excess of ten dollars in cash. (See
"Special Plans- Automatic Dividend Investment Plan" in the Prospectuses.)
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 Prospectuses. 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 Prospectuses is not intended as a substitute for
careful tax planning.
SPECIAL TAX INFORMATION
For taxable years in which it is eligible to do so, the Funds may
elect to pass through to shareholders credits for foreign taxes paid. If the
fund makes such an election, a shareholder who receives a distribution (1) will
be required to include in gross income his proportionate share of foreign taxes
allocable to the distribution and (2) may claim a credit or deduction for such
share for his taxable year in which the distribution is received, subject to the
general limitations imposed on the allowance of foreign tax credits and
deductions. Shareholders should also note that certain gains or losses
attributable to fluctuations in exchange rates or foreign currency forward
contracts may increase or decrease the amount of income of the fund available
for distribution to shareholders, and should note that if such losses exceed
other income during a taxable year, the fund would not be able to pay ordinary
income dividends.
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QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Code. 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 at least 90% of its investment company taxable income (i.e., net
investment income and the excess of net short-term capital gain over net
long-term capital loss) 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 gains of the taxable year and can
therefore satisfy the Distribution Requirement.
Each Fund may use "equalization accounting" in determining the portion
of its net investment income and capital gain net income that has been
distributed. A Fund that elects to use equalization accounting will allocate a
portion of its realized investment income and capital gains to redemptions of
Fund shares and will reduce the amount that it distributes in cash. However,
each Fund intends to make cash distributions for each taxable year in an
aggregate amount that is sufficient to satisfy the Distribution Requirement
without taking into account its use of equalization accounting. The Internal
Revenue Service has not published any guidance concerning the methods to be used
in allocating investment income and capital gains to redemptions of shares. In
the event that the Internal Revenue Service determines that a Fund is using an
improper method of allocation and has 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 or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income 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. 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
companies, and securities of other issuers, the Fund has not invested more than
5% of the value of the Fund's total assets in securities of such issuer and as
to which the Fund does not hold more than 10% of the outstanding voting
securities of such issuer), and no more than 25% of the value of its total
assets may be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment companies),
or in two or more issuers which the Fund controls and which are engaged in the
same or similar trades or businesses.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of such Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the dividends
received deduction in the case of corporate shareholders.
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. In addition, under
the rules of Code
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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 general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (a) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (b) the
asset is otherwise held by the Fund as part of a "straddle", or (c) the asset is
stock and the Fund grants certain call options with respect thereto. In
addition, a Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position. Any gain recognized by a Fund on
the lapse of, or any gain or loss recognized by a Fund from a closing
transaction with respect to, an option written by the Fund will generally be
treated as a short-term capital gain or loss. In the case of covered options,
gain or loss may be long-term.
Other hedging transactions that may be engaged in by certain of the
Funds (such as short sales "against the box") may be subject to special tax
treatment as "constructive sales" under section 1259 of the Code if a Fund holds
certain "appreciated financial positions" (defined generally as any interest
(including a futures or forward contract, short sale or option) with respect to
stock, certain debt instruments, or partnership interests if there would be a
gain were such interest sold, assigned, or otherwise terminated at its fair
market value). Upon entering into a constructive sales transaction with respect
to an appreciated financial position, a Fund will 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) unless the closed
transaction exception applies.
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 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 (taxable at a maximum rate of 20% for non-corporate shareholders)
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.
Because application of the rules governing Section 1256 contracts and
constructive sales may affect the character of gains or losses and/or accelerate
the recognition of gains or losses from the affected investment positions, the
amount which must be distributed to shareholders and which will be taxed to
shareholders as ordinary income or long-term capital gain may be increased as
compared to a fund that did not engage in transactions involving Section 1256
contracts or constructive sales.
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
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.
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For purposes of the excise tax, a regulated investment company shall
(a) 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 (b) exclude
foreign currency gains and losses incurred after October 31 of any year (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 intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
in the event that the Internal Revenue Service determines that a Fund is using
an improper method of allocation for purposes of equalization accounting (as
discussed above), such Fund may be liable for excise tax. Moreover, investors
should note that a Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
SWAP AGREEMENTS
Each Fund may enter into swap agreements. The rules governing the tax
aspects of swap agreements are in a developing stage and are not entirely clear
in certain respects. Accordingly, while a Fund intends to account for such
transactions in a manner deemed to be appropriate, the Internal Revenue Service
( the "IRS") might not accept such treatment. If it did not, the status of the
Company as a regulated investment company might be affected. The Company intends
to monitor developments in this area. Certain requirements that must be met
under the Code in order for the Company to qualify as a regulated investment
company may limit the extent to which the Fund will be able to engage in swap
agreements.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
A Fund may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation 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. If a Fund receives a so-called "excess distribution"
with respect to PFIC stock, the Fund itself may be subject to a tax on a portion
of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which the Fund held the PFIC shares. The Fund itself will be subject to
tax on the portion, if any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distributions from
a PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under one such election (the "QEF Election") the Fund generally
would be required to include in its gross income its share of the earnings of a
PFIC on a current basis, regardless of whether distributions are received from
the PFIC in a given year. For taxable years beginning after December 31, 1997,
each Fund will alternatively be able to make an election to mark any shares of
PFIC stock that it holds to market (the "Section 1296 Election"). If the Section
1296 Election is made with respect to any PFIC stock, a Fund will recognize
ordinary income to the extent that the fair market value of such PFIC stock at
the close of any taxable year exceeds its adjusted basis and will also recognize
ordinary income in the event that it disposes of any shares of such PFIC stock
at a gain. In each case, such ordinary income will be treated as dividend income
for purposes of the Income Requirement. A Fund making the Section 1296 Election
with respect to any PFIC stock will similarly recognize a deductible ordinary
loss to the extent that the adjusted basis of such PFIC stock exceeds its fair
market value at the close of any taxable year and will also recognize a
deductible ordinary loss in the event that it disposes of such PFIC stock at a
loss. However, the amount of any ordinary loss recognized by a Fund making a
Section 1296 Election with respect to any PFIC stock may not exceed the amount
of ordinary income previously recognized by such Fund by reason of marking such
PFIC stock to market. If either the QEF Election or the Section 1296 Election is
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not
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apply. A Fund's intention to qualify annually as a regulated investment company
may limit its ability to invest and hold PFIC shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, as well as subject a Fund
itself to tax on certain income from PFIC shares, 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 shares.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by a Fund may be
treated as debt securities that are issued originally at a discount. Generally,
the amount of the original issue discount ("OID") is treated as interest income
and is included in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures.
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by a Fund in the
secondary market may be treated as having market discount. Generally, gain
recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount is treated as ordinary income to the extent
the gain, or principal payment, does not exceed the "accrued market discount" on
such debt security. In addition, the deduction of any interest expenses
attributable to debt securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. A Fund may make one or
more of the elections applicable to debt securities having market discount,
which could affect the amount, character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year or less
from the date of issuance) that may be acquired by a Fund may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, a Fund will be required to include the acquisition
discount, or OID, in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures. A Fund may make one or more of the elections applicable to
debt securities having acquisition discount, or OID, which could affect the
character and timing of recognition of income.
A Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by the Fund. Cash to pay such dividends may be obtained from sales
proceeds of securities held by the Fund or by borrowing.
DISTRIBUTIONS
With respect to tax-exempt shareholders, distributions from the Funds
will not be subject to federal income taxation to the extent permitted under the
applicable tax-exemption. With respect to shareholders that are not exempt from
federal taxation, distributions of investment company taxable income are taxable
to a U.S. shareholder as ordinary income, whether paid in cash or shares.
Dividends paid by a Fund to a corporate shareholder, to the extent such
dividends are attributable to dividends received from U.S. corporations, may
qualify for the dividends received deduction. However, the alternative minimum
tax applicable to corporations may reduce the value of the dividends received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, designated by a Fund
as capital gain dividends, are taxable as long-term capital gains, whether paid
in cash or in shares, regardless of how long the shareholder has held the Fund's
shares and are not eligible for the dividends received deduction. Shareholders
will be notified annually as to the U.S. federal tax status of distributions in
accordance with the guidance that has been provided by the IRS.
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If the net asset value of shares is reduced below a shareholder's cost
as a result of a distribution by a Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of a Fund just
prior to a distribution. The price of shares purchased at this time may reflect
the amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which generally will be taxable to
them.
DISPOSITION OF SHARES
With respect to tax-exempt shareholders, a redemption, sale or
exchange of shares of a Fund will not be subject to federal income taxation to
the extent permitted under the applicable tax-exemption. Upon a redemption, sale
or exchange of his or her shares of a Fund, a shareholder that is not exempt
from federal income taxation will realize a taxable gain or loss depending upon
his or her basis in the shares. A gain or loss will be treated as capital gain
or loss if the shares are capital assets in the shareholder's hands and
generally will be long-term or short-term, depending upon the shareholder's
holding period for the shares. Except to the extent otherwise provided in future
Treasury regulations, any long-term capital gain recognized by a non-corporate
shareholder will be subject to tax at a maximum rate of 20%. Any loss realized
on a redemption, sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including through reinvestment of dividends) within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Any loss realized by a shareholder on
the sale of a Fund's shares held by the shareholder for six months or less will
be treated for tax purposes as a long-term capital loss to the extent of any
distributions of capital gain dividends received or treated as having been
received by the shareholder with respect to such shares.
If a shareholder (a) incurs a sales load in acquiring shares of a
Fund, (b) disposes of such shares less than 91 days after they are acquired, and
(c) subsequently acquires shares of the Fund or another Fund at a reduced sales
load pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of, but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
OTHER TAXATION
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. This discussion does not purport to deal with all of the
tax consequences applicable to the Funds or shareholders. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
The Advisor or sub-advisor make decisions to buy and sell securities
for each Fund, selects broker-dealers, effects the Funds' investment portfolio
transactions, allocates brokerage fees in such transactions, and where
applicable, negotiates commissions and spreads on transactions. AIM's primary
consideration in effecting a security transaction is to obtain the most
favorable execution of the order, which includes the best price on the security
and a low commission rate. While AIM seeks reasonably competitive commission
rates, the Funds may not pay the lowest commission or spread available. See
"Section 28(e) Standards" below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. In such transactions, a Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
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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.
AIM may determine target levels of commission 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; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Funds and the AIM Funds in particular, including sales of
the Funds and of the other AIM Funds. In connection with (3) above, the Funds'
trades may be executed directly by dealers that sell shares of the AIM Funds or
by other broker-dealers with which such dealers have clearing arrangements. AIM
will not use a specific formula in connection with any of these considerations
to determine the target levels.
AIM will seek, whenever possible, to recapture for the benefit of a
Fund any commissions, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fees which AIM can recapture are the
soliciting dealer fees on the tender of a Fund's portfolio securities in a
tender or exchange offer.
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 a Fund, provided the conditions of an exemptive order received by
the Funds from the SEC are met. In addition, a Fund may purchase or sell a
security from or to another AIM Fund provided the Funds follow procedures
adopted by the Board of Directors/Trustees of the various AIM Funds, including
the Company. These inter-fund transactions do not generate brokerage commissions
but may result in custodial fees or taxes or other related expenses.
Under the 1940 Act, certain persons affiliated with the Company are
prohibited from dealing with the funds as principal in any purchase or sale of
securities unless an exemptive order allowing such transactions is obtained from
the SEC. The 1940 Act also prohibits the funds from purchasing a security being
publicly underwritten by a syndicate of which certain persons affiliated with
the Company are members except in accordance with certain conditions.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage several other investment accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may vary.
The timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities is consistent with the
investment policies of the Fund(s) and one or more of these accounts, and is
considered at or about the same time, AIM will fairly allocate transactions in
such securities among the Fund(s) and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect a Fund's ability to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among
the various investment accounts advised by AIM could have an adverse effect on
the price or amount of securities available to a Fund. In making such
allocations, AIM considers the investment objectives and policies of its
advisory clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and the judgments of the persons
responsible for recommending the investment.
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SECTION 28(e) STANDARDS
Section 28(e) of the Securities Exchange Act of 1934 provides that
AIM, under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided ... viewed in terms of
either that particular transaction or [AIM's] overall responsibilities with
respect to the accounts as to which it exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, a Fund may pay
a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the Company's directors with respect to
the performance, investment activities, and fees and expenses of other mutual
funds. Broker-dealers may communicate such information electronically, orally or
in written form. Research services may also include the providing of custody
services, as well as the providing of equipment used to communicate research
information, the providing of specialized consultations with AIM personnel with
respect to computerized systems and data furnished to AIM as a component of
other research services, the arranging of meetings with management of companies,
and the providing of access to consultants who supply research information.
The outside research assistance is useful to AIM since the
broker-dealers used by AIM tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, the research provides
AIM with a diverse perspective on financial markets. Research services provided
to AIM by broker-dealers are available for the benefit of all accounts managed
or advised by AIM or by its affiliates. Some broker-dealers may indicate that
the provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Funds. However, the Funds are not under any obligation to deal
with any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fee paid by the Funds is not reduced because AIM receives such
services. However, to the extent that AIM would have purchased research services
had they not been provided by broker-dealers, the expenses to AIM could be
considered to have been reduced accordingly.
BROKERAGE COMMISSIONS PAID
For the fiscal years ended December 31, 1998, 1997 and 1996, the LARGE
CAP VALUE FUND paid total brokerage commissions of $269,546, $139,516 and
$75,469, respectively. For the fiscal year ended December 31, 1998, AIM
allocated certain of LARGE CAP VALUE FUND'S brokerage transactions to certain
broker-dealers that provide AIM with certain research, statistical and other
information. Such transactions amounted to $17,842,057, and the related
commissions were $35,562. For the fiscal years ended December 31, 1998, 1997 and
1996, the FLEX FUND paid total brokerage commissions of $291,570, $166,653 and
$193,286, respectively. For the fiscal year ended December 31, 1998, AIM
allocated certain of FLEX FUND'S brokerage transactions to certain
broker-dealers that provide AIM with certain research, statistical and other
information. Such transactions amounted to $24,369,239, and the related
commissions were $36,157. For the fiscal years ended December 31, 1998, 1997 and
1996, the MULTIFLEX FUND paid total brokerage commissions of $455,949, $455,949
and $400,646, respectively. For the fiscal year ended December 31, 1998, AIM
allocated certain of MULTIFLEX FUND'S brokerage transactions to certain broker-
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127
dealers that provide AIM with certain research, statistical and other
information. Such transactions amounted to $25,468,293 and the related
commissions were $55,350. For the fiscal year ended December 31, 1998, 1997, and
1996, the REAL ESTATE FUND paid total brokerage commissions of $256,164,
$115,951 and $40,353, respectively. For the fiscal year ended December 31, 1998,
AIM allocated certain of REAL ESTATE FUND'S brokerage transactions to certain
broker-dealers that provide AIM with certain research, statistical and other
information. Such transactions amounted to $10,232,121 and the related
commissions were $26,820. For the fiscal year ended December 31, 1998, 1997 and
1996, the INTERNATIONAL VALUE FUND paid total brokerage commissions of $42,855,
$44,731 and $21,872, respectively. For the fiscal year ended December 31, 1998,
AIM allocated certain of INTERNATIONAL VALUE FUND'S brokerage transactions to
certain broker-dealers that provide AIM with certain research, statistical and
other information. Such transactions amounted to $974,636, and the related
commissions were $935. There were no brokerage commissions paid to affiliated
broker-dealers during the fiscal years ended December 31, 1998, 1997 and 1996,
by any of the Funds.
At December 31, 1998, certain of the Funds held securities of the
Company's regular brokers or dealers, or their parents, as follows:
Value of Securities
Fund Broker or Dealer at December 31, 1998
- ---- ---------------- --------------------
INTERNATIONAL VALUE FUND Warburg Dillon Read, LLC $5,913,111
Societe Generale Securities Corp. 3,564,264
Deutsche Morgan Greenfell, Inc. 2,825,784
LARGE CAP VALUE FUND Warburg Dillon Read, LLC 4,238,817
FLEX FUND Warburg Dillon Read, LLC 7,293,570
MULTIFLEX FUND Warburg Dillon Read, LLC 2,913,509
Societe Generale Securities Corp. 2,235,766
Deutsche Morgan Greenfell, Inc. 1,942,726
REAL ESTATE FUND Warburg Dillon Read, LLC 1,026,091
During the fiscal years ended December 31, 1998, 1997 and 1996, the
LARGE CAP VALUE FUND'S portfolio turnover rates were 52%, 34% and 19%,
respectively; the FLEX FUND'S portfolio turnover rates were 34%, 17%, and 26%,
respectively; the MULTIFLEX FUND'S portfolio turnover rates were 72%, 62% and
62%, respectively; the REAL ESTATE FUND'S portfolio turnover rates were 69%, 57%
and 25%, respectively; the INTERNATIONAL VALUE FUND'S portfolio turnover rates
were 9%, 9% and 5%, respectively.
REDEMPTIONS
It is possible that in the future conditions may exist which would, in
the opinion of the Directors, make it undesirable for a Fund to pay for redeemed
shares in cash. In such cases, the Directors may authorize payment to be made in
Fund securities or other property of the applicable Fund. However, each Fund has
made an election under Rule 18f-1 under the 1940 Act, which obligates the Fund
to redeem for cash all shares presented to such Fund for redemption by any one
shareholder up to $250,000 (or 1% of the applicable Fund's net assets if that is
less) in any 90-day period. Securities delivered in payment of redemptions are
valued at the same value assigned to them in computing the applicable Fund's net
asset value per share. Shareholders receiving such securities are likely to
incur brokerage costs on their subsequent sales of such securities.
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128
PERFORMANCE INFORMATION
The Funds may from time to time include figures indicating their yield
and total return in advertisements or reports to shareholders or prospective
investors. From time to time and in its discretion, AIM or its affiliates may
waive all or a portion of their fees and/or assume certain expenses of any Fund.
Voluntary fee waivers or reductions or commitments to assume expenses may be
rescinded at any time without further notice to investors. During periods of
voluntary fee waivers or reductions or commitments to assume expenses, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions or reimbursement of expenses set
forth in the Fee Table in the Prospectus may not be terminated without the
approval of the Board of Directors. Such a practice will have the effect of
increasing that Fund's yield and total return. The performance of each Fund will
vary from time to time and past results are not necessarily indicative of future
results. A Fund's performance is a function of its portfolio management in
selecting the type and quality of portfolio securities and is affected by
operating expenses of the Fund and market conditions. A shareholder's investment
in a Fund is not insured or guaranteed. These factors should be carefully
considered by the investor before making an investment in any Fund. Following is
information on how those figures are computed. Following is information on how
those figures are computed.
Yield
ALL FUNDS
All Funds may advertise "yield," "dividend yield" and "distribution
yield" for each class. Quotations of yield for each class of these Funds will be
based on all investment income per share earned during a particular 30-day
period (including dividends and interest), less expenses accrued during the
period ("net investment income"), and are computed by dividing net investment
income by the maximum offering price per share (which includes the maximum sales
charge) on the last day of the period, according to the following formula:
(6)
Yield = 2[(a-b + 1) - 1]
---
cd
where a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements or waivers),
c = the average daily number of shares outstanding during
period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day
of the period.
For the 30-day period ended December 31, 1998, the yield for Class A
shares, Class B shares and Class C shares of REAL ESTATE FUND were 4.50%, 3.98%
and 3.98%, respectively.
Dividend yield is a measure of investment return during a specified
period based on dividends actually paid by a class of a Fund during that period.
Dividend yield is calculated by totaling the dividends paid by a class from its
net investment income during the specified period and dividing that sum by the
net asset value per share of the class on the last day of the period.
Distribution yield is computed in the same way, but includes distributions paid
with respect to a class from short-term capital gains realized by the Fund, as
well as dividends from the net investment income of the class. Where the
dividend or distribution yield is calculated for a period of less than a year,
results may be annualized by using the following calculation method:
Total dividends/distributions paid by the class during the specified
period are divided by the net asset value of a class share on the last
day of the specified period. This result is divided by the number of
days in the specified period and the result is multiplied by 365.
The dividend yields for the 30-day period ended December 31, 1998, for
Class A shares, Class B shares and Class C shares of REAL ESTATE FUND were
4.38%, 3.47% and 3.47%, respectively.
The distribution yields (including income and short-term capital gains
distributions) for the 365-day period ended December 31, 1998, for Class A
shares and Class C shares of REAL ESTATE FUND were 5.12% and 4.21%,
respectively.
Class B shares commenced operation on March 3, 1998; therefore, no
distribution yield information for the 365-day period ended December 31, 1998 is
available, as quoted above.
Total Return
Funds may advertise their "average annual total return" and their
"total return." Average annual total return and total return figures represent
the increase (or decrease) in the value of an investment in the Fund over a
specified period. Both calculations assume that all income dividends and capital
gains distributions during the period are reinvested at net asset value in
additional shares of the respective Fund.
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129
Average annual total return may be calculated without assuming payment
of the full sales load according to the following formula:
(n)
P(1+U) = ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of
only a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
Quotations of the average annual total return for each class reflect
the deduction of a proportional share of expenses allocated to the class and
Class Expenses on an annual basis. The results, which are annualized, represent
an average annual compound rate of return on a hypothetical investment in the
class over a period of 1, 5 and 10 years ending on the most recent calendar
quarter.
The average annual total return as of December 31, 1998, for Class A
shares of each of the following Funds for the periods listed below are as
follows:
Fund 1 Year Since Inception*
---- --------- ----------------
LARGE CAP VALUE FUND 7.81% 19.14%
FLEX FUND 7.03% 15.48%
MULTIFLEX FUND -5.04% 6.51%
REAL ESTATE FUND -26.20% -5.98%
INTERNATIONAL VALUE FUND 5.10% 9.37%
- ------------------
* From December 31, 1996 (commencement of operations) (2 years).
The average annual total return as of December 31, 1998, for Class B
shares of each of the following Funds for the period listed below is as follows:
Fund Since Inception*
---- ---------------
LARGE CAP VALUE FUND 1.61%
FLEX FUND 2.40%
MULTIFLEX FUND -8.52%
REAL ESTATE FUND -24.76%
INTERNATIONAL VALUE FUND -3.33%
* From March 3, 1998 (commencement of operations) (9 months)
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130
The average annual total return as of December 31, 1998, for shares now
designated as Class C shares of each of the following Funds for the periods
listed below are as follows:
Since
Fund 1 Year 5 Years 10 Years Inception
- ---- ------ ------- -------- ---------
LARGE CAP VALUE FUND 12.15% 18.31% 15.30% 14.62%
FLEX FUND 11.41% 15 13% 13 23% 12.49%*
MULTIFLEX FUND -1.21% 10.74% N/A 10.57%**
REAL ESTATE FUND -23.89% N/A N/A 8.74%***
INTERNATIONAL VALUE FUND 9.38% N/A N/A 15.17%***
- -----------------------
* From February 24, 1988 (commencement of operations) (10 years, 10
months).
** From November 17, 1993 (commencement of operations) (5 years, 1 month).
*** From May 1, 1995 (commencement of operations) (3 years, 7 months).
Quotations of total return, which are not annualized, represent
historical earnings and asset value fluctuations. Total return is based on past
performance and is not a guarantee of future results. These rates of return are
net of all expenses and assume all dividends and distributions by the Funds have
been reinvested on the reinvestment dates during each period.
The following table provides the actual total rates of return for Class
A shares of the indicated Funds for the fiscal years ended December 31, 1998 and
1997.
LARGE REAL INTERNATIONAL
CAP VALUE FLEX MULTIFLEX ESTATE VALUE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
1998 14.07% 13.26% 0.51% -22.54% 11.20%
1997* 31.66% 24.60% 19.40% 19.78% 13.84%
* Period December 31, 1996 (commencement of operation) through December 31,
1997.
The following table provides the actual total rates of return for Class
B shares of the indicated Funds for the fiscal year ended December 31, 1998.
LARGE REAL INTERNATIONAL
CAP VALUE FLEX MULTIFLEX ESTATE VALUE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
1998 6.51% 7.25% -3.96% -21.02% 1.67%
* Period March 3, 1998 (commencement of operation) through December 31, 1998.
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131
The following table provides the actual total rates of return for Class
C shares of the indicated Funds for the fiscal years ended December 31, 1998,
1997, 1996, 1995, 1994, 1993 and 1992.
LARGE REAL INTERNATIONAL
CAP VALUE FLEX MULTIFLEX ESTATE VALUE
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
1998 13.15% 12.41% -0.26% -23.16% 10.38%
1997 30.67% 22.64% 18.55% 18.88% 12.98%
1996 17.17% 13.61% 17.03% 36.43% 20.99%
1995 30.27% 27.30% 21.57% 9.12%** 11.28%**
1994 2.70% 0.64% -1.01% N/A N/A
1993 9.16% 10.48% 0.46%* N/A N/A
1992 4.84% 7.72% N/A N/A N/A
* Period November 17, 1993 (commencement of operations) through December 31,
1993.
** Period May 1, 1995 (commencement of operations) through December 31, 1995.
Performance information for a Fund or class reflects only the
performance of a hypothetical investment in that Fund or class during the
particular time period on which the calculations are based. Performance
information should be considered in light of the Fund's investment objectives
and policies, the types of quality of the Fund's portfolio investments, market
conditions during the particular time period and operating expenses. Such
information should not be considered as a representation of the future
performance of a Fund or class.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus
under the title "Shareholder Information."
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent,
as hereinafter defined. Any loss resulting from the dealer's failure to submit
an order within the prescribed time frame will be borne by that dealer. If a
check used to purchase shares does not clear, or if any investment order must be
canceled due to nonpayment, the investor will be responsible for any resulting
loss to an AIM Fund or to AIM Distributors.
SHARE CERTIFICATES. The AIM Funds will issue share certificates upon
written request to AFS. Otherwise, shares are held on the shareholder's behalf
and recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, all
shares are to be held by the Transfer Agent and all dividends and distributions
are reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events.
Since such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
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132
TERMS AND CONDITIONS OF EXCHANGES. 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 AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to NYSE Close. The Transfer Agent 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.
By signing an account application form, an investor appoints the
Transfer Agent as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by the Transfer Agent 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. The Transfer Agent
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
the Transfer Agent 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. The Transfer Agent
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.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints the Transfer Agent as his true and lawful attorney-in-fact to
surrender for redemption any and all unissued shares held by the Transfer Agent
in the designated account(s), present or future, with full power of substitution
in the premises. The Transfer Agent 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
the Transfer Agent 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. The Transfer Agent 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. If the investor so
elects, any redemptions must be effected in writing.
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
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133
authorization forms; (3) changes in previously designated wiring or electronic
funds transfer instructions; and (4) written redemptions or exchanges of shares
previously reported as lost, whether or not the redemption amount is under
$50,000 or the proceeds are to be sent to the address of record. AIM Funds may
waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in the Transfer Agent's current Signature Guarantee
Standards and Procedures, such as certain domestic banks, credit unions,
securities dealers, or securities exchanges. The Transfer Agent will also accept
signatures with either: (1) a signature guaranteed with a medallion stamp of the
STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
DIVIDENDS AND DISTRIBUTIONS. In determining the amount of capital
gains, if any, available for distribution, net capital gains are offset against
available net capital losses, if any, carried forward from previous fiscal
periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than
those for Class A shares or AIM Cash Reserve Shares because of higher
distribution fees paid by Class B and Class C shares. Dividends on all shares
may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made
by the shareholder at any time by notice to the Transfer Agent and are effective
as to any subsequent payment if such notice is received by the Transfer Agent
prior to the record date of such payment. Any dividend and distribution election
remains in effect until the Transfer Agent receives a revised written election
by the shareholder.
Any dividend or distribution paid by a fund which does not declare
dividends daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
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MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
AUDIT REPORTS
The Board of Directors will issue semi-annual reports of the
transactions of the Funds to the shareholders. Financial statements, audited by
independent auditors, will be issued annually. The firm of KPMG LLP, 700
Louisiana, NationsBank Building, Houston, Texas 77002, currently serves as the
auditors of each Fund.
LEGAL MATTERS
Legal matters for the Company have been passed upon by Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. The custodian attends to the collection of principal and income, pays
and collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. A I M Fund Services, Inc. (the "Transfer
Agent"), a wholly owned subsidiary of AIM, P.O. Box 4739, Houston, Texas
77210-4739, acts as transfer and dividend disbursing agent for the Funds. These
services do not include any supervisory function over management or provide any
protection against any possible depreciation of assets. The Funds pay the
Custodian and the Transfer Agent such compensation as may be agreed upon from
time to time.
Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as
Sub-Custodian for retail purchase of the AIM Funds.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has
entered into an agreement with the Company (and certain other AIM Funds), First
Data Investor Service Group and Financial Data Services, Inc., pursuant to which
MLPF&S has agreed to perform certain shareholder sub-accounting services for its
customers who beneficially own shares of the Fund(s).
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PRINCIPAL HOLDERS OF SECURITIES
As of March 15, 1999, the following entities owned of record or
beneficially 5% or more of the shares of a Fund:
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
- ---------------- ------ ------------
CLASS A
LARGE CAP VALUE FUND
James L. Cash -0- 5.39%
5703 155th Ave. NE
Redmond, WA 98052
FLEX FUND
Merrill Lynch Pierce Fenner & Smith 42.77% -0-
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East
Jacksonville, FL 32246
Cypress Enterprises -0- 5.28%
A Partnership
730 S. Tonti Street
New Orleans, LA 70119
MULTIFLEX FUND
Merrill Lynch Pierce Fenner & Smith 8.35% -0-
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East
Jacksonville, FL 32246
Gardonville Coop Tele Assn -0- 6.44%
P.O. Box 187
Brandon, MN 56315
- ------------------
* The Company has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a Fund may
be presumed to be in "control" of such Fund as defined in the 1940 Act.
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136
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
- ---------------- ------ ------------
INTERNATIONAL VALUE FUND
Merrill Lynch Pierce Fenner & Smith 12.91 ** -0-
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
Commerce Bank FBO 8.48% -0-
Baker University Endowment
8th and Grove
Baldwin City, KS 66006
Mulvihill Family Trust -0- 7.75%
DTD 10/1/73, Willard Thompson Trust
c/o Bessemer Trust Company
100 Woodbridge Center Drive
Woodbridge, NJ 07095
Salomon Smith Barney Inc. 6.33% -0-
00165249542
388 Greenwich Street
New York, NY 10013
- -------------------
* The Company has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a Fund may
be presumed to be in "control" of such Funds as defined in the 1940 Act.
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Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
- ---------------- ------ ------------
CLASS B
FLEX FUND
Merrill Lynch Pierce Fenner & Smith 9.76% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
MULTIFLEX FUND
Merrill Lynch Pierce Fenner & Smith 6.94% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
REAL ESTATE FUND
Merrill Lynch Pierce Fenner & Smith 6.67% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
INTERNATIONAL VALUE FUND
Merrill Lynch Pierce Fenner & Smith 32.74% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
CLASS C
LARGE CAP VALUE FUND
Merrill Lynch Pierce Fenner & Smith 15.77% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
FLEX FUND
Merrill Lynch Pierce Fenner & Smith 10.94% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
- ------------------
* The Company has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a Fund may
be presumed to be in "control" of such Fund as defined in the 1940 Act.
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Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record Beneficially
- ------------------- --------- ------------
MULTIFLEX FUND
Merrill Lynch Pierce Fenner & Smith 9.89% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
REAL ESTATE FUND
Merrill Lynch Pierce Fenner & Smith 6.49% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
INTERNATIONAL VALUE FUND
Merrill Lynch Pierce Fenner & Smith 53.71%** -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
As of March 15, 1999, the officers and Directors of the Company, as a
group, owned less than 1% of the outstanding shares of the Funds.
- -------------------
* The Company has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a Fund may
be presumed to be in "control" of such Fund as defined in the 1940 Act.
62
139
APPENDIX
Some of the terms used in the Funds' Prospectuses and this Statement of
Additional Information are described below.
The term "MONEY MARKET" refers to the marketplace composed of the
financial institutions which handle the purchase and sale of liquid, short-term,
high-grade debt instruments. The money market is not a single entity, but
consists of numerous separate markets, each of which deals in a different type
of short-term debt instrument. These include U.S. Government obligations,
commercial paper, certificates of deposit, bankers' acceptances and master
notes, which are generally referred to as money market instruments.
U.S. GOVERNMENT OBLIGATIONS are debt securities (including bills, notes
and bonds) issued by the U.S. Treasury or issued by an agency or instrumentality
of the U.S. Government which is established under the authority of an Act of
Congress. Such agencies or instrumentalities include, but are not limited to,
the Federal National Mortgage Association, Government National Mortgage
Association, the Federal Farm Credit Bank, and the Federal Home Loan Bank.
Although all obligations of agencies, authorities and instrumentalities are not
direct obligations of the U.S. Treasury, payment of the interest and principal
on these obligations is generally backed directly or indirectly by the U.S.
Government. This support can range from the backing of the full faith and credit
of the United States to U.S. Treasury guarantees, or to the backing solely of
the issuing instrumentality itself. In the case of securities not backed by the
full faith and credit of the United States, the investor must look principally
to the agency issuing or guaranteeing the obligation for ultimate repayment, and
may not be able to assert a claim against the United States itself in the event
the agency or instrumentality does not meet its commitments.
BANK OBLIGATIONS include certificates of deposit which are negotiable
certificates evidencing the indebtedness of a commercial bank to repay funds
deposited with it for a definite period of time (usually from 14 days to one
year) at a stated interest rate.
BANKERS' ACCEPTANCES are credit instruments evidencing the obligation
of a bank to pay a draft which has been drawn on it by a customer. These
instruments reflect the obligation both of the bank and of the drawer to pay the
face amount of the instrument upon maturity.
TIME DEPOSITS are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
COMMERCIAL PAPER consists of short-term (usually one to 180 days)
unsecured promissory notes issued by corporations in order to finance their
current operations.
CORPORATE DEBT obligations are bonds and notes issued by corporations
and other business organizations, including business trusts, in order to finance
their long-term credit needs.
CERTIFICATES OF DEPOSIT are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return.
MORTGAGE-BACKED SECURITIES are interests in a pool of mortgage loans.
Most mortgage securities are pass-through securities, which means that they
provide investors with payments consisting of both principal and interest as
mortgages in the underlying mortgage pool are paid off by the borrowers. The
dominant issuers or guarantors of mortgage securities are the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") are hybrid instruments
with characteristics of both mortgage-backed and mortgage pass-through
securities. Similar to a bond, interest and pre-paid principal on a CMO are
paid, in most cases, semi-annually. CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by Funds of mortgage pass-through
securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are structured into multiple
classes, with each class bearing a different stated maturity. Monthly
63
140
payments of principal, including prepayments, are first returned to investors
holding the shortest maturity class; investors holding the longer maturity
classes receive principal only after the first class has been retired.
MUNICIPAL BONDS are debt obligations which generally have a maturity at
the time of issue in excess of one year and are issued to obtain funds for
various public purposes. The two principal classifications of municipal bonds
are "general obligation" and "revenue" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue bonds are payable only from the
revenues derived from a particular facility or class of facilities, or, in some
cases, from the proceeds of a special excise or specific revenue source.
Industrial development bonds or private activity bonds are issued by or on
behalf of public authorities to obtain funds for privately operated facilities
and are, in most cases, revenue bonds which do not generally carry the pledge of
the full faith and credit of the issuer of such bonds, but depend for payment on
the ability of the industrial user to meet its obligations (or any property
pledged as security).
ZERO COUPON BONDS are debt obligations issued without any requirement
for the periodic payment of interest. Zero coupon bonds are issued at a
significant discount from face value. The discount approximates the total amount
of interest the bonds would accrue and compound over the period until maturity
at a rate of interest reflecting the market rate at the time of issuance. A
Fund, if it holds zero coupon bonds in its Fund, however, would recognize income
currently for Federal tax purposes in the amount of the unpaid, accrued interest
(determined under tax rules) and generally would be required to distribute
dividends representing such income to shareholders currently, even though funds
representing such income would not have been received by the Fund. Cash to pay
dividends representing unpaid, accrued interest may be obtained from sales
proceeds of Fund securities and Fund shares and from loan proceeds. Because
interest on zero coupon obligations is not paid to the Fund on a current basis
but is in effect compounded, the value of the securities of this type is subject
to greater fluctuations in response to changing interest rates than the value of
debt obligations which distribute income regularly.
RATINGS OF CORPORATE DEBT OBLIGATIONS Fund purchases of taxable
obligations are not limited to those obligations rated within the four highest
categories by Moody's and S&P. However, the Flex Fund's standards for investment
grade obligations are generally similar to those standards included in the four
highest categories by Moody's and S&P. The MultiFlex Fund may invest up to 5% of
Fund assets in corporate bonds rated below Baa by Moody's or below BBB by S&P,
but rated at least Ba by Moody's or BB by S&P.
The characteristics of corporate debt obligations rated by Moody's are
generally as follows:
AAA -- Bonds 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 edge." 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 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. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds 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 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.
64
141
Ba -- Bonds which are rated Ba are judged to have speculative elements.
The future of such bonds cannot be considered as well assured.
B -- Bonds which are rated B generally lack characteristics of a
desirable investment.
Caa -- Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds rated Ca are speculative to a high degree.
C -- Bonds rated C are the lowest rated class of bonds and are regarded
as having extremely poor prospects.
The characteristics of corporate debt obligations rated by S&P are
generally as follows:
AAA -- This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay principal and interest.
AA -- Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay
principal 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 is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB -- Debt rated BB is predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with terms of the
obligation. BB indicates the lowest degree of speculation; CC indicates the
highest degree of speculation.
BB,B,CCC,CC -- Debt in these ratings is predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with terms
of the obligation. BB indicates the lowest degree of speculation and CC the
highest.
A bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by the rating services from other sources which they consider reliable.
The ratings may be changed, suspended or withdrawn as a result of changes in or
unavailability of, such information, or for other reasons.
RATINGS OF COMMERCIAL PAPER. Commercial paper rated A-1 by Standard &
Poor's has the following characteristics: liquidity ratios are adequate to meet
cash requirements; the issuer's long-term debt is rated "A" or better; the
issuer has access to at least two additional channels of borrowing; and basic
earnings and cash flow have an upward trend with allowances made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry.
Commercial paper rated Prime 1 by Moody's is the highest commercial
paper assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and consumer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of
65
142
earnings over a period of ten years; (7) financial strength of a parent company
and the relationships which exist with the issuer; and (8) recognition by the
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determine how the issuer's commercial
paper is rated within various categories.
DETERMINATION OF CREDIT QUALITY OF UNRATED SECURITIES. In determining
whether an unrated debt security is of comparable quality to a rated security,
the sub-adviser may consider the following factors, among others:
(1) other securities of the issuer that are rated;
(2) the issuer's liquidity, debt structure, repayment schedules,
and external credit support facilities;
(3) the reliability and quality of the issuer's management;
(4) the length to maturity of the security and the percentage of
the Fund represented by securities of that issuer;
(5) the issuer's earnings and cash flow trends;
(6) the issuer's industry, the issuer's position in its industry,
and an appraisal of speculative risks which may be inherent in
the industry;
(7) the financial strength of the issuer's parent and its
relationship with the issuer;
(8) the extent and reliability of credit support, including a
letter of credit or third party guarantee applicable to
payment of principal and interest;
(9) the issuer's ability to repay its debt from cash sources or
asset liquidation in the event that the issuer's backup credit
facilities are unavailable;
(10) other factors deemed relevant by the subadvisor.
66
143
FINANCIAL STATEMENTS
FS
144
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Advisor Flex Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Flex Fund (a portfolio of AIM
Advisor Funds, Inc.), including the schedule of
investments, as of December 31, 1998, and the related
statement of operations, the statement of changes in net
assets, and the financial highlights for the year then
ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audit. The accompanying statement of changes
in net assets for the year ended December 31, 1997 and
the financial highlights for each of the years in the
four-year period ended December 31, 1997, were audited by
other auditors whose report thereon dated February 5,
1998, expressed an unqualified opinion on such statement
and financial highlights.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor Flex Fund as of December 31, 1998, the results of
its operations, the changes in its net assets and the
financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-1
145
SCHEDULE OF INVESTMENTS
December 31, 1998
MARKET
SHARES VALUE
COMMON STOCKS-78.75%
AEROSPACE/DEFENSE-2.03%
Boeing Co. (The) 110,000 $ 3,588,751
- --------------------------------------------------------------
Lockheed Martin Corp. 60,000 5,085,000
- --------------------------------------------------------------
Precision Castparts Corp. 135,000 5,973,750
- --------------------------------------------------------------
14,647,501
- --------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.81%
Archer-Daniels-Midland Co. 341,250 5,865,235
- --------------------------------------------------------------
AIRLINES-0.50%
Southwest Airlines Co. 160,000 3,590,001
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-2.03%
Cooper Tire & Rubber Co. 160,000 3,270,001
- --------------------------------------------------------------
Genuine Parts Co. 210,000 7,021,875
- --------------------------------------------------------------
Snap-on Inc. 125,000 4,351,562
- --------------------------------------------------------------
14,643,438
- --------------------------------------------------------------
AUTOMOBILES-1.02%
Ford Motor Co. 125,000 7,335,938
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.96%
Bank One Corp. 121,500 6,204,094
- --------------------------------------------------------------
National City Corp. 100,000 7,250,000
- --------------------------------------------------------------
Wachovia Corp. 90,000 7,869,375
- --------------------------------------------------------------
21,323,469
- --------------------------------------------------------------
BANKS (MONEY CENTER)-0.92%
BankAmerica Corp. 110,000 6,613,751
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-1.37%
Anheuser-Busch Companies, Inc. 150,000 9,843,751
- --------------------------------------------------------------
CHEMICALS-0.95%
Dow Chemical Co. (The) 75,000 6,820,312
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.24%
Great Lakes Chemical Corp. 100,000 4,000,000
- --------------------------------------------------------------
Morton International, Inc. 200,000 4,900,000
- --------------------------------------------------------------
8,900,000
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-4.99%
Compaq Computer Corp. 300,000 12,581,250
- --------------------------------------------------------------
Hewlett-Packard Co. 125,000 8,539,062
- --------------------------------------------------------------
International Business Machines
Corp. 80,000 14,780,000
- --------------------------------------------------------------
35,900,312
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-2.14%
Computer Associates International,
Inc. 125,000 5,328,125
- --------------------------------------------------------------
MARKET
SHARES VALUE
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Electronic Data Systems Corp. 200,000 $ 10,050,000
- --------------------------------------------------------------
15,378,125
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.17%
SUPERVALU, Inc. 300,000 8,400,000
- --------------------------------------------------------------
ELECTRIC COMPANIES-3.30%
Edison International 200,000 5,575,000
- --------------------------------------------------------------
Entergy Corp. 300,000 9,337,500
- --------------------------------------------------------------
GPU, Inc. 200,000 8,837,500
- --------------------------------------------------------------
23,750,000
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.80%
General Electric Co. 75,000 7,654,687
- --------------------------------------------------------------
Rockwell International Corp. 110,000 5,341,875
- --------------------------------------------------------------
12,996,562
- --------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.38%
W.W. Grainger, Inc. 65,500 2,726,437
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.72%
Raytheon Co.-Class A 100,000 5,168,750
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-3.01%
American General Corp. 110,000 8,580,000
- --------------------------------------------------------------
MGIC Investment Corp. 150,000 5,971,875
- --------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 100,000 7,100,000
- --------------------------------------------------------------
21,651,875
- --------------------------------------------------------------
FOODS-1.43%
H.J. Heinz Co. 50,000 2,831,250
- --------------------------------------------------------------
Unilever N.V.-ADR-New York Shares
(Netherlands) 90,000 7,464,375
- --------------------------------------------------------------
10,295,625
- --------------------------------------------------------------
FOOTWEAR-0.41%
Reebok International Ltd.(a) 200,000 2,975,000
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.77%
Abbott Laboratories 200,000 9,800,000
- --------------------------------------------------------------
American Home Products Corp. 180,000 10,136,250
- --------------------------------------------------------------
19,936,250
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.42%
Mylan Laboratories, Inc. 325,000 10,237,500
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.31%
Lilly (Eli) & Co. 50,000 4,443,750
- --------------------------------------------------------------
FS-2
146
MARKET
SHARES VALUE
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-(CONTINUED)
Merck & Co., Inc. 75,000 $ 11,076,562
- --------------------------------------------------------------
Schering-Plough Corp. 150,000 8,287,500
- --------------------------------------------------------------
23,807,812
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-1.03%
Columbia/HCA Healthcare Corp. 300,000 7,425,000
- --------------------------------------------------------------
HOUSEHOLD FURNITURE &
APPLIANCES-0.77%
Whirlpool Corp. 100,000 5,537,500
- --------------------------------------------------------------
HOUSEWARES-0.31%
Fortune Brands, Inc. 70,000 2,213,750
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-1.09%
Loews Corp. 80,000 7,860,000
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-2.38%
Ohio Casualty Corp. 150,000 6,168,750
- --------------------------------------------------------------
Old Republic International Corp. 200,000 4,500,000
- --------------------------------------------------------------
SAFECO Corp. 150,000 6,440,625
- --------------------------------------------------------------
17,109,375
- --------------------------------------------------------------
INSURANCE BROKERS-0.97%
Marsh & McLennan Co. 120,000 7,012,500
- --------------------------------------------------------------
IRON & STEEL-1.50%
Nucor Corp. 250,000 10,812,500
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-2.96%
Caterpillar, Inc. 100,000 4,600,000
- --------------------------------------------------------------
Deere & Co. 100,000 3,312,500
- --------------------------------------------------------------
Dover Corp. 100,000 3,662,500
- --------------------------------------------------------------
Hanson PLC-ADR (United Kingdom) 250,000 9,750,000
- --------------------------------------------------------------
21,325,000
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.73%
Illinois Tool Works, Inc. 75,000 4,350,000
- --------------------------------------------------------------
Minnesota Mining and Manufacturing
Co. 75,000 5,334,375
- --------------------------------------------------------------
Norsk Hydro A.S.A.-ADR (Norway) 125,000 4,273,437
- --------------------------------------------------------------
Textron, Inc. 75,000 5,695,312
- --------------------------------------------------------------
19,653,124
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.17%
Federal Signal Corp. 160,000 4,380,000
- --------------------------------------------------------------
York International Corp. 100,000 4,081,250
- --------------------------------------------------------------
8,461,250
- --------------------------------------------------------------
METALS MINING-0.74%
Phelps Dodge Corp. 105,000 5,341,875
- --------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-3.76%
Exxon Corp. 100,000 7,312,500
- --------------------------------------------------------------
Repsol S.A.-ADR (Spain) 150,000 8,193,750
- --------------------------------------------------------------
MARKET
SHARES VALUE
OIL (INTERNATIONAL INTEGRATED)-(CONTINUED)
Royal Dutch Petroleum Co.-ADR-New
York Shares (Netherlands) 125,000 $ 5,984,375
- --------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Argentina) 200,000 5,587,500
- --------------------------------------------------------------
27,078,125
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.56%
Westvaco Corp. 150,000 4,021,875
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.47%
IKON Office Solutions, Inc. 400,000 3,425,000
- --------------------------------------------------------------
PUBLISHING-0.08%
R.H. Donnelley Corp. 40,000 582,500
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.73%
Gannett Co., Inc. 80,000 5,295,000
- --------------------------------------------------------------
RAILROADS-0.72%
CSX Corp. 125,000 5,187,500
- --------------------------------------------------------------
RESTAURANTS-1.06%
McDonald's Corp. 100,000 7,662,500
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.63%
Lowe's Companies, Inc. 100,000 5,118,750
- --------------------------------------------------------------
Sherwin-Williams Co. 225,000 6,609,375
- --------------------------------------------------------------
11,728,125
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.24%
Dillards, Inc. 150,000 4,256,250
- --------------------------------------------------------------
J.C. Penney Co., Inc. 100,000 4,687,500
- --------------------------------------------------------------
8,943,750
- --------------------------------------------------------------
RETAIL (DRUG STORES)-0.69%
Rite Aid Corp. 100,000 4,956,250
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.53%
Kmart Corp.(a) 250,000 3,828,125
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.29%
Toys "R" Us, Inc.(a) 125,000 2,109,375
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.88%
Dun & Bradstreet Corp. 200,000 6,312,500
- --------------------------------------------------------------
SPECIALTY PRINTING-0.89%
Deluxe Corp. 175,000 6,398,437
- --------------------------------------------------------------
TELEPHONE-3.62%
Ameritech Corp. 65,000 4,119,375
- --------------------------------------------------------------
Bell Atlantic Corp. 140,000 7,953,750
- --------------------------------------------------------------
British Telecommunications PLC-ADR
(United Kingdom) 60,000 9,101,250
- --------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Mexico) 100,000 4,868,750
- --------------------------------------------------------------
26,043,125
- --------------------------------------------------------------
FS-3
147
MARKET
SHARES VALUE
TEXTILES (APPAREL)-1.74%
Liz Claiborne, Inc. 175,000 $ 5,523,437
- --------------------------------------------------------------
VF Corp. 150,000 7,031,250
- --------------------------------------------------------------
12,554,687
- --------------------------------------------------------------
TEXTILES (SPECIALTY)-0.48%
Unifi, Inc.(a) 175,000 3,423,437
- --------------------------------------------------------------
TOBACCO-1.75%
Gallaher Group PLC-ADR (United
Kingdom) 110,000 2,990,625
- --------------------------------------------------------------
Philip Morris Companies, Inc. 180,000 9,630,000
- --------------------------------------------------------------
12,620,625
- --------------------------------------------------------------
WASTE MANAGEMENT-1.30%
Browning-Ferris Industries, Inc. 150,000 4,265,625
- --------------------------------------------------------------
Waste Management, Inc. 108,750 5,070,468
- --------------------------------------------------------------
9,336,093
- --------------------------------------------------------------
Total Common Stocks (Cost
$367,668,273) 567,066,547
- --------------------------------------------------------------
PRINCIPAL
AMOUNT
CORPORATE NOTES-6.17%
AUTOMOBILES-0.57%
Ford Motor Co., Notes,
7.50%, 11/15/99 $ 750,000 $ 763,778
- --------------------------------------------------------------
6.50%, 08/01/18 3,250,000 3,341,747
- --------------------------------------------------------------
4,105,525
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.94%
National City Corp., Sub Notes,
7.20%, 05/15/05 1,000,000 1,070,191
- --------------------------------------------------------------
Nationsbank Corp., Sr. Notes,
5.375%, 04/15/00 1,550,000 1,549,442
- --------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes,
6.25%, 08/04/08 4,000,000 4,164,400
- --------------------------------------------------------------
6,784,033
- --------------------------------------------------------------
BANKS (MONEY CENTER)-0.44%
First Union Corp., Unsec. Sub.
Notes, 6.40%, 04/01/08 3,000,000 3,145,320
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.51%
Anheuser Busch Co., Unsec. Notes,
5.375%, 09/15/08 3,700,000 3,710,323
- --------------------------------------------------------------
CHEMICALS-0.14%
Eastman Chemical, Notes, 6.375%,
01/15/04 1,000,000 997,400
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.44%
Motorola Inc., Notes, 6.50%,
03/01/08 3,000,000 3,174,600
- --------------------------------------------------------------
CONSUMER FINANCE-0.85%
Beneficial Corp., Medium Term
Notes, 6.625%, 09/27/04 3,000,000 3,092,760
- --------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
CONSUMER FINANCE-(CONTINUED)
Commercial Credit Co., Unsec.
Notes, 5.55%, 02/15/01 $3,000,000 $ 3,007,020
- --------------------------------------------------------------
6,099,780
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.45%
Penn Power & Lighting, First
Mortgage Notes,
6.875%, 02/01/03 1,000,000 1,063,350
- --------------------------------------------------------------
6.55%, 03/01/06 1,900,000 2,002,619
- --------------------------------------------------------------
Union Electric, First Mortgage
Notes, 6.75%, 10/15/99 150,000 151,999
- --------------------------------------------------------------
3,217,968
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.22%
Boeing Co., Notes, 6.625%, 06/01/05 1,500,000 1,572,660
- --------------------------------------------------------------
FOODS-0.35%
Campbell Soup Co., Unsec. Notes,
4.75%, 10/01/03 2,600,000 2,555,332
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.41%
CNA Financial Corp., Unsec. Notes,
6.50%, 04/15/05 3,000,000 2,990,760
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.43%
Sherwin-Williams Co., Notes, 6.50%,
02/01/02 3,000,000 3,099,360
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.42%
Dillard Dept. Stores, Inc., Unsec.
Notes, 6.30%, 02/15/08 3,000,000 3,015,120
- --------------------------------------------------------------
Total Corporate Notes (Cost
$43,397,815) 44,468,181
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-2.61%
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC")-0.52%
Pass through certificates
6.50%, 07/01/01 2,141,748 2,164,493
- --------------------------------------------------------------
8.00%, 10/01/10 1,530,209 1,577,064
- --------------------------------------------------------------
3,741,557
- --------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA")-1.34%
Pass through certificates
8.50%, 03/01/10 1,449,332 1,509,567
- --------------------------------------------------------------
6.50%, 06/01/11 to 05/01/26 6,152,443 6,238,374
- --------------------------------------------------------------
7.50%, 11/01/26 1,839,198 1,894,943
- --------------------------------------------------------------
9,642,884
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA")-0.75%
Pass through certificates
6.50%, 10/15/08 905,700 927,492
- --------------------------------------------------------------
7.00%, 10/15/08 952,794 984,055
- --------------------------------------------------------------
FS-4
148
PRINCIPAL MARKET
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
("GNMA")-(CONTINUED)
6.00%, 11/15/08 $1,074,971 $ 1,088,407
- --------------------------------------------------------------
7.50%, 03/15/26 2,331,182 2,414,218
- --------------------------------------------------------------
5,414,172
- --------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost $18,294,842) 18,798,613
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-10.20%
U.S. TREASURY BONDS-0.73%
7.625%, 02/15/25 4,000,000 5,261,561
- --------------------------------------------------------------
U.S. TREASURY NOTES-9.47%
8.75%, 08/15/00 4,000,000 4,255,521
- --------------------------------------------------------------
7.875%, 08/15/01 5,000,000 5,397,601
- --------------------------------------------------------------
7.50%, 05/15/02 3,000,000 3,261,660
- --------------------------------------------------------------
6.25%, 02/15/03 4,000,000 4,232,800
- --------------------------------------------------------------
7.25%, 05/15/04 6,000,000 6,724,980
- --------------------------------------------------------------
7.25%, 08/15/04 2,000,000 2,249,240
- --------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY NOTES-(CONTINUED)
6.50%, 08/15/05 $7,000,000 $ 7,694,050
- --------------------------------------------------------------
9.375%, 02/15/06 4,000,000 5,101,240
- --------------------------------------------------------------
6.125%, 08/15/07 6,000,000 6,553,800
- --------------------------------------------------------------
5.50%, 02/15/08 8,000,000 8,474,320
- --------------------------------------------------------------
9.25%, 02/15/16 6,000,000 8,609,940
- --------------------------------------------------------------
7.25%, 08/15/22 4,500,000 5,603,715
- --------------------------------------------------------------
68,158,867
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $68,661,389) 73,420,428
- --------------------------------------------------------------
REPURCHASE AGREEMENT-1.01%(b)
SBC Warburg Dillon Read, Inc.,
4.75%, 01/04/99 (Cost
$7,293,570)(c) 7,293,570 7,293,570
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.74% 711,047,339
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.26% 9,086,204
- --------------------------------------------------------------
NET ASSETS-100.00% $720,133,543
==============================================================
Notes to Schedule of Investments:
(a) Non-income producing securities.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviations:
ADR - American Depositary Receipt
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
FS-5
149
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at market value (cost
$505,315,889) $711,047,339
- ---------------------------------------------------------
Receivables for:
Investments sold 5,865,395
- ---------------------------------------------------------
Capital stock sold 2,597,804
- ---------------------------------------------------------
Interest and dividends 3,321,795
- ---------------------------------------------------------
Investment for deferred compensation plan 7,757
- ---------------------------------------------------------
Other assets 15,418
- ---------------------------------------------------------
Total assets 722,855,508
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 616,563
- ---------------------------------------------------------
Deferred compensation plan 7,757
- ---------------------------------------------------------
Accrued advisory fees 453,322
- ---------------------------------------------------------
Accrued operating services fees 75,761
- ---------------------------------------------------------
Accrued distribution fees 1,529,511
- ---------------------------------------------------------
Accrued directors' fees and expenses 39,051
- ---------------------------------------------------------
Total liabilities 2,721,965
- ---------------------------------------------------------
Net assets applicable to shares outstanding $720,133,543
- ---------------------------------------------------------
NET ASSETS:
Class A $ 46,286,433
=========================================================
Class B $ 3,591,573
=========================================================
Class C $670,255,537
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 2,307,756
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 179,008
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 33,407,634
=========================================================
Class A:
Net asset value and redemption price per
share $ 20.06
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $20.06 divided by
94.50%) $ 21.23
=========================================================
Class B:
Net asset value and offering price per
share $ 20.06
=========================================================
Class C:
Net asset value and offering price per
share $ 20.06
=========================================================
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Interest $ 11,514,476
- ---------------------------------------------------------
Dividends (net of $247,098 foreign
withholding tax) 10,195,106
- ---------------------------------------------------------
Total investment income 21,709,582
- ---------------------------------------------------------
EXPENSES:
Advisory fees 5,051,593
- ---------------------------------------------------------
Operating services fees 2,996,689
- ---------------------------------------------------------
Distribution fees-Class A 126,300
- ---------------------------------------------------------
Distribution fees-Class B 10,941
- ---------------------------------------------------------
Distribution fees-Class C 6,365,011
- ---------------------------------------------------------
Directors' fees and expenses 5,841
- ---------------------------------------------------------
Total expenses 14,556,375
- ---------------------------------------------------------
Less: Fees waived by advisor (1,328,869)
- ---------------------------------------------------------
Net expenses 13,227,506
- ---------------------------------------------------------
Net investment income 8,482,076
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain from investment
securities 59,176,179
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities 11,782,197
- ---------------------------------------------------------
Net gain from investment securities 70,958,376
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 79,440,452
=========================================================
See Notes to Financial Statements.
FS-6
150
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ ------------
OPERATIONS:
Net investment income $ 8,482,076 $ 9,048,951
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities 59,176,179 23,883,293
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 11,782,197 86,058,520
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 79,440,452 118,990,764
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (693,499) (246,939)
- -----------------------------------------------------------------------------------------
Class B (14,661) --
- -----------------------------------------------------------------------------------------
Class C (7,001,855) (8,674,714)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (3,877,358) (610,538)
- -----------------------------------------------------------------------------------------
Class B (270,410) --
- -----------------------------------------------------------------------------------------
Class C (56,203,971) (14,999,384)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 21,305,857 24,377,889
- -----------------------------------------------------------------------------------------
Class B 3,715,719 --
- -----------------------------------------------------------------------------------------
Class C 55,402,752 19,575,501
- -----------------------------------------------------------------------------------------
Net increase in net assets 91,803,026 138,412,579
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 628,330,517 489,917,938
- -----------------------------------------------------------------------------------------
End of period $720,133,543 $628,330,517
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $510,018,210 $426,093,882
- -----------------------------------------------------------------------------------------
Undistributed net investment income 938,111 166,050
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 3,445,772 8,121,332
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 205,731,450 193,949,253
- -----------------------------------------------------------------------------------------
$720,133,543 $628,330,517
=========================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Flex Fund (the "Fund") is a series portfolio of AIM Advisor Funds,
Inc. (the "Company"). The Company is a Maryland corporation and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of five diversified
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to achieve a high total return on
investment through capital appreciation and current income, without regard to
federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) 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 mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date, or absent a last sales price, at the mean of the
FS-7
151
closing bid and asked prices. Debt obligations (including convertible bonds)
are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors
such as yield, type of issue, coupon rate and maturity date. Securities for
which market prices are not provided by any of the above methods are valued
at the mean between last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations are not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Company's Board of Directors.
Investments with maturities of 60 days or less are valued on the basis of
amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions-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 as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are
declared and paid quarterly. On December 31, 1998 additional paid-in capital
was increased by $3,500,000 and undistributed net realized gains was
decreased by $3,500,000 as a result of equalization credits and in order to
comply with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Bond Premiums-It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
D. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements.
E. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Capital Management, Inc. ("ICM") whereby AIM pays ICM an
annual rate of 0.20% of the Fund's average daily net assets.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. This
agreement provides that AIM pays all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1998, AIM was paid $1,703,905 for such services. As of
June 1, 1998, AIM has voluntarily agreed to limit the operating services fees to
an annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the period June 1, 1998 through December 31, 1998, AIM
voluntarily waived operating services fees in the amount of $1,292,783.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The
Fund, pursuant to the Class B Plan, pays AIM Distributors compensation at an
annual rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B or Class C shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $90,214, $10,941 and $6,365,011, respectively, as compensation
under the Plans. During the year ended December 31, 1998, AIM Distributors
waived fees of $36,086 for the Class A shares.
AIM Distributors received commissions of $33,479 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1998,
AIM Distributors received commissions of $100,172 in contingent deferred sales
charges imposed on redemptions of shares. Certain officers and directors of the
Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average daily net assets of the Fund are less
than $500 million, the Fund's expenses shall not exceed 1.55% for Class A and
2.20% for Class C; on the next $500 million of net assets, expenses shall not
exceed 1.50% for Class A and 2.15% for Class C; on the next $1 billion of net
assets, expenses shall not exceed 1.45% for Class A and 2.10% for Class C; and
on all assets over $2 billion, expenses shall not exceed 1.40% for Class A and
2.05% for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $4,762
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
FS-8
152
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, the Fund did
not borrow under the line of credit agreement. The funds which are party to the
line of credit are charged a commitment fee of 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1998 was
$232,418,225 and $222,893,137, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $222,128,397
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (16,396,947)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $205,731,450
==========================================================================
Investments have the same cost for tax and financial statement purposes.
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended December
31, 1998 and 1997 were as follows:
1998 1997*
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
Sold:
Class A 1,076,842 $ 22,390,887 1,255,277 $ 24,015,843
- --------------------------------------------------------------------------------------------------------------------
Class B** 175,059 3,648,126 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 5,318,582 109,967,149 4,707,789 86,294,017
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 223,596 4,399,200 42,162 821,435
- --------------------------------------------------------------------------------------------------------------------
Class B** 14,140 277,225 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 3,067,888 60,325,811 1,120,103 21,660,078
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (266,823) (5,484,230) (23,298) (459,389)
- --------------------------------------------------------------------------------------------------------------------
Class B** (10,191) (209,632) -- --
- --------------------------------------------------------------------------------------------------------------------
Class C (5,531,566) (114,890,208) (4,738,134) (88,378,594)
- --------------------------------------------------------------------------------------------------------------------
4,067,527 $ 80,424,328 2,363,899 $ 43,953,390
====================================================================================================================
* Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
** Class B shares commenced sales on March 3, 1998.
FS-9
153
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998, and for a share of
Class C capital stock outstanding during each of the years in the five-year
period ended December 31, 1998.
CLASS A(a) CLASS B
----------------------- ------------
1998 1997(b) 1998
------- ------------ ------------
Net asset value, beginning of period $ 19.74 $ 16.63 $ 20.69
- ------------------------------------------------------------ ------- ---------- ----------
Income from investment operations:
Net investment income 0.39 0.41(c) 0.22
- ------------------------------------------------------------ ------- ---------- ----------
Net gains on securities (both realized and unrealized) 2.16 3.63 1.22
- ------------------------------------------------------------ ------- ---------- ----------
Total from investment operations 2.55 4.04 1.44
- ------------------------------------------------------------ ------- ---------- ----------
Less distributions:
Dividends from net investment income (0.39) (0.43) (0.23)
- ------------------------------------------------------------ ------- ---------- ----------
Distributions from net realized gains (1.84) (0.50) (1.84)
- ------------------------------------------------------------ ------- ---------- ----------
Total distributions (2.23) (0.93) (2.07)
- ------------------------------------------------------------ ------- ---------- ----------
Net asset value, end of period $ 20.06 $ 19.74 $ 20.06
- ------------------------------------------------------------ ------- ---------- ----------
Total return(d) 13.26% 24.60% 7.25%
- ------------------------------------------------------------ ------- ---------- ----------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,286 $ 25,151 $ 3,592
- ------------------------------------------------------------ ------- ---------- ----------
Ratio of expenses to average net assets(e) 1.23%(f) 1.45% 2.00%(f)(g)
- ------------------------------------------------------------ ------- ---------- ----------
Ratio of net investment income to average net assets(h) 1.99%(f) 2.34% 1.22%(f)(g)
- ------------------------------------------------------------ ------- ---------- ----------
Portfolio turnover rate 34% 17% 34%
- ------------------------------------------------------------ ------- ---------- ----------
(a) Per share information and shares have been restated to
reflect a 4 for 1 stock split, effected in the form of a
300% stock dividend, on November 7, 1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and for periods less than one
year is not annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.52% and 1.55% for 1998-1997
for Class A and 2.19% (annualized) for 1998 for Class B.
(f) Ratios are based on average net assets of $36,085,767 and
$1,313,596 for Class A and Class B, respectively.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratio of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 1.70% and 2.24%
for 1998-1997 for Class A and 1.03% (annualized) for 1998
for Class B.
CLASS C(a)
----------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 19.74 $ 16.63 $ 15.66 $ 12.63 $ 13.54
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.25 0.30(c) 0.30 0.32 0.32
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 2.14 3.60 1.81 3.09 (0.23)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 2.39 3.90 2.11 3.41 0.09
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.23) (0.29) (0.29) (0.32) (0.31)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (1.84) (0.50) (0.85) (0.06) (0.69)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (2.07) (0.79) (1.14) (0.38) (1.00)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total return(d) 12.41% 23.64% 13.61% 27.30% 0.64%
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $670,256 $603,179 $489,918 $399,162 $243,848
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of expenses to average net assets 2.00%(e)(f) 2.20% 2.26% 2.28% 2.25%
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of net investment income to average net assets 1.22%(f)(g) 1.59% 1.81% 2.28% 2.32%
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Portfolio turnover rate 34% 17% 26% 5% 36%
- ------------------------------------------------------------ -------- -------- -------- -------- ---------
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.19% for 1998.
(f) Ratios are based on average net assets of $636,501,142.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.03% for 1998.
FS-10
154
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor International Value Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor International Value Fund (a
portfolio of AIM Advisor Funds, Inc.), including the
schedule of investments, as of December 31, 1998, and the
related statement of operations, the statement of changes
in net assets, and the financial highlights for the year
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and the financial
highlights based on our audit. The accompanying statement
of changes in net assets for the year ended December 31,
1997 and the financial highlights for each of the years
in the two-year period ended December 31, 1997 and the
period May 1, 1995 (date operations commenced) through
December 31, 1995, were audited by other auditors whose
report thereon dated February 5, 1998, expressed an
unqualified opinion on such statement and financial
highlights.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor International Value Fund as of December 31, 1998,
the results of its operations, the changes in its net
assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-11
155
SCHEDULE OF INVESTMENTS
December 31, 1998
MARKET
SHARES VALUE
FOREIGN STOCKS-95.70%
ARGENTINA-1.62%
YPF Sociedad Anonima-ADR
(Oil-International Integrated) 80,000 $ 2,235,000
- -------------------------------------------------------------
AUSTRALIA-5.73%
National Australia Bank Ltd.-ADR
(Banks-Regional) 45,000 3,349,688
- -------------------------------------------------------------
News Corp. Ltd. (The)
(Publishing-Newspapers) 400,000 2,640,238
- -------------------------------------------------------------
Rio Tinto Ltd.-ADR (Metals Mining) 40,000 1,899,456
- -------------------------------------------------------------
7,889,382
- -------------------------------------------------------------
DENMARK-4.13%
Den Danske Bank-ADR (Banks-Money
Center) 25,000 3,358,552
- -------------------------------------------------------------
Novo-Nordisk A.S.-ADR (Health
Care-Drugs-Major Pharmaceuticals) 35,000 2,327,500
- -------------------------------------------------------------
5,686,052
- -------------------------------------------------------------
FRANCE-6.28%
Elf Aquitaine S.A.-ADR
(Oil-International Integrated) 30,000 1,698,750
- -------------------------------------------------------------
Groupe Danone-ADR (Foods) 60,000 3,375,000
- -------------------------------------------------------------
Societe Generale (Banks-Major
Regional) 110,000 3,564,264
- -------------------------------------------------------------
8,638,014
- -------------------------------------------------------------
GERMANY-7.79%
BASF A.G.-ADR (Chemicals-Diversified) 75,000 2,863,972
- -------------------------------------------------------------
Bayer A.G.-ADR
(Chemicals-Diversified) 55,000 2,296,729
- -------------------------------------------------------------
Deutsche Bank A.G.-ADR (Banks-Money
Center) 48,000 2,825,784
- -------------------------------------------------------------
RWE A.G.-ADR
(Manufacturing-Diversified) 50,000 2,739,385
- -------------------------------------------------------------
10,725,870
- -------------------------------------------------------------
ITALY-7.27%
ENI S.p.A.-ADR (Oil-International
Integrated) 32,000 2,168,000
- -------------------------------------------------------------
Istituto Bancario San Paolo di
Torino-ADR (Banks-Major
Regional)(a) 109,725 3,922,669
- -------------------------------------------------------------
Telecom Italia S.p.A.-ADR (Telephone) 45,000 3,915,000
- -------------------------------------------------------------
10,005,669
- -------------------------------------------------------------
JAPAN-10.44%
Canon, Inc.-ADR (Office Equipment &
Supplies) 75,000 1,612,500
- -------------------------------------------------------------
Dai Nippon Printing Co., Ltd.-ADR
(Specialty Printing) 11,000 1,757,323
- -------------------------------------------------------------
Fuji Photo Film-ADR
(Photography/Imaging) 50,000 1,831,250
- -------------------------------------------------------------
Hitachi Ltd.-ADR
(Manufacturing-Diversified) 20,000 1,208,750
- -------------------------------------------------------------
Kirin Brewery Co., Ltd.-ADR
(Beverages-Alcoholic) 23,000 2,846,250
- -------------------------------------------------------------
Kyocera Corp.-ADR
(Beverages-Alcoholic) 28,000 1,454,250
- -------------------------------------------------------------
Nintendo Co. Ltd. (Leisure
Time-Products) 25,000 2,411,931
- -------------------------------------------------------------
Takefuji Corp.
(Financial-Diversified) 17,000 1,241,370
- -------------------------------------------------------------
14,363,624
- -------------------------------------------------------------
MARKET
SHARES VALUE
MEXICO-0.71%
Telefonos de Mexico S.A.-ADR
(Telephone) 20,000 $ 973,750
- -------------------------------------------------------------
NETHERLANDS-9.01%
Akzo Nobel N.V.-ADR (Chemicals) 60,000 2,677,500
- -------------------------------------------------------------
ING Groep N.V.-ADR
(Insurance-Life/Health) 55,000 3,420,313
- -------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares (Oil-International
Integrated) 45,000 2,154,375
- -------------------------------------------------------------
Unilever N.V. (Foods) 50,000 4,146,875
- -------------------------------------------------------------
12,399,063
- -------------------------------------------------------------
NORWAY-0.87%
Norsk Hydro A.S.A.-ADR
(Manufacturing-Diversified) 35,000 1,196,562
- -------------------------------------------------------------
PORTUGAL-1.78%
Portugal Telecom S.A.-ADR (Telephone) 55,000 2,454,375
- -------------------------------------------------------------
SPAIN-9.69%
Banco Santander S.A.-ADR
(Banks-Regional) 102,000 2,014,500
- -------------------------------------------------------------
Endesa S.A.-ADR (Electric Companies) 160,000 4,320,000
- -------------------------------------------------------------
Repsol S.A.-ADR (Oil-International
Integrated) 65,000 3,550,625
- -------------------------------------------------------------
Telefonica S.A.-ADR (Telephone) 25,500 3,452,062
- -------------------------------------------------------------
13,337,187
- -------------------------------------------------------------
SWEDEN-3.71%
Astra A.B.-ADR (Health
Care-Drugs-Major Pharmaceutical) 185,000 3,827,187
- -------------------------------------------------------------
Volvo A.B.-ADR (Automobiles) 55,000 1,282,188
- -------------------------------------------------------------
5,109,375
- -------------------------------------------------------------
SWITZERLAND-5.23%
Nestle S.A.-ADR (Foods) 30,000 3,265,428
- -------------------------------------------------------------
Novartis A.G.-ADR (Health
Care-Diversified) 40,000 3,931,620
- -------------------------------------------------------------
7,197,048
- -------------------------------------------------------------
UNITED KINGDOM-21.44%
Associated British Foods PLC-ADR
(Foods) 300,000 2,800,200
- -------------------------------------------------------------
British Airways PLC-ADR (Airlines) 33,000 2,237,813
- -------------------------------------------------------------
British Telecommunications PLC
(Telephone) 30,000 4,550,625
- -------------------------------------------------------------
Carlton Communications PLC-ADR
(Electrical Equipment) 78,000 3,578,250
- -------------------------------------------------------------
Glaxo Wellcome PLC-ADR (Health
Care-Drugs-Major Pharmaceuticals) 50,000 3,475,000
- -------------------------------------------------------------
HSBC Holdings PLC-ADR (Banks-Money
Center) 15,000 3,736,921
- -------------------------------------------------------------
PowerGen PLC-ADR (Electric Companies) 55,000 2,942,500
- -------------------------------------------------------------
Scottish Power PLC (Electric
Companies) 250,000 2,565,558
- -------------------------------------------------------------
FS-12
156
MARKET
SHARES VALUE
UNITED KINGDOM-(CONTINUED)
SmithKline Beecham PLC-ADR (Health
Care-Drugs-Major Pharmaceuticals) 20,000 $ 1,390,000
- -------------------------------------------------------------
Unigate PLC (Foods) 310,000 2,233,344
- -------------------------------------------------------------
29,510,211
- -------------------------------------------------------------
Total Foreign Stocks (Cost
$101,385,402) 131,721,182
- -------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
REPURCHASE AGREEMENT-4.29%(b)
SBC Warburg Dillon Read Inc.,
4.75%, 01/04/99(c) (Cost
$5,913,111) $5,913,111 $ 5,913,111
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.99% 137,634,293
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.01% 17,635
- --------------------------------------------------------------
NET ASSETS-100.00% $137,651,928
- --------------------------------------------------------------
Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sale price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
See Notes to Financial Statements.
FS-13
157
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at market value (cost
$107,298,513) $137,634,293
- ---------------------------------------------------------
Foreign currencies, at value (cost $21,310) 19,060
- ---------------------------------------------------------
Receivables for:
Capital stock sold 136,224
- ---------------------------------------------------------
Interest and dividends 364,816
- ---------------------------------------------------------
Investment for deferred compensation plan 6,044
- ---------------------------------------------------------
Total assets 138,160,437
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 119,578
- ---------------------------------------------------------
Deferred compensation plan 6,044
- ---------------------------------------------------------
Accrued advisory fees 114,615
- ---------------------------------------------------------
Accrued operating services fees 28,263
- ---------------------------------------------------------
Accrued distribution fees 237,507
- ---------------------------------------------------------
Accrued directors' fees and expenses 2,502
- ---------------------------------------------------------
Total liabilities 508,509
- ---------------------------------------------------------
Net assets applicable to shares outstanding $137,651,928
- ---------------------------------------------------------
NET ASSETS:
Class A $ 28,280,585
=========================================================
Class B $ 4,288,637
=========================================================
Class C $105,082,706
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 1,707,161
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 260,201
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 6,377,274
=========================================================
Class A:
Net asset value and redemption price per
share $ 16.57
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $16.57
divided by 94.50%) $ 17.53
=========================================================
Class B:
Net asset value and offering price per
share $ 16.48
=========================================================
Class C:
Net asset value and offering price per
share $ 16.48
=========================================================
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Dividends (net of $393,010 foreign
withholding tax) $ 2,707,231
- --------------------------------------------------------
Interest 270,056
- --------------------------------------------------------
Total investment income 2,977,287
- --------------------------------------------------------
EXPENSES:
Advisory fees 1,238,568
- --------------------------------------------------------
Operating services fees 554,160
- --------------------------------------------------------
Distribution fees-Class A 58,205
- --------------------------------------------------------
Distribution fees-Class B 19,718
- --------------------------------------------------------
Distribution fees-Class C 1,052,550
- --------------------------------------------------------
Directors' fees and expenses 8,026
- --------------------------------------------------------
Total expenses 2,931,227
- --------------------------------------------------------
Less: Fees waived by advisor (180,746)
- --------------------------------------------------------
Net expenses 2,750,481
- --------------------------------------------------------
Net investment income 226,806
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (5,464,277)
- --------------------------------------------------------
Foreign currencies (29,923)
- --------------------------------------------------------
(5,494,200)
- --------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 15,277,088
- --------------------------------------------------------
Foreign currencies (1,740)
- --------------------------------------------------------
15,275,348
- --------------------------------------------------------
Net gain from investment securities and
foreign currencies 9,781,148
- --------------------------------------------------------
Net increase in net assets resulting from
operations $10,007,954
========================================================
FS-14
158
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ ------------
OPERATIONS:
Net investment income $ 226,806 $ 88,685
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (5,494,200) 885,467
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 15,275,348 7,942,380
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 10,007,954 8,916,532
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (160,712) (4,884)
- -----------------------------------------------------------------------------------------
Class C -- (54,101)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (237) (99,400)
- -----------------------------------------------------------------------------------------
Class B (51) --
- -----------------------------------------------------------------------------------------
Class C (1,274) (1,300,488)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 18,784,781 8,386,957
- -----------------------------------------------------------------------------------------
Class B 4,303,232 --
- -----------------------------------------------------------------------------------------
Class C 3,112,106 33,845,537
- -----------------------------------------------------------------------------------------
Net increase in net assets 36,045,799 49,690,153
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 101,606,129 51,915,976
- -----------------------------------------------------------------------------------------
End of period $137,651,928 $101,606,129
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $113,159,037 $ 86,958,918
- -----------------------------------------------------------------------------------------
Undistributed net investment income 58,330 (25,744)
- -----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (5,899,391) (385,649)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 30,333,952 15,058,604
- -----------------------------------------------------------------------------------------
$137,651,928 $101,606,129
=========================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor International Value Fund (the "Fund") is a series portfolio of AIM
Advisor Funds, Inc. (the "Company"). The Company is a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of five
diversified portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's investment objective is to achieve a high total
return on investment through capital appreciation and current income, without
regard to U.S. or foreign tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) 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 mean between the closing bid and asked
prices on that day. If a mean is not available, as is the case in some
foreign markets, the closing bid will be used absent a last sales price.
Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market System) is valued at the
mean between the last bid and asked
FS-15
159
prices based upon quotes furnished by market makers for such securities.
Each security reported on the NASDAQ National Market System is valued at
the last sales price on the valuation date, or absent a last sales price,
at the mean of the closing bid and asked prices. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may
be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the
above methods are valued at the mean between last bid and asked prices
based upon quotes furnished by independent sources. Securities for which
market quotations are not readily available or are questionable are valued
at fair value as determined in good faith by or under the supervision of
the Company's Board of Directors. Investments with maturities of 60 days or
less are valued on the basis of amortized cost which approximates market
value. Generally, trading in foreign securities is substantially completed
each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of such time. Foreign currency
exchange rates are also generally determined prior to the close of the New
York Stock Exchange. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which
would not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at the date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
C. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
D. Securities Transactions, Investment Income and Distributions-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 as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are
declared and paid annually. On December 31, 1998 undistributed net
investment income was increased by $17,980 and undistributed net realized
gains was decreased by $17,980 as a result of differing book/tax treatment
of foreign currency transactions and in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
E. Federal Income Taxes-The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $5,869,981 (which may be carried forward to offset future
taxable capital gain if any) which expires, if not previously utilized,
through the year 2006.
F. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Global Asset Management Limited ("IGAM") whereby AIM pays
IGAM an annual rate of 0.35% of average net assets up to $50 million; 0.30% on
average net assets over $50 million up to $100 million; and 0.25% on average net
assets in excess of $100 million.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, registrar, custodial, shareholder reporting, sub-accounting
and recordkeeping services and functions. This agreement provides that AIM pays
all fees and expenses associated with these and other functions, including, but
not limited to, registration fees, shareholder meeting fees, and proxy statement
and shareholder report expenses. During the year ended December 31, 1998, AIM
was paid $390,044 for such services. As of June 1, 1998, AIM has voluntarily
agreed to limit the operating services fees to an annual rate of 0.45% of the
first $50 million of the Fund's average daily net assets and 0.10% of the Fund's
average daily net assets in excess of $50 million. During the period June 1,
1998 through
FS-16
160
December 31, 1998, AIM voluntarily waived operating services fees in the amount
of $164,116.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The Fund
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B or Class C shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $41,575, $19,718 and $1,052,550, respectively, as compensation
under the Plans. During the year ended December 31, 1998, AIM Distributors
waived fees of $16,630 for the Class A shares.
AIM Distributors received commissions of $23,552 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1998,
AIM Distributors received commissions of $67,046 in contingent deferred sales
charges imposed on redemptions of Fund shares. Certain officers and directors of
the Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average net assets of the Fund are less than
$100 million, the Fund's expenses shall not exceed 1.80% for Class A and 2.45%
for Class C; on the next $400 million of net assets, expenses shall not exceed
1.75% for Class A and 2.40% for Class C; on the next $500 million, expenses
shall not exceed 1.70% for Class A and 2.35% for Class C; on the next $1 billion
of net assets, expenses shall not exceed 1.65% for Class A and 2.30% for Class
C; and on all assets over $2 billion, expenses shall not exceed 1.60% for Class
A and 2.25% for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $3,673
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, the Fund did
not borrow under the line of credit agreement. The funds which are party to the
line of credit are charged a commitment fee of 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1998 was
$32,865,421 and $10,102,638, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
Aggregate unrealized appreciation of investment
securities $34,724,754
- ------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (4,388,974)
- ------------------------------------------------------------
Net unrealized appreciation of investment
securities $30,335,780
============================================================
Investments have the same cost for tax and financial statement purposes.
FS-17
161
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended December
31, 1998 and 1997 were as follows:
1998 1997*
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------
Sold:
Class A 1,753,054 $ 28,241,964 638,784 $ 9,521,875
- --------------------------------------------------------------------------------------------------------------------
Class B** 309,463 5,088,103 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 1,767,625 28,826,767 3,118,584 44,774,893
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 9,847 156,574 5,815 92,368
- --------------------------------------------------------------------------------------------------------------------
Class B 3 46 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 71 1,122 59,331 998,719
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (619,207) (9,613,757) (81,132) (1,227,286)
- --------------------------------------------------------------------------------------------------------------------
Class B** (49,265) (784,917) -- --
- --------------------------------------------------------------------------------------------------------------------
Class C (1,630,166) (25,715,783) (806,643) (11,928,075)
- --------------------------------------------------------------------------------------------------------------------
1,541,425 $ 26,200,119 2,934,739 $ 42,232,494
====================================================================================================================
*Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
**Class B Shares commenced sales on March 3, 1998.
FS-18
162
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998 and for a share of
Class C capital stock outstanding during each of the years in the three-year
period ended December 31, 1998 and the period May 1, 1995 (date operations
commenced) through December 31, 1995.
CLASS A(a) CLASS B
-------------------------- ------------
1998 1997(B) 1998
------- ------------ ------------
Net asset value, beginning of period $ 14.99 $13.42 $16.21
- ------------------------------------------------------------ ------- ------ ------
Income from investment operations:
Net investment income 0.09 0.17(c) --
- ------------------------------------------------------------ ------- ------ ------
Net gains on securities (both realized and unrealized) 1.59 1.69 0.27
- ------------------------------------------------------------ ------- ------ ------
Total from investment operations 1.68 1.86 0.27
- ------------------------------------------------------------ ------- ------ ------
Less distributions:
Dividends from net investment income (0.10) (0.07) --
- ------------------------------------------------------------ ------- ------ ------
Distributions from net realized gains -- (0.22) --
- ------------------------------------------------------------ ------- ------ ------
Total distributions (0.10) (0.29) --
- ------------------------------------------------------------ ------- ------ ------
Net asset value, end of period $ 16.57 $14.99 $16.48
- ------------------------------------------------------------ ------- ------ ------
Total return(d) 11.20% 13.84% 1.67%
- ------------------------------------------------------------ ------- ------ ------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $28,281 $8,444 $4,289
- ------------------------------------------------------------ ------- ------ ------
Ratio of expenses to average net assets(e) 1.57%(f) 1.71% 2.32%(f)(g)
- ------------------------------------------------------------ ------- ------ ------
Ratio of net investment income to average net assets(h) 0.84%(f) 0.83% 0.09%(f)(g)
- ------------------------------------------------------------ ------- ------ ------
Portfolio turnover rate 9% 9% 9%
- ------------------------------------------------------------ ------- ------ ------
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.81% and 1.81% for 1998-1997 for Class A and 2.46% (annualized) for 1998
for Class B.
(f) Ratios are based on average net assets of $16,630,080 and $2,367,422 for
Class A and Class B, respectively.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 0.60% and 0.73% for 1998-1997 for Class A and (0.05)%
(annualized) for 1998 for Class B.
CLASS C(a)
--------------------------------------------------
1998 1997(b) 1996 1995
-------- -------- -------- --------
Net asset value, beginning of period $ 14.93 $ 13.42 $ 11.13 $ 10.00
- ------------------------------------------------------------ -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) --(c) 0.01(c) (0.01) --
- ------------------------------------------------------------ -------- -------- -------- --------
Net gains on securities (both realized and unrealized) 1.55 1.73 2.34 1.13
- ------------------------------------------------------------ -------- -------- -------- --------
Total from investment operations 1.55 1.74 2.33 1.13
- ------------------------------------------------------------ -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- (0.01) -- --
- ------------------------------------------------------------ -------- -------- -------- --------
Distributions from net realized gains -- (0.22) (0.04) --
- ------------------------------------------------------------ -------- -------- -------- --------
Total distributions -- (0.23) (0.04) --
- ------------------------------------------------------------ -------- -------- -------- --------
Net asset value, end of period $ 16.48 $ 14.93 $ 13.42 $ 11.13
- ------------------------------------------------------------ -------- -------- -------- --------
Total return(d) 10.38% 12.98% 20.99% 11.28%
- ------------------------------------------------------------ -------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $105,083 $ 93,162 $ 51,916 $ 9,467
- ------------------------------------------------------------ -------- -------- -------- --------
Ratio of expenses to average net assets(e) 2.32%(f) 2.46% 2.50% 2.50%(g)
- ------------------------------------------------------------ -------- -------- -------- --------
Ratio of net investment income (loss) to average net
assets(h) 0.09%(f) 0.08% (0.16)% 0.03%(g)
- ------------------------------------------------------------ -------- -------- -------- --------
Portfolio turnover rate 9% 9% 5% 2%
- ------------------------------------------------------------ -------- -------- -------- --------
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.46% for 1998.
(f) Ratios are based on average net assets of $105,254,958.
(g) Annualized
(h) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.05)% for 1998.
FS-19
163
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor Large Cap Value Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Large Cap Value Fund (a
portfolio of AIM Advisor Funds, Inc.), including the
schedule of investments, as of December 31, 1998, and the
related statement of operations, the statement of changes
in net assets, and the financial highlights for the year
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and the financial
highlights based on our audit. The accompanying statement
of changes in net assets for the year ended December 31,
1997 and the financial highlights for each of the years
in the four-year period ended December 31, 1997, were
audited by other auditors whose report thereon dated
February 5, 1998, expressed an unqualified opinion on
such statement and financial highlights.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial presentation. We believe
that our audit provides a reasonable basis for our
opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor Large Cap Value Fund as of December 31, 1998, the
results of its operations, the changes in its net assets
and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-20
164
SCHEDULE OF INVESTMENTS
December 31, 1998
MARKET
SHARES VALUE
COMMON STOCKS-97.45%
AEROSPACE/DEFENSE-1.00%
Lockheed Martin Corp. 24,360 $ 2,064,510
- --------------------------------------------------------------
AIRLINES-1.45%
Southwest Airlines Co. 132,450 2,971,846
- --------------------------------------------------------------
AUTOMOBILES-1.40%
DaimlerChrysler AG 30,000 2,881,875
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-3.70%
Bank One Corp. 69,660 3,557,013
- --------------------------------------------------------------
National City Corp. 56,000 4,060,000
- --------------------------------------------------------------
7,617,013
- --------------------------------------------------------------
BANKS (MONEY CENTER)-4.25%
BankAmerica Corp. 45,674 2,746,150
- --------------------------------------------------------------
Chase Manhattan Corp. (The) 34,500 2,348,156
- --------------------------------------------------------------
First Union Corp. 60,000 3,648,750
- --------------------------------------------------------------
8,743,056
- --------------------------------------------------------------
BANKS (REGIONAL)-0.95%
Commerce Bancshares, Inc. 45,990 1,954,575
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.73%
Anheuser-Busch Companies, Inc. 23,000 1,509,375
- --------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-1.03%
PepsiCo, Inc. 51,600 2,112,375
- --------------------------------------------------------------
CHEMICALS-0.63%
Dow Chemical Co. (The) 14,300 1,300,407
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-4.71%
Compaq Computer Corp. 67,900 2,847,557
- --------------------------------------------------------------
International Business Machines
Corp. 16,500 3,048,375
- --------------------------------------------------------------
Sun Microsystems, Inc.(a) 44,300 3,793,188
- --------------------------------------------------------------
9,689,120
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-4.07%
Computer Associates International,
Inc. 56,000 2,387,000
- --------------------------------------------------------------
Electronic Data Systems Corp. 52,200 2,623,050
- --------------------------------------------------------------
Oracle Corp.(a) 78,100 3,368,063
- --------------------------------------------------------------
8,378,113
- --------------------------------------------------------------
CONSTRUCTION (CEMENT &
AGGREGATES)-1.66%
Vulcan Materials Co. 25,900 3,407,468
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES &
GIFTS)-0.62%
American Greetings Corp.-Class A 31,000 1,272,937
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-2.07%
SUPERVALU, INC. 152,000 4,256,000
- --------------------------------------------------------------
ELECTRIC COMPANIES-3.16%
DTE Energy Co. 35,000 1,500,625
- --------------------------------------------------------------
GPU, Inc. 35,000 1,546,563
- --------------------------------------------------------------
Southern Co. 70,000 2,034,375
- --------------------------------------------------------------
MARKET
SHARES VALUE
ELECTRIC COMPANIES-(CONTINUED)
Teco Energy, Inc. 50,000 $ 1,409,375
- --------------------------------------------------------------
6,490,938
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.51%
Emerson Electric Co. 30,000 1,876,875
- --------------------------------------------------------------
General Electric Co. 32,200 3,286,412
- --------------------------------------------------------------
5,163,287
- --------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.55%
W.W. Grainger, Inc. 27,000 1,123,875
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-1.02%
Raytheon Co. 39,400 2,098,050
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-6.25%
American General Corp. 48,600 3,790,800
- --------------------------------------------------------------
Fannie Mae 50,000 3,700,000
- --------------------------------------------------------------
MGIC Investment Corp. 44,000 1,751,750
- --------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 50,750 3,603,250
- --------------------------------------------------------------
12,845,800
- --------------------------------------------------------------
FOODS-1.61%
H.J. Heinz Co. 58,350 3,304,068
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-3.50%
Abbott Laboratories 71,200 3,488,800
- --------------------------------------------------------------
American Home Products Corp. 65,800 3,705,363
- --------------------------------------------------------------
7,194,163
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.77%
Mylan Laboratories, Inc. 50,000 1,575,000
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-4.24%
Merck & Co., Inc. 25,900 3,825,106
- --------------------------------------------------------------
Schering-Plough Corp. 88,400 4,884,100
- --------------------------------------------------------------
8,709,206
- --------------------------------------------------------------
HOUSEHOLD FURNITURE AND
APPLIANCES-1.17%
Maytag Corp. 38,600 2,402,850
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-1.00%
Kimberly-Clark Corp. 37,900 2,065,550
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.99%
Jefferson-Pilot Corp. 36,000 2,700,000
- --------------------------------------------------------------
Torchmark Corp. 39,700 1,401,906
- --------------------------------------------------------------
4,101,906
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.62%
Loews Corp. 13,000 1,277,250
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-4.01%
Allstate Corp. (The) 45,000 1,738,125
- --------------------------------------------------------------
General Re Corp.(a)>) 13,500 3,363,727
- --------------------------------------------------------------
Old Republic International Corp. 60,000 1,350,000
- --------------------------------------------------------------
FS-21
165
MARKET
SHARES VALUE
INSURANCE
(PROPERTY-CASUALTY)-(CONTINUED)
SAFECO Corp. 42,000 $ 1,803,375
- --------------------------------------------------------------
8,255,227
- --------------------------------------------------------------
IRON & STEEL-0.93%
Nucor Corp. 44,000 1,903,000
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.85%
Dover Corp. 48,000 1,758,000
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.52%
Hanson PLC-ADR (United Kingdom) 61,000 2,379,000
- --------------------------------------------------------------
Illinois Tool Works Inc. 17,000 986,000
- --------------------------------------------------------------
Textron, Inc. 24,000 1,822,500
- --------------------------------------------------------------
5,187,500
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.09%
Federal Signal Corp. 82,000 2,244,750
- --------------------------------------------------------------
METALS MINING-0.25%
Phelps Dodge Corp. 10,100 513,839
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-1.05%
Pitney Bowes, Inc. 32,600 2,153,637
- --------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-6.68%
Amoco Corp. 45,400 2,741,025
- --------------------------------------------------------------
Exxon Corp. 52,000 3,802,500
- --------------------------------------------------------------
Repsol S.A.-ADR (Spain) 60,000 3,277,500
- --------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares-ADR (Netherlands) 40,400 1,934,150
- --------------------------------------------------------------
YPF Sociedad Anonima-ADR (Argentina) 70,900 1,980,770
- --------------------------------------------------------------
13,735,945
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.49%
Xerox Corp. 26,000 3,068,000
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-1.54%
Gannett Co., Inc. 48,000 3,177,000
- --------------------------------------------------------------
RAILROADS-0.83%
GATX Corp. 25,000 946,875
- --------------------------------------------------------------
Norfolk Southern Corp. 24,000 760,500
- --------------------------------------------------------------
1,707,375
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-3.19%
Lowe's Companies, Inc. 79,000 4,043,813
- --------------------------------------------------------------
Sherwin-Williams Co. 85,400 2,508,625
- --------------------------------------------------------------
6,552,438
- --------------------------------------------------------------
MARKET
SHARES VALUE
RETAIL (DEPARTMENT STORES)-1.14%
J.C. Penney Co., Inc. 50,000 $ 2,343,750
- --------------------------------------------------------------
RETAIL (DRUG STORES)-1.35%
Rite Aid Corp. 55,900 2,770,543
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.60%
Limited, Inc. (The) 113,000 3,291,125
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-2.05%
Dun & Bradstreet Corp. (The) 125,000 3,945,313
- --------------------------------------------------------------
Waddell & Reed Financial, Inc. 2,258 53,486
- --------------------------------------------------------------
Waddell & Reed Financial, Inc.-Class
B 9,722 226,036
- --------------------------------------------------------------
4,224,835
- --------------------------------------------------------------
SPECIALTY PRINTING-1.33%
Deluxe Corp. 75,000 2,742,187
- --------------------------------------------------------------
TELEPHONE-3.37%
Ameritech Corp. 25,000 1,584,375
- --------------------------------------------------------------
Bell Atlantic Corp. 25,000 1,420,313
- --------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Mexico) 40,800 1,986,450
- --------------------------------------------------------------
US West, Inc. 30,000 1,938,750
- --------------------------------------------------------------
6,929,888
- --------------------------------------------------------------
TEXTILES (APPAREL)-1.33%
VF Corp. 58,500 2,742,187
- --------------------------------------------------------------
TOBACCO-3.75%
Philip Morris Companies, Inc. 48,500 2,594,750
- --------------------------------------------------------------
UST, Inc. 147,000 5,126,626
- --------------------------------------------------------------
7,721,376
- --------------------------------------------------------------
WASTE MANAGEMENT-0.44%
Browning-Ferris Industries, Inc. 32,100 912,843
- --------------------------------------------------------------
Total Common Stocks (Cost $123,395,128) 200,446,058
- --------------------------------------------------------------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT-2.06%(b)
SBC Warburg Dillon Read, Inc.,
4.75%, 01/04/99(c) (Cost
$4,238,817) $4,238,817 4,238,817
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.51% 204,684,875
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.49% 1,003,333
- --------------------------------------------------------------
NET ASSETS-100.00% $205,688,208
==============================================================
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked daily to
ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investments companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviation:
ADR - American Depositary Receipt
See Notes to Financial Statements.
FS-22
166
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at market value (cost
$127,633,945) $204,684,875
- ---------------------------------------------------------
Receivables for:
Investments sold 1,646,315
- ---------------------------------------------------------
Capital stock sold 179,131
- ---------------------------------------------------------
Interest and dividends 227,786
- ---------------------------------------------------------
Investment for deferred compensation plan 6,268
- ---------------------------------------------------------
Other assets 7,473
- ---------------------------------------------------------
Total assets 206,751,848
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 452,659
- ---------------------------------------------------------
Deferred compensation plan 6,268
- ---------------------------------------------------------
Accrued advisory fees 128,722
- ---------------------------------------------------------
Accrued operating services fees 32,189
- ---------------------------------------------------------
Accrued distribution fees 429,703
- ---------------------------------------------------------
Accrued directors' fees and expenses 14,099
- ---------------------------------------------------------
Total liabilities 1,063,640
- ---------------------------------------------------------
Net assets applicable to shares outstanding $205,688,208
=========================================================
NET ASSETS:
Class A $ 15,683,734
=========================================================
Class B $ 7,325,026
=========================================================
Class C $182,679,448
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 622,440
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 292,328
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 7,291,777
=========================================================
Class A:
Net asset value and redemption price per
share $ 25.20
=========================================================
Offering price per share:
(Net asset value of $25.20 divided
by 94.50%) $ 26.67
=========================================================
Class B:
Net asset value and offering price per
share $ 25.06
=========================================================
Class C:
Net asset value and offering price per
share $ 25.05
=========================================================
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Dividends (net of $27,237 foreign
withholding tax) $ 3,755,243
- --------------------------------------------------------
Interest 458,728
- --------------------------------------------------------
Total investment income 4,213,971
- --------------------------------------------------------
EXPENSES:
Advisory fees 1,430,336
- --------------------------------------------------------
Operating services fees 858,298
- --------------------------------------------------------
Directors' fees and expenses 9,117
- --------------------------------------------------------
Distribution fees-Class A 38,204
- --------------------------------------------------------
Distribution fees-Class B 35,283
- --------------------------------------------------------
Distribution fees-Class C 1,763,061
- --------------------------------------------------------
Total expenses 4,134,299
- --------------------------------------------------------
Less: Fees waived by advisor (303,604)
- --------------------------------------------------------
Net expenses 3,830,695
- --------------------------------------------------------
Net investment income 383,276
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain from investment
securities 13,666,132
- --------------------------------------------------------
Net unrealized appreciation of investment
securities 9,514,639
- --------------------------------------------------------
Net gain on investment securities 23,180,771
- --------------------------------------------------------
Net increase in net assets resulting from
operations $23,564,047
========================================================
See Notes to Financial Statements.
FS-23
167
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ ------------
OPERATIONS:
Net investment income $ 383,276 $ 45,808
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities 13,666,132 17,674,268
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 9,514,639 24,024,117
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 23,564,047 41,744,193
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (63,186) (6,926)
- -----------------------------------------------------------------------------------------
Class B (4,659) --
- -----------------------------------------------------------------------------------------
Class C (130,140) (10,706)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (1,168,568) (415,931)
- -----------------------------------------------------------------------------------------
Class B (558,881) --
- -----------------------------------------------------------------------------------------
Class C (14,182,679) (17,806,373)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 10,506,884 5,055,769
- -----------------------------------------------------------------------------------------
Class B 7,500,215 --
- -----------------------------------------------------------------------------------------
Class C 2,997,348 11,252,055
- -----------------------------------------------------------------------------------------
Net increase in net assets 28,460,381 39,812,081
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 177,227,827 137,415,746
- -----------------------------------------------------------------------------------------
End of period $205,688,208 $177,227,827
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $127,632,168 $105,927,721
- -----------------------------------------------------------------------------------------
Undistributed net investment income 210,789 5,961
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 794,321 3,757,854
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 77,050,930 67,536,291
- -----------------------------------------------------------------------------------------
$205,688,208 $177,227,827
=========================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Large Cap Value Fund (the "Fund") is a series portfolio of AIM
Advisor Funds, Inc. (the "Company"). The Company is a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of five
diversified portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's investment objective is to achieve a high total
return on investment through capital appreciation and current income, without
regard to federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) 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 mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
FS-24
168
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date, or absent a last sales price, at the mean of the closing
bid and asked prices. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity Securities for which market
prices are not provided by any of the above methods are valued at the mean
between last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's Board of Directors.
Investments with maturities of 60 days or less are valued on the basis of
amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions-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 as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are
declared and paid quarterly. On December 31, 1998 additional paid in capital
increased $700,000, undistributed net investment income was increased
$19,537 and undistributed net realized gains decreased by $719,537 as a
result of equalization credits and in order to comply with the requirements
of the American Institute of Certified Public Accountants Statement of
Position 93-2. Net assets of the fund were unaffected by the
reclassification discussed above.
C. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements.
D. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Capital Management, Inc. ("ICM") whereby AIM pays ICM an
annual rate of 0.20% of the Fund's average daily net assets.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. This
agreement provides that AIM pays all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1998, AIM was paid $565,610 for such services. As of
June 1, 1998, AIM has voluntarily agreed to limit the operating services fees to
an annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the period June 1, 1998 through December 31, 1998, AIM
voluntarily waived operating services fees in the amount of $292,688.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The
Fund, pursuant to the Class B Plan, pays AIM Distributors compensation at an
annual rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B or Class C shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $27,288, $35,283 and $1,763,060, respectively, as compensation
under the Plans. During the year ended December 31, 1998, AIM Distributors
waived fees of $10,916 for the Class A shares.
AIM Distributors received commissions of $32,564 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1998,
AIM Distributors received commissions of $34,868 in contingent deferred sales
charges imposed on redemptions of shares. Certain officers and directors of the
Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
FS-25
169
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average net assets of the Fund are less than
$500 million, the Fund's expenses shall not exceed 1.55% for Class A and 2.20%
for Class C; on the next $500 million of net assets, expenses shall not exceed
1.50% for Class A and 2.15% for Class C; on the next $1 billion of net assets,
expenses shall not exceed 1.45% for Class A and 2.10% for Class C; and on all
assets over $2 billion, expenses shall not exceed 1.40% for Class A and 2.05%
for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $3,813
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, the Fund did
not borrow under the line of credit agreement. The funds which are party to the
line of credit are charged a commitment fee of 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1998, was
$99,685,561 and $94,791,863, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
Aggregate unrealized appreciation of investment
securities $78,415,322
- -------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,364,392)
- -------------------------------------------------------------
Net unrealized appreciation of investment
securities $77,050,930
=============================================================
Investments have the same cost for tax and financial
statement purposes.
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended December
31, 1998 and 1997 were as follows:
1998 1997*
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ -------- ------------
Sold:
Class A 546,830 $ 13,836,246 198,806 $ 4,859,057
- --------------------------------------------------------------------------
Class B** 312,678 8,015,582 -- --
- --------------------------------------------------------------------------
Class C 745,155 18,894,552 745,080 17,246,229
- --------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 48,828 1,187,383 15,389 365,541
- --------------------------------------------------------------------------
Class B 20,082 485,925 -- --
- --------------------------------------------------------------------------
Class C 553,152 13,379,377 683,868 16,255,395
- --------------------------------------------------------------------------
Reacquired:
Class A (180,617) (4,516,745) (6,796) (168,829)
- --------------------------------------------------------------------------
Class B** (40,432) (1,001,292) -- --
- --------------------------------------------------------------------------
Class C (1,159,833) (29,276,581) (955,477) (22,249,569)
- --------------------------------------------------------------------------
845,843 $ 21,004,447 680,870 $ 16,307,824
==========================================================================
* Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
** Class B shares commenced sales on March 3, 1998.
FS-26
170
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998, and for a share of
Class C capital stock outstanding during each of the years in the five-year
period ended December 31, 1998.
CLASS A(a) CLASS B
------------------ -------
1998 1997(b) 1998
------- ------- -------
Net asset value, beginning of period $ 24.11 $20.57 $25.59
- ------------------------------------------------------------ ------- ------ ------
Income from investment operations:
Net investment income 0.20(c) 0.23(c) 0.02
- ------------------------------------------------------------ ------- ------ ------
Net gains on securities (both realized and unrealized) 3.11 6.17 1.57
- ------------------------------------------------------------ ------- ------ ------
Total from investment operations 3.31 6.40 1.59
- ------------------------------------------------------------ ------- ------ ------
Less distributions:
Dividends from net investment income (0.12) (0.15) (0.02)
- ------------------------------------------------------------ ------- ------ ------
Distributions from net realized gains (2.10) (2.71) (2.10)
- ------------------------------------------------------------ ------- ------ ------
Total distributions (2.22) (2.86) (2.12)
- ------------------------------------------------------------ ------- ------ ------
Net asset value, end of period $ 25.20 $24.11 $25.06
============================================================ ======= ====== ======
Total return(d) 14.07% 31.66% 6.51%
============================================================ ======= ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $15,684 $5,000 $7,325
============================================================ ======= ====== ======
Ratio of expenses to average net assets(e) 1.30%(f) 1.46% 2.05%(f)(g)
============================================================ ======= ====== ======
Ratio of net investment income to average net assets(h) 0.91%(f) 0.77% 0.16%(f)(g)
============================================================ ======= ====== ======
Portfolio turnover rate 52% 34% 52%
============================================================ ======= ====== ======
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) After fee waivers and/or reimbursements. Ratios of expenses to average net
assets prior to fee waivers and/or reimbursement were 1.55% and 1.56% for
1998-1997 for Class A and 2.20% (annualized) for 1998 for Class B.
(f) Ratios are based on average net assets of $10,915,560 and $4,236,305 for
Class A and Class B, respectively.
(g) Annualized.
(h) After fee waivers and/or reimbursements. Ratios of net investment income to
average net assets prior to fee waivers and/or reimbursement were 0.66% and
0.67% for 1998-1997 for Class A and 0.01% (annualized) for 1998 for Class B.
CLASS C(a)
--------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 24.08 $ 20.57 $ 17.60 $ 13.96 $ 14.90
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.04 0.01(c) 0.05 0.10 0.09
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains on securities (both realized and unrealized) 3.05 6.21 2.97 4.11 0.32
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 3.09 6.22 3.02 4.21 0.41
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.02) -- (0.05) (0.10) (0.09)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (2.10) (2.71) -- (0.47) (1.26)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (2.12) (2.71) (0.05) (0.57) (1.35)
============================================================ ======== ======== ======== ======== ========
Net asset value, end of period $ 25.05 $ 24.08 $ 20.57 $ 17.60 $ 13.96
============================================================ ======== ======== ======== ======== ========
Total return(d) 13.15% 30.66% 17.17% 30.28% 2.69%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $182,679 $172,228 $137,416 $113,573 $ 77,929
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 2.05%(e)(f) 2.21% 2.26% 2.28% 2.25%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 0.16%(f)(g) 0.02% 0.24% 0.64% 0.61%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 52% 34% 19% 17% 21%
============================================================ ======== ======== ======== ======== ========
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges.
(e) After fee waivers and/or reimbursements. Ratios of expenses to average net
assets prior to fee waivers and/or reimbursement were 2.20% for 1998.
(f) Ratios are based on average net assets of $176,305,963.
(g) After fee waivers and/or reimbursements. Ratios of net investment income to
average net assets prior to fee waivers and/or reimbursement were 0.01% for
1998.
FS-27
171
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor Multiflex Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Multiflex Fund (a portfolio of
AIM Advisor Funds, Inc.), including the schedule of
investments, as of December 31, 1998, and the related
statement of operations, the statement of changes in net
assets, and the financial highlights for the year then
ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audit. The accompanying statement of changes
in net assets for the year ended December 31, 1997 and
the financial highlights for each of the years in the
four-year period ended December 31, 1997, were audited by
other auditors whose report thereon dated February 5,
1998, expressed an unqualified opinion on such statement
and financial highlights.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor Multiflex Fund as of December 31, 1998, the
results of its operations, the changes in its net assets
and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-28
172
SCHEDULE OF INVESTMENTS
December 31, 1998
MARKET
SHARES VALUE
COMMON STOCKS & OTHER EQUITY
INTERESTS-95.63%
AEROSPACE/DEFENSE-0.45%
BE Aerospace, Inc.(a) 15,900 $ 333,900
- --------------------------------------------------------------
Precision Castparts Corp. 19,500 862,875
- --------------------------------------------------------------
Sequa Corp.(a) 5,500 329,312
- --------------------------------------------------------------
1,526,087
- --------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.12%
Universal Corp. 11,600 407,450
- --------------------------------------------------------------
AIR FREIGHT-0.13%
Airborne Freight Corp. 11,900 429,143
- --------------------------------------------------------------
AIRLINES-0.98%
Alaska Air Group, Inc.(a) 12,600 557,550
- --------------------------------------------------------------
British Airways PLC-ADR (United
Kingdom) 19,000 1,288,437
- --------------------------------------------------------------
SkyWest, Inc. 8,300 271,306
- --------------------------------------------------------------
Southwest Airlines Co. 52,350 1,174,603
- --------------------------------------------------------------
3,291,896
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.53%
Arvin Industries, Inc. 17,500 729,531
- --------------------------------------------------------------
Borg-Warner Automotive, Inc. 14,600 814,863
- --------------------------------------------------------------
Standard Products Co. (The) 11,400 232,275
- --------------------------------------------------------------
1,776,669
- --------------------------------------------------------------
AUTOMOBILES-0.57%
Ford Motor Co. 16,600 974,213
- --------------------------------------------------------------
Volvo A.B.-ADR (Sweden) 40,000 932,500
- --------------------------------------------------------------
1,906,713
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.66%
ABN Amro Holding NV-ADR
(Netherlands) 100,000 2,175,000
- --------------------------------------------------------------
Bank One Corp. 27,540 1,406,261
- --------------------------------------------------------------
Istituto Bancario San Paolo di
Torino-ADR (Italy)(a) 70,537 2,521,698
- --------------------------------------------------------------
Societe Generale (France) 69,000 2,235,766
- --------------------------------------------------------------
Wachovia Corp. 7,000 612,063
- --------------------------------------------------------------
8,950,788
- --------------------------------------------------------------
BANKS (MONEY CENTER)-2.83%
BankAmerica Corp. 21,662 1,302,428
- --------------------------------------------------------------
Chase Manhattan Corp. (The) 13,800 939,263
- --------------------------------------------------------------
Den Danske Bank-ADR (Denmark) 17,000 2,283,816
- --------------------------------------------------------------
Deutsche Bank A.G.-ADR (Germany) 33,000 1,942,726
- --------------------------------------------------------------
First Union Corp. 13,000 790,563
- --------------------------------------------------------------
HSBC Holdings PLC-ADR (United
Kingdom) 9,000 2,242,153
- --------------------------------------------------------------
9,500,949
- --------------------------------------------------------------
MARKET
SHARES VALUE
BANKS (REGIONAL)-2.11%
Commerce Bancorp, Inc. 15,625 $ 820,313
- --------------------------------------------------------------
Commerce Bancshares, Inc. 16,380 696,150
- --------------------------------------------------------------
Cullen/Frost Bankers, Inc. 11,600 636,550
- --------------------------------------------------------------
Firstbank Corp. 18,000 543,375
- --------------------------------------------------------------
GBC Bancorp 11,900 306,425
- --------------------------------------------------------------
HUBCO, Inc. 14,832 446,814
- --------------------------------------------------------------
Imperial Bancorp(a) 39,100 650,038
- --------------------------------------------------------------
Independent Bank Corp. 16,600 288,425
- --------------------------------------------------------------
National Australia Bank Ltd.-ADR
(Australia) 30,000 2,233,125
- --------------------------------------------------------------
Republic Bancorp, Inc. 6,700 91,287
- --------------------------------------------------------------
Silicon Valley Bancshares(a) 9,200 156,687
- --------------------------------------------------------------
Trustmark Corp. 9,900 223,987
- --------------------------------------------------------------
7,093,176
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.91%
Canandaigua Wine Co., Inc.-Class
A(a) 12,000 693,750
- --------------------------------------------------------------
Compania Cervecerias Unidas
S.A.-ADR (Chile) 45,000 866,250
- --------------------------------------------------------------
Kirin Brewery Co., Ltd.-ADR (Japan) 12,000 1,485,000
- --------------------------------------------------------------
3,045,000
- --------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.30%
PepsiCo, Inc. 24,750 1,013,203
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.12%
Adelphia Communications Corp.(a) 9,100 416,325
- --------------------------------------------------------------
BUILDING MATERIALS-0.42%
Cameron Ashley Building Products(a) 12,700 165,894
- --------------------------------------------------------------
Cemex S.A. de C.V.-ADR (Mexico) 110,000 543,895
- --------------------------------------------------------------
Nortek, Inc.(a) 7,000 193,375
- --------------------------------------------------------------
TJ International, Inc. 20,400 524,025
- --------------------------------------------------------------
1,427,189
- --------------------------------------------------------------
CHEMICALS-0.59%
Akzo Nobel N.V.-ADR (Netherlands) 40,000 1,785,000
- --------------------------------------------------------------
NL Industries, Inc. 14,500 205,719
- --------------------------------------------------------------
1,990,719
- --------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-1.07%
BASF A.G.-ADR (Germany) 50,000 1,909,315
- --------------------------------------------------------------
Bayer A.G.-ADR (Germany) 40,000 1,670,348
- --------------------------------------------------------------
3,579,663
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.27%
Dexter Corp. 28,800 905,400
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.11%
Polycom, Inc.(a) 17,100 380,475
- --------------------------------------------------------------
FS-29
173
MARKET
SHARES VALUE
COMPUTERS (HARDWARE)-1.15%
Compaq Computer Corp. 22,000 $ 922,625
- --------------------------------------------------------------
International Business Machines
Corp. 6,500 1,200,875
- --------------------------------------------------------------
Micron Electronics, Inc.(a) 11,800 204,287
- --------------------------------------------------------------
Sun Microsystems, Inc.(a) 17,800 1,524,125
- --------------------------------------------------------------
3,851,912
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.14%
META Group, Inc.(a) 16,100 478,975
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.49%
Jabil Circuit, Inc.(a) 3,600 268,650
- --------------------------------------------------------------
MICROS Systems, Inc.(a) 8,800 289,300
- --------------------------------------------------------------
Network Appliance, Inc.(a) 18,600 837,000
- --------------------------------------------------------------
Xircom, Inc.(a) 7,200 244,800
- --------------------------------------------------------------
1,639,750
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-1.80%
Aspect Development, Inc.(a) 8,900 394,381
- --------------------------------------------------------------
BroadVision, Inc.(a) 11,300 361,600
- --------------------------------------------------------------
Computer Associates International,
Inc. 23,000 980,375
- --------------------------------------------------------------
Electronic Data Systems Corp. 20,000 1,005,000
- --------------------------------------------------------------
Hyperion Solutions Corp.(a) 8,930 160,740
- --------------------------------------------------------------
Legato Systems, Inc.(a) 7,800 514,312
- --------------------------------------------------------------
Lycos, Inc.(a) 9,800 544,513
- --------------------------------------------------------------
Mastech Corp.(a) 8,500 243,312
- --------------------------------------------------------------
Oracle Corp.(a) 30,000 1,293,750
- --------------------------------------------------------------
Progress Software Corp.(a) 8,400 283,500
- --------------------------------------------------------------
Rational Software Corp.(a) 10,500 278,250
- --------------------------------------------------------------
6,059,733
- --------------------------------------------------------------
CONSTRUCTION (CEMENT & AGGREGATES)-0.77%
Centex Construction Products, Inc. 20,600 836,875
- --------------------------------------------------------------
Lone Star Industries, Inc. 8,200 301,862
- --------------------------------------------------------------
Vulcan Materials Co. 11,000 1,447,188
- --------------------------------------------------------------
2,585,925
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.15%
American Greetings Corp.-Class A 12,400 509,175
- --------------------------------------------------------------
CONSUMER FINANCE-0.33%
Doral Financial Corp. 34,700 767,738
- --------------------------------------------------------------
Flagstar Bancorp, Inc. 12,500 326,563
- --------------------------------------------------------------
1,094,301
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.77%
AmeriSource Health Corp.-Class A(a) 12,600 819,000
- --------------------------------------------------------------
Bindley Western Industries, Inc. 24,666 1,214,801
- --------------------------------------------------------------
SUPERVALU, INC 20,000 560,000
- --------------------------------------------------------------
2,593,801
- --------------------------------------------------------------
ELECTRIC COMPANIES-3.43%
CILCORP, Inc. 5,500 336,531
- --------------------------------------------------------------
Cleco Corp. 13,500 463,219
- --------------------------------------------------------------
MARKET
SHARES VALUE
ELECTRIC COMPANIES-(CONTINUED)
CMP Group Inc. 16,000 $ 302,000
- --------------------------------------------------------------
Commonwealth Energy System 10,400 421,200
- --------------------------------------------------------------
DTE Energy Co. 26,700 1,144,763
- --------------------------------------------------------------
Endesa S.A.-ADR (Spain) 90,000 2,430,000
- --------------------------------------------------------------
Hawaiian Electric Industries, Inc. 15,200 611,800
- --------------------------------------------------------------
Interstate Energy Corp. 20,355 656,449
- --------------------------------------------------------------
Minnesota Power & Light Co. 8,300 365,200
- --------------------------------------------------------------
PowerGen PLC-ADR (United Kingdom) 35,000 1,872,500
- --------------------------------------------------------------
Scottish Power PLC-ADR (United
Kingdom) 40,000 1,652,500
- --------------------------------------------------------------
SIGCORP, Inc. 10,950 390,778
- --------------------------------------------------------------
Southern Co. 30,000 871,875
- --------------------------------------------------------------
11,518,815
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.31%
C & D Technologies, Inc. 11,600 319,000
- --------------------------------------------------------------
Carlton Communications PLC-ADR
(United Kingdom) 48,000 2,202,000
- --------------------------------------------------------------
Emerson Electric Co. 14,400 900,900
- --------------------------------------------------------------
Esterline Technologies Corp.(a) 16,300 354,525
- --------------------------------------------------------------
General Cable Corp. 29,100 596,550
- --------------------------------------------------------------
General Electric Co. 11,000 1,122,688
- --------------------------------------------------------------
Matsushita Electric Industrial Co.,
Ltd.-ADR (Japan) 8,000 1,396,000
- --------------------------------------------------------------
Pinnacle Systems, Inc.(a) 7,500 268,125
- --------------------------------------------------------------
Recoton Corp.(a) 21,500 385,656
- --------------------------------------------------------------
Technitrol, Inc. 7,100 226,312
- --------------------------------------------------------------
7,771,756
- --------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.55%
Kyocera Corp.-ADR (Japan) 35,600 1,848,975
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.32%
Raytheon Co. 20,000 1,065,000
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.54%
Applied Micro Circuits Corp.(a) 11,500 390,641
- --------------------------------------------------------------
Dallas Semiconductor Corp. 9,300 378,975
- --------------------------------------------------------------
PMC-Sierra, Inc.(a) 10,000 631,250
- --------------------------------------------------------------
TranSwitch Corp.(a) 10,300 401,056
- --------------------------------------------------------------
1,801,922
- --------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.15%
Granite Construction Inc. 2,100 70,481
- --------------------------------------------------------------
Stone & Webster, Inc. 12,700 422,275
- --------------------------------------------------------------
492,756
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.84%
American General Corp. 19,900 1,552,200
- --------------------------------------------------------------
Associates First Capital
Corp.-Class A 16,000 678,000
- --------------------------------------------------------------
Citigroup Inc. 22,035 1,090,733
- --------------------------------------------------------------
Fannie Mae 24,300 1,798,200
- --------------------------------------------------------------
FS-30
174
MARKET
SHARES VALUE
FINANCIAL (DIVERSIFIED)-(CONTINUED)
Morgan Stanley, Dean Witter,
Discover & Co. 14,850 $ 1,054,350
- --------------------------------------------------------------
6,173,483
- --------------------------------------------------------------
FOODS-3.91%
Associated British Foods PLC-ADR
(United Kingdom) 200,000 1,866,800
- --------------------------------------------------------------
Earthgrains Co. (The) 20,000 618,750
- --------------------------------------------------------------
Groupe Danone-ADR (France) 40,000 2,250,000
- --------------------------------------------------------------
H.J. Heinz Co. 19,000 1,075,875
- --------------------------------------------------------------
Nestle S.A.-ADR (Switzerland) 22,000 2,394,647
- --------------------------------------------------------------
Pilgrim's Pride Corp.-Class B 13,500 269,156
- --------------------------------------------------------------
Smithfield Foods, Inc.(a) 17,000 575,875
- --------------------------------------------------------------
Unigate PLC (Spain) 200,000 1,437,540
- --------------------------------------------------------------
Unilever N.V. (Netherlands) 32,000 2,654,000
- --------------------------------------------------------------
13,142,643
- --------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.10%
Grand Casinos, Inc.(a) 42,300 341,044
- --------------------------------------------------------------
GOLD & PRECIOUS METALS MINING-0.10%
Stillwater Mining Co.(a) 7,800 319,800
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.70%
Abbott Laboratories 29,500 1,445,500
- --------------------------------------------------------------
American Home Products Corp. 22,000 1,238,875
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 15,900 2,127,619
- --------------------------------------------------------------
Johnson & Johnson 10,800 905,850
- --------------------------------------------------------------
5,717,844
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.66%
Agouron Pharmaceuticals, Inc.(a) 6,500 381,875
- --------------------------------------------------------------
Alpharma, Inc.-Class A 30,100 1,062,906
- --------------------------------------------------------------
MedImmune, Inc.(a) 3,700 367,919
- --------------------------------------------------------------
Parexel International Corp.(a) 7,100 177,500
- --------------------------------------------------------------
Roberts Pharmaceutical Corp.(a) 10,500 228,375
- --------------------------------------------------------------
2,218,575
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.27%
Astra A.B.-ADR (Sweden) 110,000 2,275,625
- --------------------------------------------------------------
Glaxo Wellcome PLC (United Kingdom) 20,000 1,390,000
- --------------------------------------------------------------
Merck & Co., Inc. 10,400 1,535,950
- --------------------------------------------------------------
Novartis A.G.-ADR (Switzerland) 26,666 2,621,014
- --------------------------------------------------------------
Novo-Nordisk A.S.-ADR (Denmark) 20,000 1,330,000
- --------------------------------------------------------------
Schering-Plough Corp. 33,000 1,823,250
- --------------------------------------------------------------
10,975,839
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.31%
Express Scripts, Inc.-Class A(a) 15,600 1,047,150
- --------------------------------------------------------------
MARKET
SHARES VALUE
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.01%
Biomatrix, Inc.(a) 5,800 $ 337,850
- --------------------------------------------------------------
Biomet, Inc. 19,500 784,875
- --------------------------------------------------------------
MiniMed, Inc.(a) 3,600 377,100
- --------------------------------------------------------------
ResMed, Inc.(a) 14,400 653,400
- --------------------------------------------------------------
Theragenics Corp.(a) 41,500 697,719
- --------------------------------------------------------------
VISX, Inc.(a) 3,400 297,287
- --------------------------------------------------------------
West Co, Inc. (The) 6,800 242,675
- --------------------------------------------------------------
3,390,906
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.35%
Covance, Inc.(a) 18,600 541,725
- --------------------------------------------------------------
Hanger Orthopedic Group, Inc.(a) 15,700 353,250
- --------------------------------------------------------------
Hooper Holmes, Inc. 9,600 278,400
- --------------------------------------------------------------
1,173,375
- --------------------------------------------------------------
HOMEBUILDING-0.52%
M.D.C. Holdings, Inc. 19,700 421,088
- --------------------------------------------------------------
NVR Inc.(a) 16,700 796,381
- --------------------------------------------------------------
Pulte Corp. 8,500 236,406
- --------------------------------------------------------------
U.S. Home Corp.(a) 9,000 299,250
- --------------------------------------------------------------
1,753,125
- --------------------------------------------------------------
HOUSEHOLD FURNITURE &
APPLIANCES-0.31%
Furniture Brands International,
Inc.(a) 14,300 389,675
- --------------------------------------------------------------
Whirlpool Corp. 11,500 636,812
- --------------------------------------------------------------
1,026,487
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.29%
Kimberly-Clark Corp. 18,000 981,000
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.67%
Delphi Financial Group, Inc. 10,852 569,052
- --------------------------------------------------------------
ING Groep N.V.-ADR (Netherlands) 21,000 1,305,937
- --------------------------------------------------------------
Presidential Life Corp. 18,900 375,637
- --------------------------------------------------------------
2,250,626
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.40%
American International Group, Inc. 7,837 757,250
- --------------------------------------------------------------
Century Business Services, Inc.(a) 18,200 261,625
- --------------------------------------------------------------
FBL Financial Group, Inc. 13,400 324,950
- --------------------------------------------------------------
1,343,825
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.98%
Fidelity National Financial, Inc. 11,220 342,210
- --------------------------------------------------------------
First American Financial Corp.
(The) 17,200 552,550
- --------------------------------------------------------------
LandAmerica Financial Group, Inc. 14,800 826,025
- --------------------------------------------------------------
Old Republic International Corp. 23,000 517,500
- --------------------------------------------------------------
Orion Capital Corp. 26,000 1,035,125
- --------------------------------------------------------------
3,273,410
- --------------------------------------------------------------
FS-31
175
MARKET
SHARES VALUE
INSURANCE BROKERS-0.34%
Marsh & McLennan Co. 12,075 $ 705,633
- --------------------------------------------------------------
Poe & Brown, Inc. 12,300 429,731
- --------------------------------------------------------------
1,135,364
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.06%
Advest Group, Inc. 10,800 199,800
- --------------------------------------------------------------
IRON & STEEL-0.69%
AK Steel Holding Corp. 40,700 956,450
- --------------------------------------------------------------
Nucor Corp. 17,000 735,250
- --------------------------------------------------------------
Texas Industries, Inc. 23,000 619,562
- --------------------------------------------------------------
2,311,262
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.07%
Bally Total Fitness Holding
Corp.(a) 11,600 288,550
- --------------------------------------------------------------
International Speedway Corp.-Class
A 13,100 530,550
- --------------------------------------------------------------
Mattel, Inc. 30,900 704,906
- --------------------------------------------------------------
Nintendo Co. Ltd.-ADR (Japan) 170,000 2,053,481
- --------------------------------------------------------------
3,577,487
- --------------------------------------------------------------
LODGING-HOTELS-0.73%
Crestline Capital Corp.(a) 16,110 235,609
- --------------------------------------------------------------
Host Marriott Corp. 161,100 2,225,194
- --------------------------------------------------------------
2,460,803
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.76%
Applied Power, Inc.-Class A 15,400 581,350
- --------------------------------------------------------------
Dover Corp. 19,700 721,512
- --------------------------------------------------------------
Manitiwoc Co., Inc. (The) 14,850 658,969
- --------------------------------------------------------------
NACCO Industries, Inc.-Class A 3,000 276,000
- --------------------------------------------------------------
Terex Corp.(a) 11,100 317,044
- --------------------------------------------------------------
2,554,875
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.07%
Carlisle Companies, Inc. 8,800 454,300
- --------------------------------------------------------------
GenCorp, Inc. 17,200 428,925
- --------------------------------------------------------------
Hitachi Ltd.-ADR (Japan) 18,000 1,087,875
- --------------------------------------------------------------
IDEX Corp. 13,300 325,850
- --------------------------------------------------------------
Illinois Tool Works Inc. 9,000 522,000
- --------------------------------------------------------------
Norsk Hydro A.S.A.-ADR (Norway) 30,000 1,025,625
- --------------------------------------------------------------
RWE A.G.-ADR (Germany) 32,000 1,753,206
- --------------------------------------------------------------
Textron, Inc. 10,700 812,531
- --------------------------------------------------------------
Tredegar Industries, Inc. 24,550 552,375
- --------------------------------------------------------------
6,962,687
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.07%
AptarGroup, Inc. 29,200 819,425
- --------------------------------------------------------------
Federal Signal Corp. 32,300 884,213
- --------------------------------------------------------------
Insituform Technologies, Inc.-Class
A(a) 22,500 326,250
- --------------------------------------------------------------
Superior TeleCom Inc. 12,100 571,725
- --------------------------------------------------------------
York International Corp. 24,600 1,003,988
- --------------------------------------------------------------
3,605,601
- --------------------------------------------------------------
MARKET
SHARES VALUE
METAL FABRICATORS-0.06%
Metals USA(a) 19,100 $ 186,225
- --------------------------------------------------------------
METALS MINING-0.44%
Rio Tinto Ltd.-ADR (Australia) 31,000 1,472,078
- --------------------------------------------------------------
NATURAL GAS-0.30%
Energen Corp. 33,000 643,500
- --------------------------------------------------------------
ONEOK, Inc. 10,200 368,475
- --------------------------------------------------------------
1,011,975
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.65%
Knoll, Inc.(a) 16,100 476,963
- --------------------------------------------------------------
Mail-Well, Inc.(a) 22,700 259,631
- --------------------------------------------------------------
Pitney Bowes, Inc. 14,000 924,875
- --------------------------------------------------------------
United Stationers, Inc.(a) 20,000 520,000
- --------------------------------------------------------------
2,181,469
- --------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-0.28%
Marine Drilling Companies, Inc.(a) 21,400 164,512
- --------------------------------------------------------------
Pride International, Inc.(a) 36,300 256,369
- --------------------------------------------------------------
SEACOR Holdings Inc.(a) 5,600 276,850
- --------------------------------------------------------------
Veritas DGC, Inc.(a) 18,500 240,500
- --------------------------------------------------------------
938,231
- --------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.37%
Barrett Resources Corp.(a) 22,800 547,200
- --------------------------------------------------------------
Basin Exploration, Inc.(a) 15,300 192,206
- --------------------------------------------------------------
Evergreen Resources, Inc.(a) 11,500 204,125
- --------------------------------------------------------------
HS Resources, Inc.(a) 38,600 291,913
- --------------------------------------------------------------
1,235,444
- --------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.18%
Atlantic Richfield Co. 9,000 587,250
- --------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-2.77%
Amoco Corp. 14,000 845,250
- --------------------------------------------------------------
Exxon Corp. 17,400 1,272,375
- --------------------------------------------------------------
Repsol S.A.-ADR (Spain) 48,000 2,622,000
- --------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares (Netherlands) 16,100 770,787
- --------------------------------------------------------------
Shell Transport & Trading Co.-ADR
(United Kingdom) 45,000 1,673,438
- --------------------------------------------------------------
Total S.A.-ADR (France) 20,000 995,000
- --------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Argentina) 40,000 1,117,500
- --------------------------------------------------------------
9,296,350
- --------------------------------------------------------------
OIL & GAS (REFINING &
MARKETING)-0.13%
Tesoro Petroleum Corp.(a) 34,700 420,737
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.02%
Fuji Photo Film-ADR (Japan) 60,000 2,197,500
- --------------------------------------------------------------
Xerox Corp. 10,500 1,239,000
- --------------------------------------------------------------
3,436,500
- --------------------------------------------------------------
FS-32
176
MARKET
SHARES VALUE
PUBLISHING (NEWSPAPERS)-0.94%
Gannett Co., Inc. 11,600 $ 767,775
- --------------------------------------------------------------
Hollinger International, Inc. 31,800 443,213
- --------------------------------------------------------------
McClatchy Newspapers, Inc. 17,300 611,988
- --------------------------------------------------------------
News Corp. Ltd.-ADR (The)
(Australia) 50,000 1,321,875
- --------------------------------------------------------------
3,144,851
- --------------------------------------------------------------
RAILROADS-0.32%
GATX Corp. 19,000 719,625
- --------------------------------------------------------------
Johnstown America Industries,
Inc.(a) 26,400 346,500
- --------------------------------------------------------------
1,066,125
- --------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-25.22%
Apartment Investment & Management
Co. 24,400 907,375
- --------------------------------------------------------------
Arden Realty Group, Inc. 114,000 2,643,375
- --------------------------------------------------------------
Avalonbay Communities, Inc. 51,300 1,757,025
- --------------------------------------------------------------
Beacon Capital(a) 60,000 952,500
- --------------------------------------------------------------
Bedford Property Investors, Inc. 97,500 1,645,313
- --------------------------------------------------------------
Camden Property Trust 54,589 1,419,314
- --------------------------------------------------------------
CarrAmerica Realty Corp. 138,000 3,312,000
- --------------------------------------------------------------
CBL & Associates Properties, Inc. 75,000 1,935,938
- --------------------------------------------------------------
Charles E. Smith Residential
Realty, Inc. 58,400 1,876,100
- --------------------------------------------------------------
Crescent Real Estate Equities, Co. 59,000 1,357,000
- --------------------------------------------------------------
CRIIMI MAE, Inc. 40,000 140,000
- --------------------------------------------------------------
Eastgroup Properties, Inc. 39,400 726,438
- --------------------------------------------------------------
Equity Office Properties Trust 124,879 2,997,096
- --------------------------------------------------------------
Equity Residential Properties Trust 79,900 3,230,956
- --------------------------------------------------------------
Essex Property Trust, Inc. 76,700 2,281,825
- --------------------------------------------------------------
First Industrial Realty Trust, Inc. 80,500 2,158,406
- --------------------------------------------------------------
Gables Residential Trust 60,100 1,393,569
- --------------------------------------------------------------
General Growth Properties 28,500 1,079,438
- --------------------------------------------------------------
Glenborough Realty Trust, Inc. 62,800 1,279,550
- --------------------------------------------------------------
Highwoods Properties, Inc. 113,800 2,930,350
- --------------------------------------------------------------
Hospitality Properties Trust 60,700 1,464,388
- --------------------------------------------------------------
JDN Realty Corp. 72,000 1,552,500
- --------------------------------------------------------------
Kilroy Realty Corp. 60,700 1,396,100
- --------------------------------------------------------------
Kimco Realty Corp. 40,600 1,611,313
- --------------------------------------------------------------
Koger Equity, Inc. 87,900 1,510,781
- --------------------------------------------------------------
Liberty Property Trust 117,700 2,898,363
- --------------------------------------------------------------
Mack-Cali Realty Corp. 64,200 1,982,175
- --------------------------------------------------------------
Meditrust Corp. 172,900 2,615,112
- --------------------------------------------------------------
MeriStar Hospitality Corp. 110,259 2,046,683
- --------------------------------------------------------------
MGI Properties, Inc. 46,000 1,285,125
- --------------------------------------------------------------
New Plan Excel Realty Trust 95,060 2,109,144
- --------------------------------------------------------------
Pan Pacific Retail Properties, Inc. 35,300 703,794
- --------------------------------------------------------------
Parkway Properties, Inc. 24,900 778,125
- --------------------------------------------------------------
Patriot American Hospitality, Inc. 407,128 2,442,768
- --------------------------------------------------------------
Philips International Realty Corp. 52,400 805,650
- --------------------------------------------------------------
Post Properties, Inc. 22,600 868,687
- --------------------------------------------------------------
MARKET
SHARES VALUE
REAL ESTATE INVESTMENT TRUSTS-(CONTINUED)
Prentiss Properties Trust 147,700 $ 3,295,556
- --------------------------------------------------------------
Prime Group Realty Trust 65,500 990,687
- --------------------------------------------------------------
Public Storage, Inc. 97,600 2,641,300
- --------------------------------------------------------------
Realty Income Corp. 36,000 895,500
- --------------------------------------------------------------
Regency Realty Corp. 70,000 1,557,500
- --------------------------------------------------------------
Security Capital U.S. Realty
(Luxembourg)(a) 98,700 977,130
- --------------------------------------------------------------
Shurgard Storage Centers, Inc. 87,700 2,263,756
- --------------------------------------------------------------
Simon Property Group, Inc. 63,600 1,812,600
- --------------------------------------------------------------
SL Green Realty Corp. 65,600 1,418,600
- --------------------------------------------------------------
Starwood Hotels & Resorts 67,150 1,523,466
- --------------------------------------------------------------
Sunstone Hotel Investors, Inc. 135,900 1,282,556
- --------------------------------------------------------------
TriNet Corporate Realty Trust, Inc. 49,900 1,334,825
- --------------------------------------------------------------
Vornado Realty Trust 56,600 1,910,250
- --------------------------------------------------------------
Weeks Corp. 25,600 721,600
- --------------------------------------------------------------
84,719,602
- --------------------------------------------------------------
RESTAURANTS-0.84%
Brinker International, Inc.(a) 27,400 791,175
- --------------------------------------------------------------
Buffets, Inc.(a) 27,900 333,056
- --------------------------------------------------------------
Cheesecake Factory (The)(a) 14,400 427,050
- --------------------------------------------------------------
Consolidated Products, Inc.(a) 20,156 415,723
- --------------------------------------------------------------
McDonald's Corp. 11,300 865,862
- --------------------------------------------------------------
2,832,866
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.57%
Lowe's Companies, Inc. 17,000 870,187
- --------------------------------------------------------------
Sherwin-Williams Co. 35,800 1,051,625
- --------------------------------------------------------------
1,921,812
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.20%
J.C. Penney Co., Inc. 14,375 673,828
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.15%
ShopKo Stores, Inc.(a) 15,400 512,050
- --------------------------------------------------------------
RETAIL (DRUG STORES)-0.41%
Rite Aid Corp. 27,900 1,382,794
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.26%
Wal-Mart Stores, Inc. 10,500 855,094
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.10%
Lands' End, Inc.(a) 11,800 317,862
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.40%
Footstar, Inc.(a) 15,400 385,000
- --------------------------------------------------------------
Inacom Corp.(a) 21,500 319,813
- --------------------------------------------------------------
Zale Corp.(a) 20,300 654,675
- --------------------------------------------------------------
1,359,488
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.44%
American Eagle Outfitters, Inc.(a) 5,400 359,775
- --------------------------------------------------------------
Cato Corp. (The)-Class A 25,700 252,984
- --------------------------------------------------------------
FS-33
177
MARKET
SHARES VALUE
RETAIL (SPECIALTY-APPAREL)-(CONTINUED)
Limited, Inc. (The) 30,000 $ 873,750
- --------------------------------------------------------------
1,486,509
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.87%
Anchor Bancorp Wisconsin, Inc. 10,100 242,400
- --------------------------------------------------------------
Astoria Financial Corp. 7,700 352,275
- --------------------------------------------------------------
Downey Financial Corp. 20,705 526,683
- --------------------------------------------------------------
FirstFed Financial Corp.(a) 33,400 597,025
- --------------------------------------------------------------
TR Financial Corp. 15,900 626,063
- --------------------------------------------------------------
Webster Financial Corp. 13,600 373,150
- --------------------------------------------------------------
WSFS Financial Corp. 12,700 214,312
- --------------------------------------------------------------
2,931,908
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.49%
Acxiom Corp.(a) 25,400 787,400
- --------------------------------------------------------------
Metris Companies Inc. 8,643 434,851
- --------------------------------------------------------------
True North Communications, Inc. 16,100 432,687
- --------------------------------------------------------------
1,654,938
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.75%
Comfort Systems USA, Inc.(a) 29,900 534,463
- --------------------------------------------------------------
Copart, Inc.(a) 9,800 317,275
- --------------------------------------------------------------
DeVry, Inc.(a) 43,000 1,316,875
- --------------------------------------------------------------
Sylvan Learning Systems, Inc.(a) 11,200 341,600
- --------------------------------------------------------------
2,510,213
- --------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.24%
Banctec, Inc.(a) 21,800 273,863
- --------------------------------------------------------------
Gerber Scientific, Inc. 22,900 545,306
- --------------------------------------------------------------
819,169
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.52%
Computer Horizons Corp.(a) 7,900 210,338
- --------------------------------------------------------------
Lason Holdings, Inc.(a) 14,100 820,444
- --------------------------------------------------------------
MedQuist, Inc.(a) 18,200 718,900
- --------------------------------------------------------------
1,749,682
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.65%
AHL Services, Inc.(a) 8,700 271,875
- --------------------------------------------------------------
Labor Ready, Inc.(a) 18,000 354,375
- --------------------------------------------------------------
Norrell Corp. 20,800 306,800
- --------------------------------------------------------------
ProBusiness Services, Inc.(a) 2,300 104,650
- --------------------------------------------------------------
Romac International, Inc.(a) 27,000 600,750
- --------------------------------------------------------------
StaffMark, Inc.(a) 11,100 248,362
- --------------------------------------------------------------
Syntel, Inc.(a) 26,600 300,913
- --------------------------------------------------------------
2,187,725
- --------------------------------------------------------------
SPECIALTY PRINTING-0.81%
Consolidated Graphics, Inc.(a) 3,300 222,956
- --------------------------------------------------------------
Dai Nippon Printing Co., Ltd.-ADR
(Japan) 9,000 1,437,809
- --------------------------------------------------------------
Deluxe Corp. 28,900 1,056,656
- --------------------------------------------------------------
2,717,421
- --------------------------------------------------------------
MARKET
SHARES VALUE
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.36%
Centennial Cellular Corp.(a) 18,900 $ 774,900
- --------------------------------------------------------------
Metromedia Fiber Network, Inc.(a) 13,200 442,200
- --------------------------------------------------------------
1,217,100
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.20%
ITC DeltaCom, Inc.(a) 22,500 343,125
- --------------------------------------------------------------
Pacific Gateway Exchange, Inc.(a) 6,700 322,019
- --------------------------------------------------------------
665,144
- --------------------------------------------------------------
TELEPHONE-3.10%
Bell Atlantic Corp. 10,000 568,125
- --------------------------------------------------------------
British Telecommunications PLC
(United Kingdom) 15,000 2,275,313
- --------------------------------------------------------------
Century Telephone Enterprises, Inc. 16,000 1,080,000
- --------------------------------------------------------------
GeoTel Communications Corp.(a) 10,400 387,400
- --------------------------------------------------------------
Portugal Telecom S.A.-ADR
(Portugal) 43,300 1,932,262
- --------------------------------------------------------------
Telecom Italia S.p.A.-ADR (Italy) 30,000 2,610,000
- --------------------------------------------------------------
Telefonica S.A.-ADR (Spain) 6,120 828,495
- --------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Mexico) 15,000 730,312
- --------------------------------------------------------------
10,411,907
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.18%
Kellwood Co. 23,800 595,000
- --------------------------------------------------------------
TEXTILES (HOME FURNISHINGS)-0.28%
Interface, Inc. 30,800 285,862
- --------------------------------------------------------------
Springs Industries, Inc.-Class A 15,600 646,425
- --------------------------------------------------------------
932,287
- --------------------------------------------------------------
TEXTILES (SPECIALTY)-0.22%
Burlington Industries, Inc.(a) 52,700 579,700
- --------------------------------------------------------------
Galey & Lord, Inc.(a) 19,200 165,600
- --------------------------------------------------------------
745,300
- --------------------------------------------------------------
TOBACCO-0.34%
Philip Morris Companies, Inc. 21,450 1,147,575
- --------------------------------------------------------------
TRUCKERS-0.22%
Roadway Express, Inc. 22,700 327,731
- --------------------------------------------------------------
Werner Enterprises, Inc. 22,875 404,602
- --------------------------------------------------------------
732,333
- --------------------------------------------------------------
WATER UTILITIES-0.07%
E'Town Corp. 5,100 241,613
- --------------------------------------------------------------
Total Common Stocks (Cost
$273,747,418) 321,189,107
- --------------------------------------------------------------
PRINCIPAL
AMOUNT
CORPORATE BONDS & NOTES-1.54%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.15%
CSC Holdings, Inc., Sr. Notes,
7.25%, 07/15/08 $ 500,000 $ 515,900
- --------------------------------------------------------------
FS-34
178
PRINCIPAL MARKET
AMOUNT VALUE
BUILDING MATERIALS-0.18%
USG Corp., Sr. Notes, 8.50%,
08/01/05 $ 550,000 $ 600,363
- --------------------------------------------------------------
CONTAINERS (METAL & GLASS)-0.15%
Owens-Illinois, Inc., Deb., 7.80%,
05/15/18 500,000 506,675
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.17%
Tyco International Group S.A.,
Yankee Bonds, 7.00%, 06/15/28 550,000 554,119
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-0.18%
Highwoods Properties, Sr. Unsec.
Notes, 7.50%, 04/15/18 700,000 619,360
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.15%
Neiman Marcus Group, Inc., Sr.
Deb., 7.125%, 06/01/28 500,000 486,050
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.30%
Bellsouth Telecommunications, Deb.,
5.85%, 11/15/45 1,000,000 1,012,690
- --------------------------------------------------------------
TELEPHONE-0.26%
GTE Corp., Deb., 10.25%, 11/01/20 790,000 885,149
- --------------------------------------------------------------
Total Corporate Bonds & Notes
(Cost $5,180,748) 5,180,306
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-1.26%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-0.36%
Pass Through Certificates
6.50%, 08/01/03 218,613 226,741
- --------------------------------------------------------------
9.00%, 01/01/05 to 08/15/06 696,417 725,967
- --------------------------------------------------------------
8.00%, 08/01/17 244,872 258,722
- --------------------------------------------------------------
1,211,430
- --------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-0.73%
Pass Through Certificates
9.00%, 12/01/06 $ 590,033 $ 619,346
- --------------------------------------------------------------
8.50%, 06/01/07 579,905 598,931
- --------------------------------------------------------------
5.50%, 02/01/14 410,000 395,266
- --------------------------------------------------------------
7.00%, 01/14/28 830,000 846,859
- --------------------------------------------------------------
2,460,402
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-0.17%
Pass Through Certificates
7.00%, 01/16/07 570,096 573,251
- --------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost $4,244,008) 4,245,083
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-1.99%
U.S. TREASURY BOND-0.21%
7.50%, 11/15/16 580,000 720,650
- --------------------------------------------------------------
U.S. TREASURY NOTES-1.78%
7.50%, 11/15/01 3,000,000 3,224,490
- --------------------------------------------------------------
6.25%, 02/15/07 2,500,000 2,741,950
- --------------------------------------------------------------
5,966,440
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $6,646,242) 6,687,090
- --------------------------------------------------------------
REPURCHASE AGREEMENT(b)-0.87%
SBC Warburg Dillon Read, Inc.,
4.75%, 01/04/99(c) (Cost
$2,913,509) 2,913,509 2,913,509
- --------------------------------------------------------------
TOTAL INVESTMENTS-101.29% 340,215,095
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(1.29%) (4,325,554)
- --------------------------------------------------------------
NET ASSETS-100.00% $335,889,541
==============================================================
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviations:
ADR - American Depositary Receipt
Deb. - Debentures
Gtd. - Guaranteed
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
FS-35
179
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at market value (cost
$292,731,925) $340,215,095
- ---------------------------------------------------------
Receivables for:
Capital stock sold 369,339
- ---------------------------------------------------------
Interest and dividends 1,589,287
- ---------------------------------------------------------
Paydowns 35,226
- ---------------------------------------------------------
Investment for deferred compensation plan 6,914
- ---------------------------------------------------------
Other assets 4,610
- ---------------------------------------------------------
Total assets 342,220,471
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,732,192
- ---------------------------------------------------------
Capital stock reacquired 2,506,522
- ---------------------------------------------------------
Deferred compensation plan 6,914
- ---------------------------------------------------------
Accrued advisory fees 283,254
- ---------------------------------------------------------
Accrued operating services fees 43,477
- ---------------------------------------------------------
Accrued distribution fees 734,061
- ---------------------------------------------------------
Accrued directors' fees and expenses 24,510
- ---------------------------------------------------------
Total liabilities 6,330,930
- ---------------------------------------------------------
Net assets applicable to shares outstanding $335,889,541
- ---------------------------------------------------------
NET ASSETS:
Class A $ 16,485,231
=========================================================
Class B $ 7,221,683
=========================================================
Class C $312,182,627
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 1,225,276
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 535,931
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 23,188,570
=========================================================
Class A:
Net asset value and redemption price per
share $ 13.45
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $13.45
divided by 94.50%) $ 14.23
=========================================================
Class B:
Net asset value and offering price per
share $ 13.48
=========================================================
Class C:
Net asset value and offering price per
share $ 13.46
=========================================================
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Interest $ 3,810,775
- --------------------------------------------------------
Dividends (net of $278,923 foreign
withholding tax) 9,401,993
- --------------------------------------------------------
Total investment income 13,212,768
- --------------------------------------------------------
EXPENSES:
Advisory fees 3,855,357
- --------------------------------------------------------
Operating services fees 1,670,511
- --------------------------------------------------------
Distribution fees-Class A 54,320
- --------------------------------------------------------
Distribution fees-Class B 38,874
- --------------------------------------------------------
Distribution fees-Class C 3,661,284
- --------------------------------------------------------
Directors' fees and expenses 11,183
- --------------------------------------------------------
Total expenses 9,291,529
- --------------------------------------------------------
Less: Fees waived (666,698)
- --------------------------------------------------------
Net expenses 8,624,831
- --------------------------------------------------------
Net investment income 4,587,937
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain on sales of investment
securities 12,874,380
- --------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities (22,961,634)
- --------------------------------------------------------
Net gain (loss) from investment
securities (10,087,254)
- --------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(5,499,317)
=========================================================
FS-36
180
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ ------------
OPERATIONS:
Net investment income $ 4,587,937 $ 3,030,247
- ------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 12,874,380 28,345,151
- ------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (22,961,634) 24,205,999
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (5,499,317) 55,581,397
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (307,700) (54,439)
- ------------------------------------------------------------------------------------------
Class B (57,949) --
- ------------------------------------------------------------------------------------------
Class C (3,942,359) (2,620,318)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (674,979) (574,586)
- ------------------------------------------------------------------------------------------
Class B (277,833) --
- ------------------------------------------------------------------------------------------
Class C (12,255,976) (29,179,585)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 8,660,733 9,196,237
- ------------------------------------------------------------------------------------------
Class B 7,834,101 --
- ------------------------------------------------------------------------------------------
Class C (43,459,114) 86,678,096
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (49,980,393) 119,026,802
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 385,869,934 266,843,132
- ------------------------------------------------------------------------------------------
End of period $335,889,541 $385,869,934
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $287,690,477 $313,154,757
- ------------------------------------------------------------------------------------------
Undistributed net investment income 759,557 479,628
- ------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities (43,663) 1,790,745
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 47,483,170 70,444,804
- ------------------------------------------------------------------------------------------
$335,889,541 $385,869,934
==========================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor MultiFlex Fund (the "Fund") is a series portfolio of AIM Advisor
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of five diversified
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to achieve a high total return on
investment through capital appreciation and current income, without regard to
federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) 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 mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and
FS-37
181
asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date, or absent a last sales
price, at the mean of the closing bid and asked prices. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may
be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the
above methods are valued at the mean between last bid and asked prices based
upon quotes furnished by independent sources. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's Board of Directors. Investments with maturities of 60 days or less
are valued on the basis of amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions-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 as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are
declared and paid quarterly. On December 31, 1998 additional paid-in capital
was increased by $1,500,000 and undistributed net realized gains was
decreased by $1,500,000 as a result of equalization credits and in order to
comply with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Bond Premiums-It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
D. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements.
E. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Management and Research, Inc. ("IMR") whereby AIM pays
IMR an annual rate of 0.35% of the Fund's average daily net assets up to $500
million and 0.25% on the Fund's average daily net assets in excess of $500
million.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. This
agreement provides that AIM pays all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1998, AIM was paid $1,019,333 for such services. As of
June 1, 1998, AIM has voluntarily agreed to limit the operating services fees to
an annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the period June 1, 1998 through December 31, 1998, AIM
voluntarily waived operating services fees in the amount of $651,178.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The Fund
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B or Class C shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $38,800, $38,874 and $3,661,284, respectively, as compensation
under the Plans. During the year ended December 31, 1998, AIM Distributors
waived fees of $15,520 for the Class A shares.
AIM Distributors received commissions of $66,763 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1998,
AIM Distributors received commissions of $86,385 in contingent deferred sales
charges imposed on redemptions of Fund shares. Certain officers and directors of
the Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
FS-38
182
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average net assets of the Fund are less than
$100 million, the Fund's expenses shall not exceed 1.80% for Class A and 2.45%
for Class C; on the next $400 million of net assets, expenses shall not exceed
1.75% for Class A and 2.40% for Class C; on the next $500 million, expenses
shall not exceed 1.70% for Class A and 2.35% for Class C; on the next $1 billion
of net assets, expenses shall not exceed 1.65% for Class A and 2.30% for Class
C; and on all assets over $2 billion, expenses shall not exceed 1.60% for Class
A and 2.25% for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $4,230
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, the Fund did
not borrow under the line of credit agreement. The funds which are party to the
line of credit are charged a commitment fee of 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1998 was
$270,515,961 and $291,512,781, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
Aggregate unrealized appreciation of
investment securities $ 72,943,595
- ------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (25,503,273)
- ------------------------------------------------------------
Net unrealized appreciation of investment
securities $ 47,440,322
============================================================
Cost of investments for tax purposes is
$292,774,773.
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding for the years ended December 31,
1998 and 1997 are as follows:
1998 1997*
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- ------------
Sold:
Class A 898,890 $ 12,964,303 619,395 $ 8,916,997
- ------------------------------------------------------------------------------
Class B** 560,937 8,180,606 -- --
- ------------------------------------------------------------------------------
Class C 3,605,748 52,233,849 6,751,442 95,937,310
- ------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 73,100 958,674 44,119 616,050
- ------------------------------------------------------------------------------
Class B** 24,700 321,494 -- --
- ------------------------------------------------------------------------------
Class C 1,187,114 15,552,589 2,197,213 30,337,244
- ------------------------------------------------------------------------------
Reacquired:
Class A (384,926) (5,262,244) (25,302) (336,810)
- ------------------------------------------------------------------------------
Class B** (49,706) (667,999) -- --
- ------------------------------------------------------------------------------
Class C (8,111,162) (111,245,552) (2,756,585) (39,596,458)
- ------------------------------------------------------------------------------
(2,195,305) $ (26,964,280) 6,830,282 $ 95,874,333
==============================================================================
* Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
** Class B shares commenced sales on March 3, 1998.
FS-39
183
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998 and for a share of
Class C capital stock outstanding during each of the years in the five-year
period ended December 31, 1998.
CLASS A(a) CLASS B
----------------------- ------------
1998 1997(b) 1998
------- ------------ ------------
Net asset value, beginning of period $ 14.21 $ 13.14 $ 14.79
- ------------------------------------------------------------ ------- ------- -------
Income from investment operations:
Net investment income 0.24 0.23 0.14
- ------------------------------------------------------------ ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (0.20) 2.26 (0.75)
- ------------------------------------------------------------ ------- ------- -------
Total from investment operations 0.04 2.49 (0.61)
- ------------------------------------------------------------ ------- ------- -------
Less distributions:
Dividends from net investment income (0.26) (0.22) (0.16)
- ------------------------------------------------------------ ------- ------- -------
Distributions from net realized gains (0.54) (1.20) (0.54)
- ------------------------------------------------------------ ------- ------- -------
Total distributions (0.80) (1.42) (0.70)
- ------------------------------------------------------------ ------- ------- -------
Net asset value, end of period $ 13.45 $ 14.21 $ 13.48
============================================================ ======= ======= =======
Total return(c) 0.51% 19.40% (3.96)%
============================================================ ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $16,485 $ 9,066 $ 7,222
============================================================ ======= ======= =======
Ratio of expenses to average net assets(d) 1.52%(e) 1.67% 2.27%(e)(f)
============================================================ ======= ======= =======
Ratio of net investment income to average net assets(g) 1.91%(e) 1.67% 1.16%(e)(f)
============================================================ ======= ======= =======
Portfolio turnover rate 72% 62% 72%
============================================================ ======= ======= =======
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Does not deduct sales charges and are not annualized for periods less than
one year.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.79% and 1.77% for 1998-1997 for Class A and 2.44% (annualized) for 1998
for Class B.
(e) Ratios are based on average net assets of $15,519,872 and $4,667,498 for
Class A and Class B, respectively.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.64% and 1.57% for 1998-1997 for Class A and 0.99%
(annualized) for 1998 for Class B.
CLASS C(a)
-----------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 14.22 $ 13.14 $ 11.68 $ 9.78 $ 10.04
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.17 0.13 0.14 0.16 0.16
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.23) 2.26 1.83 1.94 (0.26)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations (0.06) 2.39 1.97 2.10 (0.10)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.16) (0.11) (0.13) (0.16) (0.16)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.54) (1.20) (0.38) (0.04) --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.70) (1.31) (0.51) (0.20) (0.16)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 13.46 $ 14.22 $ 13.14 $ 11.68 $ 9.78
============================================================ ======== ======== ======== ======== ========
Total return(c) (0.26)% 18.55% 17.03% 21.58% (1.02)%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $312,183 $376,804 $266,843 $174,592 $120,220
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets(d) 2.27%(e) 2.42% 2.45% 2.50% 2.49%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets(f) 1.16%(e) 0.92% 1.16% 1.53% 2.01%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 72% 62% 62% 50% 81%
============================================================ ======== ======== ======== ======== ========
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Does not deduct contingent deferred sales charges.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.44%.
(e) Ratios are based on average net assets of $366,128,391.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 0.99%.
FS-40
184
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor Real Estate Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Real Estate Fund (a portfolio
of AIM Advisor Funds, Inc.), including the schedule of
investments, as of December 31, 1998, and the related
statement of operations, the statement of changes in net
assets, and the financial highlights for the year then
ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and the financial
highlights based on our audit. The accompanying statement
of changes in net assets for the year ended December 31,
1997 and the financial highlights for each of the years
in the two-year period ended December 31, 1997 and the
period May 1, 1995 (date operations commenced) through
December 31, 1995, were audited by other auditors whose
report thereon dated February 5, 1998, expressed an
unqualified opinion on such statement and financial
highlights.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor Real Estate Fund as of December 31, 1998, the
results of its operations, the changes in its net assets
and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-41
185
SCHEDULE OF INVESTMENTS
December 31, 1998
MARKET
SHARES VALUE
REAL ESTATE INVESTMENT TRUSTS &
OTHER EQUITY INTERESTS-100.02%
DIVERSIFIED-12.72%
Beacon Capital(a) 55,000 $ 873,125
- --------------------------------------------------------------
Catellus Development Corp.(a) 53,900 771,444
- --------------------------------------------------------------
Crescent Real Estate Equities, Co. 79,000 1,817,000
- --------------------------------------------------------------
Glenborough Realty Trust, Inc. 70,000 1,426,250
- --------------------------------------------------------------
RioCan Real Estate Investment Trust
(Canada) 115,000 706,535
- --------------------------------------------------------------
Security Capital U.S. Realty
(Luxembourg)(a) 74,800 740,520
- --------------------------------------------------------------
Vornado Operating Co.(a) 2,625 21,164
- --------------------------------------------------------------
Vornado Realty Trust 37,500 1,265,625
- --------------------------------------------------------------
7,621,663
- --------------------------------------------------------------
FINANCIAL SERVICES-0.84%
AMRESCO, Inc.(a) 57,850 506,188
- --------------------------------------------------------------
HEALTHCARE (DIVERSIFIED)-1.97%
Meditrust Corp. 78,100 1,181,263
- --------------------------------------------------------------
INDUSTRIAL PROPERTIES-8.03%
Bedford Property Investors, Inc. 46,800 789,750
- --------------------------------------------------------------
Eastgroup Properties, Inc. 21,600 398,250
- --------------------------------------------------------------
First Industrial Realty Trust, Inc. 56,700 1,520,268
- --------------------------------------------------------------
Prime Group Realty Trust 45,200 683,650
- --------------------------------------------------------------
ProLogis Trust 22,500 466,875
- --------------------------------------------------------------
TriNet Corporate Realty Trust, Inc. 35,500 949,625
- --------------------------------------------------------------
4,808,418
- --------------------------------------------------------------
INDUSTRIAL/OFFICE PROPERTIES-3.74%
Liberty Property Trust 72,950 1,796,394
- --------------------------------------------------------------
Reckson Associates Realty Corp. 20,000 443,750
- --------------------------------------------------------------
2,240,144
- --------------------------------------------------------------
LODGING-HOTELS-14.55%
Crestline Capital Corp.(a) 6,260 91,553
- --------------------------------------------------------------
Hospitality Properties Trust 46,400 1,119,400
- --------------------------------------------------------------
Host Marriott Corp. 62,600 864,663
- --------------------------------------------------------------
MeriStar Hospitality Corp. 94,814 1,759,985
- --------------------------------------------------------------
MeriStar Hotels & Resorts, Inc.(a) 112,700 295,838
- --------------------------------------------------------------
Patriot American Hospitality, Inc. 190,000 1,140,000
- --------------------------------------------------------------
Starwood Hotels & Resorts 96,700 2,193,881
- --------------------------------------------------------------
Sunstone Hotel Investors, Inc. 132,800 1,253,300
- --------------------------------------------------------------
8,718,620
- --------------------------------------------------------------
MARKET
SHARES VALUE
MANUFACTURED HOMES-0.92%
Asset Investors Corp. 44,000 $ 550,000
- --------------------------------------------------------------
MORTGAGE BACKED SECURITIES-0.51%
CRIIMI MAE, Inc. 87,700 306,950
- --------------------------------------------------------------
OFFICE PROPERTIES-22.40%
Arden Realty Group, Inc. 114,300 2,650,331
- --------------------------------------------------------------
CarrAmerica Realty Corp. 81,800 1,963,200
- --------------------------------------------------------------
Cornerstone Properties, Inc. 35,700 557,812
- --------------------------------------------------------------
Highwoods Properties, Inc. 70,050 1,803,788
- --------------------------------------------------------------
Kilroy Realty Corp. 42,700 982,100
- --------------------------------------------------------------
Koger Equity, Inc. 30,000 515,625
- --------------------------------------------------------------
Mack-Cali Realty Corp. 43,700 1,349,238
- --------------------------------------------------------------
Prentiss Properties Trust 89,700 2,001,431
- --------------------------------------------------------------
SL Green Realty Corp. 73,900 1,598,088
- --------------------------------------------------------------
13,421,613
- --------------------------------------------------------------
REGIONAL MALLS-8.16%
CBL & Associates Properties, Inc. 72,350 1,867,534
- --------------------------------------------------------------
Macerich Co. (The) 25,500 653,437
- --------------------------------------------------------------
Simon Property Group, Inc. 71,900 2,049,150
- --------------------------------------------------------------
SPG Properties Inc., $2.19 Series B
Pfd. 7,000 178,937
- --------------------------------------------------------------
Taubman Centers, Inc. 10,000 137,500
- --------------------------------------------------------------
4,886,558
- --------------------------------------------------------------
RESIDENTIAL PROPERTIES-15.27%
Avalonbay Communities, Inc. 54,800 1,876,900
- --------------------------------------------------------------
Camden Property Trust 31,432 817,232
- --------------------------------------------------------------
Charles E. Smith Residential Realty,
Inc. 63,800 2,049,575
- --------------------------------------------------------------
Equity Residential Properties Trust 25,500 1,031,156
- --------------------------------------------------------------
Equity Residential Properties, $1.75
Conv. Pfd. 7,000 164,062
- --------------------------------------------------------------
Essex Property Trust, Inc. 64,500 1,918,875
- --------------------------------------------------------------
Post Properties, Inc. 33,600 1,291,500
- --------------------------------------------------------------
9,149,300
- --------------------------------------------------------------
SELF-STORAGE-2.81%
Public Storage, Inc. 55,800 1,510,088
- --------------------------------------------------------------
Public Storage Inc., $2.50 Series E
Pfd. 6,000 170,625
- --------------------------------------------------------------
1,680,713
- --------------------------------------------------------------
SHOPPING CENTERS-8.10%
JDN Realty Corp. 67,500 1,455,469
- --------------------------------------------------------------
Kimco Realty Corp. 31,900 1,266,031
- --------------------------------------------------------------
FS-42
186
MARKET
SHARES VALUE
SHOPPING CENTERS-(CONTINUED)
Pan Pacific Retail Properties, Inc. 47,700 $ 951,019
- --------------------------------------------------------------
Philips International Realty Corp. 76,600 1,177,725
- --------------------------------------------------------------
4,850,244
- --------------------------------------------------------------
Total Real Estate Investment
Trusts & Other Equity
Interests (Cost $66,915,860) 59,921,674
- --------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
REPURCHASE AGREEMENT-1.72%(b)
SBC Warburg Dillon Read Inc., 4.75%,
01/04/99(c) (Cost $1,028,091) $1,028,091 $ 1,028,091
- --------------------------------------------------------------
TOTAL INVESTMENTS-101.74% 60,949,765
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(1.74)% (1,040,480)
- --------------------------------------------------------------
NET ASSETS-100.00% $59,909,285
==============================================================
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to insure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviations:
Conv. - Convertible
Pfd. - Preferred
See Notes to Financial Statements.
FS-43
187
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at market value (cost
$67,943,951) $ 60,949,765
- ---------------------------------------------------------
Foreign currencies, at value (cost $15,226) 15,187
- ---------------------------------------------------------
Receivables for:
Capital stock sold 185,829
- ---------------------------------------------------------
Interest and dividends 732,720
- ---------------------------------------------------------
Investment for deferred compensation plan 5,872
- ---------------------------------------------------------
Other assets 1,199
- ---------------------------------------------------------
Total assets 61,890,572
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,167,762
- ---------------------------------------------------------
Capital stock reacquired 649,902
- ---------------------------------------------------------
Deferred compensation plan 5,872
- ---------------------------------------------------------
Accrued advisory fees 46,459
- ---------------------------------------------------------
Accrued operating services fees 18,693
- ---------------------------------------------------------
Accrued distribution fees 92,599
- ---------------------------------------------------------
Total liabilities 1,981,287
- ---------------------------------------------------------
Net assets applicable to shares outstanding $ 59,909,285
=========================================================
NET ASSETS:
Class A $ 20,087,313
=========================================================
Class B $ 6,900,789
=========================================================
Class C $ 32,921,183
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 1,753,528
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 601,186
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 2,872,166
=========================================================
Class A:
Net asset value and redemption price per
share $ 11.46
=========================================================
Offering price per share:
(Net asset value of $11.46
divided by 95.25%) $ 12.03
=========================================================
Class B:
Net asset value and offering price per
share $ 11.48
=========================================================
Class C:
Net asset value and offering price per
share $ 11.46
=========================================================
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Dividends (net of $11,814 foreign
withholding tax) $ 3,916,800
- ---------------------------------------------------------
Interest 198,373
- ---------------------------------------------------------
Total investment income 4,115,173
- ---------------------------------------------------------
EXPENSES:
Advisory fees 625,129
- ---------------------------------------------------------
Operating services fees 312,558
- ---------------------------------------------------------
Distribution fees-Class A 80,966
- ---------------------------------------------------------
Distribution fees-Class B 50,872
- ---------------------------------------------------------
Distribution fees-Class C 412,382
- ---------------------------------------------------------
Directors' fees and expenses 5,297
- ---------------------------------------------------------
Total expenses 1,487,204
- ---------------------------------------------------------
Less: Fees waived by advisor (59,719)
- ---------------------------------------------------------
Net expenses 1,427,485
- ---------------------------------------------------------
Net investment income 2,687,688
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (7,856,868)
- ---------------------------------------------------------
Foreign currencies (11,340)
- ---------------------------------------------------------
(7,868,208)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities (13,364,558)
- ---------------------------------------------------------
Foreign currencies 56
- ---------------------------------------------------------
(13,364,502)
- ---------------------------------------------------------
Net gain (loss) from investment
securities and foreign currencies (21,232,710)
- ---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(18,545,022)
=========================================================
FS-44
188
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ -----------
OPERATIONS:
Net investment income $ 2,687,688 $ 930,868
- ----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (7,868,208) 3,781,061
- ----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and foreign currencies (13,364,502) 1,996,379
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (18,545,022) 6,708,308
- ----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (879,078) (138,336)
- ----------------------------------------------------------------------------------------
Class B (195,557) --
- ----------------------------------------------------------------------------------------
Class C (1,184,516) (755,032)
- ----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (434,776) (609,759)
- ----------------------------------------------------------------------------------------
Class B (143,531) --
- ----------------------------------------------------------------------------------------
Class C (703,226) (1,923,812)
- ----------------------------------------------------------------------------------------
Share transactions-net:
Class A 11,098,948 16,620,595
- ----------------------------------------------------------------------------------------
Class B 8,539,414 --
- ----------------------------------------------------------------------------------------
Class C 1,916,228 19,971,956
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets (531,116) 39,873,920
- ----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 60,440,401 20,566,481
- ----------------------------------------------------------------------------------------
End of period $ 59,909,285 $60,440,401
========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 74,263,053 $52,709,732
- ----------------------------------------------------------------------------------------
Undistributed net investment income 490,850 72,384
- ----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (7,850,489) 1,287,912
- ----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (6,994,129) 6,370,373
- ----------------------------------------------------------------------------------------
$ 59,909,285 $60,440,401
========================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Real Estate Fund (the "Fund") is a series portfolio of AIM Advisor
Funds, Inc. (the "Company"). The Company is a Maryland corporation and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of five
diversified portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's investment objective is to achieve a high total
return on investment through capital appreciation and current income, without
regard to federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange 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 mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities
FS-45
189
reported on the NASDAQ National Market System) is valued at the mean between
the last bid and asked prices based upon quotes furnished by market makers
for such securities. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date, or absent a
last sales price, at the mean of the closing bid and asked prices.
Securities for which market prices are not provided by any of the above
methods are valued at the mean between last bid and asked prices based upon
quotes furnished by independent sources. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's Board of Directors. Investments with maturities of 60 days or less
are valued on the basis of amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions-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 as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are
declared and paid quarterly. On December 31, 1998 additional paid-in capital
was decreased by $1,269, undistributed net investment income was decreased
by $10,071 and undistributed net realized gains was increased by $11,340 as
a result of differing book/tax treatment of foreign currency transactions
and in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassifications discussed above.
C. Foreign Currency Translations-Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at the date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
D. Foreign Currency Contracts-A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
E. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements. The Fund has a capital loss
carryforward of $1,027,346 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2006. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
F. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.90% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Realty Advisors, Inc. ("IRAI") whereby AIM pays IRAI an
annual rate of 0.35% of the Fund's average daily net assets on the first $100
million and 0.25% of the Fund's average daily net assets in excess of $100
million.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. This
agreement provides that AIM pays all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1998, AIM was paid $275,972 for such services. As of
June 1, 1998, AIM has voluntarily agreed to limit the operating services fees to
an annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the period June 1, 1998 through December 31, 1998, AIM
voluntarily waived operating services fees in the amount of $36,586.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The Fund
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of the
FS-46
190
average daily net assets attributable to the Class B shares. Of these amounts,
the Fund may pay a service fee of 0.25% of the average daily net assets of the
Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $57,833, $50,872 and $412,382, respectively, as compensation under
the Plans. During the year ended December 31, 1998, AIM Distributors waived fees
of $23,133 for the Class A shares.
AIM Distributors received commissions of $85,554 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1998,
AIM Distributors received commissions of $25,274 in contingent deferred sales
charges imposed on redemptions of shares. Certain officers and directors of the
Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average net assets of the Fund are less than
$500 million, the Fund's expenses shall not exceed 1.70% for Class A and 2.35%
for Class C; on the next $500 million of net assets, expenses shall not exceed
1.65% for Class A and 2.30% for Class C; and on all assets over $1 billion,
expenses shall not exceed 1.60% for Class A and 2.25% for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $3,558
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, the Fund did
not borrow under the line of credit agreement. The funds which are party to the
line of credit are charged a commitment fee of 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1998 was
$69,794,053 and $45,015,610, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
Aggregate unrealized appreciation of
investment securities $ 830,188
- -------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (12,663,672)
- -------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities $(11,833,484)
=============================================================
Cost of investments for tax purposes is $72,783,249.
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended December
31, 1998 and 1997 were as follows:
1998 1997*
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
Sold:
Class A 1,866,966 $ 26,220,226 1,054,003 $16,739,222
- ------------------------ ---------- ------------ --------- -----------
Class B** 965,596 13,668,547 -- --
- ------------------------ ---------- ------------ --------- -----------
Class C 867,066 12,416,738 1,421,288 21,204,369
- ------------------------ ---------- ------------ --------- -----------
Issued as reinvestment
of dividends:
Class A 103,931 1,234,506 47,730 725,852
- ------------------------ ---------- ------------ --------- -----------
Class B** 26,797 312,988 -- --
- ------------------------ ---------- ------------ --------- -----------
Class C 146,264 1,732,251 162,326 2,458,661
- ------------------------ ---------- ------------ --------- -----------
Reacquired:
Class A (1,266,277) (16,355,784) (52,825) (844,479)
- ------------------------ ---------- ------------ --------- -----------
Class B** (391,207) (5,442,121) -- --
- ------------------------ ---------- ------------ --------- -----------
Class C (933,062) (12,232,761) (240,812) (3,691,074)
- ------------------------ ---------- ------------ --------- -----------
1,386,074 $ 21,554,590 2,391,710 $36,592,551
======================== ========== ============ ========= ===========
* Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
** Class B shares commenced sales March 3, 1998.
FS-47
191
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998, and a share of Class C
capital stock outstanding during each of the years in the three-year period
ended December 31, 1998 and the period May 1, 1995 (date operations commenced)
through December 31, 1995.
CLASS A(a) CLASS B
------------------ ------------
1998 1997(b) 1998
------- ------- ------------
Net asset value, beginning of period $ 15.74 $ 14.19 $ 15.34
- ------------------------------------------------------------ ------- ------- -------
Income from investment operations:
Net investment income 0.58(c) 0.34(c) 0.37(c)
- ------------------------------------------------------------ ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (4.11) 2.39 (3.58)
- ------------------------------------------------------------ ------- ------- -------
Total from investment operations (3.53) 2.73 (3.21)
- ------------------------------------------------------------ ------- ------- -------
Less distributions:
Dividends from net investment income (0.50) (0.44) (0.40)
- ------------------------------------------------------------ ------- ------- -------
Distributions from net realized gains (0.25) (0.74) (0.25)
- ------------------------------------------------------------ ------- ------- -------
Total distributions (0.75) (1.18) (0.65)
- ------------------------------------------------------------ ------- ------- -------
Net asset value, end of period $ 11.46 $ 15.74 $ 11.48
============================================================ ======= ======= =======
Total return(d) (22.54)% 19.78% (21.02)%
============================================================ ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $20,087 $16,507 $ 6,901
============================================================ ======= ======= =======
Ratio of expenses to average net assets(e) 1.55%(f) 1.60% 2.31%(f)(g)
============================================================ ======= ======= =======
Ratio of net investment income to average net assets(h) 4.37%(f) 3.26% 3.62%(f)(g)
============================================================ ======= ======= =======
Portfolio turnover rate 69% 57% 69%
============================================================ ======= ======= =======
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.71% and 1.70% for 1998-1997 for Class A and 2.37% (annualized) for 1998
for Class B.
(f) Ratios are based on average net assets of $23,133,391 and $6,107,990 for
Class A and Class B, respectively.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.21% and 3.16% for 1998-1997 for Class A and 3.56%
(annualized) for 1998 for Class B.
CLASS C(a)
------------------------------------------
1998 1997(b) 1996 1995
------- -------- -------- --------
Net asset value, beginning of period $ 15.74 $ 14.19 $ 10.76 $ 10.00
- ------------------------------------------------------------ ------- -------- -------- --------
Income from investment operations:
Net investment income 0.50(c) 0.36(c) 0.33 0.16
- ------------------------------------------------------------ ------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (4.13) 2.26 3.51 0.75
- ------------------------------------------------------------ ------- -------- -------- --------
Total from investment operations (3.63) 2.62 3.84 0.91
- ------------------------------------------------------------ ------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.40) (0.33) (0.31) (0.15)
- ------------------------------------------------------------ ------- -------- -------- --------
Distributions from net realized gains (0.25) (0.74) (0.10) --
- ------------------------------------------------------------ ------- -------- -------- --------
Total distributions (0.65) (1.07) (0.41) (0.15)
- ------------------------------------------------------------ ------- -------- -------- --------
Net asset value, end of period $ 11.46 $ 15.74 $ 14.19 $ 10.76
============================================================ ======= ======== ======== ========
Total return(d) (23.16)% 18.88% 36.43% 9.12%
============================================================ ======= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,921 $ 43,934 $ 20,566 $ 5,565
============================================================ ======= ======== ======== ========
Ratio of expenses to average net assets(e) 2.31%(f) 2.35% 2.40% 2.40%(g)
============================================================ ======= ======== ======== ========
Ratio of net investment income to average net assets(h) 3.62%(f) 2.54% 3.21% 4.68%(g)
============================================================ ======= ======== ======== ========
Portfolio turnover rate 69% 57% 25% 7%
============================================================ ======= ======== ======== ========
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.37% for 1998.
(f) Ratios are based on average net assets of $41,238,200.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 3.56% for 1998.
FS-48
192
APPENDIX II
AIM ADVISOR FLEX FUND
AIM ADVISOR MULTIFLEX FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
COMMON STOCKS & OTHER EQUITY
INTERESTS-84.11%
AEROSPACE/DEFENSE-1.53%
15,900 15,900 BE Aerospace, Inc.(a) $ 333,900 $ $ 333,900
- -----------------------------------------------------------------------------------------------------------------------------
110,000 110,000 Boeing Co. (The) 3,588,751 3,588,751
- -----------------------------------------------------------------------------------------------------------------------------
60,000 60,000 Lockheed Martin Corp. 5,085,000 5,085,000
- -----------------------------------------------------------------------------------------------------------------------------
19,500 135,000 154,500 Precision Castparts Corp. 862,875 5,973,750 6,836,625
- -----------------------------------------------------------------------------------------------------------------------------
5,500 5,500 Sequa Corp.(a) 329,312 329,312
- -----------------------------------------------------------------------------------------------------------------------------
16,173,588
- -----------------------------------------------------------------------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.59%
341,250 341,250 Archer-Daniels-Midland Co. 5,865,235 5,865,235
- -----------------------------------------------------------------------------------------------------------------------------
11,600 11,600 Universal Corp. 407,450 407,450
- -----------------------------------------------------------------------------------------------------------------------------
6,272,685
- -----------------------------------------------------------------------------------------------------------------------------
AIR FREIGHT-0.04%
11,900 11,900 Airborne Freight Corp. 429,143 429,143
- -----------------------------------------------------------------------------------------------------------------------------
AIRLINES-0.65%
12,600 12,600 Alaska Air Group, Inc.(a) 557,550 557,550
- -----------------------------------------------------------------------------------------------------------------------------
19,000 19,000 British Airways PLC-ADR (United Kingdom) 1,288,437 1,288,437
- -----------------------------------------------------------------------------------------------------------------------------
8,300 8,300 SkyWest, Inc. 271,306 271,306
- -----------------------------------------------------------------------------------------------------------------------------
52,350 160,000 212,350 Southwest Airlines Co. 1,174,603 3,590,001 4,764,604
- -----------------------------------------------------------------------------------------------------------------------------
6,881,897
- -----------------------------------------------------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT-1.55%
17,500 17,500 Arvin Industries, Inc. 729,531 729,531
- -----------------------------------------------------------------------------------------------------------------------------
14,600 14,600 Borg-Warner Automotive, Inc. 814,863 814,863
- -----------------------------------------------------------------------------------------------------------------------------
160,000 160,000 Cooper Tire & Rubber Co. 3,270,001 3,270,001
- -----------------------------------------------------------------------------------------------------------------------------
210,000 210,000 Genuine Parts Co. 7,021,875 7,021,875
- -----------------------------------------------------------------------------------------------------------------------------
125,000 125,000 Snap-on Inc. 4,351,562 4,351,562
- -----------------------------------------------------------------------------------------------------------------------------
11,400 11,400 Standard Products Co. (The) 232,275 232,275
- -----------------------------------------------------------------------------------------------------------------------------
16,420,107
- -----------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES-0.88%
125,000 16,600 141,600 Ford Motor Co. 974,213 7,335,938 8,310,151
- -----------------------------------------------------------------------------------------------------------------------------
40,000 40,000 Volvo A.B.-ADR (Sweden) 932,500 932,500
- -----------------------------------------------------------------------------------------------------------------------------
9,242,651
- -----------------------------------------------------------------------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.87%
100,000 100,000 ABN Amro Holding NV-ADR (Netherlands) 2,175,000 2,175,000
- -----------------------------------------------------------------------------------------------------------------------------
27,540 121,500 149,040 Bank One Corp. 1,406,261 6,204,094 7,610,355
- -----------------------------------------------------------------------------------------------------------------------------
Istituto Bancario San Paolo di
70,537 70,537 Torino-ADR (Italy)(a) 2,521,698 2,521,698
- -----------------------------------------------------------------------------------------------------------------------------
100,000 100,000 National City Corp. 7,250,000 7,250,000
- -----------------------------------------------------------------------------------------------------------------------------
69,000 69,000 Societe Generale (France) 2,235,766 2,235,766
- -----------------------------------------------------------------------------------------------------------------------------
7,000 90,000 97,000 Wachovia Corp. 612,063 7,869,375 8,481,438
- -----------------------------------------------------------------------------------------------------------------------------
30,274,257
- -----------------------------------------------------------------------------------------------------------------------------
7
193
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
BANKS (MONEY CENTER)-1.53%
21,662 110,000 131,662 BankAmerica Corp. $ 1,302,428 $ 6,613,751 $ 7,916,179
- -----------------------------------------------------------------------------------------------------------------------------
13,800 13,800 Chase Manhattan Corp. (The) 939,263 939,263
- -----------------------------------------------------------------------------------------------------------------------------
17,000 17,000 Den Danske Bank-ADR (Denmark) 2,283,816 2,283,816
- -----------------------------------------------------------------------------------------------------------------------------
33,000 33,000 Deutsche Bank A.G.-ADR (Germany) 1,942,726 1,942,726
- -----------------------------------------------------------------------------------------------------------------------------
13,000 13,000 First Union Corp. 790,563 790,563
- -----------------------------------------------------------------------------------------------------------------------------
9,000 9,000 HSBC Holdings PLC-ADR (United Kingdom) 2,242,153 2,242,153
- -----------------------------------------------------------------------------------------------------------------------------
16,114,700
- -----------------------------------------------------------------------------------------------------------------------------
BANKS (REGIONAL)-0.67%
15,625 15,625 Commerce Bancorp, Inc. 820,313 820,313
- -----------------------------------------------------------------------------------------------------------------------------
16,380 16,380 Commerce Bancshares, Inc. 696,150 696,150
- -----------------------------------------------------------------------------------------------------------------------------
11,600 11,600 Cullen/Frost Bankers, Inc. 636,550 636,550
- -----------------------------------------------------------------------------------------------------------------------------
18,000 18,000 Firstbank Corp. 543,375 543,375
- -----------------------------------------------------------------------------------------------------------------------------
11,900 11,900 GBC Bancorp 306,425 306,425
- -----------------------------------------------------------------------------------------------------------------------------
14,832 14,832 HUBCO, Inc. 446,814 446,814
- -----------------------------------------------------------------------------------------------------------------------------
39,100 39,100 Imperial Bancorp(a) 650,038 650,038
- -----------------------------------------------------------------------------------------------------------------------------
16,600 16,600 Independent Bank Corp. 288,425 288,425
- -----------------------------------------------------------------------------------------------------------------------------
National Australia Bank Ltd.-ADR
30,000 30,000 (Australia) 2,233,125 2,233,125
- -----------------------------------------------------------------------------------------------------------------------------
6,700 6,700 Republic Bancorp, Inc. 91,287 91,287
- -----------------------------------------------------------------------------------------------------------------------------
9,200 9,200 Silicon Valley Bancshares(a) 156,687 156,687
- -----------------------------------------------------------------------------------------------------------------------------
9,900 9,900 Trustmark Corp. 223,987 223,987
- -----------------------------------------------------------------------------------------------------------------------------
7,093,176
- -----------------------------------------------------------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-1.22%
150,000 150,000 Anheuser-Busch Companies, Inc. 9,843,751 9,843,751
- -----------------------------------------------------------------------------------------------------------------------------
12,000 12,000 Canandaigua Wine Co., Inc.-Class A(a) 693,750 693,750
- -----------------------------------------------------------------------------------------------------------------------------
Compania Cervecerias Unidas S.A.-ADR
45,000 45,000 (Chile) 866,250 866,250
- -----------------------------------------------------------------------------------------------------------------------------
12,000 12,000 Kirin Brewery Co., Ltd.-ADR (Japan) 1,485,000 1,485,000
- -----------------------------------------------------------------------------------------------------------------------------
12,888,751
- -----------------------------------------------------------------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.10%
24,750 24,750 PepsiCo, Inc. 1,013,203 1,013,203
- -----------------------------------------------------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.04%
9,100 9,100 Adelphia Communications Corp.(a) 416,325 416,325
- -----------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS-0.14%
12,700 12,700 Cameron Ashley Building Products(a) 165,894 165,894
- -----------------------------------------------------------------------------------------------------------------------------
110,000 110,000 Cemex S.A. de C.V.-ADR (Mexico) 543,895 543,895
- -----------------------------------------------------------------------------------------------------------------------------
7,000 7,000 Nortek, Inc.(a) 193,375 193,375
- -----------------------------------------------------------------------------------------------------------------------------
20,400 20,400 TJ International, Inc. 524,025 524,025
- -----------------------------------------------------------------------------------------------------------------------------
1,427,189
- -----------------------------------------------------------------------------------------------------------------------------
CHEMICALS-0.83%
40,000 40,000 Akzo Nobel N.V.-ADR (Netherlands) 1,785,000 1,785,000
- -----------------------------------------------------------------------------------------------------------------------------
75,000 75,000 Dow Chemical Co. (The) 6,820,312 6,820,312
- -----------------------------------------------------------------------------------------------------------------------------
14,500 14,500 NL Industries, Inc. 205,719 205,719
- -----------------------------------------------------------------------------------------------------------------------------
8,811,031
- -----------------------------------------------------------------------------------------------------------------------------
8
194
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
CHEMICALS (DIVERSIFIED)-0.34%
50,000 50,000 BASF A.G.-ADR (Germany) $ 1,909,315 $ $ 1,909,315
- -----------------------------------------------------------------------------------------------------------------------------
40,000 40,000 Bayer A.G.-ADR (Germany) 1,670,348 1,670,348
- -----------------------------------------------------------------------------------------------------------------------------
3,579,663
- -----------------------------------------------------------------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.93%
28,800 28,800 Dexter Corp. 905,400 905,400
- -----------------------------------------------------------------------------------------------------------------------------
100,000 100,000 Great Lakes Chemical Corp. 4,000,000 4,000,000
- -----------------------------------------------------------------------------------------------------------------------------
200,000 200,000 Morton International, Inc. 4,900,000 4,900,000
- -----------------------------------------------------------------------------------------------------------------------------
9,805,400
- -----------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.04%
17,100 17,100 Polycom, Inc.(a) 380,475 380,475
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTERS (HARDWARE)-3.76%
22,000 300,000 322,000 Compaq Computer Corp. 922,625 12,581,250 13,503,875
- -----------------------------------------------------------------------------------------------------------------------------
125,000 125,000 Hewlett-Packard Co. 8,539,062 8,539,062
- -----------------------------------------------------------------------------------------------------------------------------
6,500 80,000 86,500 International Business Machines Corp. 1,200,875 14,780,000 15,980,875
- -----------------------------------------------------------------------------------------------------------------------------
11,800 11,800 Micron Electronics, Inc.(a) 204,287 204,287
- -----------------------------------------------------------------------------------------------------------------------------
17,800 17,800 Sun Microsystems, Inc.(a) 1,524,125 1,524,125
- -----------------------------------------------------------------------------------------------------------------------------
39,752,224
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTERS (NETWORKING)-0.05%
16,100 16,100 META Group, Inc.(a) 478,975 478,975
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.16%
3,600 3,600 Jabil Circuit, Inc.(a) 268,650 268,650
- -----------------------------------------------------------------------------------------------------------------------------
8,800 8,800 MICROS Systems, Inc.(a) 289,300 289,300
- -----------------------------------------------------------------------------------------------------------------------------
18,600 18,600 Network Appliance, Inc.(a) 837,000 837,000
- -----------------------------------------------------------------------------------------------------------------------------
7,200 7,200 Xircom, Inc.(a) 244,800 244,800
- -----------------------------------------------------------------------------------------------------------------------------
1,639,750
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-2.03%
8,900 8,900 Aspect Development, Inc.(a) 394,381 394,381
- -----------------------------------------------------------------------------------------------------------------------------
11,300 11,300 BroadVision, Inc.(a) 361,600 361,600
- -----------------------------------------------------------------------------------------------------------------------------
23,000 125,000 148,000 Computer Associates International, Inc. 980,375 5,328,125 6,308,500
- -----------------------------------------------------------------------------------------------------------------------------
20,000 200,000 220,000 Electronic Data Systems Corp. 1,005,000 10,050,000 11,055,000
- -----------------------------------------------------------------------------------------------------------------------------
8,930 8,930 Hyperion Solutions Corp.(a) 160,740 160,740
- -----------------------------------------------------------------------------------------------------------------------------
7,800 7,800 Legato Systems, Inc.(a) 514,312 514,312
- -----------------------------------------------------------------------------------------------------------------------------
9,800 9,800 Lycos, Inc.(a) 544,513 544,513
- -----------------------------------------------------------------------------------------------------------------------------
8,500 8,500 Mastech Corp.(a) 243,312 243,312
- -----------------------------------------------------------------------------------------------------------------------------
30,000 30,000 Oracle Corp.(a) 1,293,750 1,293,750
- -----------------------------------------------------------------------------------------------------------------------------
8,400 8,400 Progress Software Corp.(a) 283,500 283,500
- -----------------------------------------------------------------------------------------------------------------------------
10,500 10,500 Rational Software Corp.(a) 278,250 278,250
- -----------------------------------------------------------------------------------------------------------------------------
21,437,858
- -----------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION (CEMENT & AGGREGATES)-0.24%
20,600 20,600 Centex Construction Products, Inc. 836,875 836,875
- -----------------------------------------------------------------------------------------------------------------------------
8,200 8,200 Lone Star Industries, Inc. 301,862 301,862
- -----------------------------------------------------------------------------------------------------------------------------
11,000 11,000 Vulcan Materials Co. 1,447,188 1,447,188
- -----------------------------------------------------------------------------------------------------------------------------
2,585,925
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.05%
12,400 12,400 American Greetings Corp.-Class A 509,175 509,175
- -----------------------------------------------------------------------------------------------------------------------------
9
195
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
CONSUMER FINANCE-0.10%
34,700 34,700 Doral Financial Corp. $ 767,738 $ $ 767,738
- -----------------------------------------------------------------------------------------------------------------------------
12,500 12,500 Flagstar Bancorp, Inc. 326,563 326,563
- -----------------------------------------------------------------------------------------------------------------------------
1,094,301
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.04%
12,600 12,600 AmeriSource Health Corp.-Class A(a) 819,000 819,000
- -----------------------------------------------------------------------------------------------------------------------------
24,666 24,666 Bindley Western Industries, Inc. 1,214,801 1,214,801
- -----------------------------------------------------------------------------------------------------------------------------
20,000 300,000 320,000 SUPERVALU, INC 560,000 8,400,000 8,960,000
- -----------------------------------------------------------------------------------------------------------------------------
10,993,801
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRIC COMPANIES-3.34%
5,500 5,500 CILCORP, Inc. 336,531 336,531
- -----------------------------------------------------------------------------------------------------------------------------
13,500 13,500 Cleco Corp. 463,219 463,219
- -----------------------------------------------------------------------------------------------------------------------------
16,000 16,000 CMP Group Inc. 302,000 302,000
- -----------------------------------------------------------------------------------------------------------------------------
10,400 10,400 Commonwealth Energy System 421,200 421,200
- -----------------------------------------------------------------------------------------------------------------------------
26,700 26,700 DTE Energy Co. 1,144,763 1,144,763
- -----------------------------------------------------------------------------------------------------------------------------
200,000 200,000 Edison International 5,575,000 5,575,000
- -----------------------------------------------------------------------------------------------------------------------------
90,000 90,000 Endesa S.A.-ADR (Spain) 2,430,000 2,430,000
- -----------------------------------------------------------------------------------------------------------------------------
300,000 300,000 Entergy Corp. 9,337,500 9,337,500
- -----------------------------------------------------------------------------------------------------------------------------
200,000 200,000 GPU, Inc. 8,837,500 8,837,500
- -----------------------------------------------------------------------------------------------------------------------------
15,200 15,200 Hawaiian Electric Industries, Inc. 611,800 611,800
- -----------------------------------------------------------------------------------------------------------------------------
20,355 20,355 Interstate Energy Corp. 656,449 656,449
- -----------------------------------------------------------------------------------------------------------------------------
8,300 8,300 Minnesota Power & Light Co. 365,200 365,200
- -----------------------------------------------------------------------------------------------------------------------------
35,000 35,000 PowerGen PLC-ADR (United Kingdom) 1,872,500 1,872,500
- -----------------------------------------------------------------------------------------------------------------------------
40,000 40,000 Scottish Power PLC-ADR (United Kingdom) 1,652,500 1,652,500
- -----------------------------------------------------------------------------------------------------------------------------
10,950 10,950 SIGCORP, Inc. 390,778 390,778
- -----------------------------------------------------------------------------------------------------------------------------
30,000 30,000 Southern Co. 871,875 871,875
- -----------------------------------------------------------------------------------------------------------------------------
35,268,815
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.97%
11,600 11,600 C & D Technologies, Inc. 319,000 319,000
- -----------------------------------------------------------------------------------------------------------------------------
Carlton Communications PLC-ADR (United
48,000 48,000 Kingdom) 2,202,000 2,202,000
- -----------------------------------------------------------------------------------------------------------------------------
14,400 14,400 Emerson Electric Co. 900,900 900,900
- -----------------------------------------------------------------------------------------------------------------------------
16,300 16,300 Esterline Technologies Corp.(a) 354,525 354,525
- -----------------------------------------------------------------------------------------------------------------------------
29,100 29,100 General Cable Corp. 596,550 596,550
- -----------------------------------------------------------------------------------------------------------------------------
11,000 75,000 86,000 General Electric Co. 1,122,688 7,654,687 8,777,375
- -----------------------------------------------------------------------------------------------------------------------------
Matsushita Electric Industrial Co.,
8,000 8,000 Ltd.-ADR (Japan) 1,396,000 1,396,000
- -----------------------------------------------------------------------------------------------------------------------------
7,500 7,500 Pinnacle Systems, Inc.(a) 268,125 268,125
- -----------------------------------------------------------------------------------------------------------------------------
21,500 21,500 Recoton Corp.(a) 385,656 385,656
- -----------------------------------------------------------------------------------------------------------------------------
110,000 110,000 Rockwell International Corp. 5,341,875 5,341,875
- -----------------------------------------------------------------------------------------------------------------------------
7,100 7,100 Technitrol, Inc. 226,312 226,312
- -----------------------------------------------------------------------------------------------------------------------------
20,768,318
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.43%
35,600 35,600 Kyocera Corp.-ADR (Japan) 1,848,975 1,848,975
- -----------------------------------------------------------------------------------------------------------------------------
65,500 65,500 W.W. Grainger, Inc. 2,726,437 2,726,437
- -----------------------------------------------------------------------------------------------------------------------------
4,575,412
- -----------------------------------------------------------------------------------------------------------------------------
10
196
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
ELECTRONICS (DEFENSE)-0.59%
20,000 100,000 120,000 Raytheon Co. $ 1,065,000 $ 5,168,750 $ 6,233,750
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.17%
11,500 11,500 Applied Micro Circuits Corp.(a) 390,641 390,641
- -----------------------------------------------------------------------------------------------------------------------------
9,300 9,300 Dallas Semiconductor Corp. 378,975 378,975
- -----------------------------------------------------------------------------------------------------------------------------
10,000 10,000 PMC-Sierra, Inc.(a) 631,250 631,250
- -----------------------------------------------------------------------------------------------------------------------------
10,300 10,300 TranSwitch Corp.(a) 401,056 401,056
- -----------------------------------------------------------------------------------------------------------------------------
1,801,922
- -----------------------------------------------------------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.05%
2,100 2,100 Granite Construction Inc. 70,481 70,481
- -----------------------------------------------------------------------------------------------------------------------------
12,700 12,700 Stone & Webster, Inc. 422,275 422,275
- -----------------------------------------------------------------------------------------------------------------------------
492,756
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-2.63%
19,900 110,000 129,900 American General Corp. 1,552,200 8,580,000 10,132,200
- -----------------------------------------------------------------------------------------------------------------------------
16,000 16,000 Associates First Capital Corp.-Class A 678,000 678,000
- -----------------------------------------------------------------------------------------------------------------------------
22,035 22,035 Citigroup Inc. 1,090,733 1,090,733
- -----------------------------------------------------------------------------------------------------------------------------
24,300 24,300 Fannie Mae 1,798,200 1,798,200
- -----------------------------------------------------------------------------------------------------------------------------
150,000 150,000 MGIC Investment Corp. 5,971,875 5,971,875
- -----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover &
14,850 100,000 114,850 Co. 1,054,350 7,100,000 8,154,350
- -----------------------------------------------------------------------------------------------------------------------------
27,825,358
- -----------------------------------------------------------------------------------------------------------------------------
FOODS-2.22%
Associated British Foods PLC-ADR (United
200,000 200,000 Kingdom) 1,866,800 1,866,800
- -----------------------------------------------------------------------------------------------------------------------------
20,000 20,000 Earthgrains Co. (The) 618,750 618,750
- -----------------------------------------------------------------------------------------------------------------------------
40,000 40,000 Groupe Danone-ADR (France) 2,250,000 2,250,000
- -----------------------------------------------------------------------------------------------------------------------------
19,000 50,000 69,000 H.J. Heinz Co. 1,075,875 2,831,250 3,907,125
- -----------------------------------------------------------------------------------------------------------------------------
22,000 22,000 Nestle S.A.-ADR (Switzerland) 2,394,647 2,394,647
- -----------------------------------------------------------------------------------------------------------------------------
13,500 13,500 Pilgrim's Pride Corp.-Class B 269,156 269,156
- -----------------------------------------------------------------------------------------------------------------------------
17,000 17,000 Smithfield Foods, Inc.(a) 575,875 575,875
- -----------------------------------------------------------------------------------------------------------------------------
200,000 200,000 Unigate PLC (Spain) 1,437,540 1,437,540
- -----------------------------------------------------------------------------------------------------------------------------
32,000 32,000 Unilever N.V. (Netherlands) 2,654,000 2,654,000
- -----------------------------------------------------------------------------------------------------------------------------
Unilever N.V.-ADR-New York Shares
90,000 90,000 (Netherlands) 7,464,375 7,464,375
- -----------------------------------------------------------------------------------------------------------------------------
23,438,268
- -----------------------------------------------------------------------------------------------------------------------------
FOOTWEAR-0.28%
200,000 200,000 Reebok International Ltd.(a) 2,975,000 2,975,000
- -----------------------------------------------------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES-0.03%
42,300 42,300 Grand Casinos, Inc.(a) 341,044 341,044
- -----------------------------------------------------------------------------------------------------------------------------
GOLD & PRECIOUS METALS MINING-0.03%
7,800 7,800 Stillwater Mining Co.(a) 319,800 319,800
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.43%
29,500 200,000 229,500 Abbott Laboratories 1,445,500 9,800,000 11,245,500
- -----------------------------------------------------------------------------------------------------------------------------
22,000 180,000 202,000 American Home Products Corp. 1,238,875 10,136,250 11,375,125
- -----------------------------------------------------------------------------------------------------------------------------
15,900 15,900 Bristol-Myers Squibb Co. 2,127,619 2,127,619
- -----------------------------------------------------------------------------------------------------------------------------
10,800 10,800 Johnson & Johnson 905,850 905,850
- -----------------------------------------------------------------------------------------------------------------------------
25,654,094
- -----------------------------------------------------------------------------------------------------------------------------
11
197
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.18%
6,500 6,500 Agouron Pharmaceuticals, Inc.(a) $ 381,875 $ $ 381,875
- -----------------------------------------------------------------------------------------------------------------------------
30,100 30,100 Alpharma, Inc.-Class A 1,062,906 1,062,906
- -----------------------------------------------------------------------------------------------------------------------------
3,700 3,700 MedImmune, Inc.(a) 367,919 367,919
- -----------------------------------------------------------------------------------------------------------------------------
325,000 325,000 Mylan Laboratories, Inc. 10,237,500 10,237,500
- -----------------------------------------------------------------------------------------------------------------------------
7,100 7,100 Parexel International Corp.(a) 177,500 177,500
- -----------------------------------------------------------------------------------------------------------------------------
10,500 10,500 Roberts Pharmaceutical Corp.(a) 228,375 228,375
- -----------------------------------------------------------------------------------------------------------------------------
12,456,075
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-3.29%
110,000 110,000 Astra A.B.-ADR (Sweden) 2,275,625 2,275,625
- -----------------------------------------------------------------------------------------------------------------------------
20,000 20,000 Glaxo Wellcome PLC (United Kingdom) 1,390,000 1,390,000
- -----------------------------------------------------------------------------------------------------------------------------
50,000 50,000 Lilly (Eli) & Co. 4,443,750 4,443,750
- -----------------------------------------------------------------------------------------------------------------------------
10,400 75,000 85,400 Merck & Co., Inc. 1,535,950 11,076,562 12,612,512
- -----------------------------------------------------------------------------------------------------------------------------
26,666 26,666 Novartis A.G.-ADR (Switzerland) 2,621,014 2,621,014
- -----------------------------------------------------------------------------------------------------------------------------
20,000 20,000 Novo-Nordisk A.S.-ADR (Denmark) 1,330,000 1,330,000
- -----------------------------------------------------------------------------------------------------------------------------
33,000 150,000 183,000 Schering-Plough Corp. 1,823,250 8,287,500 10,110,750
- -----------------------------------------------------------------------------------------------------------------------------
34,783,651
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0,70%
300,000 300,000 Columbia/HCA Healthcare Corp. 7,425,000 7,425,000
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.10%
15,600 15,600 Express Scripts, Inc.-Class A(a) 1,047,150 1,047,150
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.32%
5,800 5,800 Biomatrix, Inc.(a) 337,850 337,850
- -----------------------------------------------------------------------------------------------------------------------------
19,500 19,500 Biomet, Inc. 784,875 784,875
- -----------------------------------------------------------------------------------------------------------------------------
3,600 3,600 MiniMed, Inc.(a) 377,100 377,100
- -----------------------------------------------------------------------------------------------------------------------------
14,400 14,400 ResMed, Inc.(a) 653,400 653,400
- -----------------------------------------------------------------------------------------------------------------------------
41,500 41,500 Theragenics Corp.(a) 697,719 697,719
- -----------------------------------------------------------------------------------------------------------------------------
3,400 3,400 VISX, Inc.(a) 297,287 297,287
- -----------------------------------------------------------------------------------------------------------------------------
6,800 6,800 West Co, Inc. (The) 242,675 242,675
- -----------------------------------------------------------------------------------------------------------------------------
3,390,906
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.11%
18,600 18,600 Covance, Inc.(a) 541,725 541,725
- -----------------------------------------------------------------------------------------------------------------------------
15,700 15,700 Hanger Orthopedic Group, Inc.(a) 353,250 353,250
- -----------------------------------------------------------------------------------------------------------------------------
9,600 9,600 Hooper Holmes, Inc. 278,400 278,400
- -----------------------------------------------------------------------------------------------------------------------------
1,173,375
- -----------------------------------------------------------------------------------------------------------------------------
HOMEBUILDING-0.17%
19,700 19,700 M.D.C. Holdings, Inc. 421,088 421,088
- -----------------------------------------------------------------------------------------------------------------------------
16,700 16,700 NVR Inc.(a) 796,381 796,381
- -----------------------------------------------------------------------------------------------------------------------------
8,500 8,500 Pulte Corp. 236,406 236,406
- -----------------------------------------------------------------------------------------------------------------------------
9,000 9,000 U.S. Home Corp.(a) 299,250 299,250
- -----------------------------------------------------------------------------------------------------------------------------
1,753,125
- -----------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES-0.62%
14,300 14,300 Furniture Brands International, Inc.(a) 389,675 389,675
- -----------------------------------------------------------------------------------------------------------------------------
11,500 100,000 111,500 Whirlpool Corp. 636,812 5,537,500 6,174,312
- -----------------------------------------------------------------------------------------------------------------------------
6,563,987
- -----------------------------------------------------------------------------------------------------------------------------
12
198
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.09%
18,000 18,000 Kimberly-Clark Corp. $ 981,000 $ $ 981,000
- -----------------------------------------------------------------------------------------------------------------------------
HOUSEWARES-0.21%
70,000 70,000 Fortune Brands, Inc. 2,213,750 2,213,750
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.21%
10,852 10,852 Delphi Financial Group, Inc. 569,052 569,052
- -----------------------------------------------------------------------------------------------------------------------------
21,000 21,000 ING Groep N.V.-ADR (Netherlands) 1,305,937 1,305,937
- -----------------------------------------------------------------------------------------------------------------------------
18,900 18,900 Presidential Life Corp. 375,637 375,637
- -----------------------------------------------------------------------------------------------------------------------------
2,250,626
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.87%
7,837 7,837 American International Group, Inc. 757,250 757,250
- -----------------------------------------------------------------------------------------------------------------------------
18,200 18,200 Century Business Services, Inc.(a) 261,625 261,625
- -----------------------------------------------------------------------------------------------------------------------------
13,400 13,400 FBL Financial Group, Inc. 324,950 324,950
- -----------------------------------------------------------------------------------------------------------------------------
80,000 80,000 Loews Corp. 7,860,000 7,860,000
- -----------------------------------------------------------------------------------------------------------------------------
9,203,825
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-1.93%
11,220 11,220 Fidelity National Financial, Inc. 342,210 342,210
- -----------------------------------------------------------------------------------------------------------------------------
17,200 17,200 First American Financial Corp. (The) 552,550 552,550
- -----------------------------------------------------------------------------------------------------------------------------
14,800 14,800 LandAmerica Financial Group, Inc. 826,025 826,025
- -----------------------------------------------------------------------------------------------------------------------------
150,000 150,000 Ohio Casualty Corp. 6,168,750 6,168,750
- -----------------------------------------------------------------------------------------------------------------------------
23,000 200,000 223,000 Old Republic International Corp. 517,500 4,500,000 5,017,500
- -----------------------------------------------------------------------------------------------------------------------------
26,000 26,000 Orion Capital Corp. 1,035,125 1,035,125
- -----------------------------------------------------------------------------------------------------------------------------
150,000 150,000 SAFECO Corp. 6,440,625 6,440,625
- -----------------------------------------------------------------------------------------------------------------------------
20,382,785
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE BROKERS-0.77%
12,075 120,000 132,075 Marsh & McLennan Co. 705,633 7,012,500 7,718,133
- -----------------------------------------------------------------------------------------------------------------------------
12,300 12,300 Poe & Brown, Inc. 429,731 429,731
- -----------------------------------------------------------------------------------------------------------------------------
8,147,864
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.02%
10,800 10,800 Advest Group, Inc. 199,800 199,800
- -----------------------------------------------------------------------------------------------------------------------------
IRON & STEEL-1.24%
40,700 40,700 AK Steel Holding Corp. 956,450 956,450
- -----------------------------------------------------------------------------------------------------------------------------
17,000 250,000 267,000 Nucor Corp. 735,250 10,812,500 11,547,750
- -----------------------------------------------------------------------------------------------------------------------------
23,000 23,000 Texas Industries, Inc. 619,562 619,562
- -----------------------------------------------------------------------------------------------------------------------------
13,123,762
- -----------------------------------------------------------------------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.34%
11,600 11,600 Bally Total Fitness Holding Corp.(a) 288,550 288,550
- -----------------------------------------------------------------------------------------------------------------------------
13,100 13,100 International Speedway Corp.-Class A 530,550 530,550
- -----------------------------------------------------------------------------------------------------------------------------
30,900 30,900 Mattel, Inc. 704,906 704,906
- -----------------------------------------------------------------------------------------------------------------------------
170,000 170,000 Nintendo Co. Ltd.-ADR (Japan) 2,053,481 2,053,481
- -----------------------------------------------------------------------------------------------------------------------------
3,577,487
- -----------------------------------------------------------------------------------------------------------------------------
LODGING-HOTELS-0.23%
16,110 16,110 Crestline Capital Corp.(a) 235,609 235,609
- -----------------------------------------------------------------------------------------------------------------------------
161,100 161,100 Host Marriott Corp. 2,225,194 2,225,194
- -----------------------------------------------------------------------------------------------------------------------------
2,460,803
- -----------------------------------------------------------------------------------------------------------------------------
13
199
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
MACHINERY (DIVERSIFIED)-2.26%
15,400 15,400 Applied Power, Inc.-Class A $ 581,350 $ $ 581,350
- -----------------------------------------------------------------------------------------------------------------------------
100,000 100,000 Caterpillar, Inc. 4,600,000 4,600,000
- -----------------------------------------------------------------------------------------------------------------------------
100,000 100,000 Deere & Co. 3,312,500 3,312,500
- -----------------------------------------------------------------------------------------------------------------------------
19,700 100,000 119,700 Dover Corp. 721,512 3,662,500 4,384,012
- -----------------------------------------------------------------------------------------------------------------------------
250,000 250,000 Hanson PLC-ADR (United Kingdom) 9,750,000 9,750,000
- -----------------------------------------------------------------------------------------------------------------------------
14,850 14,850 Manitiwoc Co., Inc. (The) 658,969 658,969
- -----------------------------------------------------------------------------------------------------------------------------
3,000 3,000 NACCO Industries, Inc.-Class A 276,000 276,000
- -----------------------------------------------------------------------------------------------------------------------------
11,100 11,100 Terex Corp.(a) 317,044 317,044
- -----------------------------------------------------------------------------------------------------------------------------
23,879,875
- -----------------------------------------------------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.52%
8,800 8,800 Carlisle Companies, Inc. 454,300 454,300
- -----------------------------------------------------------------------------------------------------------------------------
17,200 17,200 GenCorp, Inc. 428,925 428,925
- -----------------------------------------------------------------------------------------------------------------------------
18,000 18,000 Hitachi Ltd.-ADR (Japan) 1,087,875 1,087,875
- -----------------------------------------------------------------------------------------------------------------------------
13,300 13,300 IDEX Corp. 325,850 325,850
- -----------------------------------------------------------------------------------------------------------------------------
9,000 75,000 84,000 Illinois Tool Works Inc. 522,000 4,350,000 4,872,000
- -----------------------------------------------------------------------------------------------------------------------------
75,000 75,000 Minnesota Mining and Manufacturing Co. 5,334,375 5,334,375
- -----------------------------------------------------------------------------------------------------------------------------
30,000 125,000 155,000 Norsk Hydro A.S.A.-ADR (Norway) 1,025,625 4,273,437 5,299,062
- -----------------------------------------------------------------------------------------------------------------------------
32,000 32,000 RWE A.G.-ADR (Germany) 1,753,206 1,753,206
- -----------------------------------------------------------------------------------------------------------------------------
10,700 75,000 85,700 Textron, Inc. 812,531 5,695,312 6,507,843
- -----------------------------------------------------------------------------------------------------------------------------
24,550 24,550 Tredegar Industries, Inc. 552,375 552,375
- -----------------------------------------------------------------------------------------------------------------------------
26,615,811
- -----------------------------------------------------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.14%
29,200 29,200 AptarGroup, Inc. 819,425 819,425
- -----------------------------------------------------------------------------------------------------------------------------
32,300 160,000 192,300 Federal Signal Corp. 884,213 4,380,000 5,264,213
- -----------------------------------------------------------------------------------------------------------------------------
22,500 22,500 Insituform Technologies, Inc.-Class A(a) 326,250 326,250
- -----------------------------------------------------------------------------------------------------------------------------
12,100 12,100 Superior TeleCom Inc. 571,725 571,725
- -----------------------------------------------------------------------------------------------------------------------------
24,600 100,000 124,600 York International Corp. 1,003,988 4,081,250 5,085,238
- -----------------------------------------------------------------------------------------------------------------------------
12,066,851
- -----------------------------------------------------------------------------------------------------------------------------
METAL FABRICATORS-0.02%
19,100 19,100 Metals USA(a) 186,225 186,225
- -----------------------------------------------------------------------------------------------------------------------------
METALS MINING-0.65%
105,000 105,000 Phelps Dodge Corp. 5,341,875 5,341,875
- -----------------------------------------------------------------------------------------------------------------------------
31,000 31,000 Rio Tinto Ltd.-ADR (Australia) 1,472,078 1,472,078
- -----------------------------------------------------------------------------------------------------------------------------
6,813,953
- -----------------------------------------------------------------------------------------------------------------------------
NATURAL GAS-0.10%
33,000 33,000 Energen Corp. 643,500 643,500
- -----------------------------------------------------------------------------------------------------------------------------
10,200 10,200 ONEOK, Inc. 368,475 368,475
- -----------------------------------------------------------------------------------------------------------------------------
1,011,975
- -----------------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.21%
16,100 16,100 Knoll, Inc.(a) 476,963 476,963
- -----------------------------------------------------------------------------------------------------------------------------
22,700 22,700 Mail-Well, Inc.(a) 259,631 259,631
- -----------------------------------------------------------------------------------------------------------------------------
14,000 14,000 Pitney Bowes, Inc. 924,875 924,875
- -----------------------------------------------------------------------------------------------------------------------------
20,000 20,000 United Stationers, Inc.(a) 520,000 520,000
- -----------------------------------------------------------------------------------------------------------------------------
2,181,469
- -----------------------------------------------------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.09%
21,400 21,400 Marine Drilling Companies, Inc.(a) 164,512 164,512
- -----------------------------------------------------------------------------------------------------------------------------
14
200
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
36,300 36,300 Pride International, Inc.(a) $ 256,369 $ $ 256,369
- -----------------------------------------------------------------------------------------------------------------------------
5,600 5,600 SEACOR Holdings Inc.(a) 276,850 276,850
- -----------------------------------------------------------------------------------------------------------------------------
18,500 18,500 Veritas DGC, Inc.(a) 240,500 240,500
- -----------------------------------------------------------------------------------------------------------------------------
938,231
- -----------------------------------------------------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.12%
22,800 22,800 Barrett Resources Corp.(a) 547,200 547,200
- -----------------------------------------------------------------------------------------------------------------------------
15,300 15,300 Basin Exploration, Inc.(a) 192,206 192,206
- -----------------------------------------------------------------------------------------------------------------------------
11,500 11,500 Evergreen Resources, Inc.(a) 204,125 204,125
- -----------------------------------------------------------------------------------------------------------------------------
38,600 38,600 HS Resources, Inc.(a) 291,913 291,913
- -----------------------------------------------------------------------------------------------------------------------------
1,235,444
- -----------------------------------------------------------------------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.06%
9,000 9,000 Atlantic Richfield Co. 587,250 587,250
- -----------------------------------------------------------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-3.44%
14,000 14,000 Amoco Corp. 845,250 845,250
- -----------------------------------------------------------------------------------------------------------------------------
17,400 100,000 117,400 Exxon Corp. 1,272,375 7,312,500 8,584,875
- -----------------------------------------------------------------------------------------------------------------------------
48,000 150,000 198,000 Repsol S.A.-ADR (Spain) 2,622,000 8,193,750 10,815,750
- -----------------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
16,100 125,000 141,100 Shares (Netherlands) 770,787 5,984,375 6,755,162
- -----------------------------------------------------------------------------------------------------------------------------
Shell Transport & Trading Co.-ADR
45,000 45,000 (United Kingdom) 1,673,438 1,673,438
- -----------------------------------------------------------------------------------------------------------------------------
20,000 20,000 Total S.A.-ADR (France) 995,000 995,000
- -----------------------------------------------------------------------------------------------------------------------------
40,000 200,000 240,000 YPF Sociedad Anonima-ADR (Argentina) 1,117,500 5,587,500 6,705,000
- -----------------------------------------------------------------------------------------------------------------------------
36,374,475
- -----------------------------------------------------------------------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.04%
34,700 34,700 Tesoro Petroleum Corp.(a) 420,737 420,737
- -----------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.38%
150,000 150,000 Westvaco Corp. 4,021,875 4,021,875
- -----------------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.65%
60,000 60,000 Fuji Photo Film-ADR (Japan) 2,197,500 2,197,500
- -----------------------------------------------------------------------------------------------------------------------------
400,000 400,000 IKON Office Solutions, Inc. 3,425,000 3,425,000
- -----------------------------------------------------------------------------------------------------------------------------
10,500 10,500 Xerox Corp. 1,239,000 1,239,000
- -----------------------------------------------------------------------------------------------------------------------------
6,861,500
- -----------------------------------------------------------------------------------------------------------------------------
PUBLISHING-0.06%
40,000 40,000 R.H. Donnelley Corp. 582,500 582,500
- -----------------------------------------------------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.80%
11,600 80,000 91,600 Gannett Co., Inc. 767,775 5,295,000 6,062,775
- -----------------------------------------------------------------------------------------------------------------------------
31,800 31,800 Hollinger International, Inc. 443,213 443,213
- -----------------------------------------------------------------------------------------------------------------------------
17,300 17,300 McClatchy Newspapers, Inc. 611,988 611,988
- -----------------------------------------------------------------------------------------------------------------------------
50,000 50,000 News Corp. Ltd.-ADR (The) (Australia) 1,321,875 1,321,875
- -----------------------------------------------------------------------------------------------------------------------------
8,439,851
- -----------------------------------------------------------------------------------------------------------------------------
RAILROADS-0.59%
125,000 125,000 CSX Corp. 5,187,500 5,187,500
- -----------------------------------------------------------------------------------------------------------------------------
19,000 19,000 GATX Corp. 719,625 719,625
- -----------------------------------------------------------------------------------------------------------------------------
26,400 26,400 Johnstown America Industries, Inc.(a) 346,500 346,500
- -----------------------------------------------------------------------------------------------------------------------------
6,253,625
- -----------------------------------------------------------------------------------------------------------------------------
15
201
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
REAL ESTATE INVESTMENT TRUSTS-8.02%
24,400 24,400 Apartment Investment & Management Co. $ 907,375 $ $ 907,375
- -----------------------------------------------------------------------------------------------------------------------------
114,000 114,000 Arden Realty Group, Inc. 2,643,375 2,643,375
- -----------------------------------------------------------------------------------------------------------------------------
51,300 51,300 Avalonbay Communities, Inc. 1,757,025 1,757,025
- -----------------------------------------------------------------------------------------------------------------------------
60,000 60,000 Beacon Capital(a) 952,500 952,500
- -----------------------------------------------------------------------------------------------------------------------------
97,500 97,500 Bedford Property Investors, Inc. 1,645,313 1,645,313
- -----------------------------------------------------------------------------------------------------------------------------
54,589 54,589 Camden Property Trust 1,419,314 1,419,314
- -----------------------------------------------------------------------------------------------------------------------------
138,000 138,000 CarrAmerica Realty Corp. 3,312,000 3,312,000
- -----------------------------------------------------------------------------------------------------------------------------
75,000 75,000 CBL & Associates Properties, Inc. 1,935,938 1,935,938
- -----------------------------------------------------------------------------------------------------------------------------
Charles E. Smith Residential Realty,
58,400 58,400 Inc. 1,876,100 1,876,100
- -----------------------------------------------------------------------------------------------------------------------------
59,000 59,000 Crescent Real Estate Equities, Co. 1,357,000 1,357,000
- -----------------------------------------------------------------------------------------------------------------------------
40,000 40,000 CRIIMI MAE, Inc. 140,000 140,000
- -----------------------------------------------------------------------------------------------------------------------------
39,400 39,400 Eastgroup Properties, Inc. 726,438 726,438
- -----------------------------------------------------------------------------------------------------------------------------
124,879 124,879 Equity Office Properties Trust 2,997,096 2,997,096
- -----------------------------------------------------------------------------------------------------------------------------
79,900 79,900 Equity Residential Properties Trust 3,230,956 3,230,956
- -----------------------------------------------------------------------------------------------------------------------------
76,700 76,700 Essex Property Trust, Inc. 2,281,825 2,281,825
- -----------------------------------------------------------------------------------------------------------------------------
80,500 80,500 First Industrial Realty Trust, Inc. 2,158,406 2,158,406
- -----------------------------------------------------------------------------------------------------------------------------
60,100 60,100 Gables Residential Trust 1,393,569 1,393,569
- -----------------------------------------------------------------------------------------------------------------------------
28,500 28,500 General Growth Properties 1,079,438 1,079,438
- -----------------------------------------------------------------------------------------------------------------------------
62,800 62,800 Glenborough Realty Trust, Inc. 1,279,550 1,279,550
- -----------------------------------------------------------------------------------------------------------------------------
113,800 113,800 Highwoods Properties, Inc. 2,930,350 2,930,350
- -----------------------------------------------------------------------------------------------------------------------------
60,700 60,700 Hospitality Properties Trust 1,464,388 1,464,388
- -----------------------------------------------------------------------------------------------------------------------------
72,000 72,000 JDN Realty Corp. 1,552,500 1,552,500
- -----------------------------------------------------------------------------------------------------------------------------
60,700 60,700 Kilroy Realty Corp. 1,396,100 1,396,100
- -----------------------------------------------------------------------------------------------------------------------------
40,600 40,600 Kimco Realty Corp. 1,611,313 1,611,313
- -----------------------------------------------------------------------------------------------------------------------------
87,900 87,900 Koger Equity, Inc. 1,510,781 1,510,781
- -----------------------------------------------------------------------------------------------------------------------------
117,700 117,700 Liberty Property Trust 2,898,363 2,898,363
- -----------------------------------------------------------------------------------------------------------------------------
64,200 64,200 Mack-Cali Realty Corp. 1,982,175 1,982,175
- -----------------------------------------------------------------------------------------------------------------------------
172,900 172,900 Meditrust Corp. 2,615,112 2,615,112
- -----------------------------------------------------------------------------------------------------------------------------
110,259 110,259 MeriStar Hospitality Corp. 2,046,683 2,046,683
- -----------------------------------------------------------------------------------------------------------------------------
46,000 46,000 MGI Properties, Inc. 1,285,125 1,285,125
- -----------------------------------------------------------------------------------------------------------------------------
95,060 95,060 New Plan Excel Realty Trust 2,109,144 2,109,144
- -----------------------------------------------------------------------------------------------------------------------------
35,300 35,300 Pan Pacific Retail Properties, Inc. 703,794 703,794
- -----------------------------------------------------------------------------------------------------------------------------
24,900 24,900 Parkway Properties, Inc. 778,125 778,125
- -----------------------------------------------------------------------------------------------------------------------------
407,128 407,128 Patriot American Hospitality, Inc. 2,442,768 2,442,768
- -----------------------------------------------------------------------------------------------------------------------------
52,400 52,400 Philips International Realty Corp. 805,650 805,650
- -----------------------------------------------------------------------------------------------------------------------------
22,600 22,600 Post Properties, Inc. 868,687 868,687
- -----------------------------------------------------------------------------------------------------------------------------
147,700 147,700 Prentiss Properties Trust 3,295,556 3,295,556
- -----------------------------------------------------------------------------------------------------------------------------
65,500 65,500 Prime Group Realty Trust 990,687 990,687
- -----------------------------------------------------------------------------------------------------------------------------
97,600 97,600 Public Storage, Inc. 2,641,300 2,641,300
- -----------------------------------------------------------------------------------------------------------------------------
36,000 36,000 Realty Income Corp. 895,500 895,500
- -----------------------------------------------------------------------------------------------------------------------------
70,000 70,000 Regency Realty Corp. 1,557,500 1,557,500
- -----------------------------------------------------------------------------------------------------------------------------
Security Capital U.S. Realty
98,700 98,700 (Luxembourg)(a) 977,130 977,130
- -----------------------------------------------------------------------------------------------------------------------------
87,700 87,700 Shurgard Storage Centers, Inc. 2,263,756 2,263,756
- -----------------------------------------------------------------------------------------------------------------------------
63,600 63,600 Simon Property Group, Inc. 1,812,600 1,812,600
- -----------------------------------------------------------------------------------------------------------------------------
65,600 65,600 SL Green Realty Corp. 1,418,600 1,418,600
- -----------------------------------------------------------------------------------------------------------------------------
16
202
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
REAL ESTATE INVESTMENT TRUSTS-(CONTINUED)
67,150 67,150 Starwood Hotels & Resorts $ 1,523,466 $ $ 1,523,466
- -----------------------------------------------------------------------------------------------------------------------------
135,900 135,900 Sunstone Hotel Investors, Inc. 1,282,556 1,282,556
- -----------------------------------------------------------------------------------------------------------------------------
49,900 49,900 TriNet Corporate Realty Trust, Inc. 1,334,825 1,334,825
- -----------------------------------------------------------------------------------------------------------------------------
56,600 56,600 Vornado Realty Trust 1,910,250 1,910,250
- -----------------------------------------------------------------------------------------------------------------------------
25,600 25,600 Weeks Corp. 721,600 721,600
- -----------------------------------------------------------------------------------------------------------------------------
84,719,602
- -----------------------------------------------------------------------------------------------------------------------------
RESTAURANTS-0.99%
27,400 27,400 Brinker International, Inc.(a) 791,175 791,175
- -----------------------------------------------------------------------------------------------------------------------------
27,900 27,900 Buffets, Inc.(a) 333,056 333,056
- -----------------------------------------------------------------------------------------------------------------------------
14,400 14,400 Cheesecake Factory (The)(a) 427,050 427,050
- -----------------------------------------------------------------------------------------------------------------------------
20,156 20,156 Consolidated Products, Inc.(a) 415,723 415,723
- -----------------------------------------------------------------------------------------------------------------------------
11,300 100,000 111,300 McDonald's Corp. 865,862 7,662,500 8,528,362
- -----------------------------------------------------------------------------------------------------------------------------
10,495,366
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.29%
17,000 100,000 117,000 Lowe's Companies, Inc. 870,187 5,118,750 5,988,937
- -----------------------------------------------------------------------------------------------------------------------------
35,800 225,000 260,800 Sherwin-Williams Co. 1,051,625 6,609,375 7,661,000
- -----------------------------------------------------------------------------------------------------------------------------
13,649,937
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.91%
150,000 150,000 Dillards, Inc. 4,256,250 4,256,250
- -----------------------------------------------------------------------------------------------------------------------------
14,375 100,000 114,375 J.C. Penney Co., Inc. 673,828 4,687,500 5,361,328
- -----------------------------------------------------------------------------------------------------------------------------
9,617,578
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.05%
15,400 15,400 ShopKo Stores, Inc.(a) 512,050 512,050
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (DRUG STORES)-0.60%
27,900 100,000 127,900 Rite Aid Corp. 1,382,794 4,956,250 6,339,044
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.44%
250,000 250,000 Kmart Corp.(a) 3,828,125 3,828,125
- -----------------------------------------------------------------------------------------------------------------------------
10,500 10,500 Wal-Mart Stores, Inc. 855,094 855,094
- -----------------------------------------------------------------------------------------------------------------------------
4,683,219
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.03%
11,800 11,800 Lands' End, Inc.(a) 317,862 317,862
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (SPECIALTY)-0.33%
15,400 15,400 Footstar, Inc.(a) 385,000 385,000
- -----------------------------------------------------------------------------------------------------------------------------
21,500 21,500 Inacom Corp.(a) 319,813 319,813
- -----------------------------------------------------------------------------------------------------------------------------
125,000 125,000 Toys "R" Us, Inc.(a) 2,109,375 2,109,375
- -----------------------------------------------------------------------------------------------------------------------------
20,300 20,300 Zale Corp.(a) 654,675 654,675
- -----------------------------------------------------------------------------------------------------------------------------
3,468,863
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.14%
5,400 5,400 American Eagle Outfitters, Inc.(a) 359,775 359,775
- -----------------------------------------------------------------------------------------------------------------------------
25,700 25,700 Cato Corp. (The)-Class A 252,984 252,984
- -----------------------------------------------------------------------------------------------------------------------------
30,000 30,000 Limited, Inc. (The) 873,750 873,750
- -----------------------------------------------------------------------------------------------------------------------------
1,486,509
- -----------------------------------------------------------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.28%
10,100 10,100 Anchor Bancorp Wisconsin, Inc. 242,400 242,400
- -----------------------------------------------------------------------------------------------------------------------------
7,700 7,700 Astoria Financial Corp. 352,275 352,275
- -----------------------------------------------------------------------------------------------------------------------------
20,705 20,705 Downey Financial Corp. 526,683 526,683
- -----------------------------------------------------------------------------------------------------------------------------
17
203
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
SAVINGS & LOAN COMPANIES-(CONTINUED)
33,400 33,400 FirstFed Financial Corp.(a) $ 597,025 $ $ 597,025
- -----------------------------------------------------------------------------------------------------------------------------
15,900 15,900 TR Financial Corp. 626,063 626,063
- -----------------------------------------------------------------------------------------------------------------------------
13,600 13,600 Webster Financial Corp. 373,150 373,150
- -----------------------------------------------------------------------------------------------------------------------------
12,700 12,700 WSFS Financial Corp. 214,312 214,312
- -----------------------------------------------------------------------------------------------------------------------------
2,931,908
- -----------------------------------------------------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.16%
25,400 25,400 Acxiom Corp.(a) 787,400 787,400
- -----------------------------------------------------------------------------------------------------------------------------
8,643 8,643 Metris Companies Inc. 434,851 434,851
- -----------------------------------------------------------------------------------------------------------------------------
16,100 16,100 True North Communications, Inc. 432,687 432,687
- -----------------------------------------------------------------------------------------------------------------------------
1,654,938
- -----------------------------------------------------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.84%
29,900 29,900 Comfort Systems USA, Inc.(a) 534,463 534,463
- -----------------------------------------------------------------------------------------------------------------------------
9,800 9,800 Copart, Inc.(a) 317,275 317,275
- -----------------------------------------------------------------------------------------------------------------------------
43,000 43,000 DeVry, Inc.(a) 1,316,875 1,316,875
- -----------------------------------------------------------------------------------------------------------------------------
200,000 200,000 Dun & Bradstreet Corp. 6,312,500 6,312,500
- -----------------------------------------------------------------------------------------------------------------------------
11,200 11,200 Sylvan Learning Systems, Inc.(a) 341,600 341,600
- -----------------------------------------------------------------------------------------------------------------------------
8,822,713
- -----------------------------------------------------------------------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.08%
21,800 21,800 Banctec, Inc.(a) 273,863 273,863
- -----------------------------------------------------------------------------------------------------------------------------
22,900 22,900 Gerber Scientific, Inc. 545,306 545,306
- -----------------------------------------------------------------------------------------------------------------------------
819,169
- -----------------------------------------------------------------------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.17%
7,900 7,900 Computer Horizons Corp.(a) 210,338 210,338
- -----------------------------------------------------------------------------------------------------------------------------
14,100 14,100 Lason Holdings, Inc.(a) 820,444 820,444
- -----------------------------------------------------------------------------------------------------------------------------
18,200 18,200 MedQuist, Inc.(a) 718,900 718,900
- -----------------------------------------------------------------------------------------------------------------------------
1,749,682
- -----------------------------------------------------------------------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.21%
8,700 8,700 AHL Services, Inc.(a) 271,875 271,875
- -----------------------------------------------------------------------------------------------------------------------------
18,000 18,000 Labor Ready, Inc.(a) 354,375 354,375
- -----------------------------------------------------------------------------------------------------------------------------
20,800 20,800 Norrell Corp. 306,800 306,800
- -----------------------------------------------------------------------------------------------------------------------------
2,300 2,300 ProBusiness Services, Inc.(a) 104,650 104,650
- -----------------------------------------------------------------------------------------------------------------------------
27,000 27,000 Romac International, Inc.(a) 600,750 600,750
- -----------------------------------------------------------------------------------------------------------------------------
11,100 11,100 StaffMark, Inc.(a) 248,362 248,362
- -----------------------------------------------------------------------------------------------------------------------------
26,600 26,600 Syntel, Inc.(a) 300,913 300,913
- -----------------------------------------------------------------------------------------------------------------------------
2,187,725
- -----------------------------------------------------------------------------------------------------------------------------
SPECIALTY PRINTING-0.86%
3,300 3,300 Consolidated Graphics, Inc.(a) 222,956 222,956
- -----------------------------------------------------------------------------------------------------------------------------
Dai Nippon Printing Co., Ltd.-ADR
9,000 9,000 (Japan) 1,437,809 1,437,809
- -----------------------------------------------------------------------------------------------------------------------------
28,900 175,000 203,900 Deluxe Corp. 1,056,656 6,398,437 7,455,093
- -----------------------------------------------------------------------------------------------------------------------------
9,115,858
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.12%
18,900 18,900 Centennial Cellular Corp.(a) 774,900 774,900
- -----------------------------------------------------------------------------------------------------------------------------
13,200 13,200 Metromedia Fiber Network, Inc.(a) 442,200 442,200
- -----------------------------------------------------------------------------------------------------------------------------
1,217,100
- -----------------------------------------------------------------------------------------------------------------------------
18
204
Shares Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
TELECOMMUNICATIONS (LONG DISTANCE)-0.06%
22,500 22,500 ITC DeltaCom, Inc.(a) $ 343,125 $ $ 343,125
- -----------------------------------------------------------------------------------------------------------------------------
6,700 6,700 Pacific Gateway Exchange, Inc.(a) 322,019 322,019
- -----------------------------------------------------------------------------------------------------------------------------
665,144
- -----------------------------------------------------------------------------------------------------------------------------
TELEPHONE-3.45%
65,000 65,000 Ameritech Corp. 4,119,375 4,119,375
- -----------------------------------------------------------------------------------------------------------------------------
10,000 140,000 150,000 Bell Atlantic Corp. 568,125 7,953,750 8,521,875
- -----------------------------------------------------------------------------------------------------------------------------
British Telecommunications PLC (United
15,000 15,000 Kingdom) 2,275,313 2,275,313
- -----------------------------------------------------------------------------------------------------------------------------
British Telecommunications PLC-ADR
60,000 60,000 (United Kingdom) 9,101,250 9,101,250
- -----------------------------------------------------------------------------------------------------------------------------
16,000 16,000 Century Telephone Enterprises, Inc. 1,080,000 1,080,000
- -----------------------------------------------------------------------------------------------------------------------------
10,400 10,400 GeoTel Communications Corp.(a) 387,400 387,400
- -----------------------------------------------------------------------------------------------------------------------------
43,300 43,300 Portugal Telecom S.A.-ADR (Portugal) 1,932,262 1,932,262
- -----------------------------------------------------------------------------------------------------------------------------
30,000 30,000 Telecom Italia S.p.A.-ADR (Italy) 2,610,000 2,610,000
- -----------------------------------------------------------------------------------------------------------------------------
6,120 6,120 Telefonica S.A.-ADR (Spain) 828,495 828,495
- -----------------------------------------------------------------------------------------------------------------------------
15,000 100,000 115,000 Telefonos de Mexico S.A.-ADR (Mexico) 730,312 4,868,750 5,599,062
- -----------------------------------------------------------------------------------------------------------------------------
36,455,032
- -----------------------------------------------------------------------------------------------------------------------------
TEXTILES (APPAREL)-1.25%
23,800 23,800 Kellwood Co. 595,000 595,000
- -----------------------------------------------------------------------------------------------------------------------------
175,000 175,000 Liz Claiborne, Inc. 5,523,437 5,523,437
- -----------------------------------------------------------------------------------------------------------------------------
150,000 150,000 VF Corp. 7,031,250 7,031,250
- -----------------------------------------------------------------------------------------------------------------------------
13,149,687
- -----------------------------------------------------------------------------------------------------------------------------
TEXTILES (HOME FURNISHINGS)-0.09%
30,800 30,800 Interface, Inc. 285,862 285,862
- -----------------------------------------------------------------------------------------------------------------------------
15,600 15,600 Springs Industries, Inc.-Class A 646,425 646,425
- -----------------------------------------------------------------------------------------------------------------------------
932,287
- -----------------------------------------------------------------------------------------------------------------------------
TEXTILES (SPECIALTY)-0.39%
52,700 52,700 Burlington Industries, Inc.(a) 579,700 579,700
- -----------------------------------------------------------------------------------------------------------------------------
19,200 19,200 Galey & Lord, Inc.(a) 165,600 165,600
- -----------------------------------------------------------------------------------------------------------------------------
175,000 175,000 Unifi, Inc.(a) 3,423,437 3,423,437
- -----------------------------------------------------------------------------------------------------------------------------
4,168,737
- -----------------------------------------------------------------------------------------------------------------------------
TOBACCO-1.30%
110,000 110,000 Gallaher Group PLC-ADR (United Kingdom) 2,990,625 2,990,625
- -----------------------------------------------------------------------------------------------------------------------------
21,450 180,000 201,450 Philip Morris Companies, Inc. 1,147,575 9,630,000 10,777,575
- -----------------------------------------------------------------------------------------------------------------------------
13,768,200
- -----------------------------------------------------------------------------------------------------------------------------
TRUCKERS-0.07%
22,700 22,700 Roadway Express, Inc. 327,731 327,731
- -----------------------------------------------------------------------------------------------------------------------------
22,875 22,875 Werner Enterprises, Inc. 404,602 404,602
- -----------------------------------------------------------------------------------------------------------------------------
732,333
- -----------------------------------------------------------------------------------------------------------------------------
WASTE MANAGEMENT-0.88%
150,000 150,000 Browning-Ferris Industries, Inc. 4,265,625 4,265,625
- -----------------------------------------------------------------------------------------------------------------------------
108,750 108,750 Waste Management, Inc. 5,070,468 5,070,468
- -----------------------------------------------------------------------------------------------------------------------------
9,336,093
- -----------------------------------------------------------------------------------------------------------------------------
WATER UTILITIES-0.02%
5,100 5,100 E'Town Corp. 241,613 241,613
- -----------------------------------------------------------------------------------------------------------------------------
Total Common Stocks 321,189,107 567,066,547 888,255,654
- -----------------------------------------------------------------------------------------------------------------------------
19
205
Principal Amount Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
CORPORATE BONDS & NOTES-4.70%
AUTOMOBILES-0.40%
Ford Motor Co., Notes,
$ $ 750,000 $ 750,000 7.50%, 11/15/99 $ $ 763,778 $ 763,778
- -----------------------------------------------------------------------------------------------------------------------------
3,250,000 3,250,000 6.50%, 08/01/18 3,341,747 3,341,747
- -----------------------------------------------------------------------------------------------------------------------------
4,105,525
- -----------------------------------------------------------------------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.64%
National City Corp., Sub Notes, 7.20%,
1,000,000 1,000,000 05/05/05 1,070,191 1,070,191
- -----------------------------------------------------------------------------------------------------------------------------
Nationsbank Corp., Sr. Notes, 5.375%,
1,550,000 1,550,000 04/15/00 1,549,442 1,549,442
- -----------------------------------------------------------------------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes,
4,000,000 4,000,000 6.25%, 08/04/08 4,164,400 4,164,400
- -----------------------------------------------------------------------------------------------------------------------------
6,784,033
- -----------------------------------------------------------------------------------------------------------------------------
BANKS (MONEY CENTER)-0.30%
First Union Corp., Unsec. Sub. Notes,
3,000,000 3,000,000 6.40%, 04/01/08 3,145,320 3,145,320
- -----------------------------------------------------------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.35%
Anheuser Bush Co., Unsec. Notes, 5.375%,
3,700,000 3,700,000 09/15/08 3,710,323 3,710,323
- -----------------------------------------------------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.05%
CSC Holdings, Inc., Sr. Notes, 7.25%,
500,000 500,000 07/15/08 515,900 515,900
- -----------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS-0.06%
550,000 550,000 USG Corp., Sr. Notes, 8.50%, 08/01/05 600,363 600,363
- -----------------------------------------------------------------------------------------------------------------------------
CHEMICALS-0.09%
Eastman Chemical, Notes, 6.375%,
1,000,000 1,000,000 01/15/04 997,400 997,400
- -----------------------------------------------------------------------------------------------------------------------------
CONTAINERS (METAL & GLASS)-0.05%
Owens-Illinois, Inc., Deb., 7.80%,
500,000 500,000 05/15/18 506,675 506,675
- -----------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.30%
3,000,000 3,000,000 Motorola Inc., Notes, 6.50%, 03/01/08 3,174,600 3,174,600
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE-0.58%
Beneficial Corp., Medium Term Notes,
3,000,000 3,000,000 6.625%, 09/27/04 3,092,760 3,092,760
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Credit Co., Unsec. Notes,
3,000,000 3,000,000 5.55%, 02/15/01 3,007,020 3,007,020
- -----------------------------------------------------------------------------------------------------------------------------
6,099,780
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRIC COMPANIES-0.30%
Penn Power & Lighting, First Mortgage
Notes,
1,000,000 1,000,000 6.875%, 02/01/03 1,063,350 1,063,350
- -----------------------------------------------------------------------------------------------------------------------------
1,900,000 1,900,000 6.55%, 03/01/06 2,002,619 2,002,619
- -----------------------------------------------------------------------------------------------------------------------------
Union Electric, First Mortgage Notes,
150,000 150,000 6.75%, 10/15/99 151,999 151,999
- -----------------------------------------------------------------------------------------------------------------------------
3,217,968
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT-.15%
1,500,000 1,500,000 Boeing Co., Notes, 6.625%, 06/01/05 1,572,660 1,572,660
- -----------------------------------------------------------------------------------------------------------------------------
FOODS-0.24%
Campbell Soup Co., Unsec. Notes, 4.75%,
2,600,000 2,600,000 10/01/03 2,555,332 2,555,332
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.28%
CNA Financial Corp., Unsec. Notes,
3,000,000 3,000,000 6.50%, 04/15/05 2,990,760 2,990,760
- -----------------------------------------------------------------------------------------------------------------------------
20
206
Principal Amount Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
MANUFACTURING (DIVERSIFIED)-0.05%
Tyco International Group S.A., Yankee
$ 550,000 $ $ 550,000 Bonds, 7.00%, 06/15/28 $ 554,119 $ $ 554,119
- -----------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-0.06%
Highwoods Properties, Sr. Unsec. Notes,
700,000 700,000 7.50%, 04/15/18 619,360 619,360
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.29%
Sherwin-Williams Co., Notes, 6.50%,
3,000,000 3,000,000 02/01/02 3,099,360 3,099,360
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.33%
Dillard Dept. Stores, Inc., Unsec.
3,000,000 3,000,000 Notes, 6.30%, 02/15/08 3,015,120 3,015,120
- -----------------------------------------------------------------------------------------------------------------------------
Neiman Marcus Group, Inc., Sr. Deb.,
500,000 500,000 7.125%, 06/01/28 486,050 486,050
- -----------------------------------------------------------------------------------------------------------------------------
3,501,170
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.10%
Bellsouth Telecommunications, Deb.,
1,000,000 1,000,000 5.85%, 11/15/45 1,012,690 1,012,690
- -----------------------------------------------------------------------------------------------------------------------------
TELEPHONE-0.08%
790,000 790,000 GTE Corp., Deb., 10.25%, 11/01/20 885,149 885,149
- -----------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds & Notes 5,180,306 44,468,181 49,648,487
- -----------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-2.18%
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC")-0.46%
Pass Through Certificates
2,141,748 2,141,748 6.50%, 07/01/01 2,164,493 2,164,493
- -----------------------------------------------------------------------------------------------------------------------------
218,613 218,613 6.50%, 08/01/03 226,741 226,741
- -----------------------------------------------------------------------------------------------------------------------------
696,417 696,417 9.00%, 01/01/05 to 08/15/06 725,967 725,967
- -----------------------------------------------------------------------------------------------------------------------------
1,530,209 1,530,209 8.00%, 10/01/10 1,577,064 1,577,064
- -----------------------------------------------------------------------------------------------------------------------------
244,872 244,872 8.00%, 08/01/17 258,722 258,722
- -----------------------------------------------------------------------------------------------------------------------------
4,952,987
- -----------------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA")-1.15%
Pass Through Certificates
590,033 590,033 9.00%, 12/01/06 619,346 619,346
- -----------------------------------------------------------------------------------------------------------------------------
579,905 579,905 8.50%, 06/01/07 598,931 598,931
- -----------------------------------------------------------------------------------------------------------------------------
1,449,332 1,449,332 8.50%, 03/01/10 1,509,567 1,509,567
- -----------------------------------------------------------------------------------------------------------------------------
410,000 410,000 5.50%, 02/01/14 395,266 395,266
- -----------------------------------------------------------------------------------------------------------------------------
6,152,443 6,152,443 6.50%, 06/01/11 to 05/01/26 6,238,374 6,238,374
- -----------------------------------------------------------------------------------------------------------------------------
1,839,198 1,839,198 7.50%, 11/01/26 1,894,943 1,894,943
- -----------------------------------------------------------------------------------------------------------------------------
830,000 830,000 7.00%, 01/14/28 846,859 846,859
- -----------------------------------------------------------------------------------------------------------------------------
12,103,286
- -----------------------------------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
("GNMA")-0.57%
Pass Through Certificates
570,096 570,096 7.00%, 01/16/07 573,251 573,251
- -----------------------------------------------------------------------------------------------------------------------------
905,700 905,700 6.50%, 10/15/08 927,492 927,492
- -----------------------------------------------------------------------------------------------------------------------------
952,794 952,794 7.00%, 10/15/08 984,055 984,055
- -----------------------------------------------------------------------------------------------------------------------------
1,074,971 1,074,971 6.00%, 11/15/08 1,088,407 1,088,407
- -----------------------------------------------------------------------------------------------------------------------------
2,331,182 2,331,182 7.50%, 03/15/26 2,414,218 2,414,218
- -----------------------------------------------------------------------------------------------------------------------------
5,987,423
- -----------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Securities 4,245,083 18,798,613 23,043,696
- -----------------------------------------------------------------------------------------------------------------------------
21
207
Principal Amount Market Value
- ----------------------------------- --------------------------------------------
AIM AIM
Advisor AIM Advisor Pro Forma Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining MultiFlex Flex Combining
U.S. TREASURY SECURITIES-7.59%
U.S. TREASURY BOND-0.57%
$ 580,000 $ $ 580,000 7.50%, 11/15/16 $ 720,650 $ $ 720,650
- -----------------------------------------------------------------------------------------------------------------------------
4,000,000 4,000,000 7.625%, 02/15/25 5,261,561 5,261,561
- -----------------------------------------------------------------------------------------------------------------------------
5,982,211
- -----------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES-7.02%
4,000,000 4,000,000 8.75%, 08/15/00 4,255,521 4,255,521
- -----------------------------------------------------------------------------------------------------------------------------
5,000,000 5,000,000 7.875%, 08/15/01 5,397,601 5,397,601
- -----------------------------------------------------------------------------------------------------------------------------
3,000,000 3,000,000 7.50%, 11/15/01 3,224,490 3,224,490
- -----------------------------------------------------------------------------------------------------------------------------
3,000,000 3,000,000 7.50%, 05/15/02 3,261,660 3,261,660
- -----------------------------------------------------------------------------------------------------------------------------
4,000,000 4,000,000 6.25%, 02/15/03 4,232,800 4,232,800
- -----------------------------------------------------------------------------------------------------------------------------
6,000,000 6,000,000 7.25%, 05/15/04 6,724,980 6,724,980
- -----------------------------------------------------------------------------------------------------------------------------
2,000,000 2,000,000 7.25%, 08/15/04 2,249,240 2,249,240
- -----------------------------------------------------------------------------------------------------------------------------
7,000,000 7,000,000 6.50%, 08/15/05 7,694,050 7,694,050
- -----------------------------------------------------------------------------------------------------------------------------
4,000,000 4,000,000 9.375%, 02/15/06 5,101,240 5,101,240
- -----------------------------------------------------------------------------------------------------------------------------
2,500,000 2,500,000 6.25%, 02/15/07 2,741,950 2,741,950
- -----------------------------------------------------------------------------------------------------------------------------
6,000,000 6,000,000 6.125%, 08/15/07 6,553,800 6,553,800
- -----------------------------------------------------------------------------------------------------------------------------
8,000,000 8,000,000 5.50%, 02/15/08 8,474,320 8,474,320
- -----------------------------------------------------------------------------------------------------------------------------
6,000,000 6,000,000 9.25%, 02/15/16 8,609,940 8,609,940
- -----------------------------------------------------------------------------------------------------------------------------
4,500,000 4,500,000 7.25%, 08/15/22 5,603,715 5,603,715
- -----------------------------------------------------------------------------------------------------------------------------
74,125,307
- -----------------------------------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 6,687,090 73,420,428 80,107,518
- -----------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT(b)-0.97%
SBC Warburg Dillon Read, Inc., 4.75%,
01/04/99 (Cost $7,293,570-AIM Advisor
Flex)(c)
- -----------------------------------------------------------------------------------------------------------------------------
(Cost $2,913,509-AIM Advisor
2,913,509 7,293,570 10,207,079 MultiFlex)(c) 2,913,509 7,293,570 10,207,079
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.55% 340,215,095 711,047,339 1,051,262,434
- -----------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.45% (4,325,554) 9,086,204 4,760,650
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS-100% $335,889,541 $720,133,543 $1,056,023,084
=============================================================================================================================
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviations:
ADR - American Depositary Receipt
Deb. - Debentures
Gtd. - Guaranteed
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See accompanying notes to Pro Forma Combining Financial Statements.
22
208
AIM ADVISOR FLEX FUND
AIM ADVISOR MULTIFLEX FUND
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES
(UNAUDITED)
AIM Advisor AIM Advisor Pro Forma
MultiFlex Flex Combining
ASSETS:
Investments, at market value
(cost $505,315,889-AIM Advisor Flex) $340,215,095 $711,047,339 $1,051,262,434
- ------------------------------------------------------------------------------------------------------------
(cost $292,731,925-AIM Advisor MultiFlex)
- ------------------------------------------------------------------------------------------------------------
Receivables for:
Investments sold -- 5,865,395 5,865,395
- ------------------------------------------------------------------------------------------------------------
Capital stock sold 369,339 2,597,804 2,967,143
- ------------------------------------------------------------------------------------------------------------
Interest and dividends 1,589,287 3,321,795 4,911,082
- ------------------------------------------------------------------------------------------------------------
Paydowns 35,226 -- 35,226
- ------------------------------------------------------------------------------------------------------------
Investment for deferred compensation plan 6,914 7,757 14,671
- ------------------------------------------------------------------------------------------------------------
Other assets 4,610 15,418 20,028
- ------------------------------------------------------------------------------------------------------------
Total assets 342,220,471 722,855,508 1,065,075,979
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,732,192 -- 2,732,192
- ------------------------------------------------------------------------------------------------------------
Capital stock reacquired 2,506,522 616,563 3,123,085
- ------------------------------------------------------------------------------------------------------------
Deferred compensation plan 6,914 7,757 14,671
- ------------------------------------------------------------------------------------------------------------
Accrued advisory fees 283,254 453,322 736,576
- ------------------------------------------------------------------------------------------------------------
Accrued operating services fees 43,477 75,761 119,238
- ------------------------------------------------------------------------------------------------------------
Accrued distribution fees 734,061 1,529,511 2,263,572
- ------------------------------------------------------------------------------------------------------------
Accrued directors' fees and expenses 24,510 39,051 63,561
- ------------------------------------------------------------------------------------------------------------
Total liabilities 6,330,930 2,721,965 9,052,895
- ------------------------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $335,889,541 $720,133,543 1,056,023,084
- ------------------------------------------------------------------------------------------------------------
NET ASSETS:
Class A $ 16,485,231 $ 46,286,433 $ 62,771,664
- ------------------------------------------------------------------------------------------------------------
Class B $ 7,221,683 $ 3,591,573 $ 10,813,256
- ------------------------------------------------------------------------------------------------------------
Class C $312,182,627 $670,255,537 $ 982,438,164
- ------------------------------------------------------------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000 100,000,000 100,000,000
- ------------------------------------------------------------------------------------------------------------
Outstanding 1,225,276 2,307,756 3,129,290
- ------------------------------------------------------------------------------------------------------------
Class B:
Authorized 100,000,000 100,000,000 100,000,000
- ------------------------------------------------------------------------------------------------------------
Outstanding 535,931 179,008 539,145
- ------------------------------------------------------------------------------------------------------------
Class C:
Authorized 100,000,000 100,000,000 100,000,000
- ------------------------------------------------------------------------------------------------------------
Outstanding 23,188,570 33,407,634 48,966,864
- ------------------------------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share $ 13.45 $ 20.06 $ 20.06
- ------------------------------------------------------------------------------------------------------------
Offering price per share:
(Net asset value of $20.06 divided by 94.50%)-
AIM Advisor Flex -- $ 21.23 $ 21.23
- ------------------------------------------------------------------------------------------------------------
(Net asset value of $13.45 divided by 94.50%)-
AIM Advisor MultiFlex $ 14.23 -- --
- ------------------------------------------------------------------------------------------------------------
Class B:
Net asset value and offering price per share $ 13.48 $ 20.06 $ 20.06
- ------------------------------------------------------------------------------------------------------------
Class C:
Net asset value and offering price per share $ 13.46 $ 20.06 $ 20.06
- ------------------------------------------------------------------------------------------------------------
See Accompanying notes to Pro Forma Combining Financial Statements.
23
209
AIM ADVISOR FLEX FUND
AIM ADVISOR MULTIFLEX FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
AIM Advisor AIM Advisor Pro Forma
MultiFlex Flex Adjustments Combining
INVESTMENT INCOME:
Interest $ 3,810,775 $ 11,514,476 $ 15,325,251
- ---------------------------------------------------------------------------------------------------------------------
Dividends
(net of $247,098 foreign withholding tax-AIM Advisor
Flex)
- ---------------------------------------------------------------------------------------------------------------------
(net of $278,923 foreign withholding tax-AIM Advisor
MultiFlex) 9,401,993 10,195,106 19,597,099
- ---------------------------------------------------------------------------------------------------------------------
Total investment income 13,212,768 21,709,582 34,922,350
- ---------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 3,855,357 5,051,593 (963,839) 7,943,111
- ---------------------------------------------------------------------------------------------------------------------
Operating services fees 1,670,511 2,996,689 4,667,200
- ---------------------------------------------------------------------------------------------------------------------
Distribution fees-Class A 54,320 126,300 180,620
- ---------------------------------------------------------------------------------------------------------------------
Distribution fees-Class B 38,874 10,941 49,815
- ---------------------------------------------------------------------------------------------------------------------
Distribution fees-Class C 3,661,284 6,365,011 10,026,295
- ---------------------------------------------------------------------------------------------------------------------
Directors' fees and expenses 11,183 5,841 17,024
- ---------------------------------------------------------------------------------------------------------------------
Total expenses 9,291,529 14,556,375 (963,839) 22,884,065
- ---------------------------------------------------------------------------------------------------------------------
Less: Fees waived by advisor (666,698) (1,328,869) -- (1,995,567)
- ---------------------------------------------------------------------------------------------------------------------
Net expenses 8,624,831 13,227,506 (963,839) 20,888,498
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 4,587,937 8,482,076 963,839 14,033,852
- ---------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain on sales of investment securities 12,874,380 59,176,179 72,050,559
- ---------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities (22,961,634) 11,782,197 (11,179,437)
- ---------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investment securities (10,087,254) 70,958,376 60,871,122
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ (5,499,317) $ 79,440,452 963,839 $ 74,904,974
- ---------------------------------------------------------------------------------------------------------------------
See Accompanying notes to Pro Forma Combining Financial Statements.
24
210
AIM Advisor Flex Fund
AIM Advisor MultiFlex Fund
Notes to Pro Forma Combining Financial Statements
December 31, 1998
(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
within the AIM Advisor Funds, Inc. and the consummation of the transactions
contemplated therein to be accounted for as a tax-free reorganization of
investment companies. The Agreement and Plan of Reorganization would be
accomplished by an exchange of shares of AIM Advisor Flex Fund for the net
assets of AIM Advisor MultiFlex Fund and the distribution of AIM Advisor Flex
Fund shares to AIM Advisor MultiFlex Fund shareholders. If the Agreement and
Plan of Reorganization were to have taken place at December 31, 1998, AIM
Advisor MultiFlex Fund -- Class A shareholders would have received 821,534
shares of AIM Advisor Flex Fund -- Class A shares, AIM Advisor MultiFlex
Fund -- Class B shareholders would have received 360,137 shares of AIM Advisor
Flex Fund -- Class B shares, and AIM Advisor MultiFlex Fund -- Class C
shareholders would have received 15,559,230 shares of AIM Advisor Flex
Fund -- Class C shares.
NOTE 2 -- PRO FORMA ADJUSTMENTS
Pro forma adjustments have been made to reflect the contractual expenses of the
combined entities.
25
211
PART C. OTHER INFORMATION
Item 15. Indemnification
Section 2-418 of the General Corporation Law of the State of Maryland,
Article VI of the Registrant's Charter, Article VII of the Registrant's
By-Laws and the Investment Advisory Agreement filed as Exhibit 5(b),
provide, or will provide, for indemnification.
The Registrant's Articles of Incorporation (Article VI) provide that
the Registrant shall indemnify (a) its directors to the fullest extent
permitted by law now or hereafter in force, including the advance of
expenses under the procedures provided under such laws; (b) its
officers to the same extent it shall indemnify its directors; and (c)
its officers who are not directors to such further extent as shall be
authorized by the Board of Directors and be consistent with law,
provided, however, that such indemnification shall not be construed to
protect any director or officer against any liability to which such
director 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.
The Registrant's By-laws (Article VII) provide that the Registrant
shall indemnify any director and/or officer who was or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he is or was a director or officer of the
Registrant, or is or was serving at the request of the Registrant as a
director or officer of another corporation, partnership, joint venture,
trust or other enterprise, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding to the maximum extent permitted by law.
With respect to indemnification of officers and directors, Section
2-418 of the Maryland General Corporation Law provides that a
corporation may indemnify any director who is made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action
by or in the right of the Registrant) by reason of service in that
capacity, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement and expenses actually and reasonably incurred by him in
connection with such action, suit or proceeding unless (1) it is
established that the act or omission of the director was material to
the matter giving rise to the proceeding, and (a) was committed in bad
faith or (b) was the result of active and deliberate dishonesty; or (2)
the director actually received an improper personal benefit of money,
property, or services; or (3) in the case of any criminal action or
proceeding, had reasonably cause to believe that the act or omission
was unlawful. A court of appropriate jurisdiction may, however, except
in proceedings by or in the right of the Registrant or in which
liability has been adjudged by reason of the person receiving an
improper personal benefit, order such indemnification as the court
shall deem proper if it determines that the director is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not the director has met the requisite
standards of conduct. Under Section 2-418, the Registrant shall also
indemnify officers, employees, and agents of the Registrant to the same
extent that it shall indemnify directors, and officers, employees and
agents who are not directors to such further extent, consistent with
law, as may be provided by general or specific action of the Board of
Directors or contract. Pursuant to Section 2-418 of the Maryland
General Corporation Law, the termination of any action, suit or
proceeding by judgment, order or settlement does not create a
presumption that the person did not meet the requisite standard of
conduct required by Section 2-418. The termination of any action, suit
or proceeding by conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment,
creates a rebuttable presumption that the person did not meet the
requisite standard of conduct.
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, 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
212
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 director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue. Insurance coverage is
provided under a joint Mutual Fund & Investment Advisory Professional
and Directors & Officers Liability Policy, issued by ICI Mutual
Insurance Company, with a $35,000,000 limit of liability.
Item 16. Exhibits.
1 (a) Amended and Restated Articles of Incorporation dated March 7,
1995, previously filed with Post-Effective Amendment No. 24 to
the Registrant's Registration Statement on May 1, 1995, were
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997, and are
incorporated by reference herein.
(b) Articles of Amendment to the Articles of Incorporation, as
filed with the State Department of Assessments and Taxation of
the State of Maryland on January 16, 1996, filed on EDGAR with
Post-Effective Amendment No. 26 on April 22, 1996, and are
incorporated by reference herein.
(c) Articles Supplementary, dated February 14, 1996, to the
Articles of Incorporation were filed electronically as an
Exhibit with the Registrant's Post-Effective Amendment No. 34
on February 24, 1998, and are incorporated by reference
herein.
(d) Articles Supplementary to the Articles of Incorporation dated
August 13, 1996, were filed electronically as an Exhibit with
the Registrant's Post-Effective Amendment No. 34 on February
24, 1998, and are incorporated by reference herein.
(e) Articles Supplementary, dated September 29, 1997, to the
Articles of Incorporation were filed electronically as an
Exhibit to Registrant's Post-Effective Amendment No. 33 on
December 30, 1997, and are incorporated by reference herein.
2 (a) By-Laws of Registrant, as amended, previously filed with
Post-Effective Amendment No. 24 to the Registrant's
Registration Statement on May 1, 1995, was filed on EDGAR with
Post-Effective Amendment No. 31 on April 30, 1997.
(b) Amended and Restated Bylaws of Registrant, dated September 20,
1997, was filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997, and is
incorporated by reference herein.
3 Voting Trust Agreements - None.
4 A copy of the form of the Plan of Reorganization for MultiFlex
Fund is attached as Appendix I to the Combined Proxy Statement
and Prospectus contained in this Registration Statement and is
incorporated by reference herein.
5 Instruments defining rights of security holders - None.
6 (a) Investment Advisory Agreement between Registrant and INVESCO
Services, Inc. dated as of February 28, 1997 was filed on
EDGAR with Post-Effective Amendment No. 31 on April 30, 1997.
(b) Investment Advisory Agreement between Registrant and A I M
Advisors, Inc. dated August 4, 1997, was filed electronically
as an Exhibit to Registrant's Post-Effective Amendment No. 33
on December 30, 1997, and is incorporated by reference herein.
2
213
Item 16. Exhibits.
(c) Sub-Advisory Agreement between INVESCO Services, Inc. and
INVESCO Capital Management, Inc. dated as of February 28,
1997, was filed on EDGAR with Post-Effective Amendment No. 31
on April 30, 1997.
(d) Sub-Advisory Agreement between A I M Advisors, Inc. and
INVESCO Capital Management, Inc. dated August 4, 1997, was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997, and is
incorporated by reference herein.
(e) Sub-Advisory Agreement between INVESCO Services, Inc. and
INVESCO Management & Research, Inc. dated as of February 28,
1997 was filed on EDGAR with Post-Effective Amendment No. 31
on April 30, 1997.
(f) Sub-Advisory Agreement between A I M Advisors, Inc. and
INVESCO Management & Research, Inc. dated August 4, 1997, was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997, and is
incorporated by reference herein.
(g) Sub-Advisory Agreement between INVESCO Services, Inc. and
INVESCO Realty Advisors, Inc. dated as of February 28, 1997
was filed on EDGAR with Post-Effective Amendment No. 31 on
April 30, 1997.
(h) Sub-Advisory Agreement between A I M Advisors, Inc. and
INVESCO Realty Advisors, Inc. dated August 4, 1997, was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 33 on December 30, 1997, and is incorporated by
reference herein.
(i) Sub-Advisory Agreement between A I M Advisors, Inc. and
INVESCO Global Asset Management, Inc. dated August 4, 1997,
was filed electronically as an Exhibit with Registrant's
Post-Effective Amendment No. 34 on February 24, 1998, and is
incorporated by reference herein.
(j) Foreign Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, by and between A I M Advisors, Inc. and the Registrant,
was filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999, and is
hereby incorporated by reference herein.
(k) Amendment No. 1, dated September 28, 1998 to the Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, by and between A I M Advisors, Inc. and the Registrant,
was filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999, and is
hereby incorporated by reference herein.
(l) Amendment No. 2, dated December 14, 1998, to the Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, by and between A I M Advisors, Inc. and the Registrant,
was filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999, and is
hereby incorporated by reference herein.
(m) Amendment No. 3, dated December 22, 1998, to the Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, by and between A I M Advisors, Inc. and the Registrant,
was filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999, and is
hereby incorporated by reference herein.
3
214
Item 16. Exhibits.
(n) Amendment No. 4, dated January 26, 1999, to the Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, by and between A I M Advisors, Inc. and the Registrant,
was filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999, and is
hereby incorporated by reference herein.
(o) Amendment No. 5, dated March 1, 1999, to the Foreign Country
Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, by and between
A I M Advisors, Inc. and the Registrant, was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 35 on February 16, 1999, and is hereby
incorporated by reference herein.
7 (a) Distribution Agreement between Registrant and INVESCO
Services, Inc., dated as of February 28, 1997 was filed on
EDGAR with Post-Effective Amendment No. 31 on April 30, 1997.
(b) Distribution Agreement between Registrant and A I M
Distributors, Inc. dated August 4, 1997, was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 33 on December 30, 1997, and is incorporated by
reference herein.
(c) Master Distribution Agreement between Registrant and A I M
Distributors, Inc. (relating to Class B shares) was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 35 on February 16, 1999 and is incorporated by
reference herein.
(d) Form of Selected Dealer Agreement between A I M Distributors,
Inc. and selected dealers was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment No. 35 on
February 16, 1999 and is incorporated by reference herein.
(e) Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment No. 35 on
February 16, 1999 and is incorporated by reference herein.
8 (a) Defined Benefit Deferred Compensation Plan for Non-Interested
Directors and Trustees was filed on EDGAR with Post-Effective
Amendment No. 31 on April 30, 1997.
(b) Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors for Non-Interested Directors and
Trustees was filed electronically as an Exhibit to
Post-Effective Amendment No. 32 on June 9, 1997 and is hereby
incorporated by reference.
(c) Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors was filed electronically as an
Exhibit with Registrant's Post-Effective Amendment No. 34 on
February 24, 1998, and is incorporated by reference herein.
(d) Retirement Plan for Registrant's Non-Affiliated Directors
effective as of March 8, 1994 as restated September 18, 1997
was filed electronically as an Exhibit to Post-Effective
Amendment No. 32 on June 9, 1997 and is hereby incorporated by
reference.
9 (a) Form of Custodian Agreement between Registrant and United
Missouri Bank of Kansas City, N.S., dated as of November 1,
1993, was previously filed with Post-Effective Amendment No.
20 to the Registrant's Registration Statement on September 10,
1993. Custodian Agreement between Registrant and United
Missouri Bank of Kansas City, N.S., dated as of November 1,
1993, was previously filed with Post-Effective Amendment No.
22 to the Registrant's Registration Statement on April 28,
1994. Form of Custodian Agreement between Registrant and
United Missouri Bank of Kansas City, N.S., dated May 1, 1995,
was previously filed with Post-Effective Amendment No. 24 to
the Registrant's Registration Statement on May 1, 1995, and
filed on EDGAR with Post-Effective Amendment No. 26 on April
22, 1996.
4
215
Item 16. Exhibits.
(b) Custodian Contract, dated August 4, 1997, between Registrant
and State Street Bank and Trust Company was filed
electronically as an Exhibit with Registrant's Post-Effective
Amendment No. 34 on February 24, 1998, and is incorporated by
reference herein.
(c) Amendment to Custodian Contract dated September 9, 1998,
between Registrant and State Street Bank and Trust Company was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999 and is
incorporated by reference herein.
10 (a) Plan and Agreement of Distribution pursuant to Rule 12b-1
between the Registrant and INVESCO Services, Inc., dated as of
January 1, 1997 was filed on EDGAR with Post- Effective
Amendment No. 31 on April 30, 1997.
(b) Plan and Agreement of Distribution pursuant to Rule 12b-1
between the Registrant (on behalf of Class A and Class C
shares) and A I M Distributors, Inc. dated August 4, 1997, was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997, and is
incorporated by reference herein.
(c) Master Distribution Plan of the Registrant (on behalf of Class
B shares) was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 35 on February 16,
1999, and is incorporated by reference herein.
(d) Form of Shareholder Service Agreement to be used in connection
with Registrant's Master Distribution Plan was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 35 on February 16, 1999, and is incorporated by
reference herein.
(e) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999, and is
incorporated by reference herein.
(f) Form of Variable Group Annuity Contractholder Service
Agreement to be used in connection with Registrant's Master
Distribution Plan was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 35 on February 16,
1999, and is incorporated by reference herein.
(g) Form of Agency Pricing Agreement was filed electronically as
an Exhibit to Registrant's Post-Effective Amendment No. 35 on
February 16, 1999, and is incorporated by reference herein.
(h) Form of Service Agreement of Bank Trust Departments and for
Brokers for Bank Trust Departments to be used in connection
with Registrant's Master Distribution Plan was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 35 on February 16, 1999, and is incorporated by
reference herein.
11 Opinion and consent of Ballard Spahr Andrews & Ingersoll, LLP,
as to the legality of the securities being registered is being
filed herewith electronically.
12 Opinion and consent of Ballard Spahr Andrews & Ingersoll, LLP,
supporting the tax matters and consequences to shareholders
discussed in the Combined Proxy Statement and Prospectus will
be filed in a Post-Effective Amendment.
13 (a) Operating Services Agreement between Registrant and INVESCO
Services, Inc., dated as of February 28, 1997 was filed on
EDGAR with Post-Effective Amendment No. 31 on April 30, 1997.
(b) Operating Services Agreement between Registrant and A I M
Advisors, Inc. dated August 4, 1997, was filed electronically
as an Exhibit to Registrant's Post-Effective Amendment No. 33
on December 30, 1997, and is incorporated by reference herein.
5
216
Item 16. Exhibits.
(c) Transfer Agency and Service Agreement between Registrant, A I
M Advisors, Inc. and A I M Fund Services, Inc. dated August 4,
1997, was filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997, and is
incorporated by reference herein.
(d) Remote Access and Related Services Agreement, dated as of
December 23, 1994, between the Registrant and The Shareholder
Services Group, Inc. was filed electronically as an Exhibit
with Registrant's Post-Effective Amendment No. 34 on February
24, 1998, and is incorporated by reference herein.
(e) Amendment No. 1, dated October 4, 1995, to the Remote Access
and Related Services Agreement, dated December 23, 1994,
between Registrant and First Data Investor Services Group,
Inc. (formerly The Shareholder Services Group, Inc.) was filed
electronically as an Exhibit with Registrant's Post-Effective
Amendment No. 34 on February 24, 1998, and is incorporated by
reference herein.
(f) Addendum No. 2, dated October 12, 1995, to the Remote Access
and Related Services Agreement, dated December 23, 1994,
between Registrant and First Data Investor Services Group,
Inc. was filed electronically as an Exhibit with Registrant's
Post-Effective Amendment No. 34 on February 24, 1998, and is
incorporated by reference herein.
(g) Amendment No. 3, dated as of February 1, 1997, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between the Registrant and First Data Investor Services
Group, Inc. was filed electronically as an Exhibit with
Registrant's Post-Effective Amendment No. 34 on February 24,
1998, and is incorporated by reference herein.
(h) Exhibit 1, effective as of August 4, 1997, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between the Registrant and First Data Investor Services
Group, Inc. was filed electronically as an Exhibit with
Registrant's Post-Effective Amendment No. 34 on February 24,
1998, and is incorporated by reference herein.
(i) Preferred Registration Technology Escrow Agreement, dated
September 10, 1997, between Registrant and First Data Investor
Services Group, Inc., was filed electronically as an Exhibit
with Registrant's Post-Effective Amendment No. 34 on February
24, 1998, and is incorporated by reference herein.
(j) Amendment No. 4, dated as of June 30, 1998, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between the Registrant and First Data Investor Services
Group, Inc. was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 35 on February 16,
1999, and is incorporated by reference herein.
(k) Amendment No. 5, dated July 1, 1998, to the Remote Access and
Related Services Agreement, dated December 23, 1994, between
the Registrant and First Data Investor Services Group, Inc.
was filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999, and is
incorporated by reference herein.
14 (a) Consent of KPMG LLP is filed herewith electronically.
(b) Consent of PricewaterhouseCoopers LLP is filed herewith
electronically.
15 None.
16 None.
17 (a) Form of Proxy
(b) Prospectus of AIM Advisor MultiFlex Fund
6
217
Item 17. Undertakings
An opinion of counsel supporting the tax matters and consequences to
shareholders discussed in the prospectus will be filed in a Post-Effective
Amendment to this Registration Statement.
7
218
SIGNATURES
Pursuant to the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant has duly caused this Registration Statement on Form N-14
to be signed on its behalf by the undersigned thereto duly authorized, in the
City of Houston, State of Texas, on the 1st day of April, 1999.
AIM ADVISOR FUNDS, INC.
Registrant
By: /s/ Robert H. Graham
-------------------------------------
Robert H. Graham
President
As required by the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Charles T. Bauer Chairman & Director April 1, 1999
- --------------------------------
Charles T. Bauer
/s/ Robert H. Graham Director & President April 1, 1999
- --------------------------------
Robert H. Graham
/s/ Bruce L. Crockett Director April 1, 1999
- --------------------------------
Bruce L. Crockett
/s/ Owen Daly II Director April 1, 1999
- --------------------------------
Owen Daly II
/s/ Prema Mathai-Davis Director April 1, 1999
- --------------------------------
Prema Mathai-Davis
/s/ Edward K. Dunn, Jr. Director April 1, 1999
- --------------------------------
Edward K. Dunn, Jr.
/s/ Jack Fields Director April 1, 1999
- --------------------------------
Jack Fields
/s/ Carl Frischling Director April 1, 1999
- --------------------------------
Carl Frischling
/s/ Lewis F. Pennock Director April 1, 1999
- --------------------------------
Lewis F. Pennock
/s/ Louis Sklar Director April 1, 1999
- --------------------------------
Louis Sklar
/s/ John J. Arthur Senior Vice President & April 1, 1999
- -------------------------------- Treasurer (Principal Financial Officer)
John J. Arthur
8
219
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
11. Opinion of Ballard Spahr Andrews & Ingersoll, LLP
14. (a) Consent of KPMG LLP
14. (b) Consent of PricewaterhouseCoopers LLP
17. (a) Form of Proxy
17. (b) Prospectus of AIM Advisor MultiFlex Fund
9